As
filed with the Securities and Exchange Commission on January 30,
2008
Registration
No.
333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
Constellation
Energy Partners LLC
(and
the subsidiaries identified below in the Table of Subsidiary Guarantor
Registrants)
(Exact
name of registrant as specified in its charter)
Delaware
|
11-3742489
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification Number)
|
111
Market Place
Baltimore,
Maryland 21202
(410)
468-3500
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Felix
J. Dawson
Chief
Executive Officer
Constellation
Energy Partners LLC
111
Market Place
Baltimore,
Maryland 21202
(410)
468-3500
(Name,
address, including zip code, and telephone number, including area code, of
agent
for service)
Copy
to:
G.
Michael O’Leary
Andrews
Kurth LLP
600
Travis, Suite 4200
Houston,
Texas 77002
(713)
220-4200
Approximate
date of commencement of proposed sale to the public:
From
time to time after the effective date of this Registration
Statement.
If
the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box.
G
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. x
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. G
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. G
If
this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. G
If
this
Form is a post-effective amendment to a registration statement filed pursuant
to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. G
CALCULATION
OF REGISTRATION FEE
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Title
of Each Class of
Securities
to be Registered
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Amount
to be Registered (1)
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Proposed
Maximum Offering Price per Unit (2)
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Proposed
Maximum Aggregate
Offering
Price (2)
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Amount
of
Registration
Fee
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Primary
Offering
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Common
Units
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Debt
Securities (1)(2)
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Guarantees
of Debt Securities (2)
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Total
Primary
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$
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$1,000,000,000
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(3)(4)(5)
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$
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39,300
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(6)
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Secondary
Offering of Common Units
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5,918,894
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$
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26.53
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(7)
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$
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156,998,663
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$
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6,170
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Total
(Primary and Secondary)
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$
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1,156,998,663
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$
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45,470
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(1) |
If
any debt securities are issued at an original issue discount, then
the
offering price of those debt securities shall be in an amount that
will
result in an aggregate initial offering price not to exceed
$1,000,000,000, less the dollar amount of any registered securities
previously issued.
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(2) |
If
a series of debt securities is guaranteed, such series will be guaranteed
by certain subsidiaries other than “minor” subsidiaries as such term is
interpreted in securities regulations governing financial reporting
for
guarantors. Pursuant to Rule 457(n), no separate fee is payable with
respect to the guarantees of the debt securities being
registered.
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(3) |
Estimated
solely for the purpose of calculating the registration fee pursuant
to
Rule 457(o). In no event will the aggregate initial offering price
of all
securities offered from time to time pursuant to the prospectus included
as a part of this Registration Statement exceed $1,000,000,000. To
the
extent applicable, the aggregate amount of common units registered
is
further limited to that which is permissible under Rule 415 (a)(4)
under
the Securities Act. Any securities registered hereunder may be sold
separately or as units with other securities registered
hereunder.
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(4) |
There
are being registered hereunder a presently indeterminate number of
common
units and an indeterminate principal amount of debt securities and
guarantees of debt securities.
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(5) |
The
proposed maximum aggregate offering price for each class of securities
to
be registered is not specified pursuant to General Instruction, II.D.
of
Form S-3.
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(6) |
Calculated
in accordance with Rule 457(o).
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(7)( |
Estimated
pursuant to Rule 457(c) under the Securities Act solely for the
purpose of calculating the registration fee and is based on the high
and
low prices of the common units on January 23, 2008, as reported on
the NYSE Arca, Inc. |
The
registrants hereby amend this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrants shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
TABLE
OF SUBSIDIARY GUARANTOR REGISTRANTS
Exact
Name of Additional
Registrant
as Specified in its Charter (1)
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State
or Other Jurisdiction
of
Incorporation or
Organization
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I.R.S.
Employer
Identification
Number
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CEP
Mid-Continent LLC
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Delaware
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01-0892145
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Northeast
Shelf Energy, L.L.C.
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Oklahoma
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43-1953439
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Mid-Continent
Oilfield Supply, L.L.C.
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Oklahoma
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38-3722258
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Robinson’s
Bend Marketing II, LLC
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Delaware
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16-1725186
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Robinson’s
Bend Operating II, LLC
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Delaware
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16-1725189
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Robinson’s
Bend Production II, LLC
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Delaware
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16-1725193
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(1) |
The
address for each subsidiary guarantor registrant is 111 Market Place,
Baltimore, Maryland 21202.
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EXPLANATORY
NOTE
This
registration statement consists of two separate
forms of prospectuses to be used in connection with the offering
of:
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·
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common
units and debt securities of Constellation Energy Partners LLC
and guarantees of certain subsidiaries identified in the table
above; and
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·
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common
units that may be sold in one or more secondary offerings by the
selling
unitholder listed in the form of
prospectus.
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The
information in this prospectus is not complete and may be changed. We may
not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to
sell
these securities and is not soliciting an offer to buy these securities in
any
state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED JANUARY 30,
2008
PROSPECTUS
$1,000,000,000
Common
Units Representing Class B Limited Liability Company
Interests
Debt
Securities
We
may
offer, from time to time, in one or more series:
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·
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common
units representing Class B limited liability company interests in
Constellation Energy Partners LLC;
and
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·
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debt
securities, which may be either senior debt securities or subordinated
debt securities.
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All
other
direct or indirect subsidiaries of Constellation Energy Partners LLC, other
than
“minor” subsidiaries as such item is interpreted in securities regulations
governing financial reporting for guarantors, may guarantee the debt securities.
The
securities we may offer:
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·
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will
have a maximum aggregate offering price of
$1,000,000,000;
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·
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will
be offered at prices and on terms to be set forth in one or more
accompanying prospectus supplements;
and
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·
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may
be offered separately or together, or in separate
series.
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Our
common units are traded on the NYSE Arca, Inc. under the trading symbol “CEP.”
We will provide information in the prospectus supplement for the trading market,
if any, for any debt securities we may offer.
This
prospectus provides you with a general description of the securities we may
offer. Each time we offer to sell securities we will provide a prospectus
supplement that will contain specific information about those securities and
the
terms of that offering. The prospectus supplement also may add, update or change
information contained in this prospectus. This prospectus may be used to offer
and sell securities only if accompanied by a prospectus supplement. You should
read this prospectus and any prospectus supplement carefully before you invest.
You should also read the documents we refer to in the “Where You Can Find More
Information” section of this prospectus for information on us and our financial
statements.
Investing
in our securities involves risks. See “Risk Factors” beginning on page
2.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is
,
2008
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
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1
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ABOUT
CONSTELLATION ENERGY PARTNERS LLC
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1
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RISK
FACTORS
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2
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CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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4
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USE
OF PROCEEDS
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5
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RATIO
OF EARNINGS TO FIXED CHARGES
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6
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HOW
WE MAKE CASH DISTRIBUTIONS
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7
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CONFLICTS
OF INTEREST AND FIDUCIARY DUTIES
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17
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Conflicts
of Interest
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17
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Fiduciary
Duties
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19
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DESCRIPTION
OF THE COMMON UNITS
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20
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The
Common Units
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Transfer
Agent and Registrar
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Transfer
of Common Units
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DESCRIPTION
OF DEBT SECURITIES
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21
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General
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21
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Subsidiary
Guarantees
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22
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Covenants
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22
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Mergers
and Sale of Assets
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23
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Events
of Default
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23
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Amendments
and Waivers
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24
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Legal
Defeasance and Covenant Defeasance
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27
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Satisfaction
and Discharge
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28
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No
Personal Liability of Directors, Managers, Officers, Employees,
Partners,
Members and Unitholders
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28
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Denominations
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Paying
Agent and Registrar
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Transfer
and Exchange
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Subordination
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Payment
and Transfer
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30
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Global
Securities
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30
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Governing
Law
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31
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Notices
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32
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Information
Concerning the Trustee
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32
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DESCRIPTION
OF GUARANTEES OF DEBT SECURITIES
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32
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THE
LIMITED LIABILITY COMPANY AGREEMENT
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33
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Organization
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Purpose
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Fiduciary
Duties
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Agreement
to be Bound by Limited Liability Company Agreement; Power of
Attorney
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Capital
Contributions
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34
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Limited
Liability
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Voting
Rights
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Issuance
of Additional Securities
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35
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Election
of Members of Our Board of Managers
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35
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Amendment
of Our Limited Liability Company Agreement
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36
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Merger,
Sale or Other Disposition of Assets; Conversion
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38
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Termination
and Dissolution
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39
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Liquidation
and Distribution of Proceeds
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39
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Anti-Takeover
Provisions
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39
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Limited
Call Right
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40
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Meetings;
Voting
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40
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Non-Citizen
Assignees; Redemption
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41
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Indemnification
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41
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Books
and Reports
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42
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Right
To Inspect Our Books and Records
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42
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Registration
Rights
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42
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MATERIAL
TAX CONSEQUENCES
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43
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Partnership
Status
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43
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Common
Unitholder Status
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45
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Tax
Consequences of Unit Ownership
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45
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Tax
Treatment of Operations
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50
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Disposition
of Units
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54
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Uniformity
of Units
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55
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Tax-Exempt
Organizations and Other Investors
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56
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Administrative
Matters
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57
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State,
Local and Other Tax Considerations
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59
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Tax
Consequences of Ownership of Debt Securities
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60
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INVESTMENT
IN OUR COMPANY BY EMPLOYEE BENEFIT PLANS
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61
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PLAN
OF DISTRIBUTION
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62
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LEGAL
MATTERS
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63
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EXPERTS
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63
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WHERE
YOU CAN FIND MORE INFORMATION
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63
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APPENDIX
A— Glossary
of Terms |
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A-1 |
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You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it.
You
should assume that the information appearing in this prospectus is accurate
as
of the date on the front cover of this prospectus only. Our business, financial
condition, results of operations and prospects may have changed since that
date.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we have filed
with the Securities and Exchange Commission, or SEC, using a “shelf”
registration process. Under this shelf registration process, we may sell, in
one
or more offerings, up to $1,000,000,000 in total aggregate offering price of
securities described in this prospectus. This prospectus provides you with
a
general description of us and the securities offered under this prospectus.
Each
time
we sell securities under this prospectus, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering and the securities being offered. The prospectus supplement also may
add to, update, or change information in this prospectus. If there is any
inconsistency between the information in this prospectus and any prospectus
supplement, you should rely on the information in the prospectus supplement.
You
should read carefully this prospectus, any prospectus supplement and the
additional information described below under the heading “Where You Can Find
More Information.” We include a glossary of some of the terms used in this
prospectus in Appendix A.
References
in this prospectus to “Constellation Energy Partners,” “we,” “our,” “us,” “CEP”
or like terms refer to Constellation Energy Partners LLC and its subsidiaries.
References in this prospectus to “CEPM” are to Constellation Energy Partners
Management, LLC, a Delaware limited liability company. References in this
prospectus to “CCG” are to Constellation Energy Commodities Group, Inc., a
Delaware corporation. References in this prospectus to “CEPH” are to
Constellation Energy Partners Holdings, LLC, a Delaware limited liability
company. References to “CHI” are to Constellation Holdings, Inc., a Delaware
corporation. References in this prospectus to “Constellation” are to
Constellation Energy Group, Inc., a Maryland corporation. We refer to our Class
A limited liability company interests as the Class A units, our Class B limited
liability company interests as the common units, our Class C limited liability
company interests as the management incentive interests and our Class D limited
liability company interests as the Class D interests.
ABOUT
CONSTELLATION ENERGY PARTNERS LLC
We
are a
limited liability company that was formed by Constellation in 2005 to acquire
oil and natural gas reserves. We are focused on the acquisition, development
and
production of oil and natural gas properties (“E&P properties”) as well as
related midstream assets. Our primary business objective is to generate stable
cash flows allowing us to make quarterly cash distributions to our unitholders
and over time to increase our quarterly cash distribution. As of December 31,
2006, our estimated proved reserves were 100% natural gas and were located
in
the Black Warrior Basin in Alabama. Our estimated proved reserves at December
31, 2006 were approximately 120.3 Bcf, approximately 81% of which were
classified as proved developed. Our average proved reserve-to-production ratio
is approximately 24 years based on our estimated proved reserves at January
1,
2006 and production for the year ended December 31, 2006. We currently own
a
100% working interest (an approximate 75% average net revenue interest,
calculated before the Torch Royalty NPI, or NPI) in our Robinson’s Bend Field
producing properties, which had 467 producing natural gas wells as of December
31, 2006.
In
2007,
we expanded our operations by entering into three separate definitive purchase
agreements to acquire certain coalbed methane properties located in the Cherokee
Basin in Kansas and Oklahoma. On April 23, 2007, we closed the acquisition
of
oil and natural gas properties and interests in certain limited liability
companies which own oil and natural gas properties for approximately $115
million, subject to purchase price adjustments. On July 25, 2007, we closed
the
acquisition of additional oil and natural gas properties via an agreement of
merger providing for the merger of Amvest Osage, Inc. into a wholly-owned
subsidiary of CEP for approximately $240 million, subject to purchase price
adjustments. On September 21, 2007, we closed the acquisition of additional
oil
and natural gas properties for approximately $128 million, subject to purchase
price adjustments.
Recent
Developments
On
January 24, 2008, we announced a cash distribution for the quarter ended
December 31, 2007 of $0.5625 per outstanding common unit and Class A unit,
or
$2.25 per unit on an annualized basis. The distribution will be payable on
February 14, 2008 to unitholders of record at the close of business on February
7, 2008. A distribution of $333,333.33 for the same period will also be made
to
the Class D unitholder on February 14, 2008.
Our
principal executive offices are located at 111 Market Place, Baltimore, Maryland
21202, and our telephone number is (410) 468-3500. Our website is located at
http://www.constellationenergypartners.com.
We make
our periodic reports and other information filed with or furnished to the SEC
available, free of charge, through our website, as soon as reasonably
practicable after those reports and other information are electronically filed
with or furnished to the SEC. Information on our website or any other website
is
not incorporated by reference into this prospectus and does not constitute
a
part of this prospectus.
RISK
FACTORS
Limited
liability company interests are inherently different from capital stock of
a
corporation, although many of the business risks to which we are subject are
similar to those that would be faced by a corporation engaged in a similar
business. You should carefully consider the risk factors discussed in our Annual
Report on Form 10-K for the year ended December 31, 2006 and our quarterly
reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007 and
September 30, 2007 and the additional risk factors set forth below, together
with all of the other information included in this prospectus, any prospectus
supplement and the documents we have incorporated by reference into this
prospectus in evaluating an investment in our securities. The described risks
could materially and adversely affect our business, financial condition or
results of operation. If any of the described risks actually were to occur,
we
may not be able to pay quarterly distributions on our common units or make
principal or interest payments on our debt securities, the trading price of
our
common units or debt securities could decline and you could lose part or all
of
your investment in our company.
Risks
Related to Debt Securities
We
have a holding company structure in which our subsidiaries conduct our
operations and own our operating assets.
We
are a
holding company, and our subsidiaries conduct all of our operations and own
substantially all of our operating assets. We have no significant assets other
than the membership interests and the other equity interests in our
subsidiaries. As a result, our ability to make required payments on our debt
securities depends on the performance of our subsidiaries and their ability
to
distribute funds to us. The ability of our subsidiaries to make distributions
to
us may be restricted by, among other things, our existing reserve-based credit
facility and applicable state limited liability company and partnership laws
and
other laws and regulations. If we are unable to obtain the funds necessary
to
pay the principal amount at the maturity of our debt securities, or to
repurchase our debt securities upon an occurrence of a change in control, we
may
be required to adopt one or more alternatives, such as a refinancing of our
debt
securities. We cannot assure you that we would be able to refinance our debt
securities.
If
we issue unsecured debt securities, your right to receive payments on the debt
securities will be unsecured and will be effectively subordinated to our
existing and future secured indebtedness and to indebtedness of any of our
subsidiaries who do not guarantee the debt securities.
Any
unsecured debt securities, including any guarantees, issued by us or any of
our
subsidiary guarantors will be effectively subordinated to the claims of our
secured creditors. In the event of the insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of our business or that of any of
our
subsidiary guarantors, their secured creditors would generally have the right
to
be paid in full before any distribution is made to the holders of the unsecured
debt securities. Furthermore, if any of our subsidiaries do not guarantee the
unsecured securities, these debt securities will be effectively subordinated
to
the claims of all creditors, including trade creditors and tort claimants,
of
those subsidiaries. In the event of the insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of a subsidiary that
is not a guarantor, creditors of that subsidiary would generally have the right
to be paid in full before any distribution is made to the issuer of the
unsecured debt securities or the holders of the unsecured debt securities.
We
do not have the same flexibility as other types of organizations to accumulate
cash which may limit cash available to service our debt securities or to repay
them at maturity.
Subject
to the limitations on restricted payments contained in the indenture governing
our debt securities and in our reserve-based credit facility and other
agreements, we distribute all of our “available cash” each quarter to our
holders of common units and Class A units. “Available cash” is defined in our
limited liability company agreement, and it generally means, for each fiscal
quarter, all cash on hand at the end of the quarter:
|
·
|
less
the amount of cash reserves established by our board of managers
to:
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·
|
provide
for the proper conduct of our business (including reserves for future
capital expenditures and credit
needs);
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·
|
comply
with applicable law, any of our debt instruments or other agreements;
or
|
|
·
|
provide
funds for distributions (1) to our unitholders for any one or more
of the
next four quarters or (2) in respect of our Class D interests or
management incentive interests;
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|
·
|
plus
all cash on hand on the date of determination of available cash for
the
quarter resulting from working capital borrowings made after the
end of
the quarter. Working capital borrowings are generally borrowings
that are
made under our reserve-based credit facility or another arrangement
and in
all cases are used solely for working capital purposes or to pay
distributions to unitholders.
|
As
a
result, we do not accumulate significant amounts of cash and thus do not have
the same flexibility as corporations or other entities that do not pay dividends
or have complete flexibility regarding the amounts they will distribute to
their
equity holders. The timing and amount of our distributions could significantly
reduce the cash available to pay the principal, premium (if any) and interest
on
our debt securities. Our board of managers will determine the amount and timing
of such distributions and has broad discretion to establish and make additions
to our reserves or the reserves of our operating subsidiaries as it determines
are necessary or appropriate.
Although
our payment obligations to our unitholders will be subordinate to our payment
obligations to holders of our debt securities, the value of our units will
decrease in correlation with decreases in the amount we distribute per unit.
Accordingly, if we experience a liquidity problem in the future, we may not
be
able to issue equity to recapitalize.
The
subsidiary guarantees could be deemed fraudulent conveyances under certain
circumstances, and a court may try to subordinate or void the subsidiary
guarantees.
Under
United States bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee can be voided, or claims under a guarantee may be
subordinated to all other debts of that guarantor if, among other things, the
guarantor, at the time it incurred the indebtedness evidenced by its guarantee:
|
·
|
intended
to hinder, delay or defraud any present or future creditor or received
less than reasonably equivalent value or fair consideration for the
incurrence of the guarantee;
|
|
·
|
was
insolvent or rendered insolvent by reason of such
incurrence;
|
|
·
|
was
engaged in a business or transaction for which the guarantor’s remaining
assets constituted unreasonably small capital;
or
|
|
·
|
intended
to incur, or believed that it would incur, debts beyond its ability
to pay
those debts as they mature.
|
In
addition, any payment by that guarantor under a guarantee could be voided and
required to be returned to the guarantor or to a fund for the benefit of the
creditors of the guarantor. The measures of insolvency for purposes of these
fraudulent transfer laws will vary depending upon the law applied in any
proceeding to determine whether a fraudulent transfer has occurred. Generally,
however, a subsidiary guarantor would be considered insolvent if:
|
·
|
the
sum of its debts, including contingent liabilities, was greater than
the
fair saleable value of all of its
assets;
|
|
·
|
the
present saleable value of its assets was less than the amount that
would
be required to pay its probable liability, including contingent
liabilities, on existing debts as they become absolute and mature;
or
|
|
·
|
it
could not pay its debts as they became
due.
|
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that are subject to a number
of
risks and uncertainties, many of which are beyond our control, which may include
statements about:
|
·
|
the
volatility of realized natural gas
prices;
|
|
·
|
the
discovery, estimation, development and replacement of oil and natural
gas
reserves;
|
|
·
|
our
business and financial strategy;
|
|
·
|
our
drilling locations;
|
|
·
|
our
cash flow, liquidity and financial
position;
|
|
·
|
the
impact from the termination of the sharing arrangement before December
31,
2012;
|
|
·
|
our
production volumes;
|
|
·
|
our
lease operating expenses, general and administrative costs and finding
and
development costs;
|
|
·
|
the
availability of drilling and production equipment, labor and other
services;
|
|
·
|
our
future operating results;
|
|
·
|
our
prospect development and property
acquisitions;
|
|
·
|
the
marketing of oil and natural gas;
|
|
·
|
competition
in the oil and natural gas
industry;
|
|
·
|
the
impact of weather and the occurrence of natural disasters such as
fires,
floods, hurricanes, earthquakes and other catastrophic events and
natural
disasters;
|
|
·
|
governmental
regulation of the oil and natural gas
industry;
|
|
·
|
developments
in oil-producing and natural gas producing countries;
and
|
|
·
|
our
strategic plans, objectives, expectations and intentions for future
operations.
|
All
of
these types of statements, other than statements of historical fact included
in
this prospectus, are forward-looking statements. These forward-looking
statements may be found in the “About Constellation Energy Partners LLC,” “Risk
Factors,” and other sections of this prospectus. In some cases, forward-looking
statements can be identified by terminology such as “may,” “could,” “should,”
“expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,”
“predict,” “potential,” “pursue,” “target,” “continue,” the negative of such
terms or other comparable terminology.
The
forward-looking statements contained in this prospectus are largely based on
our
expectations, which reflect estimates and assumptions made by our management.
These estimates and assumptions reflect our best judgment based on currently
known market conditions and other factors. Although we believe such estimates
and assumptions to be reasonable, they are inherently uncertain and involve
a
number of risks and uncertainties that are beyond our control. In addition,
management’s assumptions about future events may prove to be inaccurate.
Management cautions all readers that the forward-looking statements contained
in
this prospectus are not guarantees of future performance, and we cannot assure
any reader that such statements will be realized or the forward-looking events
and circumstances will occur. Actual results may differ materially from those
anticipated or implied in the forward-looking statements due to factors listed
in the “Risk Factors” section and elsewhere in this prospectus. All
forward-looking statements speak only as of the date of this prospectus. We
do
not intend to publicly update or revise any forward-looking statements as a
result of new information, future events or otherwise. These cautionary
statements qualify all forward-looking statements attributable to us or persons
acting on our behalf.
USE
OF PROCEEDS
Unless
we
specify otherwise in any prospectus supplement, we will use the net proceeds
we
receive from the sale of securities covered by this prospectus for general
limited liability company purposes, which may include, among other
things:
|
·
|
paying
or refinancing all or a portion of our indebtedness outstanding at
the
time; and
|
|
·
|
funding
working capital, capital expenditures or
acquisitions.
|
The
actual application of proceeds from the sale of any particular offering of
securities using this prospectus will be described in the applicable prospectus
supplement relating to such offering. The precise amount and timing of the
application of these proceeds will depend upon our funding requirements and
the
availability and cost of other funds.
RATIO
OF EARNINGS TO FIXED CHARGES
The
following table sets forth the ratios of earnings to fixed charges for us and
our predecessors for each of the periods indicated. All dollar amounts are
reported in thousands.
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Constellation
Energy
Partners
LLC
|
|
|
|
Everlast
Energy LLC
|
|
|
|
Torch
Energy
|
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
For
the
period
from
February
7, 2005
(inception)
to
December
31,
|
|
|
|
For
the
period
from
January
1, 2005
(inception)
to
June
12,
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2006
|
|
2005
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
2002
|
|
Net
Income (loss)(1)
|
|
$
|
11,330
|
|
$
|
10,316
|
|
$
|
15,989
|
|
$
|
11,941
|
|
|
|
$
|
(10,636
|
)
|
$
|
2,099
|
|
$
|
4,987
|
|
|
|
$
|
414
|
|
Fixed
Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and Amortization of Debt Issuance Costs
|
|
|
4,209
|
|
|
2
|
|
|
221
|
|
|
3
|
|
|
|
|
2,437
|
|
|
3,028
|
|
|
1,961
|
|
|
|
|
—
|
|
Total
Fixed Charges
|
|
|
4,209
|
|
|
2
|
|
|
221
|
|
|
3
|
|
|
|
|
2,437
|
|
|
3,028
|
|
|
1,961
|
|
|
|
|
—
|
|
Earnings
(loss)(2)
|
|
$
|
15,539
|
|
$
|
10,318
|
|
$
|
16,210
|
|
$
|
11,944
|
|
|
|
$
|
(8,199
|
)
|
$
|
5,127
|
|
$
|
6,948
|
|
|
|
$
|
414
|
|
Ratio
of earnings (loss) to fixed charges
|
|
|
3.69
|
|
|
5,159.00
|
|
|
73.35
|
|
|
3,981.33
|
|
|
|
|
(3.36
|
)
|
|
1.69
|
|
|
3.54
|
|
|
|
|
—
|
|
(1) |
Net
income is the equivalent of income from continuing operations, as
CEP has
no discontinued operations.
|
(2) |
Earnings
are deemed to consist of income from continuing operations and fixed
charges.
|
HOW
WE MAKE CASH DISTRIBUTIONS
Initial
Quarterly Distributions
The
amount of distributions paid under our cash distribution policy and the decision
to make any distribution will be determined by our board of managers, taking
into consideration the terms of our limited liability company agreement. We
intend to distribute to the holders of common units and Class A units on a
quarterly basis at least the initial quarterly distribution of $0.4625 per
unit
(“IQD”), or $1.85 per unit per year to the extent we have sufficient available
cash after we establish appropriate reserves and pay fees and expenses,
including payments to CEPM in reimbursement of costs and expenses it incurs
on
our behalf. Our current quarterly distribution rate is $0.5625 per unit, or
$2.25 per unit on an annualized basis. Our current quarterly distribution is
intended to reflect the level of cash that we expect to be available for
distribution per common unit and Class A unit each quarter from our productive
assets. There is no guarantee we will pay the current quarterly distribution
in
any quarter and we will be prohibited from making any distributions to
unitholders if it would cause an event of default or an event of default is
existing under our credit agreement. Our board of managers has adopted a policy
that it will raise our quarterly cash distribution only when it believes that
(i) we have sufficient reserves and liquidity for the proper conduct of our
business, including the maintenance of our asset base, and (ii) we can maintain
such an increased distribution level for a sustained period. While this is
our
current policy, our board of managers may alter such policy in the future when
and if it determines such alteration to be appropriate.
Distributions
of Available Cash
Overview
Our
limited liability company agreement requires that, within 45 days after the
end
of each quarter, we distribute all of our available cash to unitholders of
record on the applicable record date.
Definition
of Available Cash
We
define
available cash in the glossary, and it generally means, for each fiscal quarter,
all cash on hand at the end of the quarter:
|
·
|
less
the amount of cash reserves established by our board of managers
to:
|
|
·
|
provide
for the proper conduct of our business (including reserves for future
capital expenditures and credit
needs);
|
|
·
|
comply
with applicable law, any of our debt instruments, or other agreements;
or
|
|
·
|
provide
funds for distributions (1) to our unitholders for any one or more
of the
next four quarters or (2) in respect of our Class D interests or
management incentive interests;
|
|
·
|
plus
all cash on hand on the date of determination of available cash for
the
quarter resulting from working capital borrowings made after the
end of
the quarter. Working capital borrowings are generally borrowings
that are
made under our reserve-based credit facility or another arrangement
and in
all cases are used solely for working capital purposes or to pay
distributions to unitholders.
|
Operating
Surplus and Capital Surplus
General
All
cash
distributed to unitholders will be characterized as either “operating surplus”
or “capital surplus.” Our limited liability company agreement requires that we
distribute available cash from operating surplus differently than available
cash
from capital surplus.
Definition
of Operating Surplus
We
define
operating surplus in the glossary, and for any period, it generally
means:
|
·
|
$20.0
million (as described below); plus
|
|
·
|
all
of our cash receipts after the closing of our initial public offering,
excluding cash from (1) borrowings that are not working capital
borrowings, (2) sales of equity and debt securities, and (3) sales
or
other dispositions of assets outside the ordinary course of business;
plus
|
|
·
|
working
capital borrowings made after the end of a quarter but before the
date of
determination of operating surplus for the quarter; plus
|
|
·
|
cash
distributions paid on equity issued to finance all or a portion of
the
construction, replacement or improvement of a capital asset (such
as
equipment or reserves) during the period beginning on the date that
we
enter into a binding obligation to commence the construction, acquisition
or improvement of a capital improvement or replacement of a capital
asset
and ending on the earlier to occur of the date the capital improvement
or
capital asset is placed into service or the date that it is abandoned
or
disposed of; plus
|
|
·
|
if
the right to receive distributions (other than distributions in
liquidation) on the Class D interests terminates before December
31, 2012,
the excess of the amount of the $8.0 million contribution by CHI
for the
Class D interests over the cumulative cash distributions paid on
the Class
D interests before such termination shall be included in operating
surplus, such inclusion to occur over a series of quarters with the
amount
included in each quarter to be equal to the amount of the payment
we make
to the Torch Energy Royalty Trust (the “Trust”) in respect of the NPI for
such quarter that would not have been paid but for termination of
the
sharing arrangement; less
|
|
·
|
our
operating expenditures (as defined below) after the closing of our
initial
public offering; less
|
|
·
|
the
amount of cash reserves established by our board of managers to provide
funds for future operating expenditures; less
|
|
·
|
all
working capital borrowings not repaid within twelve months after
having
been incurred.
|
As
described above, operating surplus does not reflect actual cash on hand that
is
available for distribution to our unitholders. For example, it includes a
provision that will enable us, if we choose, to distribute as operating surplus
up to $20.0 million of cash we receive in the future from non-operating sources
such as asset sales, issuances of securities and long-term borrowings that
would
otherwise be distributed as capital surplus. In addition, the effect of
including, as described above, certain cash distributions on equity securities
in operating surplus would be to increase operating surplus by the amount of
any
such cash distributions. As a result, we may also distribute as operating
surplus up to the amount of any such cash distributions we receive from
non-operating sources.
If
a
working capital borrowing, which increases operating surplus, is not repaid
during the twelve-month period following the borrowing, it will be deemed repaid
at the end of such period, thus decreasing operating surplus at such time.
When
such working capital borrowing is in fact repaid, it will not be treated as
a
reduction in operating surplus because operating surplus will have been
previously reduced by the deemed repayment.
We
define
operating expenditures in the glossary, and it generally means all of our cash
expenditures, including, but not limited to, taxes, reimbursement of expenses
to
CEPM for services under the management services agreement, payments made in
the
ordinary course of business under commodity hedge contracts, manager and officer
compensation, repayment of working capital borrowings, debt service payments
and
estimated maintenance capital expenditures, provided that operating expenditures
will not include:
|
·
|
repayment
of working capital borrowings deducted from operating surplus pursuant
to
the last bullet point of the definition of operating surplus when
such
repayment actually occurs;
|
|
·
|
payments
(including prepayments and prepayment penalties) of principal of
and
premium on indebtedness, other than working capital
borrowings;
|
|
·
|
expansion
capital expenditures;
|
|
·
|
actual
maintenance capital expenditures;
|
|
·
|
investment
capital expenditures;
|
|
·
|
payment
of transaction expenses relating to interim capital transactions;
or
|
|
·
|
distributions
to our members (including distributions in respect of our Class D
interests and management incentive
interests).
|
Capital
Expenditures
For
purposes of determining operating surplus, maintenance capital expenditures
are
those capital expenditures required to maintain, including over the long term,
our asset base, and expansion capital expenditures are those capital
expenditures that we expect will increase our asset base over the long term.
Examples of maintenance capital expenditures include capital expenditures
associated with the replacement of equipment and oil and natural gas reserves
(including non-proved reserves attributable to undeveloped leasehold acreage),
whether through the development, exploitation and production of an existing
leasehold or the acquisition or development of a new oil or natural gas
property. Maintenance capital expenditures will also include interest (and
related fees) on debt incurred and distributions on equity issued to finance
all
or any portion of a replacement asset during the period from such financing
until the earlier to occur of the date any such replacement asset is placed
into
service or the date that it is abandoned or disposed of. Plugging and
abandonment costs will also constitute maintenance capital expenditures. Capital
expenditures made solely for investment purposes will not be considered
maintenance capital expenditures.
Because
our maintenance capital expenditures can be very large and irregular, the amount
of our actual maintenance capital expenditures may differ substantially from
period to period, which could cause similar fluctuations in the amounts of
operating surplus, adjusted operating surplus and cash available for
distribution to our unitholders if we subtracted actual maintenance capital
expenditures from operating surplus. As a result, to eliminate the effect on
operating surplus of these fluctuations, our limited liability company agreement
requires that an estimate of the average quarterly maintenance capital
expenditures (including estimated plugging and abandonment costs) necessary
to
maintain our asset base over the long term be subtracted from operating surplus
each quarter as opposed to the actual amounts spent. The amount of estimated
maintenance capital expenditures deducted from operating surplus is subject
to
review and change by our board of managers at least once a year, provided
that any
change is approved by our conflicts committee. The estimate is made at least
annually and whenever an event occurs that is likely to result in a material
adjustment to the amount of our maintenance capital expenditures, such as a
major acquisition or the introduction of new governmental regulations that
will
impact our business. For purposes of calculating operating surplus, any
adjustment to this estimate will be prospective only.
The
use
of estimated maintenance capital expenditures in calculating operating surplus
has the following effects:
|
·
|
it
reduces the risk that maintenance capital expenditures in any one
quarter
will be large enough to render operating surplus less than the IQD
to be
paid on all the units for that quarter and subsequent
quarters;
|
|
·
|
it
increases our ability to distribute as operating surplus cash we
receive
from non-operating sources;
|
|
·
|
it
is more difficult for us to raise our distribution above the IQD
and pay
management incentive distributions on our management incentive interests;
and
|
|
·
|
it
reduces the likelihood that a large maintenance capital expenditure
during
the First MII Earnings Period (as defined in “— Management Incentive
Interests” below) or Later MII Earnings Period (as defined in
“—Management Incentive Interests” below) will prevent the payment of
a management incentive distribution in respect of the First MII Earnings
Period or Later MII Earnings Period since the effect of an estimate
is to
spread the expected expense over several periods, thereby mitigating
the
effect of the actual payment of the expenditure on any single
period.
|
Expansion
capital expenditures are those capital expenditures that we expect will increase
our asset base. Examples of expansion capital expenditures include the
acquisition of reserves or equipment, the acquisition of new leasehold interest,
or the development, exploitation and production of an existing leasehold
interest, to the extent such expenditures are incurred to increase our asset
base. Expansion capital expenditures will also include interest (and related
fees) on debt incurred and distributions on equity issued to finance all or
any
portion of such capital improvement during the period from such financing until
the earlier to occur of the date any such capital improvement is placed into
service or the date that it is abandoned or disposed of. Capital expenditures
made solely for investment purposes will not be considered expansion capital
expenditures.
Investment
capital expenditures are those capital expenditures that are neither maintenance
capital expenditures nor expansion capital expenditures. Investment capital
expenditures largely will consist of capital expenditures made for investment
purposes. Examples of investment capital expenditures include traditional
capital expenditures for investment purposes, such as purchases of securities,
as well as other capital expenditures that might be made in lieu of such
traditional investment capital expenditures, such as the acquisition of a
capital asset for investment purposes or development of our undeveloped
properties in excess of maintenance capital expenditures, but which are not
expected to expand for more than the short term our asset base.
As
described above, none of actual maintenance capital expenditures, investment
capital expenditures or expansion capital expenditures are subtracted from
operating surplus. Because actual maintenance capital expenditures, investment
capital expenditures and expansion capital expenditures include interest
payments (and related fees) on debt incurred and distributions on equity issued
to finance all of the portion of the construction, replacement or improvement
of
a capital asset (such as equipment or reserves) during the period from such
financing until the earlier to occur of the date any such capital asset is
placed into service or the date that it is abandoned or disposed of, such
interest payments and equity distributions are also not subtracted from
operating surplus (except, in the case of maintenance capital expenditures,
to
the extent such interest payments and distributions are included in estimated
maintenance capital expenditures).
Capital
expenditures that are made in part for maintenance capital purposes and in
part
for investment capital or expansion capital purposes will be allocated as
maintenance capital expenditures, investment capital expenditures or expansion
capital expenditure by our board of managers, based upon its good faith
determination, subject to approval by our conflicts committee.
Definition
of Capital Surplus
We
also
define capital surplus in the glossary, and it will generally be generated
only
by:
|
·
|
borrowings
other than working capital
borrowings;
|
|
·
|
sales
of debt and equity securities; and
|
|
·
|
sales
or other disposition of assets for cash, other than inventory, accounts
receivable and other current assets sold in the ordinary course of
business or as part of normal retirements or replacements of
assets.
|
Characterization
of Cash Distributions
We
treat
all available cash distributed as coming from operating surplus until the sum
of
all available cash distributed since we began operations equals the operating
surplus as of the most recent date of determination of available cash. We treat
any amount distributed in excess of operating surplus, regardless of its source,
as capital surplus. We do not anticipate that we will make any distributions
from capital surplus.
Distributions
of Available Cash from Operating Surplus
We
make
distributions of available cash from operating surplus for any quarter in the
following manner:
|
·
|
first,
98% to the common unitholders, pro rata, and 2% to the holder(s)
of our
Class A units, pro rata, until we distribute for each outstanding
unit an
amount equal to the Target Distribution (that is, our $0.4625 IQD
plus
$0.0694), which aggregate amount we refer to as the “Target Distribution”,
for that quarter; and
|
|
·
|
thereafter,
any amount distributed in respect of such quarter in excess of the
Target
Distribution per unit will be distributed 98% to the holders of the
common
units, pro rata, and 2% to the holder(s) of our Class A units until
distributions become payable in respect of our management incentive
interests as described in “—Management Incentive Interests”
below.
|
The
Class
A units are entitled to 2% of all cash distributions from operating surplus,
without any requirement for future capital contributions by the holders of
such
Class A units, even if we issue additional common units or other senior or
subordinated equity securities in the future. The percentage interests shown
above for the Class A units assume they have not been converted into common
units. If the Class A units have been converted, the common units will receive
the 2% of distributions originally allocated to the Class A units.
Management
Incentive Interests
Management
incentive interests represent the right to receive 15% of quarterly
distributions of available cash from operating surplus after the Target
Distribution has been achieved and certain other tests have been met. CEPM
currently holds the management incentive interests, which are evidenced by
the
Class C limited liability company interests, but may transfer these rights
separately from its Class A units, subject to restrictions in our limited
liability company agreement. The earliest that we could be required to make
distributions in respect of the management incentive interests is after a period
of 12 consecutive quarters after we pay per unit cash distributions from
operating surplus to holders of Class A and common units in an amount equal
or
greater than the Target Distribution. The increase of our regular quarterly
distribution from $0.4625 per unit to $0.5625 per unit on our outstanding common
and Class A units commenced the First MII Earnings Period. An initial reserve
of
$0.1 million has been established to fund future distributions on the management
incentive interests. We are not able to predict the amount of the distributions
in respect of the management incentive interests.
Prior
to
the end of the First MII Earnings Period or Later MII Earnings Period, which
are
defined below, we will not pay any management incentive distributions. To the
extent, however, that during the First MII Earnings Period or Later MII Earnings
Period we distribute available cash from operating surplus in excess of the
Target Distribution, our board of managers intends to cause us to reserve an
amount for payment of the EP MID, which is defined below, earned during the
First MII Earnings Period or Later MII Earnings Period, as the case may be,
after such period ends. If during the First MII Earnings Period or Later MII
Earnings Period we fail to satisfy a condition specified in the next paragraph,
our board of managers will cause any such reserved amount to be released from
that reserve and restored to available cash.
Payments
to the holder of our management incentive interests are subject to the
satisfaction of certain requirements. The first requirement is the 12-Quarter
Test, which requires that for the 12 full, consecutive, non-overlapping calendar
quarters that begin with the first calendar quarter in respect of which we
pay
per unit cash distributions from operating surplus to holders of Class A and
common units in an amount equal to or greater than the Target Distribution
(we
refer to such 12-quarter period as the “First MII Earnings
Period”):
|
·
|
we
pay cash distributions from operating surplus to holders of our
outstanding Class A and common units in an amount that on average
exceeds
the Target Distribution on all of the outstanding Class A units and
common
units over the First MII Earnings
Period;
|
|
·
|
we
generate adjusted operating surplus (which is summarized below and
is
defined in the glossary included as Appendix A) during the First
MII
Earnings Period that on average is in an amount at least equal to
100% of
all distributions on the outstanding Class A and common units up
to the
Target Distribution plus 117.65% of all such distributions in excess
of
the Target Distribution; and
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|
·
|
we
do not reduce the amount distributed per unit in respect of any such
12
quarters.
|
The
second requirement is the 4-Quarter Test, which requires that for each of the
last four full, consecutive, non-overlapping calendar quarters in the First
MII
Earnings Period:
|
·
|
we
pay cash distributions from operating surplus to the holders of our
outstanding Class A and common units that exceed the Target Distribution
on all of the outstanding Class A and common
units;
|
|
·
|
we
generate adjusted operating surplus in an amount at least equal to
100% of
all distributions on the outstanding Class A and common units up
to the
Target Distribution plus 117.65% of all such distributions in excess
of
the Target Distribution; and
|
|
·
|
we
do not reduce the amount distributed per unit in respect of any such
four
quarters.
|
If
both
the 12-Quarter Test and the 4-Quarter Test have been met, then: (i) we will
make
a one-time management incentive distribution (contemporaneously with the
distribution paid in respect of the Class A and common units for the twelfth
calendar quarter in the First MII Earnings Period) to the holder of our
management incentive interests equal to 17.65% of the sum of the cumulative
amounts, if any, by which quarterly cash distributions per unit part on the
outstanding Class A and common units during the First MII Earnings Period
exceeded the Target Distribution on all of the outstanding Class A and common
units (we refer to this one-time management incentive distribution as an “EP
MID”); and (ii) for each calendar quarter after the First MII Earnings Period,
the holders of our Class A units and common units and management incentive
interests will receive 2%, 83% and 15%, respectively, of cash distributions
from
available cash from operating surplus that we pay for such quarter in excess
of
the Target Distribution.
If
the
12-Quarter Test is not met and except as described below, management incentive
distributions will not be payable in respect of the First MII Earnings Period
and the holder of the management incentive interests will forfeit any and all
rights to any management incentive distributions in respect of the First MII
Earnings Period. An EP MID may become payable, however, with respect to a Later
MII Earnings Period, if the 12-Quarter Test and the 4-Quarter Test are met
in
respect of such Later MII Earnings Period. A Later MII Earnings Period may
begin
with the first quarter following the quarter in which the 12-Quarter Test is
not
met, or, where we do not meet the 12-Quarter Test because we reduced our cash
distribution in a particular quarter, the Later MII Earnings Period may begin
with the quarter in which such reduction is made. If both tests are met with
respect to a Later MII Earnings Period, then for each calendar quarter after
the
Later MII Earnings Period, the holders of the Class A units and common units
and
management incentive interests will receive 2%, 83% and 15%, respectively,
of
cash distributions from available cash from operating surplus that we pay for
such quarter in excess of the Target Distribution.
However,
if (a) the 12-Quarter Test has been met in respect of the First MII Earnings
Period or any Later MII Earnings Period, but not the 4-Quarter Test; (b) the
4-Quarter Test has been met in any period of four full, consecutive and
non-overlapping quarters occurring after the end of the First MII Earnings
Period or Later MII Earnings Period, as the case may be, up to three of which
quarters can fall within the First MII Earnings Period or Later MII Earnings
Period, as the case may be (we refer to such four-quarter period as the “MII
4-Quarter Earnings Period”); and (c) we have paid at least the IQD in each
calendar quarter occurring between the end of the First MII Earnings Period
or
Later MII Earnings Period, as the case may be, and the beginning of the MII
4-Quarter Earnings Period:
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·
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the
holders of our Class A units and common units and management incentive
interests will receive 2%, 83% and 15%, respectively, of cash
distributions from available cash from operating surplus that we
pay in
excess of the Target Distribution for each calendar quarter after
the MII
4-Quarter Earnings Period; and
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|
·
|
the
holder of our management incentive interests will receive an EP MID
with
respect to the First MII Earnings Period or Later MII Earnings Period,
as
the case may be.
|
Our
board
of managers has adopted a policy that it will raise our quarterly cash
distribution only when it believes that (i) we have sufficient reserves and
liquidity for the proper conduct of our business, including the maintenance
of
our asset base, and (ii) we can maintain such increased distribution level
for a
sustained period. While this is our current policy, our board of managers may
alter such policy in the future when and if it determines such alteration to
be
appropriate.
Definition
of Adjusted Operating Surplus
We
define
adjusted operating surplus in the glossary and for any period it generally
means:
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·
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operating
surplus generated with respect to that period less any amounts described
in the fifth bullet point under “—Definition of Operating Surplus” above;
less
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·
|
any
net increase in working capital borrowings with respect to that period
(excluding any such borrowings to the extent the proceeds are distributed
to the record holder of our Class D interests);
less
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|
·
|
any
net reduction in cash reserves for operating expenditures with respect
to
that period not relating to an operating expenditure made with respect
to
that period; plus
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|
·
|
any
net decrease in working capital borrowings with respect to that period;
plus
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|
·
|
any
net increase in cash reserves for operating expenditures made with
respect
to that period required by any debt instrument for the repayment
of
principal, interest or premium.
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Adjusted
operating surplus is intended to reflect the cash generated from our operations
during a particular period and therefore excludes net increases in working
capital borrowings and net drawdowns of reserves of cash generated in prior
periods.
Percentage
Allocations of Available Cash from Operating Surplus
The
following table illustrates the percentage allocations of the additional
available cash from operating surplus between the unitholders and CEPM as the
owner of our management incentive interests up to various distribution levels.
The amounts set forth under “Marginal Percentage Interest in Distributions” are
the percentage interests of our Class A unitholders and common unitholders
and
the holders of our management incentive interests in any available cash from
operating surplus we distribute up to and including the corresponding amount
in
the column “Quarterly Distribution Level,” until available cash from operating
surplus we distribute reaches the next distribution level, if any. The
percentage interests shown for the IQD are also applicable to quarterly
distribution amounts that are less than the IQD. The percentage interests shown
in the table below assume that the Class A units have not been converted into
common units as described herein.
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Marginal
Percentage Interest in Distributions
|
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Quarterly
Distribution Level
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Class
A Unitholders
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|
Common
Unitholders
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Management
Incentive Interests
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IQD
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$0.4625
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|
2%
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98%
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0%
|
Target
Distribution
|
|
above
$0.4625 up to $0.5319
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|
2%
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|
98%
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0%
|
Thereafter*
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|
above
$0.5319
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|
2%
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|
83%
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|
15%
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* |
Assumes
the management incentive interests have met the 12-Quarter Test and
the
4-Quarter Test. Until the 12-Quarter Test and the 4-Quarter Test
are met
and distributions in respect of the management incentive interests
become
payable, quarterly distributions in excess of the $0.5319 Target
Distribution will be made 2% to the holder of the Class A units and
98% to
the holders of common units, pro
rata.
|
Distributions
from Capital Surplus
How
Distributions from Capital Surplus Are Made
We
make
distributions of available cash from capital surplus, if any, in the following
manner:
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·
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first,
2% to the holder of our Class A units and 98% to all common unitholders,
pro rata, until we distribute for each common unit that was issued
in our
initial public offering an amount of available cash from capital
surplus
equal to the initial public offering price;
and
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|
·
|
thereafter,
we will make all distributions of available cash from capital surplus
as
if they were from operating
surplus.
|
Effect
of a Distribution from Capital Surplus
Our
limited liability company agreement treats a distribution of capital surplus
as
the repayment of the initial common unit price from our initial public offering,
which is a return of capital. The initial public offering price less any
distributions of capital surplus per common unit is referred to as the
“unrecovered capital” per initial common unit. Each time a distribution of
capital surplus is made, the IQD and the Target Distribution will be reduced
in
the same proportion as the corresponding reduction in the unrecovered capital
per common unit. Because distributions of capital surplus will reduce the IQD,
after any of these distributions are made, it may be easier for CEPM to receive
management incentive distributions. However, any distribution of capital surplus
before the unrecovered capital per common unit is reduced to zero cannot be
applied to the payment of the IQD.
Once
we
distribute capital surplus on a common unit in an amount equal to the
unrecovered capital per common unit, we will reduce the IQD and the Target
Distribution to zero. We will then make all future distributions from operating
surplus, with 2% being distributed to the holder of our Class A units, 83%
being
distributed to our common unitholders, pro rata, and 15% being distributed
to
the holder of our management incentive interests. The percentage interests
shown
above for the Class A units assume they have not been converted into common
units. If the Class A units have been converted, the common units will receive
the 2% of distributions originally allocated to the Class A units.
Adjustment
to the IQD and Target Distribution
In
addition to adjusting the IQD and Target Distribution to reflect a distribution
of capital surplus, if we combine our common units into fewer common units
or
subdivide our common units into a greater number of common units, we will
proportionately adjust:
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·
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the
Target Distribution; and
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|
·
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the
unrecovered capital per common
unit.
|
For
example, if a two-for-one split of the common units should occur, the Target
Distribution and the unrecovered capital per common unit would each be reduced
to 50% of its initial level. We will not make any adjustment by reason of the
issuance of additional units for cash or property.
In
addition, if legislation is enacted or if existing law is modified or
interpreted by a court of competent jurisdiction, so that we become taxable
as a
corporation or otherwise subject to taxation as an entity for federal, state
or
local income tax purposes, we will reduce the IQD and the Target Distribution
for each quarter by multiplying each by a fraction, the numerator of which
is
available cash for that quarter (after deducting our board of manager’s estimate
of our aggregate liability for the quarter for such income taxes payable by
reason of such legislation or interpretation) and the denominator of which
is
the sum of available cash for that quarter plus our board of managers’ estimate
of our aggregate liability for the quarter for such income taxes payable by
reason of such legislation or interpretation. To the extent that the actual
tax
liability differs from the estimated tax liability for any quarter, the
difference will be accounted for in subsequent quarters.
Quarterly
Cash Distributions on Our Class D Interests
In
order
to address the risk of early termination, without the prior consent of board
of
managers, prior to December 31, 2012, of the sharing arrangement under the
gas
purchase contract pertaining to the calculation of amounts payable to the Trust
for the NPI, and the potential reduction in our revenues resulting therefrom,
at
the closing of our initial public offering CHI contributed $8.0 million to
us
for all of our Class D interests. For each full calendar quarter during the
period commencing January 1, 2007 and ending on December 31, 2012 that the
sharing arrangement remains in effect, we will distribute to the holder of
the
Class D interests $333,333.33, as a partial return of the $8.0 million capital
contribution made for the Class D interests, which payment will be made
concurrently with the quarterly cash distribution to our unitholders for that
quarter. The Class D interests will be cancelled upon the payment of the final
distribution of $333,333.41 to CHI for the quarter ending December 31, 2012,
unless the special distribution right has been terminated earlier. Such special
quarterly cash distributions will be made 45 days after the end of each calendar
quarter.
If
the
amounts payable by us to the Trust are not calculated based on the sharing
arrangement through December 31, 2012, unless such change is approved in advance
by our board of managers and our conflicts committee, the special distribution
right for future quarters will terminate and the remaining portion of the $8.0
million original contribution not so returned in special cash distributions
will
be retained by us to partially offset the reduction in our revenues resulting
from termination of the sharing arrangement. In the case of such termination
of
the special distribution right, CHI will have the right only under specific
circumstances upon our liquidation to receive the unpaid portion of the $8.0
million capital contribution that has not then been distributed to CHI in such
special distributions. See “—Distributions of Cash Upon Liquidation” below. If
the sharing arrangement in respect of the specified wells in the Robinson’s Bend
Field (the “Trust Wells”) is terminated during a quarter, the special
distribution to CHI as the holder of our Class D interests will be prorated
for
that quarter based on the ratio of the number of days in such quarter prior
to
the effective date of such termination to 90. If we and any of the Trust, the
trustee of the Trust, or any subsequent holder of the NPI become involved in
a
dispute or proceeding in which such person asserts that prior to December 31,
2012 the sharing arrangement ceased to be applicable in calculating amounts
payable in respect of production from the Trust Wells, special cash
distributions in respect of the Class D interests for periods commencing at
the
inception of such dispute will be suspended, and such suspended amounts will
only be paid to the holder of the Class D interests to the extent it is finally
determined that the sharing arrangement remained applicable during some or
all
of the suspension period.
Distributions
of Cash Upon Liquidation
General
If
we
dissolve in accordance with our limited liability company agreement, we will
sell or otherwise dispose of our assets in a process called liquidation. We
will
first apply the proceeds of liquidation to the payment of our creditors. We
will
distribute any remaining proceeds to the unitholders, to CHI, the entity that
contributed $8.0 million to us in exchange for the Class D interests, CEPH
and
CEPM in accordance with their capital account balances, as adjusted to reflect
any gain or loss upon the sale or other disposition of our assets in
liquidation.
Manner
of Adjustments for Gain
The
manner of the adjustment for gain is set forth in our limited liability company
agreement, and requires that we will allocate any gain to the unitholders and
holders of the Class A units in the following manner:
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first,
to the holders of common units who have negative balances in their
capital
accounts to the extent of and in proportion to those negative
balances;
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second,
2% to the holder of our Class A units and 98% to the common unitholders,
pro rata, until the capital account for each common unit is equal
to the
sum of:
|
(1) the
unrecovered initial common unit price; and
(2) the
amount of the IQD for the quarter during which our liquidation occurs;
and
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third,
100% to the holder of our Class D interests, until the capital account
of
the Class D interests equals, in the aggregate, the excess, if any,
of (i)
the $8.0 million capital contribution made to us by CHI at the closing
of
our initial public offering for all of our Class D interests over
(ii) the
cumulative amount distributed as a special distribution to the holder
of
the Class D interests in accordance with the description under “Quarterly
Cash Distributions On Our Class D interests”
above;
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·
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fourth,
2%
to the holder of our Class A units and 98% to the common unitholders,
pro
rata, until the capital account for each common unit is equal to
the sum
of:
|
(1) the
amount described above under the second bullet point of this paragraph;
and
(2) the
excess of (I) over (II), where
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(I)
|
equals
the sum of the excess of the Target Distribution per common unit
over the
IQD for each quarter of our existence;
and
|
|
(II)
|
equals
the cumulative amount per common unit of any distributions of available
cash from operating surplus in excess of the IQD per common unit
that we
distributed 98% to our common unitholders, pro rata, for each quarter
of
our existence; and
|
|
·
|
thereafter,
2% to the holder of our Class A units, 83% to all common unitholders,
pro
rata, and 15% to the holder of our management incentive
interests.
|
Manner
of Adjustments for Losses
Upon
our
liquidation, we will generally allocate any loss 2% to the holder of the Class
A
units and 98% to the holders of the outstanding common units, pro
rata.
Adjustments
to Capital Accounts
We
will
make adjustments to capital accounts upon the issuance of additional common
units. In doing so, we will allocate any unrealized and, for tax purposes,
unrecognized gain or loss resulting from the adjustments to the holder of the
Class A units, the common unitholders, the holders of Class D interests and
the
holders of the management incentive interests in the same manner as we allocate
gain or loss upon liquidation. In the event that we make positive adjustments
to
the capital accounts upon the issuance of additional common units, we will
allocate any later negative adjustments to the capital accounts resulting from
the issuance of additional common units or upon our liquidation in a manner
which results, to the extent possible, in the capital account balances of the
holders of the management incentive interests equaling the amount which they
would have been if no earlier positive adjustments to the capital accounts
had
been made.
CONFLICTS
OF INTEREST AND FIDUCIARY DUTIES
Conflicts
of Interest
Affiliates
of Constellation own all of our Class A units, 5,918,894 common units, our
management incentive interests and our Class D interests. In addition, upon
the
closing of our initial offering, we entered into a management services agreement
with CEPM, a subsidiary of Constellation, and are dependent on CEPM for the
management of our operations. Conflicts of interest exist and may arise in
the
future as a result of the relationships between us and our unaffiliated
unitholders and our board of managers and executive officers and Constellation
and its affiliates, including CEPM and CEPH. These potential conflicts may
relate to the divergent interests of these parties.
Whenever
a conflict arises between Constellation and its affiliates, on the one hand,
and
us or any other unitholder, on the other hand, our board of managers will
resolve that conflict. Our limited liability company agreement limits the
remedies available to unitholders in the event a unitholder has a claim relating
to conflicts of interest.
No
breach
of obligation will occur under our limited liability company agreement in
respect of any conflict of interest if the resolution of the conflict
is:
|
·
|
Approved
by the conflicts committee of our board of managers, although our
board of
managers is not obligated to seek such
approval;
|
|
·
|
approved
by the vote of a majority of the outstanding units, excluding any
common
or Class A units owned by CEPM, CEPH or any of their affiliates although
our board of managers is not obligated to seek such
approval;
|
|
·
|
on
terms no less favorable to us than those generally provided to or
available from unaffiliated third parties;
or
|
|
·
|
fair
and reasonable to us, taking into account the totality of the
relationships between the parties involved, including other transactions
that may be particularly favorable or advantageous to
us.
|
We
anticipate that our board of managers will submit for review and approval by
our
conflicts committee any acquisitions of properties or other assets that we
propose to acquire from Constellation or any of its affiliates.
If
our
board of managers does not seek approval from the conflicts committee of our
board of managers and our board determines that the resolution or course of
action taken with respect to the conflict of interest satisfies either of the
standards set forth in the third and fourth bullet points above, then it will
be
presumed that, in making its decision, the board of managers, including board
members affected by the conflict of interest, acted in good faith, and in any
proceeding brought by or on behalf of any member or the company, the person
bringing or prosecuting such proceeding will have the burden of overcoming
such
presumption. Unless the resolution of a conflict is specifically provided for
in
our limited liability company agreement, our board of managers or its conflicts
committee may consider any factors in good faith when resolving a conflict.
When
our limited liability company agreement requires someone to act in good faith,
it requires that person to reasonably believe that he is acting in our best
interests, unless the context otherwise requires.
Conflicts
of interest could arise in the situations described below, among
others.
Constellation
and its affiliates may compete with us.
None
of
Constellation or any of its affiliates is restricted from competing with us.
Constellation and its affiliates may acquire, invest in or dispose of E&P or
other assets, including those that might be in direct competition with
us.
Neither
Constellation nor its affiliates have any obligation to offer us the opportunity
to purchase or own interests in any assets.
We
intend
to rely on CEPM to provide us with opportunities for the acquisition of oil
and
natural gas reserves, however, neither Constellation nor its affiliates has
any
obligation to offer us the opportunity to purchase or own interests in any
assets.
Affiliates
of Constellation not only have the exclusive right to elect two members of
our
board of managers but also may influence the election of the other three members
of our board of managers.
CEPM,
as
the holder of our Class A units will have the exclusive right to elect two
members of our board of managers, and CEPH, as the largest holder of our common
units, may be able to influence any vote of common unitholders, including the
election of the three members of our board of managers that are elected by
the
common unitholders. In turn, our board of managers shall have the power to
appoint our officers. Situations in which the interests of our management and
Constellation and its affiliates may differ from interests of our unaffiliated
unitholders include the following situations:
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·
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our
limited liability company agreement gives our board of managers broad
discretion in establishing cash reserves for the proper conduct of
our
business, which will affect the amount of cash available for distribution.
For example, our management will use its reasonable discretion to
establish and maintain cash reserves sufficient to fund our drilling
program;
|
|
·
|
our
management team determines the timing and extent of our drilling
program
and related capital expenditures, asset purchases and sales, borrowings,
issuances of additional membership interests and reserve adjustments,
all
of which will affect the amount of cash that we distribute to our
unitholders;
|
|
·
|
our
board of managers may cause us to borrow funds in order to permit
us to
pay cash distributions to our unitholders, even if the purpose or
effect
of the borrowing is to make management incentive distributions;
and
|
|
·
|
our
board of managers is allowed to take into account the interest of
parties
other than us, such as Constellation and its affiliates, in resolving
conflicts of interest, which has the effect of limiting the fiduciary
duty
to our unaffiliated unitholders.
|
Our
executive officers and our Class A managers also serve as managers, directors,
officers or employees of Constellation or its other affiliates as a result
of
which conflicts of interest exist and will arise in the
future.
Our
executive officers and our Class A managers are also managers, directors,
officers or employees of Constellation or its affiliates (other than us). In
making decisions in such person’s capacity as a manager, director, officer or
employee of Constellation or such affiliate, such person may make a decision
that favors the interests of Constellation or such affiliate over your interests
and may be to our detriment, notwithstanding that in making decisions in such
person’s capacity as our officer or manager such person is required to act in
good faith and in accordance with the standards set forth in our limited
liability company agreement. If in resolving a conflict of interest any of
our
executive officers and our Class A managers satisfies the applicable standards
set forth in our limited liability company agreement for resolving a conflict
of
interest, you will not be able to assert that such resolution constituted a
breach of fiduciary duty owed to us or to you by such executive officer or
Class
A manager.
We
may compete for the time and effort of our managers and officers who are also
managers, directors and officers of Constellation and its
affiliates.
Constellation
and its affiliates conduct business and activities of their own in which we
have
no economic interest. Certain of our managers and officers are employees of
Constellation and serve as managers, directors and officers of Constellation
and
its affiliates. Our managers and officers are not required to work full time
on
our business and affairs and may devote significant time to the affairs of
Constellation and its affiliates. There could be material competition for the
time and effort of our managers and officers who provide services to
Constellation and its affiliates.
Unitholders
will have no right to enforce obligations of Constellation and its affiliates
under agreements with us.
Any
agreements, including the management services agreement, between us, on the
one
hand, and Constellation and its affiliates, on the other hand, will not grant
to
our unitholders any right to enforce the obligations of Constellation and its
affiliates in our favor.
Contracts
between us, on the one hand, and Constellation and its affiliates, on the other,
will not be the result of arm’s-length negotiations.
Neither
our limited liability company agreement nor any of the other contracts or
arrangements, including our management services agreement, between us and
Constellation and its affiliates are or will be the result of arm’s-length
negotiations.
Fiduciary
Duties
Our
limited liability company agreement provides that our business and affairs
shall
be managed under the direction of our board of managers, which shall have the
power to appoint our officers. Our limited liability company agreement further
provides that the authority and function of our board of managers and officers
shall be identical to the authority and functions of a board of directors and
officers of a corporation organized under the Delaware General Corporation
Law
(“DGCL”). However, our managers and officers do not owe us the same duties that
the directors and officers of a corporation organized under the DGCL would
owe
to that corporation. Rather, our limited liability company agreement provides
that the fiduciary duties and obligations owed to us and to our members by
our
managers and officers is generally to act in good faith in the performance
of
their duties on our behalf. Our limited liability company agreement permits
affiliates of our managers to invest or engage in other businesses or activities
that compete with us. In addition, if our conflicts committee approves a
transaction involving potential conflicts, or if a transaction is on terms
generally available from unaffiliated third parties or an action is taken that
is fair and reasonable to the company, unitholders will not be able to assert
that such approval constituted a breach of fiduciary duties owed to them by
our
managers and officers.
We
are
unlike publicly traded partnerships whose business and affairs are managed
by a
general partner with fiduciary duties to the partnership. While CEPM provides
legal, accounting, finance, tax, property management, engineering and other
services to us pursuant to the management services agreement, subject to the
oversight of our board of managers, we have no general partner with fiduciary
duties to us. CEPM’s duties to us are contractual in nature and arise solely
under the management services agreement. As a consequence, none of
Constellation, CEPM, CEPH, CCG or their affiliates owe to us a fiduciary duty
similar to that owed by a general partner to its limited partners.
DESCRIPTION
OF THE COMMON UNITS
The
Common Units
The
common units represent limited liability company interests in us. The holders
of
common units are entitled to participate in distributions and exercise the
rights or privileges provided under our limited liability company agreement.
For
a description of the relative rights and preferences of holders of common units
in and to distributions, please read this section and “How We Make Cash
Distributions.” For a description of the rights and privileges of holders of
common units under our limited liability company agreement, including voting
rights, please read “The Limited Liability Company Agreement.”
Transfer
Agent and Registrar
Computershare
Trust Company, N.A. serves as registrar and transfer agent for the common units.
We pay all fees charged by the transfer agent for transfers of common units,
except the following fees that will be paid by holders of common
units:
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surety
bond premiums to replace lost or stolen certificates, taxes and other
governmental charges;
|
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·
|
special
charges for services requested by a holder of a common unit;
and
|
|
·
|
other
similar fees or charges.
|
There
is
no charge to unitholders for disbursements of our cash distributions. We will
indemnify the transfer agent, its agents and each of their shareholders,
managers, officers and employees against all claims and losses that may arise
out of acts performed or omitted in that capacity, except for any liability
due
to any gross negligence or intentional misconduct of the indemnified person
or
entity.
The
transfer agent may at any time resign, by notice to us, or be removed by us.
The
resignation or removal of the transfer agent will become effective upon our
appointment of a successor transfer agent and registrar and its acceptance
of
the appointment. If no successor has been appointed and has accepted the
appointment within 30 days after notice of the resignation or removal, we are
authorized to act as the transfer agent and registrar until a successor is
appointed.
Transfer
of Common Units
By
transfer of common units in accordance with our limited liability company
agreement, each transferee of common units shall be admitted as a unitholder
of
our company with respect to the common units transferred when such transfer
and
admission is reflected on our books and records. Additionally, each transferee
of common units:
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becomes
the record holder of the common
units;
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automatically
agrees to be bound by the terms and conditions of, and is deemed
to have
executed our limited liability company
agreement;
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represents
that the transferee has the capacity, power and authority to enter
into
the limited liability company
agreement;
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grants
powers of attorney to our officers and any liquidator of our company
as
specified in the limited liability company agreement;
and
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makes
the consents and waivers contained in our limited liability company
agreement.
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A
transferee will become a unitholder of our company for the transferred common
units upon the recording of the name of the transferee on our books and
records.
Until
a
common unit has been transferred on our books, we and the transfer agent,
notwithstanding any notice to the contrary, may treat the record holder of
the
common unit as the absolute owner for all purposes, except as otherwise required
by law or stock exchange regulations.
DESCRIPTION
OF DEBT SECURITIES
Any
debt
securities that we offer under a prospectus supplement will be direct, unsecured
general obligations. The debt securities will be either senior debt securities
or subordinated debt securities. The debt securities will be issued under one
or
more separate indentures between us and a banking or financial institution,
as
trustee. Senior debt securities will be issued under a senior indenture, and
subordinated debt securities will be issued under a subordinated indenture.
Together, the senior indenture and the subordinated indenture are called the
“indentures.” The indentures will be supplemented by supplemental indentures,
the material provisions of which will be described in a prospectus
supplement.
As
used
in this description, the words “CEP,” “we,” “us” and “our” refer to
Constellation Energy Partners LLC, and not to any of its subsidiaries or
affiliates.
We
have
summarized some of the material provisions of the indentures below. This summary
does not restate those agreements in their entirety. A form of senior indenture
and a form of subordinated indenture have been filed as exhibits to the
registration statement of which this prospectus is a part. We urge you to read
each of the indentures because each one, and not this description, defines
the
rights of holders of debt securities.
Capitalized
terms defined in the indentures have the same meanings when used in this
prospectus.
General
The
debt
securities issued under the indentures will be our direct, unsecured general
obligations. The senior debt securities will rank equally with all of our other
senior and unsubordinated debt. The subordinated debt securities will have
a
junior position to all of our senior debt.
A
substantial portion of our assets are held by our operating subsidiaries. With
respect to these assets, holders of senior debt securities that are not
guaranteed by our operating subsidiaries and holders of subordinated debt
securities will have a position junior to the prior claims of creditors of
these
subsidiaries, including trade creditors, debtholders (including those under
our
reserve-based credit facility), secured creditors, taxing authorities and
guarantee holders, and any preferred unitholders, except to the extent that
CEP
itself may be a creditor with recognized claims against any subsidiary. Our
ability to pay the principal, premium, if any, and interest on any debt
securities is, to a large extent, dependent upon the payment to us by our
subsidiaries of dividends, debt principal and interest or other
charges.
The
following description sets forth the general terms and provisions that could
apply to debt securities that we may offer to sell. A prospectus supplement
and
an indenture relating to any series of debt securities being offered will
include specific terms relating to the offering. These terms will include some
or all of the following:
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the
title and type of the debt securities;
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the
total principal amount of the debt securities;
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the
percentage of the principal amount at which the debt securities will
be
issued and any payments due if the maturity of the debt securities
is
accelerated;
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the
dates on which the principal of the debt securities will be payable;
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the
interest rate which the debt securities will bear and the interest
payment
dates for the debt securities;
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any
conversion or exchange features;
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any
optional redemption periods;
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any
sinking fund or other provisions that would obligate us to repurchase
or
otherwise redeem some or all of the debt securities;
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any
provisions granting special rights to holders when a specified event
occurs;
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any
changes to or additional events of default or covenants;
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any
special tax implications of the debt securities, including provisions
for
original issue discount securities, if offered; and
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any
other terms of the debt securities.
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None
of
the indentures will limit the amount of debt securities that may be issued.
Each
indenture will allow debt securities to be issued up to the principal amount
that may be authorized by us and may be in any currency or currency unit
designated by us.
Debt
securities of a series may be issued in registered, coupon or global
form.
Subsidiary
Guarantees
If
the
applicable prospectus supplement relating to a series of our senior debt
securities provides that those senior debt securities will have the benefit
of a
guarantee by any or all of our operating subsidiaries, payment of the principal,
premium, if any, and interest on those senior debt securities will be
unconditionally guaranteed on an unsecured, unsubordinated basis by such
subsidiary or subsidiaries. The guarantee of senior debt securities will rank
equally in right of payment with all of the unsecured and unsubordinated
indebtedness of such subsidiary or subsidiaries.
If
the
applicable prospectus supplement relating to a series of our subordinated debt
securities provides that those subordinated debt securities will have the
benefit of a guarantee by any or all of our operating subsidiaries, payment
of
the principal, premium, if any, and interest on those subordinated debt
securities will be unconditionally guaranteed on an unsecured, subordinated
basis by such subsidiary or subsidiaries. The guarantee of the subordinated
debt
securities will be subordinated in right of payment to all of such subsidiary’s
or subsidiaries’ existing and future senior indebtedness (as defined in the
related prospectus supplement),
including any guarantee of the senior debt securities, to the same extent and
in
the same manner as the subordinated debt securities are subordinated to our
senior indebtedness (as defined in the related prospectus supplement). See
“―Subordination”
below.
The
obligations of our operating subsidiaries under any such guarantee will be
limited as necessary to prevent the guarantee from constituting a fraudulent
conveyance or fraudulent transfer under applicable law.
Covenants
Under
the
indentures, we:
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will
pay the principal of, interest and any premium on, the debt securities
when due;
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will
maintain a place of payment;
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will
deliver a certificate to the trustee at the end of each fiscal year
reviewing our obligations under the indentures;
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will
preserve our limited liability company existence; and
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will
deposit sufficient funds with any paying agent on or before the due
date
for any principal, interest or premium.
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Mergers
and Sale of Assets
Each
of
the indentures will provide that we may not consolidate with or merge into
any
other Person or sell, convey, transfer or lease all or substantially all of
our
properties and assets (on a consolidated basis) to another Person,
unless:
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either:
(a) CEP is the surviving Person; or (b) the Person formed by or surviving
any such consolidation, amalgamation or merger or resulting from
such
conversion (if other than CEP) or to which such sale, assignment,
transfer, conveyance or other disposition has been made is a corporation,
limited liability company or limited partnership organized or existing
under the laws of the United States, any state of the United States
or the
District of Columbia;
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the
Person formed by or surviving any such conversion, consolidation,
amalgamation or merger (if other than CEP) or the Person to which
such
sale, assignment, transfer, conveyance or other disposition has been
made
assumes all of the obligations of CEP under such indenture and the
debt
securities governed thereby pursuant to agreements reasonably satisfactory
to the trustee;
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we
or the successor will not immediately be in default under such indenture;
and
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we
deliver an officer’s certificate and opinion of counsel to the trustee
stating that such consolidation or merger complies with such indenture
and
that all conditions precedent set forth in such indenture have been
complied with.
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Upon
the
assumption of our obligations under each indenture by a successor, we will
be
discharged from all obligations under such indenture.
As
used
in the indenture and in this description, the word “Person” means any
individual, corporation, company, limited liability company, partnership,
limited partnership, joint venture, association, joint-stock company, trust,
other entity, unincorporated organization or government or any agency or
political subdivision thereof..
Events
of Default
“Event
of
default,” when used in the indentures, with respect to debt securities of any
series, will mean any of the following:
(1) default
in the payment of any interest upon any debt security of that series when it
becomes due and payable, and continuance of such default for a period of 30
days;
(2) default
in the payment of the principal of (or premium, if any, on) any debt security
of
that series at its maturity;
(3) default
in the performance, or breach, of any covenant set forth in Article Ten of
the
applicable indenture (other than a covenant a default in whose performance
or
whose breach is elsewhere specifically dealt with as an event of default or
which has expressly been included in such indenture solely for the benefit
of
one or more series of debt securities other than that series), and continuance
of such default or breach for a period of 90 days after there has been given,
by
registered or certified mail, to CEP by the trustee or to CEP and the trustee
by
the holders of at least 25% in principal amount of the then-outstanding debt
securities of that series a written notice specifying such default or breach
and
requiring it to be remedied and stating that such notice is a “Notice of
Default” thereunder;
(4) default
in the performance, or breach, of any covenant in the applicable indenture
(other than a covenant set forth in Article Ten of such indenture or any other
covenant a default in whose performance or whose breach is elsewhere
specifically dealt with as an event of default or which has expressly been
included in such indenture solely for the benefit of one or more series of
debt
securities other than that series), and continuance of such default or breach
for a period of 180 days after there has been given, by registered or certified
mail, to CEP by the trustee or to CEP and the trustee by the holders of at
least
25% in principal amount of the then-outstanding debt securities of that series
a
written notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a “Notice of Default” thereunder;
(5) CEP,
pursuant to or within the meaning of any bankruptcy law, (i) commences a
voluntary case, (ii) consents to the entry of any order for relief against
it in
an involuntary case, (iii) consents to the appointment of a custodian of it
or
for all or substantially all of its property, or (iv) makes a general assignment
for the benefit of its creditors;
(6) a
court
of competent jurisdiction enters an order or decree under any bankruptcy law
that (i) is for relief against CEP in an involuntary case, (ii) appoints a
custodian of CEP or for all or substantially all of its property, or (iii)
orders the liquidation of CEP ; and the order or decree remains unstayed and
in
effect for 60 consecutive days;
(7) default
in the deposit of any sinking fund payment when due; or
(8) any
other
event of default provided with respect to debt securities of that series in
accordance with provisions of the indenture related to the issuance of such
debt
securities.
An
event
of default for a particular series of debt securities does not necessarily
constitute an event of default for any other series of debt securities issued
under an indenture. The trustee may withhold notice to the holders of debt
securities of any default (except in the payment of principal, interest or
any
premium) if it considers the withholding of notice to be in the interests of
the
holders.
If
an
event of default for any series of debt securities occurs and continues, the
trustee or the holders of a specified percentage in aggregate principal amount
of the debt securities of the series may declare the entire principal of all
of
the debt securities of that series to be due and payable immediately. If this
happens, subject to certain conditions, the holders of a specified percentage
of
the aggregate principal amount of the debt securities of that series can void
the declaration.
Other
than its duties in case of a default, a trustee is not obligated to exercise
any
of its rights or powers under any indenture at the request, order or direction
of any holders, unless the holders offer the trustee reasonable indemnity.
If
they provide this reasonable indemnification, the holders of a majority in
principal amount outstanding of any series of debt securities may direct the
time, method and place of conducting any proceeding or any remedy available
to
the trustee, or exercising any power conferred upon the trustee, for any series
of debt securities.
Amendments
and Waivers
Subject
to certain exceptions, the indentures, the debt securities issued thereunder
or
the subsidiary guarantees may be amended or supplemented with the consent of
the
holders of a majority in aggregate principal amount of the then-outstanding
debt
securities of each series affected by such amendment or supplemental indenture,
with each such series voting as a separate class (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, debt securities) and, subject to certain exceptions, any past default
or compliance with any provisions may be waived with respect to each series
of
debt securities with the consent of the holders of a majority in principal
amount of the then-outstanding debt securities of such series voting as a
separate class (including consents obtained in connection with a purchase of,
or
tender offer or exchange offer for, debt securities).
Without
the consent of each holder of the outstanding debt securities affected, an
amendment or waiver may not, among other things:
(1) change
the stated maturity of the principal of, or any installment of principal of
or
interest on, any debt security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption thereof,
or
reduce the amount of the principal of an original issue discount security that
would be due and payable upon a declaration of acceleration of the maturity
thereof pursuant to the applicable indenture, or change any place of payment
where, or the coin or currency in which, any debt security or any premium or
the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the stated maturity thereof (or,
in
the case of redemption, on or after the redemption date therefor);
(2) reduce
the percentage in principal amount of the then-outstanding debt securities
of
any series, the consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver (of
compliance with certain provisions of the applicable indenture or certain
defaults thereunder and their consequences) provided for in the applicable
indenture;
(3) modify
any of the provisions set forth in (i) the sections related to matters addressed
in items (1) through (15) of this caption, “− Amendments and Waivers,”
immediately below, (ii) the provisions of the applicable indenture related
to
the holder’s unconditional right to receive principal, premium, if any, and
interest on the debt securities or (iii) the provisions of the applicable
indenture related to the waiver of past defaults under such indenture except
to
increase any such percentage or to provide that certain other provisions of
such
indenture cannot be modified or waived without the consent of the holder of
each
then-outstanding debt security affected thereby; provided,
however,
that
this clause shall not be deemed to require the consent of any holder with
respect to changes in the references to “the trustee” and concomitant changes in
this section of such indenture, or the deletion of this proviso in such
indenture, in accordance with the requirements of such indenture;
(4) waive
a
redemption payment with respect to any debt security; provided,
however,
that
any purchase or repurchase of debt securities shall not be deemed a redemption
of the debt securities;
(5) release
any guarantor from any of its obligations under its guarantee or the applicable
indenture, except in accordance with the terms of such indenture (as
supplemented by any supplemental indenture); or
(6) make
any
change in the foregoing amendment and waiver provisions.
Notwithstanding
the foregoing, without the consent of any holder of debt securities, CEP, the
guarantors and the trustee may amend each of the indentures or the debt
securities issued thereunder to:
(1) cure
any
ambiguity or to correct or supplement any provision therein that may be
inconsistent with any other provision therein;
(2) evidence
the succession of another Person to CEP and the assumption by any such successor
of the covenants of CEP therein and, to the extent applicable, to the debt
securities;
(3) provide
for uncertificated debt securities in addition to or in place of certificated
debt securities; provided
that the
uncertificated debt securities are issued in registered form for purposes of
Section 163(f) of the Internal Revenue Code of 1986, as amended (the “Code”), or
in the manner such that the uncertificated debt securities are described in
Section 163(f)(2)(B) of the Code;
(4) add
a
guarantee and cause any Person to become a guarantor, and/or to evidence the
succession of another person or entity to a guarantor and the assumption by
any
such successor of the guarantee of such guarantor therein and, to the extent
applicable, endorsed upon any debt securities of any series;
(5) secure
the debt securities of any series;
(6) add
to
the covenants of CEP such further covenants, restrictions, conditions or
provisions as CEP shall consider to be appropriate for the benefit of the
holders of all or any series of debt securities (and if such covenants,
restrictions, conditions or provisions are to be for the benefit of less than
all series of debt securities, stating that such covenants are expressly being
included solely for the benefit of such series) or to surrender any right or
power therein conferred upon CEP 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 the applicable indenture as set
forth
therein; provided,
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 debt securities of such series to waive such an event
of
default;
(7) make
any
change to any provision of the applicable indenture that does not adversely
affect the rights or interests of any holder of debt securities issued
thereunder;
(8) provide
for the issuance of additional debt securities in accordance with the provisions
set forth in the applicable indenture on the date of such
indenture;
(9) add
any
additional defaults or events of default in respect of all or any series of
debt
securities;
(10) add
to,
change or eliminate any of the provisions of the applicable indenture to such
extent as shall be necessary to permit or facilitate the issuance of debt
securities in bearer form, registrable or not registrable as to principal,
and
with or without interest coupons;
(11) change
or
eliminate any of the provisions of the applicable indenture; provided
that any
such change or elimination shall become effective only when there is no debt
security outstanding of any series created prior to the execution of such
supplemental indenture that is entitled to the benefit of such
provision;
(12) establish
the form or terms of debt securities of any series as permitted thereunder,
including to reopen any series of any debt securities as permitted
thereunder;
(13) evidence
and provide for the acceptance of appointment thereunder by a successor trustee
with respect to the debt securities of one or more series and to add to or
change any of the provisions of the applicable indenture as shall be necessary
to provide for or facilitate the administration of the trusts thereunder by
more
than one trustee, pursuant to the requirements of such indenture;
(14) conform
the text of the applicable indenture (and/or any supplemental indenture) or
any
debt securities issued thereunder to any provision of a description of such
debt
securities appearing in a prospectus or prospectus supplement or an offering
memorandum or offering circular to the extent that such provision was intended
to be a verbatim recreation of a provision of such indenture (and/or any
supplemental indenture) or any debt securities issued thereunder;
or
(15) modify,
eliminate or add to the provisions of the applicable indenture to such extent
as
shall be necessary to effect the qualification of such indenture under the
Trust
Indenture Act of 1939, as amended (the “Trust Indenture Act”), or under any
similar federal statute subsequently enacted, and to add to such indenture
such
other provisions as may be expressly required under the Trust Indenture
Act.
The
consent of the holders is not necessary under either indenture to approve the
particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment. After an amendment under
an
indenture becomes effective, CEP is required to mail to the holders of debt
securities thereunder a notice briefly describing such amendment. However,
the
failure to give such notice to all such holders, or any defect therein, will
not
impair or affect the validity of the amendment.
Legal
Defeasance and Covenant Defeasance
Each
indenture provides that CEP may, at its option and at any time, elect to have
all of its obligations discharged with respect to the debt securities
outstanding thereunder and all obligations of any guarantors of such debt
securities discharged with respect to their guarantees (“Legal Defeasance”),
except for:
(1) the
rights of holders of outstanding debt securities to receive payments in respect
of the principal of, or interest or premium, if any, on such debt securities
when such payments are due from the trust referred to below;
(2) CEP’s
obligations with respect to the debt securities concerning issuing temporary
debt securities, registration of debt securities, mutilated, destroyed, lost
or
stolen debt securities and the maintenance of an office or agency for payment
and money for security payments held in trust;
(3) the
rights, powers, trusts, duties and immunities of the trustee, and CEP’s and each
guarantor’s obligations in connection therewith; and
(4) the
Legal
Defeasance and Covenant Defeasance (as defined below) provisions of the
applicable indenture.
In
addition, CEP may, at its option and at any time, elect to have the obligations
of CEP released with respect to certain provisions of each indenture, including
certain provisions set forth in any supplemental indenture thereto (such release
and termination being referred to as “Covenant Defeasance”), and thereafter any
omission to comply with such obligations or provisions will not constitute
a
default or event of default. In the event Covenant Defeasance occurs in
accordance with the applicable indenture, the events of default described under
clauses (3) and (4) under the caption “− Events of Default”, in each case, will
no longer constitute an event of default thereunder.
In
order
to exercise either Legal Defeasance or Covenant Defeasance:
(1) CEP
must
irrevocably deposit with the trustee, in trust, for the benefit of the holders
of the debt securities, cash in U.S. dollars, non-callable government
securities, or a combination of cash in U.S. dollars and non-callable U.S.
government securities, in amounts as will be sufficient, in the opinion of
a
nationally recognized investment bank, appraisal firm or firm of independent
public accountants to pay the principal of, or interest and premium, if any,
on
the outstanding debt securities on the stated date for payment thereof or on
the
applicable redemption date, as the case may be, and CEP must specify whether
the
debt securities are being defeased to such stated date for payment or to a
particular redemption date;
(2) in
the
case of Legal Defeasance, CEP has delivered to the trustee an opinion of counsel
reasonably acceptable to the trustee confirming that (a) CEP has received from,
or there has been published by, the Internal Revenue Service a ruling or (b)
since the issue date of the debt securities, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel will confirm that, the holders of the
outstanding debt securities will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject
to
federal income tax on the same amounts, in the same manner and at the same
time
as would have been the case if such Legal Defeasance had not
occurred;
(3) in
the
case of Covenant Defeasance, CEP has delivered to the trustee an opinion of
counsel reasonably acceptable to the trustee confirming that the holders of
the
outstanding debt securities will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(4) no
default or event of default has occurred and is continuing on the date of such
deposit (other than a default or event of default resulting from the borrowing
of funds to be applied to such deposit);
(5) the
deposit will not result in a breach or violation of, or constitute a default
under, any other instrument to which CEP or any guarantor is a party or by
which
CEP or any guarantor is bound;
(6) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under, any material agreement or instrument (other
than the applicable indenture) to which CEP or any of its subsidiaries is a
party or by which CEP or any of its subsidiaries is bound;
(7) CEP
must
deliver to the trustee an officers’ certificate stating that the deposit was not
made by CEP with the intent of preferring the holders of debt securities over
the other creditors of CEP with the intent of defeating, hindering, delaying
or
defrauding creditors of CEP or others;
(8) CEP
must
deliver to the trustee an officers’ certificate, stating that all conditions
precedent set forth in clauses (1) through (7) of this paragraph have been
complied with; and
(9) CEP
must
deliver to the trustee an opinion of counsel (which opinion of counsel may
be
subject to customary assumptions, qualifications, and exclusions), stating
that
all conditions precedent set forth in clauses (2), (3) and (5) of this paragraph
have been complied with; provided
that the
opinion of counsel with respect to clause (5) of this paragraph may be to the
knowledge of such counsel.
Satisfaction
and Discharge
Each
of
the indentures will be discharged and will cease to be of further effect (except
as to surviving rights of registration of transfer or exchange of debt
securities, as expressly provided for in such indenture) as to all outstanding
debt securities issued thereunder and the guarantees issued thereunder
when:
(1) either
(a) all of the debt securities theretofore authenticated and delivered under
such indenture (except lost, stolen or destroyed debt securities that have
been
replaced or paid and debt securities for whose payment money or certain United
States governmental obligations have theretofore been deposited in trust or
segregated and held in trust by CEP and thereafter repaid to CEP or discharged
from such trust) have been delivered to the trustee for cancellation or (b)
all
debt securities not theretofore delivered to the trustee for cancellation have
become due and payable or will become due and payable at their stated maturity
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
by the trustee in the name, and at the expense, of CEP, and CEP or the
guarantors have irrevocably deposited or caused to be deposited with the trustee
funds or United States government obligations, or a combination thereof, in
an
amount sufficient to pay and discharge the entire indebtedness on the debt
securities not theretofore delivered to the trustee for cancellation, for
principal of and premium, if any, on and interest on the debt securities to
the
date of deposit (in the case of debt securities that have become due and
payable) or to the stated maturity or redemption date, as the case may be,
together with instructions from CEP irrevocably directing the trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be;
(2) CEP
or
the guarantors have paid all other sums then due and payable under such
indenture by CEP; and
(3) CEP
has
delivered to the trustee an officers’ certificate and an opinion of counsel,
which, taken together, state that all conditions precedent under such indenture
relating to the satisfaction and discharge of such indenture have been complied
with.
No
Personal Liability of Directors, Managers, Officers, Employees, Partners,
Members and Unitholders
No
director, manager, officer, employee, incorporator, partner, member or
stockholder of CEP or any guarantor, as such, shall have any liability for
any
obligations of CEP or the guarantors under the debt securities, the indentures,
the guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder, upon CEP’s issuance of the debt
securities and execution of the indentures, waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of
the debt securities. Such waiver may not be effective to waive liabilities
under
the federal securities laws and it is the view of the SEC that such a waiver
is
against public policy.
Denominations
Unless
stated otherwise in the prospectus supplement for each issuance of debt
securities, the debt securities will be issued in denominations of $1,000 each
or integral multiples of $1,000.
Paying
Agent and Registrar
The
trustee will initially act as paying agent and registrar for the debt
securities. CEP may change the paying agent or registrar without prior notice
to
the holders of the debt securities, and CEP may act as paying agent or
registrar.
Transfer
and Exchange
A
holder
may transfer or exchange debt securities in accordance with the applicable
indenture. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and CEP
may
require a holder to pay any taxes and fees required by law or permitted by
the
applicable indenture. CEP is not required to transfer or exchange any debt
security selected for redemption. In addition, CEP is not required to transfer
or exchange any debt security for a period of 15 days before a selection of
debt
securities to be redeemed.
Subordination
The
payment of the principal of, any premium on and interest on, subordinated debt
securities and any other payment obligations of CEP in respect of subordinated
debt securities (including any obligation to repurchase subordinated debt
securities) is subordinated in certain circumstances in right of payment, as
set
forth in the subordinated indenture, to the prior payment in full in cash of
all
senior debt.
CEP
also
may not make any payment, whether by redemption, purchase, retirement,
defeasance or otherwise, upon or in respect of subordinated debt securities,
except from the trust described under “— Legal Defeasance and Covenant
Defeasance,” if
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a
default in the payment of all or any portion of the obligations on
any
senior debt (“payment default”) occurs,
or
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any
other default occurs and is continuing with respect to designated
senior
debt pursuant to which the maturity thereof may be accelerated
(“non-payment default”) and, solely with respect to this clause, the
trustee for the subordinated debt securities receives a notice of
the
default (a “Payment Blockage Notice”) from the trustee or other
representative for the holders of such designated senior
debt.
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Cash
payments on subordinated debt securities will be resumed (a) in the case of
a
payment default, upon the date on which such default is cured or waived and
(b)
in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
designated senior debt has been accelerated or a bankruptcy event of default
has
occurred and is continuing. No new period of payment blockage may be commenced
unless and until 360 days have elapsed since the date of commencement of the
payment blockage period resulting from the immediately prior Payment Blockage
Notice. No nonpayment default in respect of designated senior debt that existed
or was continuing on the date of delivery of any Payment Blockage Notice to
the
trustee for the subordinated debt securities will be, or be made, the basis
for
a subsequent Payment Blockage Notice unless such default shall have been cured
or waived for a period of no less than 90 consecutive days.
The
subordinated indenture also requires that we promptly notify holders of senior
debt if payment of subordinated debt securities is accelerated because of an
event of default.
Upon
any
payment or distribution of assets or securities of CEP, in connection with
any
dissolution or winding up or total or partial liquidation or reorganization
of
CEP, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings or other marshalling of assets for the benefit
of creditors, all amounts due or to become due upon all senior debt shall first
be paid in full, in cash or cash equivalents, before the holders of the
subordinated debt securities or the trustee on their behalf shall be entitled
to
receive any payment by CEP on account of the subordinated debt securities,
or
any payment to acquire any of the subordinated debt securities for cash,
property or securities, or any distribution with respect to the subordinated
debt securities of any cash, property or securities. Before any payment may
be
made by, or on behalf of, CEP on any subordinated debt security (other than
with
the money, securities or proceeds held under any defeasance trust established
in
accordance with the subordinated indenture), in connection with any such
dissolution, winding up, liquidation or reorganization, any payment or
distribution of assets or securities for CEP, to which the holders of
subordinated debt securities or the trustee on their behalf would be entitled
shall be made by CEP or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person making such payment or distribution
or by
the holders or the trustee if received by them or it, directly to the holders
of
senior debt or their representatives or to any trustee or trustees under any
indenture pursuant to which any such senior debt may have been issued, as their
respective interests appear, to the extent necessary to pay all such senior
debt
in full, in cash or cash equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such senior
debt.
As
a
result of these subordination provisions, in the event of the liquidation,
bankruptcy, reorganization, insolvency, receivership or similar proceeding
or an
assignment for the benefit of the creditors of CEP or a marshalling of assets
or
liabilities of CEP, holders of subordinated debt securities may receive ratably
less than other creditors.
Payment
and Transfer
Principal,
interest and any premium on fully registered debt securities will be paid at
designated places. Payment will be made by check mailed to the persons in whose
names the debt securities are registered on days specified in the indentures
or
any prospectus supplement. Debt securities payments in other forms will be
paid
at a place designated by us and specified in a prospectus
supplement.
Fully
registered debt securities may be transferred or exchanged at the corporation
trust office of the trustee or at any other office or agency maintained by
us
for such purposes, without the payment of any service charge except for any
tax
or governmental charge.
Global
Securities
The
debt
securities of a series may be issued in whole or in part in the form of one
or
more global certificates that we will deposit with a depositary identified
in
the applicable prospectus supplement. Unless and until it is exchanged in whole
or in part for the individual debt securities that it represents, a global
security may not be transferred except as a whole:
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by
the applicable depositary to a nominee of the depositary;
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by
any nominee to the depositary itself or another nominee; or
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by
the depositary or any nominee to a successor depositary or any nominee
of
the successor.
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We
will
describe the specific terms of the depositary arrangement with respect to a
series of debt securities in the applicable prospectus supplement. We anticipate
that the following provisions will generally apply to depositary
arrangements.
When
we
issue a global security in registered form, the depositary for the global
security or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts of the individual debt securities
represented by that global security to the accounts of persons that have
accounts with the depositary (“participants”). Those accounts will be designated
by the dealers, underwriters or agents with respect to the underlying debt
securities or by us if those debt securities are offered and sold directly
by
us. Ownership of beneficial interests in a global security will be limited
to
participants or persons that may hold interests through participants. For
interests of participants, ownership of beneficial interests in the global
security will be shown on records maintained by the applicable depositary or
its
nominee. For interests of persons other than participants, that ownership
information will be shown on the records of participants. Transfer of that
ownership will be effected only through those records. The laws of some states
require that certain purchasers of securities take physical delivery of
securities in definitive form. These limits and laws may impair our ability
to
transfer beneficial interests in a global security.
As
long
as the depositary for a global security, or its nominee, is the registered
owner
of that global security, the depositary or nominee will be considered the sole
owner or holder of the debt securities represented by the global security for
all purposes under the applicable indenture. Except as provided below, owners
of
beneficial interests in a global security:
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will
not be entitled to have any of the underlying debt securities registered
in their names;
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will
not receive or be entitled to receive physical delivery of any of
the
underlying debt securities in definitive form; and
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will
not be considered the owners or holders under the indenture relating
to
those debt securities.
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Payments
of the principal of, any premium on and any interest on individual debt
securities represented by a global security registered in the name of a
depositary or its nominee will be made to the depositary or its nominee as
the
registered owner of the global security representing such debt securities.
Neither we, the trustee for the debt securities, any paying agent nor the
registrar for the debt securities will be responsible for any aspect of the
records relating to or payments made by the depositary or any participants
on
account of beneficial interests in the global security.
We
expect
that the depositary or its nominee, upon receipt of any payment of principal,
any premium or interest relating to a global security representing any series
of
debt securities, immediately will credit participants’ accounts with the
payments. Those payments will be credited in amounts proportional to the
respective beneficial interests of the participants in the principal amount
of
the global security as shown on the records of the depositary or its nominee.
We
also expect that payments by participants to owners of beneficial interests
in
the global security held through those participants will be governed by standing
instructions and customary practices. This is now the case with securities
held
for the accounts of customers registered in “street name.” Those payments will
be the sole responsibility of those participants.
If
the
depositary for a series of debt securities is at any time unwilling, unable
or
ineligible to continue as depositary and we do not appoint a successor
depositary within 90 days, we will issue individual debt securities of that
series in exchange for the global security or securities representing that
series. In addition, we may at any time in our sole discretion determine not
to
have any debt securities of a series represented by one or more global
securities. In that event, we will issue individual debt securities of that
series in exchange for the global security or securities. Furthermore, if we
specify, an owner of a beneficial interest in a global security may, on terms
acceptable to us, the trustee and the applicable depositary, receive individual
debt securities of that series in exchange for those beneficial interests.
The
foregoing is subject to any limitations described in the applicable prospectus
supplement. In any such instance, the owner of the beneficial interest will
be
entitled to physical delivery of individual debt securities equal in principal
amount to the beneficial interest and to have the debt securities registered
in
its name. Those individual debt securities will be issued in any authorized
denominations.
Governing
Law
Each
indenture and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
Notices
Notices
to holders of debt securities will be given by mail to the addresses of such
holders as they appear in the security register for such debt
securities.
Information
Concerning the Trustee
A
banking
or financial institution will be the trustee under the indentures. A successor
trustee may be appointed in accordance with the terms of the
indentures.
The
indentures and the provisions of the Trust Indenture Act incorporated by
reference therein, will contain certain limitations on the rights of the
trustee, should it become a creditor of us, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such
claim as security or otherwise. The trustee will be permitted to engage in
other
transactions; however, if it acquires any conflicting interest (within the
meaning of the Trust Indenture Act), it must eliminate such conflicting interest
or resign.
A
single
banking or financial institution may act as trustee with respect to both the
subordinated indenture and the senior indenture. If this occurs, and should
a
default occur with respect to either the subordinated debt securities or the
senior debt securities, such banking or financial institution would be required
to resign as trustee under one of the indentures within 90 days of such default,
pursuant to the Trust Indenture Act, unless such default were cured, duly waived
or otherwise eliminated.
DESCRIPTION
OF GUARANTEES OF DEBT SECURITIES
Our
subsidiaries may issue guarantees of debt securities that we offer in any
prospectus supplement. A copy of the guarantee will be filed with the SEC in
connection with the offering of guarantees. Each guarantee will be issued under
a supplement to an indenture. The prospectus supplement relating to a particular
issue of guarantees will describe the terms of those guarantees, including
the
following:
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the
series of debt securities to which the guarantees
apply;
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whether
the guarantees are secured or
unsecured;
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whether
the guarantees are conditional or
unconditional;
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whether
the guarantees are senior or subordinate to other guarantees or
debt;
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the
terms under which the guarantees may be amended, modified, waived,
released or otherwise terminated, if different from the provisions
applicable to the guaranteed debt securities;
and
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any
additional terms of the guarantees.
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THE
LIMITED LIABILITY COMPANY AGREEMENT
The
following is a summary of the material provisions of our limited liability
company agreement. Our limited liability company agreement is incorporated
by
reference as an exhibit to the registration statement of which this prospectus
constitutes a part. We will provide prospective investors with a copy of the
form of this agreement upon request at no charge.
We
summarize the following provisions of our limited liability company agreement
elsewhere in this prospectus:
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with
regard to distributions of available cash, please read “How We Make Cash
Distributions.”
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with
regard to the transfer of common units, please read “Description of the
Common Units—Transfer of Common Units;”
and
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with
regard to allocations of taxable income and taxable loss, please
read
“Material Tax Consequences.”
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Organization
Our
company was formed in February 2005 and will remain in existence until dissolved
in accordance with our limited liability company agreement.
Purpose
Under
our
limited liability company agreement, we are permitted to engage, directly or
indirectly, in any activity that our board of managers approves and that a
limited liability company organized under Delaware law lawfully may conduct;
provided,
that
our board of managers shall not cause us to engage, directly or indirectly,
in
any business activities that it determines would cause us to be treated as
an
association taxable as a corporation or otherwise taxable as an entity for
federal income tax purposes.
Although
our board of managers has the ability to cause us and our operating subsidiaries
to engage in activities other than the acquisition, development and
exploitation, of oil and natural gas properties and related midstream assets,
our board of managers has no current plans to do so. Our board of managers
is
authorized in general to perform all acts it deems to be necessary or
appropriate to carry out our purposes and to conduct our business.
Fiduciary
Duties
Our
limited liability company agreement provides that the fiduciary duties and
obligations owed to us and to our members by our managers and officers is
generally limited to their acting in good faith in the performance of their
duties on our behalf. For a description of fiduciary duties, please read
“Conflicts of Interest and Fiduciary Duties.”
Agreement
to be Bound by Limited Liability Company Agreement; Power of
Attorney
By
purchasing a common unit in us, you will be admitted as a member of our company
and will be deemed to have agreed to be bound by the terms of our limited
liability company agreement. Pursuant to this agreement, each holder of common
units and each person who acquires a common unit from a holder of common units
grants to our board of managers (and, if appointed, a liquidator) a power of
attorney to, among other things, execute and file documents required for our
qualification, continuance or dissolution. The power of attorney also grants
our
board of managers the authority to make certain amendments to, and to make
consents and waivers under and in accordance with, our limited liability company
agreement.
Capital
Contributions
Unitholders
(including holders of common units) are not obligated to make additional capital
contributions, except as described below under “—Limited
Liability.”
Limited
Liability
Unlawful
Distributions
The
Delaware Limited Liability Company Act (the “Delaware Act”) provides that any
unitholder who receives a distribution and knew at the time of the distribution
that the distribution was in violation of the Delaware Act shall be liable
to
the company for the amount of the distribution for three years. Under the
Delaware Act, a limited liability company may not make a distribution to any
unitholder if, after the distribution, all liabilities of the company, other
than liabilities to unitholders on account of their limited liability company
interests and liabilities for which the recourse of creditors is limited to
specific property of the company, would exceed the fair value of the assets
of
the company. For the purpose of determining the fair value of the assets of
a
company, the Delaware Act provides that the fair value of property subject
to
liability for which recourse of creditors is limited shall be included in the
assets of the company only to the extent that the fair value of that property
exceeds the nonrecourse liability. Under the Delaware Act, an assignee who
becomes a substituted unitholder of a company is liable for the obligations
of
his assignor to make contributions to the company, except the assignee is not
obligated for liabilities unknown to him at the time he became a unitholder
and
that could not be ascertained from the limited liability company
agreement.
Failure
to Comply with the Limited Liability Provisions of Jurisdictions in Which We
Do
Business
Our
subsidiaries may be deemed to conduct business in Alabama, Kansas, Maryland,
Oklahoma and Texas. We may decide to conduct business in other states, and
maintenance of limited liability for us, as a member of our operating
subsidiaries, may require compliance with legal requirements in the
jurisdictions in which the operating subsidiaries conduct business, including
qualifying our subsidiaries to do business there. Limitations on the liability
of unitholders for the obligations of a limited liability company have not
been
clearly established in many jurisdictions. We will operate in a manner that
our
board of managers considers reasonable and necessary or appropriate to preserve
the limited liability of our unitholders.
Voting
Rights
Holders
of our common units and our Class A units, have voting rights on most matters.
The following matters require the unitholder vote specified below:
Election
of members of the board of managers
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Our
board of managers consists of five members, as required by our limited
liability company agreement. Except as set forth below, at each annual
meeting of our unitholders, Class A unitholders, voting as a single
class,
will elect two managers and the holders of our common units, voting
together as a single class, will elect the remaining three managers.
Please read “—Election of Members of Our Board of Managers,” “—Removal of
Members of Our Board of Managers” and “—Elimination of Special Voting
Rights of Class A Units.”
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Issuance
of additional securities including common units
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No
approval right.
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Amendment
of the limited liability company agreement
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Certain
amendments may be made by our board of managers without unitholder
approval. Other amendments generally require the approval of both
a common
unit majority and Class A unit majority. Please read “—Amendment of Our
Limited Liability Company
Agreement.”
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Merger
of our company or the sale of all or substantially all of our
assets
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Common
unit majority and Class A unit majority. Please read
“—Merger,
Sale or Other Disposition of Assets.”
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Dissolution
of our company
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Common
unit majority and Class A unit majority. Please read
“—Termination
and Dissolution.”
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Matters
requiring the approval of a “common unit majority” require the approval of at
least a majority of the outstanding common units voting together as a single
class. In addition, matters requiring the approval of a “Class A unit majority”
require the approval of at least a majority of the outstanding Class A units
voting together as a single class.
Issuance
of Additional Securities
Our
limited liability company agreement authorizes us to issue an unlimited number
of additional securities and authorizes us to buy securities for the
consideration and on the terms and conditions determined by our board of
managers without the approval of our unitholders.
It
is
possible that we will fund acquisitions through the issuance of additional
common units or other equity securities. Holders of any additional common units
we issue will be entitled to share equally with the then-existing holders of
common units, Class A units and management incentive interests in our
distributions of available cash. Also, the issuance of additional common units
or other equity securities may dilute the value of the interests of the
then-existing holders of common units in our net assets.
In
accordance with Delaware law and the provisions of our limited liability company
agreement, we may also issue additional securities that, as determined by our
board of managers, may have special voting or other rights to which the units
are not entitled.
The
holders of units will not have preemptive or preferential rights to acquire
additional units or other securities.
Election
of Members of Our Board of Managers
At
our
first annual meeting of the holders of our Class A units and our common
unitholders following our initial public offering:
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two
members of our board of managers were elected by CEPM, as the holder
of
all of our Class A units; and
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three
members of our board of managers were elected by our common
unitholders.
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The
board
of managers will be subject to re-election on an annual basis in this manner
at
our annual meeting of the holders of our Class A units and our common
unitholders.
Removal
of Members of Our Board of Managers
Any
manager elected by the holder of our Class A units may be removed, with or
without cause, by the holders of 66 2/3% of the outstanding Class A units then
entitled to vote at an election of managers. Any manager elected by the holders
of our common units may be removed, with or without cause, by the holders of
at
least a majority of the outstanding common units then entitled to vote at an
election of managers.
Increase
in the Size of Our Board of Managers
The
size
of our board of managers may increase only with the approval of the holders
of
66 2/3% outstanding Class A units. If the size of our board of managers is
so
increased, the vacancy created thereby shall be filled by a person appointed
by
our board of managers or a nominee approved by a majority vote of our common
unitholders, unless such vacancy is specified by an amendment to our limited
liability company agreement as a vacancy to be filled by our Class A
unitholders, in which case such vacancy shall be filled by a person approved
by
our Class A unitholders.
Elimination
of Special Voting Rights of Class A Units
The
holders of our Class A units have the right, voting as a separate class, to
elect two of the five members of our board of managers and any replacement
of
either of such members, subject to the matters described under “—Election of
Members of Our Board of Managers—Increase in the Size of Our Board of Managers”
above. This right can be eliminated only upon a proposal submitted by or with
the consent of our board of managers and the vote of the holders of not less
than 66 2/3% of our outstanding common units. If such elimination is so approved
and Constellation and its affiliates do not vote their common units in favor
of
such elimination, the Class A units will be converted into common units on
a
one-for-one basis and CEPM will have the right to convert its management
incentive interests into common units based on the then-fair market value of
such interests.
Amendment
of Our Limited Liability Company Agreement
General
Amendments
to our limited liability company agreement may be proposed only by or with
the
consent of our board of managers. To adopt a proposed amendment, other than
the
amendments discussed below, our board of managers is required to seek written
approval of the holders of the number of units required to approve the amendment
or call a meeting of our unitholders to consider and vote upon the proposed
amendment. Except as described below, an amendment must be approved by a common
unit majority and a Class A unit majority.
Prohibited
Amendments
No
amendment may be made that would:
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enlarge
the obligations of any unitholder without its consent, unless approved
by
at least a majority of the type or class of member interests so
affected;
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provide
that we are not dissolved upon an election to dissolve our company
by our
board of managers that is approved by a common unit majority and
a Class A
unit majority;
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entitle
members holding common units and/or Class A units to more or less
than one
vote per unit;
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prohibit
the holders of Class A units from acting without a
meeting;
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change
the procedures for notice to members of business to be brought before
a
meeting and nominations to board of
managers;
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require
some percentage other than a majority of votes cast affirmatively
or
negatively by members holding units for approval of matters submitted
for
a member vote;
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allow
the calling of a special meeting by other than a majority of the
board of
managers;
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change
the term of existence of our
company;
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give
any person the right to dissolve our company other than our board
of
managers’ right to dissolve our company with the approval of a common unit
majority and a Class A unit majority;
or
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enlarge
the size of our board of managers without the approval of the holders
of
66 2/3% of our Class A units.
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The
provision of our limited liability company agreement preventing the amendments
having the effects described in any of the clauses above can be amended upon
the
approval of the holders of at least 75% of the outstanding common units, voting
together as a single class, and 75% of the outstanding Class A units, voting
together as a single class.
No
Unitholder Approval
Our
board
of managers may generally make amendments to our limited liability company
agreement without unitholder approval to reflect:
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a
change in our name, the location of our principal place of our business,
our registered agent or our registered
office;
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the
admission, substitution, withdrawal or removal of members in accordance
with our limited liability company
agreement;
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a
change that our board of managers determines to be necessary or
appropriate for us to qualify or continue our qualification as a
company
in which our members have limited liability under the laws of any
state or
to ensure that neither we, our operating subsidiaries nor any of
its
subsidiaries will be treated as an association taxable as a corporation
or
otherwise taxed as an entity for federal income tax
purposes;
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the
merger of our company or any of its subsidiaries into, or the conveyance
of all of our assets to, a newly formed entity if the sole purpose
of that
merger or conveyance is to effect a mere change in our legal form
into
another limited liability entity;
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an
amendment that is necessary, in the opinion of our counsel, to prevent
us,
members of our board, or our officers, agents or trustees from in
any
manner being subjected to the provisions of the Investment Company
Act of
1940, the Investment Advisors Act of 1940, or “plan asset” regulations
adopted under the Employee Retirement Income Security Act of 1974
(“ERISA”) whether or not substantially similar to plan asset regulations
currently applied or proposed;
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an
amendment that our board of managers determines to be necessary or
appropriate for the authorization of additional securities or rights
to
acquire securities;
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any
amendment expressly permitted in our limited liability company agreement
to be made by our board of managers acting
alone;
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an
amendment effected, necessitated or contemplated by a merger agreement
that has been approved under the terms of our limited liability company
agreement;
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any
amendment that our board of managers determines to be necessary or
appropriate for the formation by us of, or our investment in, any
corporation, partnership or other entity, as otherwise permitted
by our
limited liability company
agreement;
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a
change in our fiscal year or taxable year and related
changes;
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a
merger, conversion or conveyance effected in accordance with the
limited
liability company agreement; and
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any
other amendments substantially similar to any of the matters described
in
the clauses above.
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In
addition, our board of managers may make amendments to our limited liability
company agreement without unitholder approval if our board of managers
determines that those amendments:
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do
not adversely affect the unitholders (including any particular class
of
unitholders as compared to other classes of unitholders) in any material
respect;
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are
necessary or appropriate to satisfy any requirements, conditions
or
guidelines contained in any opinion, directive, order, ruling or
regulation of any federal or state agency or judicial authority or
contained in any federal or state
statute;
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are
necessary or appropriate to facilitate the trading of common units
or to
comply with any rule, regulation, guideline or requirement of any
securities exchange on which the common units are or will be listed
for
trading, compliance with any of which our board of managers deems
to be in
the best interests of us and our common
unitholders;
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are
necessary or appropriate for any action taken by our board of managers
relating to splits or combinations of units under the provisions
of our
limited liability company agreement;
or
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are
required to effect the intent expressed in this prospectus or the
intent
of the provisions of our limited liability company agreement or are
otherwise contemplated by our limited liability company
agreement.
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Opinion
of Counsel and Unitholder Approval
Our
board
of managers will not be required to obtain an opinion of counsel that an
amendment will not result in a loss of limited liability to our unitholders
or
result in our being treated as an entity for federal income tax purposes if
one
of the amendments described above under “—No Unitholder Approval” should occur.
No other amendments to our limited liability company agreement will become
effective without the approval of holders of at least 90% of the common units
and Class A units unless we obtain an opinion of counsel to the effect that
the
amendment will not affect the limited liability under applicable law of any
unitholder of our company.
Any
amendment that would have a material adverse effect on the rights or preferences
of any type or class of outstanding units in relation to other classes of units
will require the approval of at least a majority of the type or class of units
so affected. Any amendment that reduces the voting percentage required to take
any action is required to be approved by the affirmative vote of unitholders
whose aggregate outstanding units constitute not less than the voting
requirement sought to be reduced.
Merger,
Sale or Other Disposition of Assets; Conversion
Our
board
of managers is generally prohibited, without the prior approval of a common
unit
majority and a Class A unit majority from causing us to, among other things,
sell, exchange or otherwise dispose of all or substantially all of our assets
in
a single transaction or a series of related transactions, including by way
of
merger, consolidation or other combination, or approving on our behalf the
sale,
exchange or other disposition of all or substantially all of the assets of
our
subsidiaries, provided that our board of managers may mortgage, pledge,
hypothecate or grant a security interest in all or substantially all of our
assets without that approval. Our board of managers may also sell all or
substantially all of our assets under a foreclosure or other realization upon
the encumbrances above without that approval.
If
the
conditions specified in the limited liability company agreement are satisfied,
our board of managers may merge our company or any of its subsidiaries into,
or
convey all of our assets to, a newly formed entity if the sole purpose of that
merger or conveyance is to effect a mere change in our legal form into another
limited liability entity. Additionally, the Company may convert into any “other
entity” as defined in the Delaware Limited Liability Company Act, whether such
entity is formed under the laws of the State of Delaware or any other state
in
the United States of America. Our unitholders are not entitled to dissenters’
rights of appraisal under the limited liability company agreement or applicable
Delaware law in the event of a merger or consolidation, a sale of all or
substantially all of our assets or any other transaction or event.
Termination
and Dissolution
We
will
continue as a company until terminated under our limited liability company
agreement. We will dissolve upon: (1) the election of our board of managers
to
dissolve us, if approved by a common unit majority and a Class A unit majority;
(2) the sale, exchange or other disposition of all or substantially all of
the
assets and properties of our company and our subsidiaries; or (3) the entry
of a
decree of judicial dissolution of our company.
Liquidation
and Distribution of Proceeds
Upon
our
dissolution, the liquidator authorized to wind up our affairs will, acting
with
all of the powers of our board of managers that the liquidator deems necessary
or desirable in its judgment, liquidate our assets and apply the proceeds of
the
liquidation as provided in “How We Make Cash Distributions—Distributions of Cash
Upon Liquidation.” The liquidator may defer liquidation or distribution of our
assets for a reasonable period of time or distribute assets to unitholders
in
kind if it determines that a sale would be impractical or would cause undue
loss
to our unitholders.
Anti-Takeover
Provisions
Our
limited liability company agreement contains specific provisions that are
intended to discourage a person or group from attempting to take control of
our
company without the approval of our board of managers. Specifically, our limited
liability company agreement provides that we will elect to have Section 203
of
the DGCL apply to transactions in which an interested common unitholder (as
described below) seeks to enter into a merger or business combination with
us.
Under this provision, such a holder will not be permitted to enter into a merger
or business combination with us unless:
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prior
to such time, our board of managers approved either the business
combination or the transaction that resulted in the common unitholder’s
becoming an interested common
unitholder;
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upon
consummation of the transaction that resulted in the common unitholder
becoming an interested common unitholder, the interested common unitholder
owned at least 85% of our outstanding common units at the time the
transaction commenced, excluding for purposes of determining the
number of
common units outstanding those common units
owned:
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by
persons who are managers and also officers;
and
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by
employee common unit plans in which employee participants do not
have the
right to determine confidentially whether common units held subject
to the
plan will be tendered in a tender or exchange offer;
or
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at
or subsequent to such time the business combination is approved by
our
board of managers and authorized at an annual or special meeting
of our
common unitholders, and not by written consent, by the affirmative
vote of
the holders of at least 66 2/3% of our outstanding voting common
units
that are not owned by the interested common
unitholder.
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Section
203 of the DGCL defines “business combination” to include:
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any
merger or consolidation involving the company and the interested
common
unitholder;
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any
sale, transfer, pledge or other disposition of 10% or more of the
assets
of the company involving the interested common
unitholder;
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subject
to certain exceptions, any transaction that results in the issuance
or
transfer by the company of any common units of the company to the
interested common unitholder;
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any
transaction involving the company that has the effect of increasing
the
proportionate share of the units of any class or series of the company
beneficially owned by the interested common unitholder;
or
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the
receipt by the interested common unitholder of the benefit of any
loans,
advances, guarantees, pledges or other financial benefits provided
by or
through the company.
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In
general, by reference to Section 203, an “interested common unitholder” is any
person or entity, other than Constellation, CEPM, their affiliates or
transferees, that beneficially owns (or within three years did own) 15% or
more
of the outstanding common units of the company and any entity or person
affiliated with or controlling or controlled by such entity or
person.
The
existence of this provision would be expected to have an anti-takeover effect
with respect to transactions not approved in advance by our board of managers,
including discouraging attempts that might result in a premium over the market
price for common units held by common unitholders.
Our
limited liability agreement also restricts the voting rights of common
unitholders by providing that any units held by a person that owns 20% or more
of any class of units then outstanding, other than Constellation, CEPM, their
affiliates or transferees and persons who acquire such units with the prior
approval of the board of managers, cannot vote on any matter.
Limited
Call Right
If
at any
time any person owns more than 80% of the then-issued and outstanding common
units, it will have the right, which it may assign in whole or in part to any
of
its affiliates or to us, to acquire all, but not less than all, of the remaining
common units held by unaffiliated persons as of a record date to be selected
by
our board of managers, on at least 10 days but not more than 60 days notice.
The
common unitholders are not entitled to dissenters’ rights of appraisal under the
limited liability company agreement or applicable Delaware law if this limited
call right is exercised. The purchase price in the event of this purchase is
the
greater of:
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the
highest cash price paid by such person for any common units purchased
within the 90 days preceding the date on which such person first
mails
notice of its election to purchase the remaining common units;
and
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the
closing market price of the common units as of the date three days
before
the date the notice is mailed.
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As
a
result of this limited call right, a holder of common units may have his limited
liability company interests purchased at an undesirable time or price. The
tax
consequences to a common unitholder of the exercise of this call right are
the
same as a sale by that common unitholder of his common units in the market.
Please read “Material Tax Consequences—Disposition of Units.”
Meetings;
Voting
All
notices of meetings of unitholders shall be sent or otherwise given in
accordance with Sections 11.4 and 14.1 of our limited liability company
agreement not less than 10 days nor more than 60 days before the date of the
meeting. The notice shall specify the place, date and hour of the meeting and
(i) in the case of a special meeting, the general nature of the business to
be
transacted (no business other than that specified in the notice may be
transacted) or (ii) in the case of the annual meeting, those matters which
the
board of managers, at the time of giving the notice, intends to present for
action by the unitholders (but any proper matter may be presented at the meeting
for such action). The notice of any meeting at which managers are to be elected
shall include the name of any nominee or nominees who, at the time of the
notice, the board of managers intends to present for election. Any previously
scheduled meeting of the unitholders may be postponed, and any special meeting
of the unitholders may be cancelled, by resolution of the board of managers
upon
public notice given prior to the date previously scheduled for such meeting
of
unitholders.
Units
that are owned by an assignee who is a record holder, but who has not yet been
admitted as a member, shall be voted at the written direction of the record
holder by a proxy designated by our board of managers. Absent direction of
this
kind, the units will not be voted, except that units held by us on behalf of
non-citizen assignees shall be voted in the same ratios as the votes of
unitholders on other units are cast.
Any
action required or permitted to be taken by our common unitholders must be
effected at a duly called annual or special meeting of unitholders and may
not
be effected by any consent in writing by such common unitholders.
Special
meetings of the unitholders may only be called by a majority of our board of
managers. Unitholders may vote either in person or by proxy at meetings. The
holders of a majority of the outstanding units for which a meeting has been
called represented in person or by proxy shall constitute a quorum unless any
action by the unitholders requires approval by holders of a greater percentage
of the units, in which case the quorum shall be the greater
percentage.
Each
record holder of a unit has a vote according to his percentage interest in
us,
although additional units having special voting rights could be issued. Please
read “—Issuance of Additional Securities.” Units held in nominee or street name
accounts will be voted by the broker or other nominee in accordance with the
instruction of the beneficial owner unless the arrangement between the
beneficial owner and its nominee provides otherwise.
Any
notice, demand, request, report or proxy material required or permitted to
be
given or made to record holders of units under our limited liability company
agreement will be delivered to the record holder by us or by the transfer
agent.
Our
limited liability agreement also restricts the voting rights of common
unitholders by providing that any units held by a person that owns 20% or more
of any class of units then outstanding, other than Constellation, CEPM, their
affiliates or transferees and persons who acquire such units with the prior
approval of the board of managers, cannot vote on any matter.
Non-Citizen
Assignees; Redemption
If
we or
any of our subsidiaries are or become subject to federal, state or local laws
or
regulations that, in the reasonable determination of our board of managers,
create a substantial risk of cancellation or forfeiture of any property that
we
have an interest in because of the nationality, citizenship or other related
status of any unitholder or assignee, we may redeem, upon 30 days’ advance
notice, the units held by the unitholder or assignee at their current market
price. To avoid any cancellation or forfeiture, our board of managers may
require each unitholder or assignee to furnish information about his
nationality, citizenship or related status. If a unitholder or assignee fails
to
furnish information about his nationality, citizenship or other related status
within 30 days after a request for the information or our board of managers
determines after receipt of the information that the unitholder or assignee
is
not an eligible citizen, the unitholder or assignee may be treated as a
non-citizen assignee. In addition to other limitations on the rights of an
assignee who is not a substituted unitholder, a non-citizen assignee does not
have the right to direct the voting of his units and may not receive
distributions in kind upon our liquidation.
Indemnification
Under
our
limited liability company agreement and subject to specified limitations, we
will indemnify to the fullest extent permitted by law from and against all
losses, claims, damages or similar events any person who is or was our manager
or officer, or while serving as our manager or officer, is or was serving as
a
tax matters member or, at our request, as a manager, officer, tax matters
member, employee, partner, fiduciary or trustee of us or any of our
subsidiaries. Additionally, we shall indemnify to the fullest extent permitted
by law and authorized by our board of managers, from and against all losses,
claims, damages or similar events any person is or was an employee or agent
(other than an officer) of our company.
Any
indemnification under our limited liability company agreement will only be
out
of our assets. We are authorized to purchase insurance against liabilities
asserted against and expenses incurred by persons for our activities, regardless
of whether we would have the power to indemnify the person against liabilities
under our limited liability company agreement.
Books
and Reports
We
are
required to keep appropriate books of our business at our principal offices.
The
books will be maintained for both tax and financial reporting purposes on an
accrual basis. For tax and fiscal reporting purposes, our fiscal year is the
calendar year.
We
will
furnish or make available to record holders of units, within 120 days after
the
close of each fiscal year, an annual report containing audited financial
statements and a report on those financial statements by our independent public
accountants. Except for our fourth quarter, we will also furnish or make
available summary financial information within 90 days after the close of each
quarter.
We
will
furnish each record holder of a unit with information reasonably required for
tax reporting purposes within 90 days after the close of each calendar year.
This information is expected to be furnished in summary form so that some
complex calculations normally required of unitholders can be avoided. Our
ability to furnish this summary information to unitholders will depend on the
cooperation of unitholders in supplying us with specific information. Every
unitholder will receive information to assist him in determining his federal
and
state tax liability and filing his federal and state income tax returns,
regardless of whether he supplies us with information.
Right
To Inspect Our Books and Records
Our
limited liability company agreement provides that a unitholder can, for a
purpose reasonably related to his interest as a unitholder, upon reasonable
demand and at his own expense, have furnished to him:
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a
current list of the name and last known address of each
unitholder;
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a
copy of our tax returns;
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information
as to the amount of cash, and a description and statement of the
agreed
value of any other property or services, contributed or to be contributed
by each unitholder and the date on which each became a
unitholder;
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copies
of our limited liability company agreement, the certificate of formation
of the company, related amendments and powers of attorney under which
they
have been executed;
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information
regarding the status of our business and financial condition;
and
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any
other information regarding our affairs as is just and
reasonable.
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Our
board
of managers may, and intends to, keep confidential from our unitholders
information that it believes to be in the nature of trade secrets or other
information, the disclosure of which our board of managers believes in good
faith is not in our best interests, information that could damage our company
or
our business, or information that we are required by law or by agreements with
a
third-party to keep confidential.
Registration
Rights
We
have
agreed to register for sale under the Securities Act and applicable state
securities laws any common units or other of our securities held by CEPM, CEPH
or any of their affiliates if an exemption from the registration requirements
is
not otherwise available. These registration rights continue for two years
following any termination of the special voting rights of the holders of our
Class A units. We have also agreed to include any of our securities held by
CEPM, CEPH or their affiliates in any registration statement that we file to
offer our securities for cash, except an offering relating solely to an employee
benefit plan, for the same period. We are obligated to pay all expenses
incidental to the registration, excluding underwriting discounts and
commissions.
MATERIAL
TAX CONSEQUENCES
This
section is a discussion of the material tax consequences that may be relevant
to
prospective common unitholders who are individual citizens or residents of
the
United States and, unless otherwise noted in the following discussion, is the
opinion of Andrews Kurth LLP, counsel to us, insofar as it relates to matters
of
United States federal income tax law and legal conclusions with respect to
those
matters. This section is based on current provisions of the Internal Revenue
Code, existing and proposed regulations and current administrative rulings
and
court decisions, all of which are subject to change. Later changes in these
authorities may cause the tax consequences to vary substantially from the
consequences described below. Unless the context otherwise requires, references
in this section to “us” or “we” are references to Constellation Energy Partners
LLC and our limited liability company operating subsidiaries.
This
section does not address all federal income tax matters that affect us or common
unitholders. Furthermore, this section focuses on common unitholders who are
individual citizens or residents of the United States and has only limited
application to corporations, estates, trusts, non-resident aliens or other
common unitholders subject to specialized tax treatment, such as tax-exempt
institutions, foreign persons, individual retirement accounts (IRAs), employee
benefit plans, real estate investment trusts (REITs) or mutual funds.
Accordingly, we urge each prospective holder of common units to consult, and
depend on, his own tax advisor in analyzing the federal, state, local and
foreign tax consequences particular to him of the ownership or disposition
of
our units.
No
ruling
has been or will be requested from the IRS regarding any matter that affects
us
or prospective common unitholders. Instead, we rely on opinions and advice
of
Andrews Kurth LLP. Unlike a ruling, an opinion of counsel represents only that
counsel’s best legal judgment and does not bind the IRS or the courts.
Accordingly, the opinions and statements made in this discussion may not be
sustained by a court if contested by the IRS. Any contest of this sort with
the
IRS may materially and adversely impact the market for our units and the prices
at which our units trade. In addition, the costs of any contest with the IRS,
principally legal, accounting and related fees, will result in a reduction
in
cash available for distribution to our common unitholders and thus will be
borne
directly by our common unitholders. Furthermore, the tax treatment of us, or
of
an investment in us, may be significantly modified by future legislative or
administrative changes or court decisions. Any modifications may or may not
be
retroactively applied.
All
statements regarding matters of law and legal conclusions set forth below,
unless otherwise noted, are the opinion of Andrews Kurth LLP and are based
on
the accuracy of the representations made by us. Statements of fact do not
represent opinions of Andrews Kurth LLP.
For
the
reasons described below, Andrews Kurth LLP has not rendered an opinion with
respect to the following specific federal income tax issues:
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the
treatment of a common unitholder whose units are loaned to a short
seller
to cover a short sale of units (please read “—Tax Consequences of Unit
Ownership—Treatment of Short
Sales”);
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whether
our monthly convention for allocating taxable income and losses is
permitted by existing Treasury regulations (please read “—Disposition of
Units—Allocations Between Transferors and Transferees”);
and
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whether
our method for depreciating Section 743 adjustments is sustainable
in
certain cases (please read “—Tax Consequences of Unit Ownership—Section
754 Election” and “—Uniformity of
Units”).
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Partnership
Status
Except
as
discussed in the following paragraph, a limited liability company that has
more
than one member and that has not elected to be treated as a corporation is
treated as a partnership for federal income tax purposes and, therefore, is
not
a taxable entity and incurs no federal income tax liability. Instead, each
partner is required to take into account his share of items of income, gain,
loss and deduction of the partnership in computing his federal income tax
liability, even if no cash distributions are made to him. Distributions by
a
partnership to a partner are generally not taxable to the partner unless the
amount of cash distributed to him is in excess of his adjusted basis in his
partnership interest.
Section
7704 of the Internal Revenue Code provides that publicly traded partnerships
will, as a general rule, be taxed as corporations. However, an exception,
referred to in this discussion as the “Qualifying Income Exception,” exists with
respect to publicly traded partnerships 90% or more of the gross income of
which
for every taxable year consists of “qualifying income.” Qualifying income
includes income and gains derived from the exploration, development, mining
or
production, processing, transportation and marketing of natural resources,
including oil, natural gas, and products thereof. Other types of qualifying
income include interest (other than from a financial business), dividends,
gains
from the sale of real property and gains from the sale or other disposition
of
capital assets held for the production of income that otherwise constitutes
qualifying income. We estimate that less than 3% of our current gross income
does not constitute qualifying income; however, this estimate could change
from
time to time. Based on and subject to this estimate, the factual representations
made by us, and a review of the applicable legal authorities, Andrews Kurth
LLP
is of the opinion that more than 90% of our current gross income constitutes
qualifying income. The portion of our income that is qualifying income can
change from time to time.
No
ruling
has been or will be sought from the IRS, and the IRS has made no determination
as to our status or the status of our operating subsidiaries for federal income
tax purposes or whether our operations generate “qualifying income” under
Section 7704 of the Internal Revenue Code. Instead, we will rely on the opinion
of Andrews Kurth LLP. Andrews Kurth LLP is of the opinion, based upon the
Internal Revenue Code, its regulations, published revenue rulings, court
decisions and the representations described below, that we are and will continue
to be classified as a partnership, and each of our operating subsidiaries will
be disregarded as an entity separate from us, for federal income tax
purposes.
In
rendering its opinion, Andrews Kurth LLP has relied on factual representations
made by us. The representations made by us upon which Andrews Kurth LLP has
relied include:
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Neither
we, nor any of our limited liability company subsidiaries, have elected
nor will we elect to be treated as a corporation;
and
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For
each taxable year, more than 90% of our gross income has been and
will be
income that Andrews Kurth LLP has opined or will opine is “qualifying
income” within the meaning of Section 7704(d) of the Internal Revenue
Code.
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If
we
fail to meet the Qualifying Income Exception, other than a failure that is
determined by the IRS to be inadvertent and that is cured within a reasonable
time after discovery, we will be treated as if we had transferred all of our
assets, subject to liabilities, to a newly formed corporation, on the first
day
of the year in which we fail to meet the Qualifying Income Exception, in return
for stock in that corporation and then distributed that stock to common
unitholders in liquidation of their interests in us. This deemed contribution
and liquidation would be tax-free to common unitholders and us so long as we,
at
that time, do not have liabilities in excess of the tax basis of our assets.
Thereafter, we would be treated as a corporation for federal income tax
purposes.
If
we
were taxable as a corporation in any taxable year, either as a result of a
failure to meet the Qualifying Income Exception or otherwise, our items of
income, gain, loss and deduction would be reflected only on our tax return
rather than being passed through to common unitholders, and our net income
would
be taxed to us at corporate rates. In addition, any distribution made to a
common unitholder would be treated as taxable dividend income to the extent
of
our current or accumulated earnings and profits, or, in the absence of earnings
and profits, a nontaxable return of capital to the extent of the common
unitholder’s tax basis in his units, or taxable capital gain, after the common
unitholder’s tax basis in his units is reduced to zero. Accordingly, taxation as
a corporation would result in a material reduction in a common unitholder’s cash
flow and after-tax return and thus would likely result in a substantial
reduction of the value of the units.
The
remainder of this section is based on Andrews Kurth LLP’s opinion that we are
and will continue to be classified as a partnership for federal income tax
purposes.
Common
Unitholder Status
Common
unitholders who become members of Constellation Energy Partners LLC will be
treated as partners of Constellation Energy Partners LLC for federal income
tax
purposes. Also, common unitholders whose units are held in street name or by
a
nominee and who have the right to direct the nominee in the exercise of all
substantive rights attendant to the ownership of their units will be treated
as
partners of Constellation Energy Partners LLC for federal income tax
purposes.
A
beneficial owner of units whose units have been transferred to a short seller
to
complete a short sale would appear to lose his status as a partner with respect
to those units for federal income tax purposes. Please read “—Tax Consequences
of Unit Ownership—Treatment of Short Sales.”
Items
of
our income, gain, loss, or deduction are not reportable by a common unitholder
who is not a partner for federal income tax purposes, and any cash distributions
received by a common unitholder who is not a partner for federal income tax
purposes would therefore be fully taxable as ordinary income. These common
unitholders are urged to consult their own tax advisors with respect to their
status as partners in us for federal income tax purposes.
The
references to “common unitholders” in the discussion that follows are to persons
who are treated as partners in Constellation Energy Partners LLC for federal
income tax purposes.
Tax
Consequences of Unit Ownership
Flow-Through
of Taxable Income
We
do not
pay any federal income tax. Instead, each common unitholder is be required
to
report on his income tax return his share of our income, gains, losses and
deductions without regard to whether corresponding cash distributions are
received by him. Consequently, we may allocate income to a common unitholder
even if he has not received a cash distribution. Each common unitholder is
required to include in income his share of our income, gain, loss and deduction
for our taxable year or years ending with or within his taxable year. Our
taxable year ends on December 31.
Treatment
of Distributions
Distributions
made by us to a common unitholder generally are not be taxable to him for
federal income tax purposes to the extent of his tax basis in his units
immediately before the distribution. Cash distributions made by us to a common
unitholder in an amount in excess of his tax basis in his units generally are
considered to be gain from the sale or exchange of those units, taxable in
accordance with the rules described under “—Disposition of Units” below. To the
extent that cash distributions made by us cause a common unitholder’s “at risk”
amount to be less than zero at the end of any taxable year, he must recapture
any losses deducted in previous years. Please read “—Limitations on
Deductibility of Losses.”
Any
reduction in a common unitholder’s share of our liabilities for which no partner
bears the economic risk of loss, known as “non-recourse liabilities,” will be
treated as a distribution of cash to that common unitholder.
A
decrease in a common unitholder’s percentage interest in us because of our
issuance of additional units will decrease his share of our nonrecourse
liabilities and thus will result in a corresponding deemed distribution of
cash,
which may constitute a non-pro rata distribution. A non-pro rata distribution
of
money or property may result in ordinary income to a common unitholder,
regardless of his tax basis in his units, if the distribution reduces the common
unitholder’s share of our “unrealized receivables,” including recapture of
intangible drilling costs, depletion and depreciation recapture, and/or
substantially appreciated “inventory items,” both as defined in Section 751 of
the Internal Revenue Code, and collectively, “Section 751 Assets.” To that
extent, he will be treated as having received his proportionate share of the
Section 751 Assets and having exchanged those assets with us in return for
the
non-pro rata portion of the actual distribution made to him. This latter deemed
exchange will generally result in the common unitholder’s realization of
ordinary income. That income will equal the excess of (1) the non-pro rata
portion of that distribution over (2) the common unitholder’s tax basis for the
share of Section 751 Assets deemed relinquished in the exchange.
Basis
of Units
A
common
unitholder’s initial tax basis for his units will be the amount he paid for the
units plus his share of our nonrecourse liabilities. That basis will be
increased by his share of our income and by any increases in his share of our
nonrecourse liabilities. That basis generally will be decreased, but not below
zero, by distributions to him from us, by his share of our losses, by depletion
deductions taken by him to the extent such deductions do not exceed his
proportionate share of the adjusted tax basis of the underlying producing
properties, by any decreases in his share of our nonrecourse liabilities and
by
his share of our expenditures that are not deductible in computing taxable
income and are not required to be capitalized. A common unitholder’s share of
our nonrecourse liabilities will generally be based on his share of our profits.
Please read “—Disposition of Units—Recognition of Gain or Loss.”
Limitations
on Deductibility of Losses
The
deduction by a common unitholder of his share of our losses is limited to his
tax basis in his units and, in the case of an individual common unitholder
or a
corporate common unitholder, if more than 50% of the value of its stock is
owned
directly or indirectly by or for five or fewer individuals or some tax-exempt
organizations, to the amount for which the common unitholder is considered
to be
“at risk” with respect to our activities, if that amount is less than his tax
basis. A common unitholder must recapture losses deducted in previous years
to
the extent that distributions cause his at-risk amount to be less than zero
at
the end of any taxable year. Losses disallowed to a common unitholder or
recaptured as a result of these limitations will carry forward and will be
allowable as a deduction in a later year to the extent that his tax basis or
at-risk amount, whichever is the limiting factor, is subsequently increased.
Upon the taxable disposition of a unit, any gain recognized by a common
unitholder can be offset by losses that were previously suspended by the at-risk
limitation but may not be offset by losses suspended by the basis limitation.
Any excess loss above that gain previously suspended by the at risk or basis
limitations is no longer utilizable.
In
general, a common unitholder will be at risk to the extent of his tax basis
in
his units, excluding any portion of that basis attributable to his share of
our
nonrecourse liabilities, reduced by any amount of money he borrows to acquire
or
hold his units, if the lender of those borrowed funds owns an interest in us,
is
related to the common unitholder or can look only to the units for repayment.
A
common unitholder’s at-risk amount will increase or decrease as the tax basis of
the common unitholder’s common units increases or decreases, other than tax
basis increases or decreases attributable to increases or decreases in his
share
of our nonrecourse liabilities. Moreover, a common unitholder’s at risk amount
will decrease by the amount of the common unitholder’s depletion deductions and
will increase to the extent of the amount by which the common unitholder’s
percentage depletion deductions with respect to our property exceed the common
unitholder’s share of the basis of that property.
The
at
risk limitation applies on an activity-by-activity basis, and in the case of
oil
and natural gas properties, each property is treated as a separate activity.
Thus, a taxpayer’s interest in each oil or gas property is generally required to
be treated separately so that a loss from any one property would be limited
to
the at risk amount for that property and not the at risk amount for all the
taxpayer’s oil and natural gas properties. It is uncertain how this rule is
implemented in the case of multiple oil and natural gas properties owned by
a
single entity treated as a partnership for federal income tax purposes. However,
for taxable years ending on or before the date on which further guidance is
published, the IRS will permit aggregation of oil or gas properties we own
in
computing a common unitholder’s at risk limitation with respect to us. If a
common unitholder must compute his at risk amount separately with respect to
each oil or gas property we own, he may not be allowed to utilize his share
of
losses or deductions attributable to a particular property even though he has
a
positive at risk amount with respect to his units as a whole.
The
passive loss limitation generally provides that individuals, estates, trusts
and
some closely held corporations and personal service corporations are permitted
to deduct losses from passive activities, which are generally defined as trade
or business activities in which the taxpayer does not materially participate,
only to the extent of the taxpayer’s income from those passive activities. The
passive loss limitation is applied separately with respect to each publicly
traded partnership. Consequently, any losses we generate will be available
to
offset only our passive income generated in the future and will not be available
to offset income from other passive activities or investments, including our
investments, a common unitholder’s investments in other publicly traded
partnerships, or a common unitholder’s salary or active business income. If we
dispose of all or only a part of our interest in an oil and gas property, common
unitholders will be able to offset their suspended passive activity losses
from
our activities against the gain, if any, on the disposition. Any previously
suspended losses in excess of the amount of gain recognized will remain
suspended. Notwithstanding whether a natural gas and oil property is a separate
activity, passive losses that are not deductible because they exceed a common
unitholder’s share of income we generate may only be deducted by the common
unitholder in full when he disposes of his entire investment in us in a fully
taxable transaction with an unrelated party. The passive activity loss rules
are
applied after certain other applicable limitations on deductions, including
the
at-risk rules and the tax basis limitation.
A
common
unitholder’s share of our net income may be offset by any of our suspended
passive losses, but it may not be offset by any other current or carryover
losses from other passive activities, including those attributable to other
publicly traded partnerships.
Limitation
on Interest Deductions
The
deductibility of a non-corporate taxpayer’s “investment interest expense” is
generally limited to the amount of that taxpayer’s “net investment income.”
Investment interest expense includes:
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interest
on indebtedness properly allocable to property held for
investment;
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our
interest expense attributable to portfolio income;
and
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the
portion of interest expense incurred to purchase or carry an interest
in a
passive activity to the extent attributable to portfolio
income.
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The
computation of a common unitholder’s investment interest expense will take into
account interest on any margin account borrowing or other loan incurred to
purchase or carry a unit.
Net
investment income includes gross income from property held for investment and
amounts treated as portfolio income under the passive loss rules, less
deductible expenses, other than interest, directly connected with the production
of investment income, but generally does not include gains attributable to
the
disposition of property held for investment. The IRS has indicated that net
passive income earned by a publicly traded partnership will be treated as
investment income to its common unitholders. In addition, the common
unitholder’s share of our portfolio income will be treated as investment
income.
Entity-Level
Collections
If
we are
required or elect under applicable law to pay any federal, state or local income
tax on behalf of any common unitholder or any former common unitholder, we
are
authorized to pay those taxes from our funds. That payment, if made, will be
treated as a distribution of cash to the common unitholder on whose behalf
the
payment was made. If the payment is made on behalf of a common unitholder whose
identity cannot be determined, we are authorized to treat the payment as a
distribution to all current common unitholders. We are authorized to amend
our
limited liability company agreement in the manner necessary to maintain
uniformity of intrinsic tax characteristics of units and to adjust later
distributions, so that after giving effect to these distributions, the priority
and characterization of distributions otherwise applicable under our limited
liability company agreement is maintained as nearly as is practicable. Payments
by us as described above could give rise to an overpayment of tax on behalf
of a
common unitholder in which event the common unitholder would be required to
file
a claim in order to obtain a credit or refund.
Allocation
of Income, Gain, Loss and Deduction
In
general, if we have a net profit, our items of income, gain, loss and deduction
will be allocated among the common unitholders in accordance with their
percentage interests in us. If we have a net loss for an entire year, the loss
will be allocated to our common unitholders according to their percentage
interests in us to the extent of their positive capital account
balances.
Specified
items of our income, gain, loss and deduction will be allocated under Section
704(c) of the Internal Revenue Code to account for the difference between the
tax basis and fair market value of our assets at the time of an offering, which
assets are referred to in this discussion as “Contributed Property.” These
allocations are required to eliminate the difference between a partner’s “book”
capital account, credited with the fair market value of Contributed Property,
and the “tax” capital account, credited with the tax basis of Contributed
Property, referred to in this discussion as the “book-tax disparity.” The effect
of these allocations to a common unitholder who purchases units in an offering
will be essentially the same as if the tax basis of our assets were equal to
their fair market value at the time of the offering. In the event we issue
additional units or engage in certain other transactions in the future, Section
704(c) allocations will be made to all holders of partnership interests to
account for the difference between the “book” basis for purposes of maintaining
capital accounts and the fair market value of all property held by us at the
time of the future transaction. In addition, items of recapture income will
be
allocated to the extent possible to the common unitholder who was allocated
the
deduction giving rise to the treatment of that gain as recapture income in
order
to minimize the recognition of ordinary income by other common unitholders.
Finally, although we do not expect that our operations will result in the
creation of negative capital accounts, if negative capital accounts nevertheless
result, items of our income and gain will be allocated in an amount and manner
sufficient to eliminate the negative balance as quickly as
possible.
An
allocation of items of our income, gain, loss or deduction, other than an
allocation required by Section 704(c), will generally be given effect for
federal income tax purposes in determining a common unitholder’s share of an
item of income, gain, loss or deduction only if the allocation has substantial
economic effect. In any other case, a common unitholder’s share of an item will
be determined on the basis of his interest in us, which will be determined
by
taking into account all the facts and circumstances, including:
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his
relative contributions to us;
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the
interests of all the common unitholders in profits and
losses;
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the
interest of all the common unitholders in cash flow;
and
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the
rights of all the common unitholders to distributions of capital
upon
liquidation.
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Andrews
Kurth LLP is of the opinion that, with the exception of the issues described
in
“—Tax Consequences of Unit Ownership—Section 754 Election,” “—Uniformity of
Units” and “—Disposition of Units—Allocations Between Transferors and
Transferees,” allocations under our limited liability company agreement will be
given effect for federal income tax purposes in determining a common
unitholder’s share of an item of income, gain, loss or deduction.
Treatment
of Short Sales
A
common
unitholder whose units are loaned to a “short seller” to cover a short sale of
units may be considered as having disposed of those units. If so, he would
no
longer be a partner for tax purposes with respect to those units during the
period of the loan and may recognize gain or loss from the disposition. As
a
result, during this period:
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none
of our income, gain, loss or deduction with respect to those units
would
be reportable by the common
unitholder;
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any
cash distributions received by the common unitholder with respect
to those
units would be fully taxable; and
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all
of these distributions would appear to be ordinary
income.
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Andrews
Kurth LLP has not rendered an opinion regarding the treatment of a common
unitholder whose units are loaned to a short seller. Therefore, common
unitholders desiring to assure their status as partners and avoid the risk
of
gain recognition are urged to modify any applicable brokerage account agreements
to prohibit their brokers from loaning their units. The IRS has announced that
it is studying issues relating to the tax treatment of short sales of
partnership interests. Please also read “—Disposition of Units—Recognition of
Gain or Loss.”
Alternative
Minimum Tax
Each
common unitholder is required to take into account his distributive share of
any
items of our income, gain, loss or deduction for purposes of the alternative
minimum tax. The current minimum tax rate for non-corporate taxpayers is 26%
on
the first $175,000 of alternative minimum taxable income in excess of the
exemption amount and 28% on any additional alternative minimum taxable income.
Prospective common unitholders are urged to consult their tax advisors with
respect to the impact of an investment in our units on their liability for
the
alternative minimum tax.
Tax
Rates
In
general, the highest effective federal income tax rate for individuals currently
is 35% and the maximum federal income tax rate for net capital gains of an
individual currently is 15% if the asset disposed of was held for more than
12
months at the time of disposition. The capital gains rate is scheduled to remain
at 15% for years 2008 through 2010, and then increase to 20% beginning January
1, 2011.
Section
754 Election
We
have
made the election permitted by Section 754 of the Internal Revenue Code. That
election is irrevocable without the consent of the IRS. That election will
generally permit us to adjust a unit purchaser’s tax basis in our assets
(“inside basis”) under Section 743(b) of the Internal Revenue Code to reflect
his purchase price. The Section 743(b) adjustment does not apply to a person
who
purchases units directly from us, and it belongs only to the purchaser and
not
to other common unitholders. Please also read, however, “—Allocation of Income,
Gain, Loss and Deduction” above. For purposes of this discussion, a common
unitholder’s inside basis in our assets has two components: (1) his share of our
tax basis in our assets (“common basis”) and (2) his Section 743(b) adjustment
to that basis.
Treasury
regulations under Section 743 of the Internal Revenue Code require, if the
remedial allocation method is adopted (which we have adopted), a portion of
the
Section 743(b) adjustment attributable to recovery property to be depreciated
over the remaining cost recovery period for the Section 704(c) built-in gain.
Under Treasury Regulation Section 1.167(c)-l(a)(6), a Section 743(b) adjustment
attributable to property subject to depreciation under Section 167 of the
Internal Revenue Code rather than cost recovery deductions under Section 168
is
generally required to be depreciated using either the straight-line method
or
the 150% declining balance method. Under our limited liability company
agreement, we are authorized to take a position to preserve the uniformity
of
units even if that position is not consistent with the Treasury regulations.
Please read “—Uniformity of Units.”
Although
Andrews Kurth LLP is unable to opine on the validity of this approach because
there is no clear authority on this issue, we intend to depreciate the portion
of a Section 743(b) adjustment attributable to unrealized appreciation in the
value of Contributed Property, to the extent of any unamortized book-tax
disparity, using a rate of depreciation or amortization derived from the
depreciation or amortization method and useful life applied to the unamortized
book-tax disparity of the property, or treat that portion as non-amortizable
to
the extent attributable to property which is not amortizable. This method is
consistent with the regulations under Section 743 but is arguably inconsistent
with Treasury regulation Section 1.167(c)-1(a)(6), which is not expected to
directly apply to a material portion of our assets. To the extent a Section
743(b) adjustment is attributable to appreciation in value in excess of the
unamortized book-tax disparity, we will apply the rules described in the
Treasury regulations and legislative history. If we determine that this position
cannot reasonably be taken, we may take a depreciation or amortization position
under which all purchasers acquiring units in the same month would receive
depreciation or amortization, whether attributable to common basis or a Section
743(b) adjustment, based upon the same applicable rate as if they had purchased
a direct interest in our assets. This kind of aggregate approach may result
in
lower annual depreciation or amortization deductions than would otherwise be
allowable to some common unitholders. Please read “—Uniformity of Units.” A
common unitholder’s tax basis for his common units is reduced by his share of
our deductions (whether or not such deductions were claimed on an individual’s
income tax return) so that any position we take that understates deductions
will
overstate the common unitholder’s basis in his common units. Please read
“—Disposition of Units - Recognition of Gain or Loss.” The IRS may challenge our
position with respect to depreciating or amortizing the Section 743(b)
adjustment we take to preserve the uniformity of the common units. If such
a
challenge were sustained, the gain from the sale of common units might be
increased without the benefit of additional deductions.
A
Section
754 election is advantageous if the transferee’s tax basis in his units is
higher than the units’ share of the aggregate tax basis of our assets
immediately prior to the transfer. In that case, as a result of the election,
the transferee would have, among other items, a greater amount of depletion
and
depreciation deductions and his share of any gain on a sale of our assets would
be less. Conversely, a Section 754 election is disadvantageous if the
transferee’s tax basis in his units is lower than those units’ share of the
aggregate tax basis of our assets immediately prior to the transfer. Thus,
the
fair market value of the units may be affected either favorably or unfavorably
by the election. A basis adjustment is required regardless of whether a Section
754 election is made in the case of a transfer of an interest in us if we have
a
substantial built-in loss immediately after the transfer, or if we distribute
property and have a substantial basis reduction. Generally a built-in loss
or a
basis reduction is substantial if it exceeds $250,000.
The
calculations involved in the Section 754 election are complex and will be made
on the basis of assumptions as to the value of our assets and other matters.
For
example, the allocation of the Section 743(b) adjustment among our assets must
be made in accordance with the Internal Revenue Code. The IRS could seek to
reallocate some or all of any Section 743(b) adjustment we allocated to our
tangible assets to goodwill instead. Goodwill, an intangible asset, is generally
either non-amortizable or amortizable over a longer period of time or under
a
less accelerated method than our tangible assets. We cannot assure you that
the
determinations we make will not be successfully challenged by the IRS or that
the resulting deductions will not be reduced or disallowed altogether. Should
the IRS require a different basis adjustment to be made, and should, in our
opinion, the expense of compliance exceed the benefit of the election, we may
seek permission from the IRS to revoke our Section 754 election. If permission
is granted, a subsequent purchaser of units may be allocated more income than
he
would have been allocated had the election not been revoked.
Tax
Treatment of Operations
Accounting
Method and Taxable Year
We
use
the year ending December 31 as our taxable year and the accrual method of
accounting for federal income tax purposes. Each common unitholder is required
to include in income his share of our income, gain, loss and deduction for
our
taxable year ending within or with his taxable year. In addition, a common
unitholder who has a taxable year ending on a date other than December 31 and
who disposes of all of his units following the close of our taxable year but
before the close of his taxable year must include his share of our income,
gain,
loss and deduction in income for his taxable year, with the result that he
will
be required to include in income for his taxable year his share of more than
twelve months of our income, gain, loss and deduction. Please read “—Disposition
of Units—Allocations Between Transferors and Transferees.”
Depletion
Deductions
Subject
to the limitations on deductibility of losses discussed above, common
unitholders are entitled to deductions for the greater of either cost depletion
or (if otherwise allowable) percentage depletion with respect to our oil and
natural gas interests. Although the Internal Revenue Code requires each common
unitholder to compute his own depletion allowance and maintain records of his
share of the adjusted tax basis of the underlying property for depletion and
other purposes, we intend to furnish each of our common unitholders with
information relating to this computation for federal income tax
purposes.
Percentage
depletion is generally available with respect to common unitholders who qualify
under the independent producer exemption contained in Section 613A(c) of the
Internal Revenue Code. For this purpose, an independent producer is a person
not
directly or indirectly involved in the retail sale of oil, natural gas, or
derivative products or the operation of a major refinery. Percentage depletion
is calculated as an amount generally equal to 15% (and, in the case of marginal
production, potentially a higher percentage) of the common unitholder’s gross
income from the depletable property for the taxable year. The percentage
depletion deduction with respect to any property is limited to 100% of the
taxable income of the common unitholder from the property for each taxable
year,
computed without the depletion allowance. A common unitholder that qualifies
as
an independent producer may deduct percentage depletion only to the extent
the
common unitholder’s daily production of domestic crude oil, or the natural gas
equivalent, does not exceed 1,000 barrels. This depletable amount may be
allocated between oil and natural gas production, with 6,000 cubic feet of
domestic natural gas production regarded as equivalent to one barrel of crude
oil. The 1,000 barrel limitation must be allocated among the independent
producer and controlled or related persons and family members in proportion
to
the respective production by such persons during the period in
question.
In
addition to the foregoing limitations, the percentage depletion deduction
otherwise available is limited to 65% of a common unitholder’s total taxable
income from all sources for the year, computed without the depletion allowance,
net operating loss carrybacks, or capital loss carrybacks. Any percentage
depletion deduction disallowed because of the 65% limitation may be deducted
in
the following taxable year if the percentage depletion deduction for such year
plus the deduction carryover does not exceed 65% of the common unitholder’s
total taxable income for that year. The carryover period resulting from the
65%
net income limitation is indefinite.
Common
unitholders that do not qualify under the independent producer exemption are
generally restricted to depletion deductions based on cost depletion. Cost
depletion deductions are calculated by (i) dividing the common unitholder’s
share of the adjusted tax basis in the underlying mineral property by the number
of mineral units (barrels of oil and thousand cubic feet, or Mcf, of natural
gas) remaining as of the beginning of the taxable year and (ii) multiplying
the
result by the number of mineral units sold within the taxable year. The total
amount of deductions based on cost depletion cannot exceed the common
unitholder’s share of the total adjusted tax basis in the property.
All
or a
portion of any gain recognized by a common unitholder as a result of either
the
disposition by us of some or all of our oil and natural gas interests or the
disposition by the common unitholder of some or all of his units may be taxed
as
ordinary income to the extent of recapture of depletion deductions, except
for
percentage depletion deductions in excess of the basis of the property. The
amount of the recapture is generally limited to the amount of gain recognized
on
the disposition.
The
foregoing discussion of depletion deductions does not purport to be a complete
analysis of the complex legislation and Treasury regulations relating to the
availability and calculation of depletion deductions by the common unitholders.
We encourage each prospective common unitholder to consult his tax advisor
to
determine whether percentage depletion would be available to him.
Deductions
for Intangible Drilling and Development Costs
We
elect
to currently deduct intangible drilling and development costs (“IDCs”). IDCs
generally include our expenses for wages, fuel, repairs, hauling, supplies
and
other items that are incidental to, and necessary for, the drilling and
preparation of wells for the production of oil, natural gas or geothermal
energy. The option to currently deduct IDCs applies only to those items that
do
not have a salvage value.
Although
we elect to currently deduct IDCs, each common unitholder will have the option
of either currently deducting IDCs or capitalizing all or part of the IDCs
and
amortizing them on a straight-line basis over a 60-month period, beginning
with
the taxable month in which the expenditure is made. If a common unitholder
makes
the election to amortize the IDCs over a 60-month period, no IDC preference
amount will result for alternative minimum tax purposes.
Integrated
oil companies must capitalize 30% of all their IDCs (other than IDCs paid or
incurred with respect to oil and natural gas wells located outside of the United
States) and amortize these IDCs over 60 months beginning in the month in which
those costs are paid or incurred. If the taxpayer ceases to be an integrated
oil
company, it must continue to amortize those costs as long as it continues to
own
the property to which the IDCs relate. An “integrated oil company” is a taxpayer
that has economic interests in crude oil deposits and also carries on
substantial retailing or refining operations. An oil or gas producer is deemed
to be a substantial retailer or refiner if it is subject to the rules
disqualifying retailers and refiners from taking percentage depletion. In order
to qualify as an “independent producer” that is not subject to these IDC
deduction limits, a common unitholder, either directly or indirectly through
certain related parties, may not be involved in the refining of more than 75,000
barrels of oil (or the equivalent amount of natural gas) on average for any
day
during the taxable year or in the retail marketing of oil and natural gas
products exceeding $5 million per year in the aggregate.
IDCs
previously deducted that are allocable to property (directly or through
ownership of an interest in a partnership) and that would have been included
in
the adjusted basis of the property had the IDC deduction not been taken are
recaptured to the extent of any gain realized upon the disposition of the
property or upon the disposition by a common unitholder of interests in us.
Recapture is generally determined at the common unitholder level. Where only
a
portion of the recapture property is sold, any IDCs related to the entire
property are recaptured to the extent of the gain realized on the portion of
the
property sold. In the case of a disposition of an undivided interest in a
property, a proportionate amount of the IDCs with respect to the property is
treated as allocable to the transferred undivided interest to the extent of
any
gain recognized. See “—Disposition of Units—Recognition of Gain or
Loss.”
Deduction
for United States Production Activities
Subject
to the limitations on the deductibility of losses discussed above and the
limitation discussed below, common unitholders will be entitled to a deduction,
herein referred to as the Section 199 deduction, equal to a specified percentage
of our qualified production activities income that is allocated to such common
unitholder. The percentages are 6% for qualified production activities income
generated in the years 2008 and 2009; and 9% thereafter.
Qualified
production activities income is generally equal to gross receipts from domestic
production activities reduced by cost of goods sold allocable to those receipts,
other expenses directly associated with those receipts, and a share of other
deductions, expenses and losses that are not directly allocable to those
receipts or another class of income. The products produced must be manufactured,
produced, grown or extracted in whole or in significant part by the taxpayer
in
the United States.
For
a
partnership, the Section 199 deduction is determined at the partner level.
To
determine his Section 199 deduction, each common unitholder will aggregate
his
share of the qualified production activities income allocated to him from us
with the common unitholder’s qualified production activities income from other
sources. Each common unitholder must take into account his distributive share
of
the expenses allocated to him from our qualified production activities
regardless of whether we otherwise have taxable income. However, our expenses
that otherwise would be taken into account for purposes of computing the Section
199 deduction are only taken into account if and to the extent the common
unitholder’s share of losses and deductions from all of our activities is not
disallowed by the basis rules, the at-risk rules or the passive activity loss
rules. Please read “—Tax Consequences of Unit Ownership—Limitations on
Deductibility of Losses.”
The
amount of a common unitholder’s Section 199 deduction for each year is limited
to 50% of the IRS Form W-2 wages paid by the common unitholder during the
calendar year that are deducted in arriving at qualified production activities
income. Each common unitholder is treated as having been allocated IRS Form
W-2
wages from us equal to the common unitholder’s allocable share of our wages that
are deducted in arriving at our qualified production activities income for
that
taxable year. It is not anticipated that we or our subsidiaries will pay
material wages that will be allocated to our common unitholders.
This
discussion of the Section 199 deduction does not purport to be a complete
analysis of the complex legislation and Treasury authority relating to the
calculation of domestic production gross receipts, qualified production
activities income, or IRS Form W-2 Wages, or how such items are allocated by
us
to common unitholders. Each prospective common unitholder is encouraged to
consult his tax advisor to determine whether the Section 199 deduction would
be
available to him.
Lease
Acquisition Costs
The
cost
of acquiring oil and natural gas leaseholder or similar property interests
is a
capital expenditure that must be recovered through depletion deductions if
the
lease is productive. If a lease is proved worthless and abandoned, the cost
of
acquisition less any depletion claimed may be deducted as an ordinary loss
in
the year the lease becomes worthless. Please read “Tax Treatment of
Operations—Depletion Deductions.”
Geophysical
Costs
Geophysical
costs paid or incurred in connection with the exploration for, or development
of, oil or gas within the United States are allowed as a deduction ratably
over
the 24-month period beginning on the date that such expense was paid or
incurred.
Operating
and Administrative Costs
Amounts
paid for operating a producing well are deductible as ordinary business
expenses, as are administrative costs to the extent they constitute ordinary
and
necessary business expenses which are reasonable in amount.
Tax
Basis, Depreciation and Amortization
The
tax
basis of our assets, such as casing, tubing, tanks, pumping units and other
similar property, will be used for purposes of computing depreciation and cost
recovery deductions and, ultimately, gain or loss on the disposition of these
assets. The federal income tax burden associated with the difference between
the
fair market value of our assets and their tax basis immediately prior to (i)
this offering will be borne by our existing common unitholders, and (ii) any
other offering will be borne by our common unitholders as of that time. Please
read “—Tax Consequences of Unit Ownership—Allocation of Income, Gain, Loss and
Deduction.”
To
the
extent allowable, we may elect to use the depreciation and cost recovery methods
that will result in the largest deductions being taken in the early years after
assets are placed in service. Property we subsequently acquire or construct
may
be depreciated using accelerated methods permitted by the Internal Revenue
Code.
If
we
dispose of depreciable property by sale, foreclosure, or otherwise, all or
a
portion of any gain, determined by reference to the amount of depreciation
previously deducted and the nature of the property, may be subject to the
recapture rules and taxed as ordinary income rather than capital gain.
Similarly, a common unitholder who has taken cost recovery or depreciation
deductions with respect to property we own will likely be required to recapture
some or all of those deductions as ordinary income upon a sale of his interest
in us. Please read “—Tax Consequences of Unit Ownership—Allocation of Income,
Gain, Loss and Deduction” and “—Disposition of Units—Recognition of Gain or
Loss.”
The
costs
incurred in selling our units (called “syndication expenses”) must be
capitalized and cannot be deducted currently, ratably or upon our termination.
There are uncertainties regarding the classification of costs as organization
expenses, which we may be able to amortize, and as syndication expenses, which
we may not amortize. The underwriting discounts and commissions we incur will
be
treated as syndication expenses.
Valuation
and Tax Basis of Our Properties
The
federal income tax consequences of the ownership and disposition of units will
depend in part on our estimates of the relative fair market values and the
tax
bases of our assets. Although we may from time to time consult with professional
appraisers regarding valuation matters, we will make many of the relative fair
market value estimates ourselves. These estimates and determinations of basis
are subject to challenge and will not be binding on the IRS or the courts.
If
the estimates of fair market value or basis are later found to be incorrect,
the
character and amount of items of income, gain, loss or deduction previously
reported by common unitholders might change, and common unitholders might be
required to adjust their tax liability for prior years and incur interest and
penalties with respect to those adjustments.
Disposition
of Units
Recognition
of Gain or Loss
Gain
or
loss will be recognized on a sale of units equal to the difference between
the
common unitholder’s amount realized and the common unitholder’s tax basis for
the units sold. A common unitholder’s amount realized will equal the sum of the
cash or the fair market value of other property he receives plus his share
of
our nonrecourse liabilities. Because the amount realized includes a common
unitholder’s share of our nonrecourse liabilities, the gain recognized on the
sale of units could result in a tax liability in excess of any cash received
from the sale.
Prior
distributions from us in excess of cumulative net taxable income for a unit
that
decreased a common unitholder’s tax basis in that unit will, in effect, become
taxable income if the unit is sold at a price greater than the common
unitholder’s tax basis in that unit, even if the price received is less than his
original cost.
Except
as
noted below, gain or loss recognized by a common unitholder, other than a
“dealer” in units, on the sale or exchange of a unit held for more than one year
will generally be taxable as capital gain or loss. A portion of this gain or
loss, which may be substantial, however, will be separately computed and taxed
as ordinary income or loss under Section 751 of the Internal Revenue Code to
the
extent attributable to assets giving rise to “unrealized receivables” or
“inventory items” that we own. The term “unrealized receivables” includes
potential recapture items, including depreciation, depletion, and IDC recapture.
Ordinary income attributable to unrealized receivables and inventory items
may
exceed net taxable gain realized on the sale of a unit and may be recognized
even if there is a net taxable loss realized on the sale of a unit. Thus, a
common unitholder may recognize both ordinary income and a capital loss upon
a
sale of units. Net capital loss may offset capital gains and no more than $3,000
of ordinary income, in the case of individuals, and may only be used to offset
capital gain in the case of corporations.
The
IRS
has ruled that a partner who acquires interests in a partnership in separate
transactions must combine those interests and maintain a single adjusted tax
basis for all those interests. Upon a sale or other disposition of less than
all
of those interests, a portion of that tax basis must be allocated to the
interests sold using an “equitable apportionment” method. Treasury regulations
under Section 1223 of the Internal Revenue Code allow a selling common
unitholder who can identify units transferred with an ascertainable holding
period to elect to use the actual holding period of the units transferred.
Thus,
according to the ruling, a common unitholder will be unable to select high
or
low basis units to sell as would be the case with corporate stock, but,
according to the regulations, may designate specific units sold for purposes
of
determining the holding period of units transferred. A common unitholder
electing to use the actual holding period of units transferred must consistently
use that identification method for all subsequent sales or exchanges of units.
A
common unitholder considering the purchase of additional units or a sale of
units purchased in separate transactions is urged to consult his tax advisor
as
to the possible consequences of this ruling and those Treasury
regulations.
Specific
provisions of the Internal Revenue Code affect the taxation of some financial
products and securities, including partnership interests, by treating a taxpayer
as having sold an “appreciated” partnership interest, one in which gain would be
recognized if it were sold, assigned or terminated at its fair market value,
if
the taxpayer or related persons enter(s) into:
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an
offsetting notional principal contract;
or
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a
futures or forward contract with respect to the partnership interest
or
substantially identical property.
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Moreover,
if a taxpayer has previously entered into a short sale, an offsetting notional
principal contract or a futures or forward contract with respect to the
partnership interest, the taxpayer will be treated as having sold that position
if the taxpayer or a related person then acquires the partnership interest
or
substantially identical property. The Secretary of the Treasury is also
authorized to issue regulations that treat a taxpayer who enters into
transactions or positions that have substantially the same effect as the
preceding transactions as having constructively sold the financial
position.
Allocations
Between Transferors and Transferees
In
general, our taxable income or loss will be determined annually, will be
prorated on a monthly basis and will be subsequently apportioned among the
common unitholders in proportion to the number of units owned by each of them
as
of the opening of the applicable exchange on the first business day of the
month
(the “Allocation Date”). However, gain or loss realized on a sale or other
disposition of our assets other than in the ordinary course of business will
be
allocated among the common unitholders on the Allocation Date in the month
in
which that gain or loss is recognized. As a result, a common unitholder
transferring units may be allocated income, gain, loss and deduction realized
after the date of transfer.
Although
simplifying conventions are contemplated by the Code and most publicly traded
partnerships use similar simplifying conventions, the use of this method may
not
be permitted under existing Treasury regulations. Accordingly, Andrews Kurth
LLP
is unable to opine on the validity of this method of allocating income and
deductions between common unitholders. If this method is not allowed under
the
Treasury regulations, or only applies to transfers of less than all of the
common unitholder’s interest, our taxable income or losses might be reallocated
among the common unitholders. We are authorized to revise our method of
allocation between common unitholders, as well as among common unitholders
whose
interests vary during a taxable year, to conform to a method permitted under
future Treasury regulations.
A
common
unitholder who owns units at any time during a quarter and who disposes of
them
prior to the record date set for a cash distribution for that quarter will
be
allocated items of our income, gain, loss and deductions attributable to that
quarter but will not be entitled to receive that cash distribution.
Notification
Requirements
A
common
unitholder who sells any of his units, other than through a broker, generally
is
required to notify us in writing of that sale within 30 days after the sale
(or,
if earlier, January 15 of the year following the sale). A person who purchases
units is required to notify us in writing of that purchase within 30 days after
the purchase, unless a broker or nominee will satisfy such requirement. We
are
required to notify the IRS of any such transfers of units and to furnish
specified information to the transferor and transferee. Failure to notify us
of
a transfer of units may lead to the imposition of substantial
penalties.
Constructive
Termination
We
will
be considered to have terminated for tax purposes if there is a sale or exchange
of 50% or more of the total interests in our capital and profits within a
twelve-month period. A constructive termination results in the closing of our
taxable year for all common unitholders. In the case of a common unitholder
reporting on a taxable year other than a fiscal year ending December 31, the
closing of our taxable year may result in more than 12 months of our taxable
income or loss being includable in his taxable income for the year of
termination. A constructive termination occurring on a date other than December
31 will result in us filing two tax returns (and common unitholders receiving
two Schedule K-1s) for one calendar year and the cost of the preparation of
these returns will be borne by all common unitholders. We would be required
to
make new tax elections after a termination, including a new election under
Section 754 of the Internal Revenue Code, and a termination would result in
a
deferral of our deductions for depreciation. A termination could also result
in
penalties if we were unable to determine that the termination had occurred.
Moreover, a termination might either accelerate the application of, or subject
us to, any tax legislation enacted before the termination.
Uniformity
of Units
Because
we cannot match transferors and transferees of units, we must maintain
uniformity of the economic and tax characteristics of the units to a purchaser
of these units. In the absence of uniformity, we may be unable to completely
comply with a number of federal income tax requirements, both statutory and
regulatory. A lack of uniformity can result from a literal application of
Treasury Regulation Section 1.167(c)-1(a)(6). Any non-uniformity could have
a
negative impact on the value of the units. Please read “—Tax Consequences of
Unit Ownership—Section 754 Election.”
We
intend
to depreciate the portion of a Section 743(b) adjustment attributable to
unrealized appreciation in the value of Contributed Property, to the extent
of
any unamortized book-tax disparity, using a rate of depreciation or amortization
derived from the depreciation or amortization method and useful life applied
to
the unamortized book-tax disparity of that property, or treat that portion
as
non-amortizable, to the extent attributable to property which is not
amortizable, consistent with the regulations under Section 743 of the Internal
Revenue Code. This method is consistent with the Treasury regulations applicable
to property depreciable under the accelerated cost recovery system or the
modified accelerated cost recovery system, which we expect will apply to
substantially all, if not all, of our depreciable property. We also intend
to
use this method with respect to property that we own, if any, depreciable under
Section 167 of the Internal Revenue Code, even though that position may be
inconsistent with Treasury regulation Section 1.167(c)-1(a)(6). We do not expect
Section 167 to apply to a material portion, if any, of our assets. Please read
“—Tax Consequences of Unit Ownership—Section 754 Election.” To the extent that
the Section 743(b) adjustment is attributable to appreciation in value in excess
of the unamortized book-tax disparity, we will apply the rules described in
the
Treasury regulations and legislative history. If we determine that this position
cannot reasonably be taken, we may adopt a depreciation and amortization
position under which all purchasers acquiring units in the same month would
receive depreciation and amortization deductions, whether attributable to a
common basis or Section 743(b) adjustment, based upon the same applicable rate
as if they had purchased a direct interest in our property. If we adopt this
position, it may result in lower annual deductions than would otherwise be
allowable to some common unitholders and risk the loss of depreciation and
amortization deductions not taken in the year that these deductions are
otherwise allowable. We will not adopt this position if we determine that the
loss of depreciation and amortization deductions will have a material adverse
effect on the common unitholders. If we choose not to utilize this aggregate
method, we may use any other reasonable depreciation and amortization method
to
preserve the uniformity of the intrinsic tax characteristics of any units that
would not have a material adverse effect on the common unitholders. Our counsel,
Andrews Kurth LLP, is unable to opine on the validity of any of these positions.
The IRS may challenge any method of depreciating the Section 743(b) adjustment
described in this paragraph. If this challenge were sustained, the uniformity
of
units might be affected, and the gain from the sale of units might be increased
without the benefit of additional deductions. Please read “—Disposition of
Units—Recognition of Gain or Loss.”
Tax-Exempt
Organizations and Other Investors
Ownership
of units by employee benefit plans, other tax-exempt organizations, non-resident
aliens, foreign corporations and other foreign persons raises issues unique
to
those investors and, as described below, may have substantially adverse tax
consequences to them.
Employee
benefit plans and most other organizations exempt from federal income tax,
including individual retirement accounts and other retirement plans, are subject
to federal income tax on unrelated business taxable income. Virtually all of
our
income allocated to a common unitholder that is a tax-exempt organization will
be unrelated business taxable income and will be taxable to them.
A
regulated investment company, or “mutual fund,” is required to derive at least
90% of its gross income from certain permitted sources. Income from the
ownership of units in a “qualified publicly traded partnership” is generally
treated as income from a permitted source. We expect that we will meet the
definition of a qualified publicly traded partnership.
Non-resident
aliens and foreign corporations, trusts or estates that own units will be
considered to be engaged in business in the United States because of the
ownership of units. As a consequence they will be required to file federal
tax
returns to report their share of our income, gain, loss or deduction and pay
federal income tax at regular rates on their share of our net income or gain.
Under rules applicable to publicly traded partnerships, we will withhold tax,
at
the highest effective applicable rate, from cash distributions made quarterly
to
foreign common unitholders. Each foreign common unitholder must obtain a
taxpayer identification number from the IRS and submit that number to our
transfer agent on a Form W-8 BEN or applicable substitute form in order to
obtain credit for these withholding taxes. A change in applicable law may
require us to change these procedures.
In
addition, because a foreign corporation that owns units will be treated as
engaged in a United States trade or business, that corporation may be subject
to
the United States branch profits tax at a rate of 30%, in addition to regular
federal income tax, on its share of our income and gain, as adjusted for changes
in the foreign corporation’s “U.S. net equity,” that is effectively connected
with the conduct of a United States trade or business. That tax may be reduced
or eliminated by an income tax treaty between the United States and the country
in which the foreign corporate common unitholder is a “qualified resident.” In
addition, this type of common unitholder is subject to special information
reporting requirements under Section 6038C of the Internal Revenue
Code.
Under
a
ruling issued by the IRS, a foreign common unitholder who sells or otherwise
disposes of a unit will be subject to federal income tax on gain realized on
the
sale or disposition of that unit to the extent the gain is effectively connected
with a United States trade or business of the foreign common unitholder. Because
a foreign unitholder is considered to be engaged in business in the United
States by virtue of the ownership of units, under this ruling a foreign
unitholder who sells or otherwise disposes of a unit generally will be subject
to federal income tax on gain realized on the sale or disposition of the unit.
Apart from the ruling, a foreign common unitholder will not be taxed or subject
to withholding upon the sale or disposition of a unit if he has owned less
than
5% in value of the units during the five-year period ending on the date of
the
disposition and if the units are regularly traded on an established securities
market at the time of the sale or disposition.
Administrative
Matters
Information
Returns and Audit Procedures
We
intend
to furnish to each common unitholder, within 90 days after the close of each
calendar year, specific tax information, including a Schedule K-1, which
describes his share of our income, gain, loss and deduction for our preceding
taxable year. In preparing this information, which will not be reviewed by
counsel, we will take various accounting and reporting positions, some of which
have been mentioned earlier, to determine each common unitholder’s share of
income, gain, loss and deduction.
We
cannot
assure you that those positions will yield a result that conforms to the
requirements of the Internal Revenue Code, Treasury regulations or
administrative interpretations of the IRS. Neither we nor counsel can assure
prospective common unitholders that the IRS will not successfully contend in
court that those positions are impermissible. Any challenge by the IRS could
negatively affect the value of the units.
The
IRS
may audit our federal income tax information returns. Adjustments resulting
from
an IRS audit may require each common unitholder to adjust a prior year’s tax
liability and possibly may result in an audit of his own return. Any audit
of a
common unitholder’s return could result in adjustments not related to our
returns as well as those related to our returns.
Partnerships
generally are treated as separate entities for purposes of federal tax audits,
judicial review of administrative adjustments by the IRS and tax settlement
proceedings. The tax treatment of partnership items of income, gain, loss and
deduction are determined in a partnership proceeding rather than in separate
proceedings with the partners. The Internal Revenue Code requires that one
partner be designated as the “Tax Matters Partner” for these purposes. The
limited liability company agreement appoints CEPM as our Tax Matters Partner,
subject to redetermination by our board of managers from time to
time.
The
Tax
Matters Partner will make some elections on our behalf and on behalf of common
unitholders. In addition, the Tax Matters Partner can extend the statute of
limitations for assessment of tax deficiencies against common unitholders for
items in our returns. The Tax Matters Partner may bind a common unitholder
with
less than a 1% profits interest in us to a settlement with the IRS unless that
common unitholder elects, by filing a statement with the IRS, not to give that
authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial
review, by which all the common unitholders are bound, of a final partnership
administrative adjustment and, if the Tax Matters Partner fails to seek judicial
review, judicial review may be sought by any common unitholder having at least
a
1% interest in profits or by any group of common unitholders having in the
aggregate at least a 5% interest in profits. However, only one action for
judicial review will go forward, and each common unitholder with an interest
in
the outcome may participate.
A
common
unitholder must file a statement with the IRS identifying the treatment of
any
item on his federal income tax return that is not consistent with the treatment
of the item on our return. Intentional or negligent disregard of this
consistency requirement may subject a holder of common units to substantial
penalties.
Nominee
Reporting
Persons
who hold an interest in us as a nominee for another person are required to
furnish to us:
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the
name, address and taxpayer identification number of the beneficial
owner
and the nominee;
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a
statement regarding whether the beneficial owner
is:
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a
person that is not a United States
person,
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a
foreign government, an international organization or any wholly-owned
agency or instrumentality of either of the foregoing,
or
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the
amount and description of units held, acquired or transferred for
the
beneficial owner; and
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specific
information including the dates of acquisitions and transfers, means
of
acquisitions and transfers, and acquisition cost for purchases, as
well as
the amount of net proceeds from
sales.
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Brokers
and financial institutions are required to furnish additional information,
including whether they are United States persons and specific information on
units they acquire, hold or transfer for their own account. A penalty of $50
per
failure, up to a maximum of $100,000 per calendar year, is imposed by the
Internal Revenue Code for failure to report that information to us. The nominee
is required to supply the beneficial owner of the units with the information
furnished to us.
Accuracy-related
Penalties
An
additional tax equal to 20% of the amount of any portion of an underpayment
of
tax that is attributable to one or more specified causes, including negligence
or disregard of rules or regulations, substantial understatements of income
tax
and substantial valuation misstatements, is imposed by the Internal Revenue
Code. No penalty will be imposed, however, for any portion of an underpayment
if
it is shown that there was a reasonable cause for that portion and that the
taxpayer acted in good faith regarding that portion.
A
substantial understatement of income tax in any taxable year exists if the
amount of the understatement exceeds the greater of 10% of the tax required
to
be shown on the return for the taxable year or $5,000. The amount of any
understatement subject to penalty generally is reduced if any portion is
attributable to a position adopted on the return:
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for
which there is, or was, “substantial authority,”
or
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as
to which there is a reasonable basis and the relevant facts of that
position are disclosed on the
return.
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We
believe we will not be classified as a tax shelter. If any item of income,
gain,
loss or deduction included in the distributive shares of common unitholders
could result in that kind of an “understatement” of income for which no
“substantial authority” exists, we would be required to disclose the pertinent
facts on our return. In addition, we will make a reasonable effort to furnish
sufficient information for common unitholders to make adequate disclosure on
their returns to avoid liability for this penalty. More stringent rules would
apply to an understatement of tax resulting from ownership of units if we were
classified as a “tax shelter.”
A
substantial valuation misstatement exists if the value of any property, or
the
adjusted basis of any property, claimed on a tax return is 150% or more of
the
amount determined to be the correct amount of the valuation or adjusted basis.
No penalty is imposed unless the portion of the underpayment attributable to
a
substantial valuation misstatement exceeds $5,000 ($10,000 for a corporation
other than an S Corporation or a personal holding company). If the valuation
claimed on a return is 200% or more than the correct valuation, the penalty
imposed increases to 40%.
Reportable
Transactions
If
we
were to engage in a “reportable transaction,” we (and possibly you and others)
would be required to make a detailed disclosure of the transaction to the IRS.
A
transaction may be a reportable transaction based upon any of several factors,
including the fact that it is a type of transaction publicly identified by
the
IRS as a “listed transaction” or that it produces certain kinds of losses in
excess of $2 million. Our participation in a reportable transaction could
increase the likelihood that our federal income tax information return (and
possibly your tax return) is audited by the IRS. Please read “—Information
Returns and Audit Procedures” above.
Moreover,
if we were to participate in a listed transaction or a reportable transaction
(other than a listed transaction) with a significant purpose to avoid or evade
tax, you could be subject to the following provisions of the American Jobs
Creation Act of 2004:
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accuracy-related
penalties with a broader scope, significantly narrower exceptions,
and
potentially greater amounts than described above at “—Accuracy-related
Penalties,”
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for
those persons otherwise entitled to deduct interest on federal tax
deficiencies, non-deductibility of interest on any resulting tax
liability, and
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in
the case of a listed transaction, an extended statute of
limitations.
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We
do not
expect to engage in any reportable transactions.
State,
Local and Other Tax Considerations
In
addition to federal income taxes, you will be subject to other taxes, including
state and local income taxes, unincorporated business taxes, and estate,
inheritance or intangible taxes that may be imposed by the various jurisdictions
in which we do business or own property or in which you are a resident. We
currently do business and own property in Kansas, Maryland, Oklahoma and
Alabama. We are registered to do business in Texas. We may also own property
or
do business in other states in the future. Although an analysis of those various
taxes is not presented here, each prospective common unitholder should consider
their potential impact on his investment in us. You may not be required to
file
a return and pay taxes in some states because your income from that state falls
below the filing and payment requirement. You will be required, however, to
file
state income tax returns and to pay state income taxes in many of the states
in
which we may do business or own property, and you may be subject to penalties
for failure to comply with those requirements. In some states, tax losses may
not produce a tax benefit in the year incurred and also may not be available
to
offset income in subsequent taxable years. Some of the states may require us,
or
we may elect, to withhold a percentage of income from amounts to be distributed
to a common unitholder who is not a resident of the state. Withholding, the
amount of which may be greater or less than a particular common unitholder’s
income tax liability to the state, generally does not relieve a nonresident
common unitholder from the obligation to file an income tax return. Amounts
withheld may be treated as if distributed to common unitholders for purposes
of
determining the amounts distributed by us. Please read “—Tax Consequences of
Unit Ownership—Entity-Level Collections.” Based on current law and our estimate
of our future operations, we anticipate that any amounts required to be withheld
will not be material.
It
is the
responsibility of each common unitholder to investigate the legal and tax
consequences, under the laws of pertinent states and localities, of his
investment in us. Andrews Kurth LLP has not rendered an opinion on the state
local, or foreign tax consequences of an investment in us. We strongly recommend
that each prospective common unitholder consult, and depend on, his own tax
counsel or other advisor with regard to those matters. It is the responsibility
of each common unitholder to file all tax returns, that may be required of
him.
Tax
Consequences of Ownership of Debt Securities
Because
the terms and corresponding tax consequences of various debt issuances may
differ significantly, descriptions of the material federal income tax
consequences of the acquisition, ownership and disposition of debt securities
will be set forth in the prospectus supplement relating to the offering of
any
such debt securities.
INVESTMENT
IN OUR COMPANY BY EMPLOYEE BENEFIT PLANS
An
investment in us by an employee benefit plan is subject to additional
considerations because the investments of these plans are subject to the
fiduciary responsibility and prohibited transaction provisions of ERISA and
restrictions imposed by Section 4975 of the Internal Revenue Code. For these
purposes, the term “employee benefit plan” includes, but is not limited to,
qualified pension, profit-sharing and stock bonus plans, Keogh plans, simplified
employee pension plans and tax deferred annuities or IRAs established or
maintained by an employer or employee organization. Among other things, the
person with investment discretion with respect to the assets of an employee
benefit plan, often called a fiduciary, should consider:
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whether
the investment is prudent under Section 404(a)(1)(B) of
ERISA;
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whether
in making the investment, that plan will satisfy the diversification
requirements of Section 404(a)(l)(C) of ERISA;
and
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whether
the investment will result in recognition of unrelated business taxable
income by the plan and, if so, the potential after-tax investment
return.
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A
plan
fiduciary should determine whether an investment in us is authorized by the
appropriate governing instrument and is a proper investment for the
plan.
Section
406 of ERISA and Section 4975 of the Internal Revenue Code prohibits employee
benefit plans, and IRAs that are not considered part of an employee benefit
plan, from engaging in specified transactions involving “plan assets” with
parties that are “parties in interest” under ERISA or “disqualified persons”
under the Internal Revenue Code with respect to the plan.
In
addition to considering whether the purchase of common units is a prohibited
transaction, a fiduciary of an employee benefit plan should consider whether
the
plan will, by investing in us, be deemed to own an undivided interest in our
assets, with the result that CEPM also would be a fiduciary of the plan and
our
operations would be subject to the regulatory restrictions of ERISA, including
its prohibited transaction rules, as well as the prohibited transaction rules
of
the Internal Revenue Code.
The
Department of Labor regulations provide guidance with respect to whether the
assets of an entity in which employee benefit plans acquire equity interests
would be deemed “plan assets” under some circumstances. Under these regulations,
an entity’s assets would not be considered to be “plan assets” if, among other
things:
|
·
|
the
equity interests acquired by employee benefit plans are publicly
offered
securities—i.e., the equity interests are widely held by 100 or more
investors independent of the issuer and each other, freely transferable
and registered under some provisions of the federal securities
laws;
|
|
·
|
the
entity is an “operating company,”—i.e.,
it is
primarily engaged in the production or sale of a product or service
other
than the investment of capital either directly or through a majority
owned
subsidiary or subsidiaries; or
|
|
·
|
there
is no significant investment by benefit plan investors, which is
defined
to mean that less than 25% of the value of each class of equity interest,
disregarding some interests held by CEPM, its affiliates, and some
other
persons, is held by the employee benefit plans referred to above,
IRAs and
other employee benefit plans not subject to ERISA, including governmental
plans.
|
Our
assets should not be considered “plan assets” under these regulations because it
is expected that the investment will satisfy the requirements in the first
bullet above.
Plan
fiduciaries contemplating a purchase of our common units should consult with
their own counsel regarding the consequences under ERISA and the Internal
Revenue Code in light of the serious penalties imposed on persons who engage
in
prohibited transactions or other violations.
PLAN
OF DISTRIBUTION
We
may
sell the securities being offered hereby directly to purchasers, through agents,
through underwriters or through dealers.
We,
or
agents designated by us, may directly solicit, from time to time, offers to
purchase the securities. Any such agent may be deemed to be an underwriter
as
that term is defined in the Securities Act of 1933. We will name the agents
involved in the offer or sale of the securities and describe any commissions
payable by us to these agents in the prospectus supplement. Unless otherwise
indicated in the prospectus supplement, these agents will be acting on a best
efforts basis for the period of their appointment. The agents may be entitled
under agreements they may enter into with us to indemnification by us against
specified civil liabilities, including liabilities under the Securities Act
of
1933. The agents may also be our customers or may engage in transactions with
or
perform services for us in the ordinary course of business.
If
we use
any underwriters in the sale of the securities in respect of which this
prospectus is delivered, we will enter into an underwriting agreement with
those
underwriters at the time of sale to them. We will set forth the names of the
underwriters and the terms of the transaction in a prospectus supplement, which
will be used by the underwriters to make resales of the securities in respect
of
which this prospectus is delivered to the public. We may indemnify the
underwriters under the underwriting agreement against specified liabilities,
including liabilities under the Securities Act of 1933. The underwriters may
also be our customers or may engage in transactions with or perform services
for
us in the ordinary course of business.
If
we use
a dealer in the sale of the securities in respect of which this prospectus
is
delivered, we will sell those securities to the dealer, as principal. The dealer
may then resell those securities to the public at varying prices to be
determined by the dealer at the time of resale. We may indemnify the dealers
against specified liabilities, including liabilities under the Securities Act
of
1933. The dealers may also be our customers or may engage in transactions with,
or perform services for us in the ordinary course of business.
We
also
may sell common units and debt securities directly. In this case, no
underwriters or agents would be involved. We may use electronic media, including
the Internet, to sell offered securities directly.
Because
the Financial Industry Regulatory Authority (“FINRA”) views our common units as
interests in a direct participation program, any offering of common units under
the registration statement of which this prospectus forms a part will be made
in
compliance with Rule 2810 of the FINRA Conduct Rules.
To
the
extent required, this prospectus may be amended or supplemented from time to
time to describe a particular plan of distribution. The place and time of
delivery for the securities in respect of which this prospectus is delivered
will be set forth in the accompanying prospectus supplement.
In
connection with offerings of securities under the registration statement of
which this prospectus forms a part and in compliance with applicable law,
underwriters, brokers or dealers may engage in transactions that stabilize
or
maintain the market price of the securities at levels above those that might
otherwise prevail in the open market. Specifically, underwriters, brokers or
dealers may over-allot in connection with offerings, creating a short position
in the securities for their own accounts. For the purpose of covering a
syndicate short position or stabilizing the price of the securities, the
underwriters, brokers or dealers may place bids for the securities or effect
purchases of the securities in the open market. Finally, the underwriters may
impose a penalty whereby selling concessions allowed to syndicate members or
other brokers or dealers for distribution of the securities in offerings may
be
reclaimed by the syndicate if the syndicate repurchases previously distributed
securities in transactions to cover short positions, in stabilization
transactions or otherwise. These activities may stabilize, maintain or otherwise
affect the market price of the securities, which may be higher than the price
that might otherwise prevail in the open market, and, if commenced, may be
discontinued at any time.
LEGAL
MATTERS
Certain
legal matters in connection with the securities will be passed upon for us
by
Andrews Kurth LLP, Houston, Texas. If certain legal matters in connection with
an offering of the securities made by this prospectus and a related prospectus
supplement are passed on by counsel for the underwriters of such offering,
that
counsel will be named in the applicable prospectus supplement related to that
offering.
EXPERTS
The
financial statements of Constellation Energy Partners LLC as of December 31,
2006 and 2005, for the year ended December 31, 2006 and for the period February
7, 2005 (inception) through December 31, 2005 and of Everlast Energy LLC as
of
and for the year ended December 31, 2004 and for the period January 1, 2005
through June 12, 2005, incorporated in this prospectus by reference to the
Annual Report on Form 10-K of Constellation Energy Partners LLC for the year
ended December 31, 2006, the audited historical statements of direct revenues
and direct operating expenses of the natural gas and oil properties acquired
from EnergyQuest Resources, LP and the audited historical financial statements
of Kansas Processing EQR, LLC, included as Exhibit 99.1 pages F-1 through F-5
and Exhibit 99.2 pages F-1 through F-8, respectively, in Constellation Energy
Partners LLC’s Current Report on Form 8-K/A dated July 3, 2007 and the
statements of revenues and direct operating expenses of certain oil and gas
properties acquired from Newfield Exploration Mid-Continent Inc., included
as
Exhibit 99.1 pages 1 through 7 in Constellation Energy Partners LLC’s Current
Report on Form 8-K/A dated October 12, 2007, have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.
The
financial statements of AMVEST Osage, Inc. as of July 31, 2006 and 2005 and
for
each of the three years in the period ended July 31, 2006, incorporated in
this
Form S-3 Registration Statement by reference from Constellation Energy Partners
LLC’s Current Report on Form 8-K/A filed on September 14, 2007 have been audited
by Deloitte & Touche LLP, independent auditors as stated in their report
(which report expresses an unqualified opinion on the financial statements
and
includes an explanatory paragraph relating to supplemental information), which
is incorporated herein by reference, and has been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
Certain
information included or incorporated by reference in this prospectus regarding
our estimated quantities of natural gas reserves was prepared by Netherland,
Sewell & Associates, Inc.
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed a registration statement with the SEC under the Securities Act of 1933,
as
amended, that registers the offer and sale of the securities covered by this
prospectus. The registration statement, including the attached exhibits,
contains additional relevant information about us. In addition, we file annual,
quarterly and other reports and other information with the SEC. You may read
and
copy any document we file with the SEC at the SEC’s Public Reference Room at 100
F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the SEC’s Public
Reference Room. The SEC maintains an Internet site that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the SEC. Our SEC filings are available on the SEC’s web site
at http://www.sec.gov. You also can obtain information about us at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
The
SEC
allows us to “incorporate by reference” the information we have filed with the
SEC. This means that we can disclose important information to you without
actually including the specific information in this prospectus by referring
you
to other documents filed separately with the SEC. The information incorporated
by reference is an important part of this prospectus. Information that we later
provide to the SEC, and which is deemed to be “filed” with the SEC, will
automatically update information previously filed with the SEC, and may replace
information in this prospectus and information previously filed with the
SEC.
We
incorporate by reference in this prospectus the following documents that we
have
previously filed with the SEC:
|
·
|
Annual
Report on Form 10-K (File No. 1-33147) for the year ended December
31,
2006 filed on March 12, 2007;
|
|
·
|
Quarterly
Reports on Form 10-Q (File No. 1-33147) for the quarter ended March
31,
2007 filed on May 10, 2007, for the quarter ended June 30, 2007 filed
on
August 10, 2007 and for the quarter ended September 30, 2007 filed
on
November 14, 2007;
|
|
·
|
Current
Reports on Form 8-K (File No. 1-33147) filed on March 9, 2007 (except
for
the information under Item 7.01 and the related exhibit), April
24, 2007,
May 25, 2007, July 2, 2007, July 16, 2007, July 26, 2007, August
3, 2007,
August 6, 2007, August 17, 2007, September 26, 2007, October 18,
2007,
November 19, 2007, November 26, 2007, December 27, 2007, December 28,
2007, January 9, 2008 and January 29,
2008;
|
|
·
|
Current
Reports on Form 8-K/A (File No. 1-33147) filed on July 5, 2007, September
14, 2007 and October 12, 2007;
and
|
|
·
|
The
description of our common units contained in our registration statement
on
Form 8-A (File No. 1-33147) filed on November 13,
2006.
|
These
reports contain important information about us, our financial condition and
our
results of operations.
Nothing
in this prospectus shall be deemed to incorporate information furnished to,
but
not filed with, the SEC pursuant to Item 2.02 or Item 7.01 of Form 8-K (or
corresponding information furnished under Item 9.01 or included as an
exhibit).
We
make
available free of charge on or through our Internet website, http://www.constellationenergypartners.com,
our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on
Form 8-K and amendments to these reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after
we
electronically file such material with, or furnish it to, the SEC. Information
contained on our Internet website is not part of this prospectus.
You
may
obtain any of the documents incorporated by reference in this prospectus from
the SEC through the SEC’s website at the address provided above. You also may
request a copy of any document incorporated by reference in this prospectus
(excluding any exhibits to those documents, unless the exhibit is specifically
incorporated by reference in this document), at no cost, by visiting our
Internet website at http://www.constellationenergypartners.com,
or by
writing or calling us at the following address:
Investor
Relations
Constellation
Energy Partners LLC
111
Market Place
Baltimore,
Maryland 21202
Telephone:
(410) 864-6440
You
should rely only on the information incorporated by reference or provided in
this prospectus. We have not authorized anyone else to provide you with any
information. You should not assume that the information incorporated by
reference or provided in this prospectus is accurate as of any date other than
the date on the front of each document.
APPENDIX
A
GLOSSARY
OF TERMS
Adjusted
Operating Surplus
for any
period means:
|
(a) |
Operating
Surplus generated with respect to that period; less
|
|
(b) |
any
net increase in working capital borrowings with respect to that period
(excluding any such borrowings to the extent the proceeds are distributed
to the record holder of the Class D interests); less
|
|
(c) |
any
net reduction in cash reserves for operating expenditures with respect
to
that period not relating to an operating expenditure made with respect
to
that period; plus
|
|
(d) |
any
net decrease in working capital borrowings with respect to that period;
plus
|
|
(e) |
any
net increase in cash reserves for operating expenditures made with
respect
to that period required by any debt instrument for the repayment
of
principal, interest or premium.
|
Available
Cash
means,
for any quarter ending prior to liquidation:
(i) all
cash
and cash equivalents of Constellation Energy Partners LLC and its subsidiaries
(or the Company’s proportionate share of cash and cash equivalents in the case
of subsidiaries that are not wholly-owned) on hand at the end of that quarter;
and
(ii) all
additional cash and cash equivalents of Constellation Energy Partners LLC and
its subsidiaries (or the Company’s proportionate share of cash and cash
equivalents in the case of subsidiaries that are not wholly-owned) on hand
on
the date of determination of available cash for that quarter resulting from
working capital borrowings made subsequent to the end of such
quarter,
|
(b) |
less
the amount of any cash reserves established by the board of managers
(or
the Company’s proportionate share of cash reserves in the case of
subsidiaries that are not wholly-owned)
to
|
(i) provide
for the proper conduct of the business of Constellation Energy Partners LLC
and
its subsidiaries (including reserves for future capital expenditures including
drilling and acquisitions and for anticipated future credit needs) subsequent
to
such quarter,
(ii) comply
with applicable law or any loan agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to which Constellation Energy
Partners LLC or any of its subsidiaries is a party or by which it is bound
or
its assets are subject; or
(iii) provide
funds for distributions (1) to our unitholders or (2) in respect of our Class
D
interests or management incentive interests with respect to any one or more
of
the next four quarters;
provided,
however,
that
the Board of Managers may not establish cash reserves pursuant to (iii) above
if
the effect of such reserves would be that the Company is unable to distribute
the Initial Quarterly Distribution on all Common Units and Class A Units with
respect to such Quarter; and provided
further,
that
disbursements made by us or any of our subsidiaries or cash reserves
established, increased or reduced after the end of that quarter but on or before
the date of determination of available cash for that quarter shall be deemed
to
have been made, established, increased or reduced, for purposes of determining
available cash, within that quarter if board of managers so
determines.
Bcf.
One
billion cubic feet.
Capital
Surplus
is
generated by:
|
(a) |
borrowings
other than working capital
borrowings;
|
|
(b) |
sales
of debt and equity securities; and
|
|
(c) |
sales
or other disposition of assets for cash, other than inventory, accounts
receivable and other current assets sold in the ordinary course of
business or as a part of normal retirements or replacements of
assets.
|
Exploitation.
A
drilling or other project which may target proved or unproved reserves (such
as
probable or possible reserves), but which generally has a lower risk than that
associated with exploration projects.
Mcf.
One
thousand cubic feet.
Mcf/d.
One
thousand cubic feet per day.
Operating
expenditures means
all
expenditures of Constellation Energy Partners LLC and its subsidiaries (or
Constellation Energy Partners LLC’s proportionate share in the case of
subsidiaries that are not wholly-owned), including taxes, amounts paid for
services under the management services agreement, payments made in the ordinary
course of business under commodity hedge contracts (other than payments in
connection with termination of same prior to its termination date), provided
that with respect to amounts paid in connection with the initial purchase or
placing of a commodity hedge contract, such amounts shall be amortized over
the
life of the applicable commodity hedge contract and upon its termination, if
earlier, manager and officer compensation, compensation paid to our board of
managers, repayment of working capital borrowings, debt service payments, and
estimated maintenance capital expenditures, provided that operating expenditures
will not include:
repayment
of working capital borrowings deducted from operating surplus pursuant to
subparagraph (h) of the definition of operating surplus when such repayment
actually occurs;
|
·
|
payments
(including prepayments) of principal of and premium on indebtedness,
other
than working capital borrowings;
|
|
·
|
capital
expenditures made for acquisitions or for capital improvements, or
expansion capital expenditures;
|
|
·
|
actual
maintenance capital expenditures;
|
|
·
|
investment
capital expenditures;
|
|
·
|
payment
of transaction expenses relating to interim capital transactions;
or
|
|
·
|
distributions
to members (including distributions in respect of our Class D interests
and management incentive
interests).
|
Where
capital expenditures are made in part for acquisitions or for capital
improvements and in part for other purposes, our board of managers, with the
concurrence of the conflicts committee, shall determine the allocation between
the amounts paid for each.
Operating
surplus for
any
period means:
|
(a) |
$20.0
million (if we choose to distribute as operating surplus up to $20.0
million of cash we receive in the future from non-operating sources
such
as asset sales, issuances of securities and long-term borrowings);
plus
|
|
(b) |
all
of our cash receipts after the closing of our initial public offering,
excluding cash from (1) borrowings that are not working capital
borrowings, (2) sales of equity and debt securities and (3) sales
or other
dispositions of assets outside the ordinary course of business;
plus
|
|
(c) |
working
capital borrowings made after the end of a quarter but before the
date of
determination of operating surplus for the quarter;
plus
|
|
(d) |
cash
distributions paid on equity issued to finance all or a portion of
the
construction, replacement or improvement of a capital asset (such
as
equipment or reserves) during the period beginning on the date that
the
group member enters into a binding obligation to commence the
construction, acquisition or improvement of a capital improvement
or
replacement of a capital asset and ending on the earlier to occur
of the
date the capital improvement or capital asset commences commercial
service
or the date that it is abandoned or disposed of;
plus
|
|
(e) |
if
the right to receive distributions (other than distributions in
liquidation) on the Class D interests terminates before December
31, 2012,
the excess of the amount of the original $8.0 million contribution
by CHI
for the Class D interests over the cumulative cash distributions
paid on
the Class D interests before such termination shall be included in
operating surplus, such inclusion to occur over a series of quarters
with
the amount included in each quarter to be equal to the amount of
the
payment a group member makes to the Trust in respect of the NPI for
such
quarter that would not have been paid but for termination of the
sharing
arrangement; less
|
|
(f) |
our
operating expenditures after the closing of our initial public offering;
less
|
|
(g) |
the
amount of cash reserves established by our board of managers to provide
funds for future operating expenditures;
less
|
|
(h) |
all
working capital borrowings not repaid within twelve months after
having
been incurred.
|
Working
capital borrowings.
Borrowings used solely for working capital purposes or to pay distributions
to
members made pursuant to a credit facility, commercial paper facility or other
similar financing arrangement, provided that when it is incurred it is the
intent of the borrower to repay such borrowings within 12 months from other
than
Working Capital Borrowings.
Working
interest. The
operating interest that gives the owner the right to drill, produce and conduct
operating activities on the property and a share of production.
The
information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with
the
Securities and Exchange Commission is effective. This prospectus is not
an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED JANUARY 30,
2008
PROSPECTUS
5,918,894
Common
Units Representing Class B Limited Liability Company
Interests
This
prospectus relates up to 5,918,894 common units representing Class B limited
liability company interests in us that may be offered and sold by the selling
unitholder named in this prospectus. The selling unitholder acquired the
common
units in connection with our initial public offering occurring in November
2006.
We are not selling any common units under this prospectus and will not receive
any proceeds from the sale of common units by the selling unitholder. The
common
units to which this prospectus relates may be offered and sold from time
to time
directly from the selling unitholder or alternatively through underwriters
or
broker-dealers or agents. The selling unitholder may sell the common units
in
one or more transactions, at fixed prices, at prevailing market prices at
the
time of sale or at negotiated prices. Because all of the common units being
offered under this prospectus are being offered by the selling unitholder,
we
cannot currently determine the price or prices at which our common units
may be
sold under this prospectus.
Our
common units are traded on the NYSE Arca, Inc. under the trading symbol “CEP.”
Each
time
the selling unitholder offers to sell securities under the prospectus, the
selling unitholder will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement
also may add, update or change information contained in this prospectus.
This
prospectus may be used to offer and sell common units only if accompanied
by a
prospectus supplement. You should read this prospectus and any prospectus
supplement carefully before you invest. You should also read the documents
we
refer to in the “Where You Can Find More Information” section of this prospectus
for information on us and our financial statements.
Investing
in our securities involves risks. See “Risk Factors” beginning on page
2.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is
,
2008
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
|
|
|
1
|
|
ABOUT
CONSTELLATION ENERGY PARTNERS LLC
|
|
|
1
|
|
RISK
FACTORS
|
|
|
2
|
|
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
|
|
3
|
|
USE
OF PROCEEDS
|
|
|
4
|
|
HOW
WE MAKE CASH DISTRIBUTIONS
|
|
|
5
|
|
CONFLICTS
OF INTEREST AND FIDUCIARY DUTIES
|
|
|
15
|
|
Conflicts
of Interest
|
|
|
15
|
|
Fiduciary
Duties
|
|
|
17
|
|
DESCRIPTION
OF THE COMMON UNITS
|
|
|
18
|
|
The
Common Units
|
|
|
|
|
Transfer
Agent and Registrar
|
|
|
|
|
Transfer
of Common Units
|
|
|
|
|
THE
LIMITED LIABILITY COMPANY AGREEMENT
|
|
|
19
|
|
Organization
|
|
|
|
|
Purpose
|
|
|
|
|
Fiduciary
Duties
|
|
|
|
|
Agreement
to be Bound by Limited Liability Company Agreement; Power of
Attorney
|
|
|
|
|
Capital
Contributions
|
|
|
20
|
|
Limited
Liability
|
|
|
|
|
Voting
Rights
|
|
|
|
|
Issuance
of Additional Securities
|
|
|
21
|
|
Election
of Members of Our Board of Managers
|
|
|
21
|
|
Amendment
of Our Limited Liability Company Agreement
|
|
|
|
|
Merger,
Sale or Other Disposition of Assets; Conversion
|
|
|
|
|
Termination
and Dissolution
|
|
|
25
|
|
Liquidation
and Distribution of Proceeds
|
|
|
25
|
|
Anti-Takeover
Provisions
|
|
|
25
|
|
Limited
Call Right
|
|
|
26
|
|
Meetings;
Voting
|
|
|
26
|
|
Non-Citizen
Assignees; Redemption
|
|
|
27
|
|
Indemnification
|
|
|
27
|
|
Books
and Reports
|
|
|
28
|
|
Right
To Inspect Our Books and Records
|
|
|
28
|
|
Registration
Rights
|
|
|
28
|
|
MATERIAL
TAX CONSEQUENCES
|
|
|
29
|
|
Partnership
Status
|
|
|
29
|
|
Common
Unitholder Status
|
|
|
31
|
|
Tax
Consequences of Unit Ownership
|
|
|
31
|
|
Tax
Treatment of Operations
|
|
|
36
|
|
Disposition
of Units
|
|
|
40
|
|
Uniformity
of Units
|
|
|
41
|
|
Tax-Exempt
Organizations and Other Investors
|
|
|
42
|
|
Administrative
Matters
|
|
|
43
|
|
State,
Local and Other Tax Considerations
|
|
|
45
|
|
INVESTMENT
IN OUR COMPANY BY EMPLOYEE BENEFIT PLANS
|
|
|
46
|
|
PLAN
OF DISTRIBUTION
|
|
|
47
|
|
SELLING
UNITHOLDER
|
|
|
48 |
|
LEGAL
MATTERS
|
|
|
49
|
|
EXPERTS
|
|
|
49
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
|
|
49
|
|
APPENDIX
A— Glossary
of Terms |
|
|
A-1 |
|
You
should rely only on the information contained in this prospectus. We have
not
authorized anyone to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it.
You
should assume that the information appearing in this prospectus is accurate as
of the date on the front cover of this prospectus only. Our business, financial
condition, results of operations and prospects may have changed since that
date.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we have filed
with the Securities and Exchange Commission, or SEC, using a “shelf”
registration process. Under this shelf registration process, the selling
unitholder named in this prospectus or in any supplement to this prospectus
may
sell the common units described in this prospectus in one or more offerings.
This prospectus provides you with a general description of us and the common
units the selling unitholder may offer under this prospectus.
Each
time
the selling unitholder sells common units under this prospectus, the selling
unitholder will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement also
may
add to, update, or change information in this prospectus. If there is any
inconsistency between the information in this prospectus and any prospectus
supplement, you should rely on the information in the prospectus supplement.
You
should read carefully this prospectus, any prospectus supplement and the
additional information described below under the heading “Where You Can Find
More Information.” We include a glossary of some of the terms used in this
prospectus in Appendix A.
References
in this prospectus to “Constellation Energy Partners,” “we,” “our,” “us,” “CEP”
or like terms refer to Constellation Energy Partners LLC and its subsidiaries.
References in this prospectus to “CEPM” are to Constellation Energy Partners
Management, LLC, a Delaware limited liability company. References in this
prospectus to “CCG” are to Constellation Energy Commodities Group, Inc., a
Delaware corporation. References in this prospectus to “CEPH” are to
Constellation Energy Partners Holdings, LLC, a Delaware limited liability
company. References to “CHI” are to Constellation Holdings, Inc., a Delaware
corporation. References in this prospectus to “Constellation” are to
Constellation Energy Group, Inc., a Maryland corporation. We refer to our
Class
A limited liability company interests as the Class A units, our Class B limited
liability company interests as the common units, our Class C limited liability
company interests as the management incentive interests and our Class D limited
liability company interests as the Class D interests.
ABOUT
CONSTELLATION ENERGY PARTNERS LLC
We
are a
limited liability company that was formed by Constellation in 2005 to acquire
oil and natural gas reserves. We are focused on the acquisition, development
and
production of oil and natural gas properties (“E&P properties”) as well as
related midstream assets. Our primary business objective is to generate stable
cash flows allowing us to make quarterly cash distributions to our unitholders
and over time to increase our quarterly cash distribution. As of December
31,
2006, our estimated proved reserves were 100% natural gas and were located
in
the Black Warrior Basin in Alabama. Our estimated proved reserves at December
31, 2006 were approximately 120.3 Bcf, approximately 81% of which were
classified as proved developed. Our average proved reserve-to-production
ratio
is approximately 24 years based on our estimated proved reserves at January
1,
2006 and production for the year ended December 31, 2006. We currently own
a
100% working interest (an approximate 75% average net revenue interest,
calculated before the Torch Royalty NPI, or NPI) in our Robinson’s Bend Field
producing properties, which had 467 producing natural gas wells as of December
31, 2006.
In
2007,
we expanded our operations by entering into three separate definitive purchase
agreements to acquire certain coalbed methane properties located in the Cherokee
Basin in Kansas and Oklahoma. On April 23, 2007, we closed the acquisition
of
oil and natural gas properties and interests in certain limited liability
companies which own oil and natural gas properties for approximately $115
million, subject to purchase price adjustments. On July 25, 2007, we closed
the
acquisition of additional oil and natural gas properties via an agreement
of
merger providing for the merger of Amvest Osage, Inc. into a wholly-owned
subsidiary of CEP for approximately $240 million, subject to purchase price
adjustments. On September 21, 2007, we closed the acquisition of additional
oil
and natural gas properties for approximately $128 million, subject to purchase
price adjustments.
Recent
Developments
On
January 24, 2008, we announced a cash distribution for the quarter ended
December 31, 2007 of $0.5625 per outstanding common unit and Class A unit,
or
$2.25 per unit on an annualized basis. The distribution will be payable on
February 14, 2008 to unitholders of record at the close of business on February
7, 2008. A distribution of $333,333.33 for the same period will also be made
to
the Class D unitholder on February 14, 2008.
Our
principal executive offices are located at 111 Market Place, Baltimore, Maryland
21202, and our telephone number is (410) 468-3500. Our website is located
at
http://www.constellationenergypartners.com.
We make
our periodic reports and other information filed with or furnished to the
SEC
available, free of charge, through our website, as soon as reasonably
practicable after those reports and other information are electronically
filed
with or furnished to the SEC. Information on our website or any other website
is
not incorporated by reference into this prospectus and does not constitute
a
part of this prospectus.
RISK
FACTORS
Limited
liability company interests are inherently different from capital stock of
a
corporation, although many of the business risks to which we are subject
are
similar to those that would be faced by a corporation engaged in a similar
business. You should carefully consider the risk factors discussed in our
Annual
Report on Form 10-K for the year ended December 31, 2006 and our quarterly
reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007
and
September 30, 2007, together with all of the other information included in
this
prospectus, any prospectus supplement and the documents we have incorporated
by
reference into this prospectus in evaluating an investment in our common
units.
The described risks could materially and adversely affect our business,
financial condition or results of operation. If any of the described risks
actually were to occur, we may not be able to pay quarterly distributions
on our
common units, the trading price of our common units could decline and you
could
lose part or all of your investment in our company.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that are subject to a number
of
risks and uncertainties, many of which are beyond our control, which may
include
statements about:
· |
the
volatility of realized natural gas
prices;
|
· |
the
discovery, estimation, development and replacement of oil and natural
gas
reserves;
|
· |
our
business and financial strategy;
|
· |
our
drilling locations;
|
· |
our
cash flow, liquidity and financial
position;
|
· |
the
impact from the termination of the sharing arrangement before December
31,
2012;
|
· |
our
production volumes;
|
· |
our
lease operating expenses, general and administrative costs and
finding and
development costs;
|
· |
the
availability of drilling and production equipment, labor and other
services;
|
· |
our
future operating results;
|
· |
our
prospect development and property
acquisitions;
|
· |
the
marketing of oil and natural gas;
|
· |
competition
in the oil and natural gas
industry;
|
· |
the
impact of weather and the occurrence of natural disasters such
as fires,
floods, hurricanes, earthquakes and other catastrophic events and
natural
disasters;
|
· |
governmental
regulation of the oil and natural gas
industry;
|
· |
developments
in oil-producing and natural gas producing countries;
and
|
· |
our
strategic plans, objectives, expectations and intentions for future
operations.
|
All
of
these types of statements, other than statements of historical fact included
in
this prospectus, are forward-looking statements. These forward-looking
statements may be found in the “About Constellation Energy Partners LLC,” “Risk
Factors,” and other sections of this prospectus. In some cases, forward-looking
statements can be identified by terminology such as “may,” “could,” “should,”
“expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,”
“predict,” “potential,” “pursue,” “target,” “continue,” the negative of such
terms or other comparable terminology.
The
forward-looking statements contained in this prospectus are largely based
on our
expectations, which reflect estimates and assumptions made by our management.
These estimates and assumptions reflect our best judgment based on currently
known market conditions and other factors. Although we believe such estimates
and assumptions to be reasonable, they are inherently uncertain and involve
a
number of risks and uncertainties that are beyond our control. In addition,
management’s assumptions about future events may prove to be inaccurate.
Management cautions all readers that the forward-looking statements contained
in
this prospectus are not guarantees of future performance, and we cannot assure
any reader that such statements will be realized or the forward-looking events
and circumstances will occur. Actual results may differ materially from those
anticipated or implied in the forward-looking statements due to factors listed
in the “Risk Factors” section and elsewhere in this prospectus. All
forward-looking statements speak only as of the date of this prospectus.
We do
not intend to publicly update or revise any forward-looking statements as
a
result of new information, future events or otherwise. These cautionary
statements qualify all forward-looking statements attributable to us or persons
acting on our behalf.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of common units offered under this
prospectus. Any proceeds from the sale of common units offered under this
prospectus will be received by the selling unitholder.
HOW
WE MAKE CASH DISTRIBUTIONS
Initial
Quarterly Distributions
The
amount of distributions paid under our cash distribution policy and the decision
to make any distribution will be determined by our board of managers, taking
into consideration the terms of our limited liability company agreement.
We
intend to distribute to the holders of common units and Class A units on
a
quarterly basis at least the initial quarterly distribution of $0.4625 per
unit
(“IQD”), or $1.85 per unit per year to the extent we have sufficient available
cash after we establish appropriate reserves and pay fees and expenses,
including payments to CEPM in reimbursement of costs and expenses it incurs
on
our behalf. Our current quarterly distribution rate is $0.5625 per unit,
or
$2.25 per unit on an annualized basis. Our current quarterly distribution
is
intended to reflect the level of cash that we expect to be available for
distribution per common unit and Class A unit each quarter from our productive
assets. There is no guarantee we will pay the current quarterly distribution
in
any quarter and we will be prohibited from making any distributions to
unitholders if it would cause an event of default or an event of default
is
existing under our credit agreement. Our board of managers has adopted a
policy
that it will raise our quarterly cash distribution only when it believes
that
(i) we have sufficient reserves and liquidity for the proper conduct of our
business, including the maintenance of our asset base, and (ii) we can maintain
such an increased distribution level for a sustained period. While this is
our
current policy, our board of managers may alter such policy in the future
when
and if it determines such alteration to be appropriate.
Distributions
of Available Cash
Overview
Our
limited liability company agreement requires that, within 45 days after the
end
of each quarter, we distribute all of our available cash to unitholders of
record on the applicable record date.
Definition
of Available Cash
We
define
available cash in the glossary, and it generally means, for each fiscal quarter,
all cash on hand at the end of the quarter:
· |
less
the amount of cash reserves established by our board of managers
to:
|
· |
provide
for the proper conduct of our business (including reserves for
future
capital expenditures and credit needs);
|
· |
comply
with applicable law, any of our debt instruments, or other agreements;
or
|
· |
provide
funds for distributions (1) to our unitholders for any one or more
of the
next four quarters or (2) in respect of our Class D interests or
management incentive interests;
|
· |
plus
all cash on hand on the date of determination of available cash
for the
quarter resulting from working capital borrowings made after the
end of
the quarter. Working capital borrowings are generally borrowings
that are
made under our reserve-based credit facility or another arrangement
and in
all cases are used solely for working capital purposes or to pay
distributions to unitholders.
|
Operating
Surplus and Capital Surplus
General
All
cash
distributed to unitholders will be characterized as either “operating surplus”
or “capital surplus.” Our limited liability company agreement requires that we
distribute available cash from operating surplus differently than available
cash
from capital surplus.
Definition
of Operating Surplus
We
define
operating surplus in the glossary, and for any period, it generally
means:
· |
$20.0
million (as described below); plus
|
· |
all
of our cash receipts after the closing of our initial public offering,
excluding cash from (1) borrowings that are not working capital
borrowings, (2) sales of equity and debt securities, and (3) sales
or
other dispositions of assets outside the ordinary course of business;
plus
|
· |
working
capital borrowings made after the end of a quarter but before the
date of
determination of operating surplus for the quarter; plus
|
· |
cash
distributions paid on equity issued to finance all or a portion
of the
construction, replacement or improvement of a capital asset (such
as
equipment or reserves) during the period beginning on the date
that we
enter into a binding obligation to commence the construction, acquisition
or improvement of a capital improvement or replacement of a capital
asset
and ending on the earlier to occur of the date the capital improvement
or
capital asset is placed into service or the date that it is abandoned
or
disposed of; plus
|
· |
if
the right to receive distributions (other than distributions in
liquidation) on the Class D interests terminates before December
31, 2012,
the excess of the amount of the $8.0 million contribution by CHI
for the
Class D interests over the cumulative cash distributions paid on
the Class
D interests before such termination shall be included in operating
surplus, such inclusion to occur over a series of quarters with
the amount
included in each quarter to be equal to the amount of the payment
we make
to the Torch Energy Royalty Trust (the “Trust”) in respect of the NPI for
such quarter that would not have been paid but for termination
of the
sharing arrangement; less
|
· |
our
operating expenditures (as defined below) after the closing of
our initial
public offering; less
|
· |
the
amount of cash reserves established by our board of managers to
provide
funds for future operating expenditures; less
|
· |
all
working capital borrowings not repaid within twelve months after
having
been incurred.
|
As
described above, operating surplus does not reflect actual cash on hand that
is
available for distribution to our unitholders. For example, it includes a
provision that will enable us, if we choose, to distribute as operating surplus
up to $20.0 million of cash we receive in the future from non-operating sources
such as asset sales, issuances of securities and long-term borrowings that
would
otherwise be distributed as capital surplus. In addition, the effect of
including, as described above, certain cash distributions on equity securities
in operating surplus would be to increase operating surplus by the amount
of any
such cash distributions. As a result, we may also distribute as operating
surplus up to the amount of any such cash distributions we receive from
non-operating sources.
If
a
working capital borrowing, which increases operating surplus, is not repaid
during the twelve-month period following the borrowing, it will be deemed
repaid
at the end of such period, thus decreasing operating surplus at such time.
When
such working capital borrowing is in fact repaid, it will not be treated
as a
reduction in operating surplus because operating surplus will have been
previously reduced by the deemed repayment.
We
define
operating expenditures in the glossary, and it generally means all of our
cash
expenditures, including, but not limited to, taxes, reimbursement of expenses
to
CEPM for services under the management services agreement, payments made
in the
ordinary course of business under commodity hedge contracts, manager and
officer
compensation, repayment of working capital borrowings, debt service payments
and
estimated maintenance capital expenditures, provided that operating expenditures
will not include:
· |
repayment
of working capital borrowings deducted from operating surplus pursuant
to
the last bullet point of the definition of operating surplus when
such
repayment actually occurs;
|
· |
payments
(including prepayments and prepayment penalties) of principal of
and
premium on indebtedness, other than working capital
borrowings;
|
· |
expansion
capital expenditures;
|
· |
actual
maintenance capital expenditures;
|
· |
investment
capital expenditures;
|
· |
payment
of transaction expenses relating to interim capital transactions;
or
|
· |
distributions
to our members (including distributions in respect of our Class
D
interests and management incentive
interests).
|
Capital
Expenditures
For
purposes of determining operating surplus, maintenance capital expenditures
are
those capital expenditures required to maintain, including over the long
term,
our asset base, and expansion capital expenditures are those capital
expenditures that we expect will increase our asset base over the long term.
Examples of maintenance capital expenditures include capital expenditures
associated with the replacement of equipment and oil and natural gas reserves
(including non-proved reserves attributable to undeveloped leasehold acreage),
whether through the development, exploitation and production of an existing
leasehold or the acquisition or development of a new oil or natural gas
property. Maintenance capital expenditures will also include interest (and
related fees) on debt incurred and distributions on equity issued to finance
all
or any portion of a replacement asset during the period from such financing
until the earlier to occur of the date any such replacement asset is placed
into
service or the date that it is abandoned or disposed of. Plugging and
abandonment costs will also constitute maintenance capital expenditures.
Capital
expenditures made solely for investment purposes will not be considered
maintenance capital expenditures.
Because
our maintenance capital expenditures can be very large and irregular, the
amount
of our actual maintenance capital expenditures may differ substantially from
period to period, which could cause similar fluctuations in the amounts of
operating surplus, adjusted operating surplus and cash available for
distribution to our unitholders if we subtracted actual maintenance capital
expenditures from operating surplus. As a result, to eliminate the effect
on
operating surplus of these fluctuations, our limited liability company agreement
requires that an estimate of the average quarterly maintenance capital
expenditures (including estimated plugging and abandonment costs) necessary
to
maintain our asset base over the long term be subtracted from operating surplus
each quarter as opposed to the actual amounts spent. The amount of estimated
maintenance capital expenditures deducted from operating surplus is subject
to
review and change by our board of managers at least once a year, provided
that any
change is approved by our conflicts committee. The estimate is made at least
annually and whenever an event occurs that is likely to result in a material
adjustment to the amount of our maintenance capital expenditures, such as
a
major acquisition or the introduction of new governmental regulations that
will
impact our business. For purposes of calculating operating surplus, any
adjustment to this estimate will be prospective only.
The
use
of estimated maintenance capital expenditures in calculating operating surplus
has the following effects:
· |
it
reduces the risk that maintenance capital expenditures in any one
quarter
will be large enough to render operating surplus less than the
IQD to be
paid on all the units for that quarter and subsequent
quarters;
|
· |
it
increases our ability to distribute as operating surplus cash we
receive
from non-operating sources;
|
· |
it
is more difficult for us to raise our distribution above the IQD
and pay
management incentive distributions on our management incentive
interests;
and
|
· |
it
reduces the likelihood that a large maintenance capital expenditure
during
the First MII Earnings Period (as defined in “— Management Incentive
Interests” below) or Later MII Earnings Period (as defined in
“—Management Incentive Interests” below) will prevent the payment of
a management incentive distribution in respect of the First MII
Earnings
Period or Later MII Earnings Period since the effect of an estimate
is to
spread the expected expense over several periods, thereby mitigating
the
effect of the actual payment of the expenditure on any single
period.
|
Expansion
capital expenditures are those capital expenditures that we expect will increase
our asset base. Examples of expansion capital expenditures include the
acquisition of reserves or equipment, the acquisition of new leasehold interest,
or the development, exploitation and production of an existing leasehold
interest, to the extent such expenditures are incurred to increase our asset
base. Expansion capital expenditures will also include interest (and related
fees) on debt incurred and distributions on equity issued to finance all
or any
portion of such capital improvement during the period from such financing
until
the earlier to occur of the date any such capital improvement is placed into
service or the date that it is abandoned or disposed of. Capital expenditures
made solely for investment purposes will not be considered expansion capital
expenditures.
Investment
capital expenditures are those capital expenditures that are neither maintenance
capital expenditures nor expansion capital expenditures. Investment capital
expenditures largely will consist of capital expenditures made for investment
purposes. Examples of investment capital expenditures include traditional
capital expenditures for investment purposes, such as purchases of securities,
as well as other capital expenditures that might be made in lieu of such
traditional investment capital expenditures, such as the acquisition of a
capital asset for investment purposes or development of our undeveloped
properties in excess of maintenance capital expenditures, but which are not
expected to expand for more than the short term our asset base.
As
described above, none of actual maintenance capital expenditures, investment
capital expenditures or expansion capital expenditures are subtracted from
operating surplus. Because actual maintenance capital expenditures, investment
capital expenditures and expansion capital expenditures include interest
payments (and related fees) on debt incurred and distributions on equity
issued
to finance all of the portion of the construction, replacement or improvement
of
a capital asset (such as equipment or reserves) during the period from such
financing until the earlier to occur of the date any such capital asset is
placed into service or the date that it is abandoned or disposed of, such
interest payments and equity distributions are also not subtracted from
operating surplus (except, in the case of maintenance capital expenditures,
to
the extent such interest payments and distributions are included in estimated
maintenance capital expenditures).
Capital
expenditures that are made in part for maintenance capital purposes and in
part
for investment capital or expansion capital purposes will be allocated as
maintenance capital expenditures, investment capital expenditures or expansion
capital expenditure by our board of managers, based upon its good faith
determination, subject to approval by our conflicts committee.
Definition
of Capital Surplus
We
also
define capital surplus in the glossary, and it will generally be generated
only
by:
· |
borrowings
other than working capital
borrowings;
|
· |
sales
of debt and equity securities; and
|
· |
sales
or other disposition of assets for cash, other than inventory,
accounts
receivable and other current assets sold in the ordinary course
of
business or as part of normal retirements or replacements of
assets.
|
Characterization
of Cash Distributions
We
treat
all available cash distributed as coming from operating surplus until the
sum of
all available cash distributed since we began operations equals the operating
surplus as of the most recent date of determination of available cash. We
treat
any amount distributed in excess of operating surplus, regardless of its
source,
as capital surplus. We do not anticipate that we will make any distributions
from capital surplus.
Distributions
of Available Cash from Operating Surplus
We
make
distributions of available cash from operating surplus for any quarter in
the
following manner:
· |
first,
98% to the common unitholders, pro rata, and 2% to the holder(s)
of our
Class A units, pro rata, until we distribute for each outstanding
unit an
amount equal to the Target Distribution (that is, our $0.4625 IQD
plus
$0.0694), which aggregate amount we refer to as the “Target Distribution”,
for that quarter; and
|
· |
thereafter,
any amount distributed in respect of such quarter in excess of
the Target
Distribution per unit will be distributed 98% to the holders of
the common
units, pro rata, and 2% to the holder(s) of our Class A units until
distributions become payable in respect of our management incentive
interests as described in “—Management Incentive Interests”
below.
|
The
Class
A units are entitled to 2% of all cash distributions from operating surplus,
without any requirement for future capital contributions by the holders of
such
Class A units, even if we issue additional common units or other senior or
subordinated equity securities in the future. The percentage interests shown
above for the Class A units assume they have not been converted into common
units. If the Class A units have been converted, the common units will receive
the 2% of distributions originally allocated to the Class A units.
Management
Incentive Interests
Management
incentive interests represent the right to receive 15% of quarterly
distributions of available cash from operating surplus after the Target
Distribution has been achieved and certain other tests have been met. CEPM
currently holds the management incentive interests, which are evidenced by
the
Class C limited liability company interests, but may transfer these rights
separately from its Class A units, subject to restrictions in our limited
liability company agreement. The earliest that we could be required to make
distributions in respect of the management incentive interests is after a
period
of 12 consecutive quarters after we pay per unit cash distributions from
operating surplus to holders of Class A and common units in an amount equal
or
greater than the Target Distribution. The increase of our regular quarterly
distribution from $0.4625 per unit to $0.5625 per unit on our outstanding
common
and Class A units commenced the First MII Earnings Period. An initial reserve
of
$0.1 million has been established to fund future distributions on the management
incentive interests. We are not able to predict the amount of the distributions
in respect of the management incentive interests.
Prior
to
the end of the First MII Earnings Period or Later MII Earnings Period, which
are
defined below, we will not pay any management incentive distributions. To
the
extent, however, that during the First MII Earnings Period or Later MII Earnings
Period we distribute available cash from operating surplus in excess of the
Target Distribution, our board of managers intends to cause us to reserve
an
amount for payment of the EP MID, which is defined below, earned during the
First MII Earnings Period or Later MII Earnings Period, as the case may be,
after such period ends. If during the First MII Earnings Period or Later
MII
Earnings Period we fail to satisfy a condition specified in the next paragraph,
our board of managers will cause any such reserved amount to be released
from
that reserve and restored to available cash.
Payments
to the holder of our management incentive interests are subject to the
satisfaction of certain requirements. The first requirement is the 12-Quarter
Test, which requires that for the 12 full, consecutive, non-overlapping calendar
quarters that begin with the first calendar quarter in respect of which we
pay
per unit cash distributions from operating surplus to holders of Class A
and
common units in an amount equal to or greater than the Target Distribution
(we
refer to such 12-quarter period as the “First MII Earnings
Period”):
· |
we
pay cash distributions from operating surplus to holders of our
outstanding Class A and common units in an amount that on average
exceeds
the Target Distribution on all of the outstanding Class A units
and common
units over the First MII Earnings
Period;
|
· |
we
generate adjusted operating surplus (which is summarized below
and is
defined in the glossary included as Appendix A) during the First
MII
Earnings Period that on average is in an amount at least equal
to 100% of
all distributions on the outstanding Class A and common units up
to the
Target Distribution plus 117.65% of all such distributions in excess
of
the Target Distribution; and
|
· |
we
do not reduce the amount distributed per unit in respect of any
such 12
quarters.
|
The
second requirement is the 4-Quarter Test, which requires that for each of
the
last four full, consecutive, non-overlapping calendar quarters in the First
MII
Earnings Period:
· |
we
pay cash distributions from operating surplus to the holders of
our
outstanding Class A and common units that exceed the Target Distribution
on all of the outstanding Class A and common
units;
|
· |
we
generate adjusted operating surplus in an amount at least equal
to 100% of
all distributions on the outstanding Class A and common units up
to the
Target Distribution plus 117.65% of all such distributions in excess
of
the Target Distribution; and
|
· |
we
do not reduce the amount distributed per unit in respect of any
such four
quarters.
|
If
both
the 12-Quarter Test and the 4-Quarter Test have been met, then: (i) we will
make
a one-time management incentive distribution (contemporaneously with the
distribution paid in respect of the Class A and common units for the twelfth
calendar quarter in the First MII Earnings Period) to the holder of our
management incentive interests equal to 17.65% of the sum of the cumulative
amounts, if any, by which quarterly cash distributions per unit part on the
outstanding Class A and common units during the First MII Earnings Period
exceeded the Target Distribution on all of the outstanding Class A and common
units (we refer to this one-time management incentive distribution as an
“EP
MID”); and (ii) for each calendar quarter after the First MII Earnings Period,
the holders of our Class A units and common units and management incentive
interests will receive 2%, 83% and 15%, respectively, of cash distributions
from
available cash from operating surplus that we pay for such quarter in excess
of
the Target Distribution.
If
the
12-Quarter Test is not met and except as described below, management incentive
distributions will not be payable in respect of the First MII Earnings Period
and the holder of the management incentive interests will forfeit any and
all
rights to any management incentive distributions in respect of the First
MII
Earnings Period. An EP MID may become payable, however, with respect to a
Later
MII Earnings Period, if the 12-Quarter Test and the 4-Quarter Test are met
in
respect of such Later MII Earnings Period. A Later MII Earnings Period may
begin
with the first quarter following the quarter in which the 12-Quarter Test
is not
met, or, where we do not meet the 12-Quarter Test because we reduced our
cash
distribution in a particular quarter, the Later MII Earnings Period may begin
with the quarter in which such reduction is made. If both tests are met with
respect to a Later MII Earnings Period, then for each calendar quarter after
the
Later MII Earnings Period, the holders of the Class A units and common units
and
management incentive interests will receive 2%, 83% and 15%, respectively,
of
cash distributions from available cash from operating surplus that we pay
for
such quarter in excess of the Target Distribution.
However,
if (a) the 12-Quarter Test has been met in respect of the First MII Earnings
Period or any Later MII Earnings Period, but not the 4-Quarter Test; (b)
the
4-Quarter Test has been met in any period of four full, consecutive and
non-overlapping quarters occurring after the end of the First MII Earnings
Period or Later MII Earnings Period, as the case may be, up to three of which
quarters can fall within the First MII Earnings Period or Later MII Earnings
Period, as the case may be (we refer to such four-quarter period as the “MII
4-Quarter Earnings Period”); and (c) we have paid at least the IQD in each
calendar quarter occurring between the end of the First MII Earnings Period
or
Later MII Earnings Period, as the case may be, and the beginning of the MII
4-Quarter Earnings Period:
· |
the
holders of our Class A units and common units and management incentive
interests will receive 2%, 83% and 15%, respectively, of cash
distributions from available cash from operating surplus that we
pay in
excess of the Target Distribution for each calendar quarter after
the MII
4-Quarter Earnings Period; and
|
· |
the
holder of our management incentive interests will receive an EP
MID with
respect to the First MII Earnings Period or Later MII Earnings
Period, as
the case may be.
|
Our
board
of managers has adopted a policy that it will raise our quarterly cash
distribution only when it believes that (i) we have sufficient reserves and
liquidity for the proper conduct of our business, including the maintenance
of
our asset base, and (ii) we can maintain such increased distribution level
for a
sustained period. While this is our current policy, our board of managers
may
alter such policy in the future when and if it determines such alteration
to be
appropriate.
Definition
of Adjusted Operating Surplus
We
define
adjusted operating surplus in the glossary and for any period it generally
means:
· |
operating
surplus generated with respect to that period less any amounts
described
in the fifth bullet point under “—Definition of Operating Surplus” above;
less
|
· |
any
net increase in working capital borrowings with respect to that
period
(excluding any such borrowings to the extent the proceeds are distributed
to the record holder of our Class D interests);
less
|
· |
any
net reduction in cash reserves for operating expenditures with
respect to
that period not relating to an operating expenditure made with
respect to
that period; plus
|
· |
any
net decrease in working capital borrowings with respect to that
period;
plus
|
· |
any
net increase in cash reserves for operating expenditures made with
respect
to that period required by any debt instrument for the repayment
of
principal, interest or premium.
|
Adjusted
operating surplus is intended to reflect the cash generated from our operations
during a particular period and therefore excludes net increases in working
capital borrowings and net drawdowns of reserves of cash generated in prior
periods.
Percentage
Allocations of Available Cash from Operating Surplus
The
following table illustrates the percentage allocations of the additional
available cash from operating surplus between the unitholders and CEPM as
the
owner of our management incentive interests up to various distribution levels.
The amounts set forth under “Marginal Percentage Interest in Distributions” are
the percentage interests of our Class A unitholders and common unitholders
and
the holders of our management incentive interests in any available cash from
operating surplus we distribute up to and including the corresponding amount
in
the column “Quarterly Distribution Level,” until available cash from operating
surplus we distribute reaches the next distribution level, if any. The
percentage interests shown for the IQD are also applicable to quarterly
distribution amounts that are less than the IQD. The percentage interests
shown
in the table below assume that the Class A units have not been converted
into
common units as described herein.
|
|
Marginal
Percentage Interest in Distributions
|
|
Quarterly
Distribution Level
|
Class
A Unitholders
|
Common
Unitholders
|
Management
Incentive Interests
|
IQD
|
$0.4625
|
2%
|
98%
|
0%
|
Target
Distribution
|
above
$0.4625 up to $0.5319
|
2%
|
98%
|
0%
|
Thereafter*
|
above
$0.5319
|
2%
|
83%
|
15%
|
*
|
Assumes
the management incentive interests have met the 12-Quarter Test
and the
4-Quarter Test. Until the 12-Quarter Test and the 4-Quarter Test
are met
and distributions in respect of the management incentive interests
become
payable, quarterly distributions in excess of the $0.5319 Target
Distribution will be made 2% to the holder of the Class A units
and 98% to
the holders of common units, pro
rata.
|
Distributions
from Capital Surplus
How
Distributions from Capital Surplus Are Made
We
make
distributions of available cash from capital surplus, if any, in the following
manner:
· |
first,
2% to the holder of our Class A units and 98% to all common unitholders,
pro rata, until we distribute for each common unit that was issued
in our
initial public offering an amount of available cash from capital
surplus
equal to the initial public offering price;
and
|
· |
thereafter,
we will make all distributions of available cash from capital surplus
as
if they were from operating
surplus.
|
Effect
of a Distribution from Capital Surplus
Our
limited liability company agreement treats a distribution of capital surplus
as
the repayment of the initial common unit price from our initial public offering,
which is a return of capital. The initial public offering price less any
distributions of capital surplus per common unit is referred to as the
“unrecovered capital” per initial common unit. Each time a distribution of
capital surplus is made, the IQD and the Target Distribution will be reduced
in
the same proportion as the corresponding reduction in the unrecovered capital
per common unit. Because distributions of capital surplus will reduce the
IQD,
after any of these distributions are made, it may be easier for CEPM to receive
management incentive distributions. However, any distribution of capital
surplus
before the unrecovered capital per common unit is reduced to zero cannot
be
applied to the payment of the IQD.
Once
we
distribute capital surplus on a common unit in an amount equal to the
unrecovered capital per common unit, we will reduce the IQD and the Target
Distribution to zero. We will then make all future distributions from operating
surplus, with 2% being distributed to the holder of our Class A units, 83%
being
distributed to our common unitholders, pro rata, and 15% being distributed
to
the holder of our management incentive interests. The percentage interests
shown
above for the Class A units assume they have not been converted into common
units. If the Class A units have been converted, the common units will receive
the 2% of distributions originally allocated to the Class A units.
Adjustment
to the IQD and Target Distribution
In
addition to adjusting the IQD and Target Distribution to reflect a distribution
of capital surplus, if we combine our common units into fewer common units
or
subdivide our common units into a greater number of common units, we will
proportionately adjust:
· |
the
Target Distribution; and
|
· |
the
unrecovered capital per common
unit.
|
For
example, if a two-for-one split of the common units should occur, the Target
Distribution and the unrecovered capital per common unit would each be reduced
to 50% of its initial level. We will not make any adjustment by reason of
the
issuance of additional units for cash or property.
In
addition, if legislation is enacted or if existing law is modified or
interpreted by a court of competent jurisdiction, so that we become taxable
as a
corporation or otherwise subject to taxation as an entity for federal, state
or
local income tax purposes, we will reduce the IQD and the Target Distribution
for each quarter by multiplying each by a fraction, the numerator of which
is
available cash for that quarter (after deducting our board of manager’s estimate
of our aggregate liability for the quarter for such income taxes payable
by
reason of such legislation or interpretation) and the denominator of which
is
the sum of available cash for that quarter plus our board of managers’ estimate
of our aggregate liability for the quarter for such income taxes payable
by
reason of such legislation or interpretation. To the extent that the actual
tax
liability differs from the estimated tax liability for any quarter, the
difference will be accounted for in subsequent quarters.
Quarterly
Cash Distributions on Our Class D Interests
In
order
to address the risk of early termination, without the prior consent of board
of
managers, prior to December 31, 2012, of the sharing arrangement under the
gas
purchase contract pertaining to the calculation of amounts payable to the
Trust
for the NPI, and the potential reduction in our revenues resulting therefrom,
at
the closing of our initial public offering CHI contributed $8.0 million to
us
for all of our Class D interests. For each full calendar quarter during the
period commencing January 1, 2007 and ending on December 31, 2012 that the
sharing arrangement remains in effect, we will distribute to the holder of
the
Class D interests $333,333.33, as a partial return of the $8.0 million capital
contribution made for the Class D interests, which payment will be made
concurrently with the quarterly cash distribution to our unitholders for
that
quarter. The Class D interests will be cancelled upon the payment of the
final
distribution of $333,333.41 to CHI for the quarter ending December 31, 2012,
unless the special distribution right has been terminated earlier. Such special
quarterly cash distributions will be made 45 days after the end of each calendar
quarter.
If
the
amounts payable by us to the Trust are not calculated based on the sharing
arrangement through December 31, 2012, unless such change is approved in
advance
by our board of managers and our conflicts committee, the special distribution
right for future quarters will terminate and the remaining portion of the
$8.0
million original contribution not so returned in special cash distributions
will
be retained by us to partially offset the reduction in our revenues resulting
from termination of the sharing arrangement. In the case of such termination
of
the special distribution right, CHI will have the right only under specific
circumstances upon our liquidation to receive the unpaid portion of the $8.0
million capital contribution that has not then been distributed to CHI in
such
special distributions. See “—Distributions of Cash Upon Liquidation” below. If
the sharing arrangement in respect of the specified wells in the Robinson’s Bend
Field (the “Trust Wells”) is terminated during a quarter, the special
distribution to CHI as the holder of our Class D interests will be prorated
for
that quarter based on the ratio of the number of days in such quarter prior
to
the effective date of such termination to 90. If we and any of the Trust,
the
trustee of the Trust, or any subsequent holder of the NPI become involved
in a
dispute or proceeding in which such person asserts that prior to December
31,
2012 the sharing arrangement ceased to be applicable in calculating amounts
payable in respect of production from the Trust Wells, special cash
distributions in respect of the Class D interests for periods commencing
at the
inception of such dispute will be suspended, and such suspended amounts will
only be paid to the holder of the Class D interests to the extent it is finally
determined that the sharing arrangement remained applicable during some or
all
of the suspension period.
Distributions
of Cash Upon Liquidation
General
If
we
dissolve in accordance with our limited liability company agreement, we will
sell or otherwise dispose of our assets in a process called liquidation.
We will
first apply the proceeds of liquidation to the payment of our creditors.
We will
distribute any remaining proceeds to the unitholders, to CHI, the entity
that
contributed $8.0 million to us in exchange for the Class D interests, CEPH
and
CEPM in accordance with their capital account balances, as adjusted to reflect
any gain or loss upon the sale or other disposition of our assets in
liquidation.
Manner
of Adjustments for Gain
The
manner of the adjustment for gain is set forth in our limited liability company
agreement, and requires that we will allocate any gain to the unitholders
and
holders of the Class A units in the following manner:
· |
first,
to the holders of common units who have negative balances in their
capital
accounts to the extent of and in proportion to those negative
balances;
|
· |
second,
2% to the holder of our Class A units and 98% to the common unitholders,
pro rata, until the capital account for each common unit is equal
to the
sum of:
|
(1) |
the
unrecovered initial common unit price;
and
|
(2) |
the
amount of the IQD for the quarter during which our liquidation
occurs;
and
|
· |
third,
100% to the holder of our Class D interests, until the capital
account of
the Class D interests equals, in the aggregate, the excess, if
any, of (i)
the $8.0 million capital contribution made to us by CHI at the
closing of
our initial public offering for all of our Class D interests over
(ii) the
cumulative amount distributed as a special distribution to the
holder of
the Class D interests in accordance with the description under
“Quarterly
Cash Distributions On Our Class D interests”
above;
|
· |
fourth,
2%
to the holder of our Class A units and 98% to the common unitholders,
pro
rata, until the capital account for each common unit is equal to
the sum
of:
|
(1) |
the
amount described above under the second bullet point of this paragraph;
and
|
(2) |
the
excess of (I) over (II), where
|
(I) |
equals
the sum of the excess of the Target Distribution per common unit
over the
IQD for each quarter of our existence;
and
|
(II) |
equals
the cumulative amount per common unit of any distributions of available
cash from operating surplus in excess of the IQD per common unit
that we
distributed 98% to our common unitholders, pro rata, for each quarter
of
our existence; and
|
· |
thereafter,
2% to the holder of our Class A units, 83% to all common unitholders,
pro
rata, and 15% to the holder of our management incentive
interests.
|
Manner
of Adjustments for Losses
Upon
our
liquidation, we will generally allocate any loss 2% to the holder of the
Class A
units and 98% to the holders of the outstanding common units, pro
rata.
Adjustments
to Capital Accounts
We
will
make adjustments to capital accounts upon the issuance of additional common
units. In doing so, we will allocate any unrealized and, for tax purposes,
unrecognized gain or loss resulting from the adjustments to the holder of
the
Class A units, the common unitholders, the holders of Class D interests and
the
holders of the management incentive interests in the same manner as we allocate
gain or loss upon liquidation. In the event that we make positive adjustments
to
the capital accounts upon the issuance of additional common units, we will
allocate any later negative adjustments to the capital accounts resulting
from
the issuance of additional common units or upon our liquidation in a manner
which results, to the extent possible, in the capital account balances of
the
holders of the management incentive interests equaling the amount which they
would have been if no earlier positive adjustments to the capital accounts
had
been made.
CONFLICTS
OF INTEREST AND FIDUCIARY DUTIES
Conflicts
of Interest
Affiliates
of Constellation own all of our Class A units, 5,918,894 common units, our
management incentive interests and our Class D interests. In addition, upon
the
closing of our initial offering, we entered into a management services agreement
with CEPM, a subsidiary of Constellation, and are dependent on CEPM for the
management of our operations. Conflicts of interest exist and may arise in
the
future as a result of the relationships between us and our unaffiliated
unitholders and our board of managers and executive officers and Constellation
and its affiliates, including CEPM and CEPH. These potential conflicts may
relate to the divergent interests of these parties.
Whenever
a conflict arises between Constellation and its affiliates, on the one hand,
and
us or any other unitholder, on the other hand, our board of managers will
resolve that conflict. Our limited liability company agreement limits the
remedies available to unitholders in the event a unitholder has a claim relating
to conflicts of interest.
No
breach
of obligation will occur under our limited liability company agreement in
respect of any conflict of interest if the resolution of the conflict
is:
· |
Approved
by the conflicts committee of our board of managers, although our
board of
managers is not obligated to seek such
approval;
|
· |
approved
by the vote of a majority of the outstanding units, excluding any
common
or Class A units owned by CEPM, CEPH or any of their affiliates
although
our board of managers is not obligated to seek such
approval;
|
· |
on
terms no less favorable to us than those generally provided to
or
available from unaffiliated third parties;
or
|
· |
fair
and reasonable to us, taking into account the totality of the
relationships between the parties involved, including other transactions
that may be particularly favorable or advantageous to
us.
|
We
anticipate that our board of managers will submit for review and approval
by our
conflicts committee any acquisitions of properties or other assets that we
propose to acquire from Constellation or any of its affiliates.
If
our
board of managers does not seek approval from the conflicts committee of
our
board of managers and our board determines that the resolution or course
of
action taken with respect to the conflict of interest satisfies either of
the
standards set forth in the third and fourth bullet points above, then it
will be
presumed that, in making its decision, the board of managers, including board
members affected by the conflict of interest, acted in good faith, and in
any
proceeding brought by or on behalf of any member or the company, the person
bringing or prosecuting such proceeding will have the burden of overcoming
such
presumption. Unless the resolution of a conflict is specifically provided
for in
our limited liability company agreement, our board of managers or its conflicts
committee may consider any factors in good faith when resolving a conflict.
When
our limited liability company agreement requires someone to act in good faith,
it requires that person to reasonably believe that he is acting in our best
interests, unless the context otherwise requires.
Conflicts
of interest could arise in the situations described below, among
others.
Constellation
and its affiliates may compete with us.
None
of
Constellation or any of its affiliates is restricted from competing with
us.
Constellation and its affiliates may acquire, invest in or dispose of E&P or
other assets, including those that might be in direct competition with
us.
Neither
Constellation nor its affiliates have any obligation to offer us the opportunity
to purchase or own interests in any assets.
We
intend
to rely on CEPM to provide us with opportunities for the acquisition of oil
and
natural gas reserves, however, neither Constellation nor its affiliates has
any
obligation to offer us the opportunity to purchase or own interests in any
assets.
Affiliates
of Constellation not only have the exclusive right to elect two members of
our
board of managers but also may influence the election of the other three
members
of our board of managers.
CEPM,
as
the holder of our Class A units will have the exclusive right to elect two
members of our board of managers, and CEPH, as the largest holder of our
common
units, may be able to influence any vote of common unitholders, including
the
election of the three members of our board of managers that are elected by
the
common unitholders. In turn, our board of managers shall have the power to
appoint our officers. Situations in which the interests of our management
and
Constellation and its affiliates may differ from interests of our unaffiliated
unitholders include the following situations:
· |
our
limited liability company agreement gives our board of managers
broad
discretion in establishing cash reserves for the proper conduct
of our
business, which will affect the amount of cash available for distribution.
For example, our management will use its reasonable discretion
to
establish and maintain cash reserves sufficient to fund our drilling
program;
|
· |
our
management team determines the timing and extent of our drilling
program
and related capital expenditures, asset purchases and sales, borrowings,
issuances of additional membership interests and reserve adjustments,
all
of which will affect the amount of cash that we distribute to our
unitholders;
|
· |
our
board of managers may cause us to borrow funds in order to permit
us to
pay cash distributions to our unitholders, even if the purpose
or effect
of the borrowing is to make management incentive distributions;
and
|
· |
our
board of managers is allowed to take into account the interest
of parties
other than us, such as Constellation and its affiliates, in resolving
conflicts of interest, which has the effect of limiting the fiduciary
duty
to our unaffiliated unitholders.
|
Our
executive officers and our Class A managers also serve as managers, directors,
officers or employees of Constellation or its other affiliates as a result
of
which conflicts of interest exist and will arise in the
future.
Our
executive officers and our Class A managers are also managers, directors,
officers or employees of Constellation or its affiliates (other than us).
In
making decisions in such person’s capacity as a manager, director, officer or
employee of Constellation or such affiliate, such person may make a decision
that favors the interests of Constellation or such affiliate over your interests
and may be to our detriment, notwithstanding that in making decisions in
such
person’s capacity as our officer or manager such person is required to act in
good faith and in accordance with the standards set forth in our limited
liability company agreement. If in resolving a conflict of interest any of
our
executive officers and our Class A managers satisfies the applicable standards
set forth in our limited liability company agreement for resolving a conflict
of
interest, you will not be able to assert that such resolution constituted
a
breach of fiduciary duty owed to us or to you by such executive officer or
Class
A manager.
We
may compete for the time and effort of our managers and officers who are
also
managers, directors and officers of Constellation and its
affiliates.
Constellation
and its affiliates conduct business and activities of their own in which
we have
no economic interest. Certain of our managers and officers are employees
of
Constellation and serve as managers, directors and officers of Constellation
and
its affiliates. Our managers and officers are not required to work full time
on
our business and affairs and may devote significant time to the affairs of
Constellation and its affiliates. There could be material competition for
the
time and effort of our managers and officers who provide services to
Constellation and its affiliates.
Unitholders
will have no right to enforce obligations of Constellation and its affiliates
under agreements with us.
Any
agreements, including the management services agreement, between us, on the
one
hand, and Constellation and its affiliates, on the other hand, will not grant
to
our unitholders any right to enforce the obligations of Constellation and
its
affiliates in our favor.
Contracts
between us, on the one hand, and Constellation and its affiliates, on the
other,
will not be the result of arm’s-length negotiations.
Neither
our limited liability company agreement nor any of the other contracts or
arrangements, including our management services agreement, between us and
Constellation and its affiliates are or will be the result of arm’s-length
negotiations.
Fiduciary
Duties
Our
limited liability company agreement provides that our business and affairs
shall
be managed under the direction of our board of managers, which shall have
the
power to appoint our officers. Our limited liability company agreement further
provides that the authority and function of our board of managers and officers
shall be identical to the authority and functions of a board of directors
and
officers of a corporation organized under the Delaware General Corporation
Law
(“DGCL”). However, our managers and officers do not owe us the same duties that
the directors and officers of a corporation organized under the DGCL would
owe
to that corporation. Rather, our limited liability company agreement provides
that the fiduciary duties and obligations owed to us and to our members by
our
managers and officers is generally to act in good faith in the performance
of
their duties on our behalf. Our limited liability company agreement permits
affiliates of our managers to invest or engage in other businesses or activities
that compete with us. In addition, if our conflicts committee approves a
transaction involving potential conflicts, or if a transaction is on terms
generally available from unaffiliated third parties or an action is taken
that
is fair and reasonable to the company, unitholders will not be able to assert
that such approval constituted a breach of fiduciary duties owed to them
by our
managers and officers.
We
are
unlike publicly traded partnerships whose business and affairs are managed
by a
general partner with fiduciary duties to the partnership. While CEPM provides
legal, accounting, finance, tax, property management, engineering and other
services to us pursuant to the management services agreement, subject to
the
oversight of our board of managers, we have no general partner with fiduciary
duties to us. CEPM’s duties to us are contractual in nature and arise solely
under the management services agreement. As a consequence, none of
Constellation, CEPM, CEPH, CCG or their affiliates owe to us a fiduciary
duty
similar to that owed by a general partner to its limited partners.
DESCRIPTION
OF THE COMMON UNITS
The
Common Units
The
common units represent limited liability company interests in us. The holders
of
common units are entitled to participate in distributions and exercise the
rights or privileges provided under our limited liability company agreement.
For
a description of the relative rights and preferences of holders of common
units
in and to distributions, please read this section and “How We Make Cash
Distributions.” For a description of the rights and privileges of holders of
common units under our limited liability company agreement, including voting
rights, please read “The Limited Liability Company Agreement.”
Transfer
Agent and Registrar
Computershare
Trust Company, N.A. serves as registrar and transfer agent for the common
units.
We pay all fees charged by the transfer agent for transfers of common units,
except the following fees that will be paid by holders of common
units:
· |
surety
bond premiums to replace lost or stolen certificates, taxes and
other
governmental charges;
|
· |
special
charges for services requested by a holder of a common unit;
and
|
· |
other
similar fees or charges.
|
There
is
no charge to unitholders for disbursements of our cash distributions. We
will
indemnify the transfer agent, its agents and each of their shareholders,
managers, officers and employees against all claims and losses that may arise
out of acts performed or omitted in that capacity, except for any liability
due
to any gross negligence or intentional misconduct of the indemnified person
or
entity.
The
transfer agent may at any time resign, by notice to us, or be removed by
us. The
resignation or removal of the transfer agent will become effective upon our
appointment of a successor transfer agent and registrar and its acceptance
of
the appointment. If no successor has been appointed and has accepted the
appointment within 30 days after notice of the resignation or removal, we
are
authorized to act as the transfer agent and registrar until a successor is
appointed.
Transfer
of Common Units
By
transfer of common units in accordance with our limited liability company
agreement, each transferee of common units shall be admitted as a unitholder
of
our company with respect to the common units transferred when such transfer
and
admission is reflected on our books and records. Additionally, each transferee
of common units:
· |
becomes
the record holder of the common
units;
|
· |
automatically
agrees to be bound by the terms and conditions of, and is deemed
to have
executed our limited liability company
agreement;
|
· |
represents
that the transferee has the capacity, power and authority to enter
into
the limited liability company
agreement;
|
· |
grants
powers of attorney to our officers and any liquidator of our company
as
specified in the limited liability company agreement;
and
|
· |
makes
the consents and waivers contained in our limited liability company
agreement.
|
A
transferee will become a unitholder of our company for the transferred common
units upon the recording of the name of the transferee on our books and
records.
Until
a
common unit has been transferred on our books, we and the transfer agent,
notwithstanding any notice to the contrary, may treat the record holder of
the
common unit as the absolute owner for all purposes, except as otherwise required
by law or stock exchange regulations.
THE
LIMITED LIABILITY COMPANY AGREEMENT
The
following is a summary of the material provisions of our limited liability
company agreement. Our limited liability company agreement is incorporated
by
reference as an exhibit to the registration statement of which this prospectus
constitutes a part. We will provide prospective investors with a copy of
the
form of this agreement upon request at no charge.
We
summarize the following provisions of our limited liability company agreement
elsewhere in this prospectus:
· |
with
regard to distributions of available cash, please read “How We Make Cash
Distributions.”
|
· |
with
regard to the transfer of common units, please read “Description of the
Common Units—Transfer of Common Units;”
and
|
· |
with
regard to allocations of taxable income and taxable loss, please
read
“Material Tax Consequences.”
|
Organization
Our
company was formed in February 2005 and will remain in existence until dissolved
in accordance with our limited liability company agreement.
Purpose
Under
our
limited liability company agreement, we are permitted to engage, directly
or
indirectly, in any activity that our board of managers approves and that
a
limited liability company organized under Delaware law lawfully may conduct;
provided,
that
our board of managers shall not cause us to engage, directly or indirectly,
in
any business activities that it determines would cause us to be treated as
an
association taxable as a corporation or otherwise taxable as an entity for
federal income tax purposes.
Although
our board of managers has the ability to cause us and our operating subsidiaries
to engage in activities other than the acquisition, development and
exploitation, of oil and natural gas properties and related midstream assets,
our board of managers has no current plans to do so. Our board of managers
is
authorized in general to perform all acts it deems to be necessary or
appropriate to carry out our purposes and to conduct our business.
Fiduciary
Duties
Our
limited liability company agreement provides that the fiduciary duties and
obligations owed to us and to our members by our managers and officers is
generally limited to their acting in good faith in the performance of their
duties on our behalf. For a description of fiduciary duties, please read
“Conflicts of Interest and Fiduciary Duties.”
Agreement
to be Bound by Limited Liability Company Agreement; Power of
Attorney
By
purchasing a common unit in us, you will be admitted as a member of our company
and will be deemed to have agreed to be bound by the terms of our limited
liability company agreement. Pursuant to this agreement, each holder of common
units and each person who acquires a common unit from a holder of common
units
grants to our board of managers (and, if appointed, a liquidator) a power
of
attorney to, among other things, execute and file documents required for
our
qualification, continuance or dissolution. The power of attorney also grants
our
board of managers the authority to make certain amendments to, and to make
consents and waivers under and in accordance with, our limited liability
company
agreement.
Capital
Contributions
Unitholders
(including holders of common units) are not obligated to make additional
capital
contributions, except as described below under “—Limited
Liability.”
Limited
Liability
Unlawful
Distributions
The
Delaware Limited Liability Company Act (the “Delaware Act”) provides that any
unitholder who receives a distribution and knew at the time of the distribution
that the distribution was in violation of the Delaware Act shall be liable
to
the company for the amount of the distribution for three years. Under the
Delaware Act, a limited liability company may not make a distribution to
any
unitholder if, after the distribution, all liabilities of the company, other
than liabilities to unitholders on account of their limited liability company
interests and liabilities for which the recourse of creditors is limited
to
specific property of the company, would exceed the fair value of the assets
of
the company. For the purpose of determining the fair value of the assets
of a
company, the Delaware Act provides that the fair value of property subject
to
liability for which recourse of creditors is limited shall be included in
the
assets of the company only to the extent that the fair value of that property
exceeds the nonrecourse liability. Under the Delaware Act, an assignee who
becomes a substituted unitholder of a company is liable for the obligations
of
his assignor to make contributions to the company, except the assignee is
not
obligated for liabilities unknown to him at the time he became a unitholder
and
that could not be ascertained from the limited liability company
agreement.
Failure
to Comply with the Limited Liability Provisions of Jurisdictions in Which
We Do
Business
Our
subsidiaries may be deemed to conduct business in Alabama, Kansas, Maryland,
Oklahoma and Texas. We may decide to conduct business in other states, and
maintenance of limited liability for us, as a member of our operating
subsidiaries, may require compliance with legal requirements in the
jurisdictions in which the operating subsidiaries conduct business, including
qualifying our subsidiaries to do business there. Limitations on the liability
of unitholders for the obligations of a limited liability company have not
been
clearly established in many jurisdictions. We will operate in a manner that
our
board of managers considers reasonable and necessary or appropriate to preserve
the limited liability of our unitholders.
Voting
Rights
Holders
of our common units and our Class A units, have voting rights on most matters.
The following matters require the unitholder vote specified below:
Election
of members of the board of managers
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Our
board of managers consists of five members, as required by our
limited
liability company agreement. Except as set forth below, at each
annual
meeting of our unitholders, Class A unitholders, voting as a single
class,
will elect two managers and the holders of our common units, voting
together as a single class, will elect the remaining three managers.
Please read “—Election of Members of Our Board of Managers,” “—Removal of
Members of Our Board of Managers” and “—Elimination of Special Voting
Rights of Class A Units.”
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Issuance
of additional securities including common units
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No
approval right.
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Amendment
of the limited liability company agreement
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Certain
amendments may be made by our board of managers without unitholder
approval. Other amendments generally require the approval of both
a common
unit majority and Class A unit majority. Please read “—Amendment of Our
Limited Liability Company Agreement.”
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Merger
of our company or the sale of all or substantially all of our
assets
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Common
unit majority and Class A unit majority. Please read
“—Merger,
Sale or Other Disposition of Assets.”
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Dissolution
of our company
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Common
unit majority and Class A unit majority. Please read
“—Termination
and Dissolution.”
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Matters
requiring the approval of a “common unit majority” require the approval of at
least a majority of the outstanding common units voting together as a single
class. In addition, matters requiring the approval of a “Class A unit majority”
require the approval of at least a majority of the outstanding Class A units
voting together as a single class.
Issuance
of Additional Securities
Our
limited liability company agreement authorizes us to issue an unlimited number
of additional securities and authorizes us to buy securities for the
consideration and on the terms and conditions determined by our board of
managers without the approval of our unitholders.
It
is
possible that we will fund acquisitions through the issuance of additional
common units or other equity securities. Holders of any additional common
units
we issue will be entitled to share equally with the then-existing holders
of
common units, Class A units and management incentive interests in our
distributions of available cash. Also, the issuance of additional common
units
or other equity securities may dilute the value of the interests of the
then-existing holders of common units in our net assets.
In
accordance with Delaware law and the provisions of our limited liability
company
agreement, we may also issue additional securities that, as determined by
our
board of managers, may have special voting or other rights to which the units
are not entitled.
The
holders of units will not have preemptive or preferential rights to acquire
additional units or other securities.
Election
of Members of Our Board of Managers
At
our
first annual meeting of the holders of our Class A units and our common
unitholders following our initial public offering:
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two
members of our board of managers were elected by CEPM, as the holder
of
all of our Class A units; and
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three
members of our board of managers were elected by our common
unitholders.
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The
board
of managers will be subject to re-election on an annual basis in this manner
at
our annual meeting of the holders of our Class A units and our common
unitholders.
Removal
of Members of Our Board of Managers
Any
manager elected by the holder of our Class A units may be removed, with or
without cause, by the holders of 66 2/3% of the outstanding Class A units
then
entitled to vote at an election of managers. Any manager elected by the holders
of our common units may be removed, with or without cause, by the holders
of at
least a majority of the outstanding common units then entitled to vote at
an
election of managers.
Increase
in the Size of Our Board of Managers
The
size
of our board of managers may increase only with the approval of the holders
of
66 2/3% outstanding Class A units. If the size of our board of managers is
so
increased, the vacancy created thereby shall be filled by a person appointed
by
our board of managers or a nominee approved by a majority vote of our common
unitholders, unless such vacancy is specified by an amendment to our limited
liability company agreement as a vacancy to be filled by our Class A
unitholders, in which case such vacancy shall be filled by a person approved
by
our Class A unitholders.
Elimination
of Special Voting Rights of Class A Units
The
holders of our Class A units have the right, voting as a separate class,
to
elect two of the five members of our board of managers and any replacement
of
either of such members, subject to the matters described under “—Election of
Members of Our Board of Managers—Increase in the Size of Our Board of Managers”
above. This right can be eliminated only upon a proposal submitted by or
with
the consent of our board of managers and the vote of the holders of not less
than 66 2/3% of our outstanding common units. If such elimination is so approved
and Constellation and its affiliates do not vote their common units in favor
of
such elimination, the Class A units will be converted into common units on
a
one-for-one basis and CEPM will have the right to convert its management
incentive interests into common units based on the then-fair market value
of
such interests.
Amendment
of Our Limited Liability Company Agreement
General
Amendments
to our limited liability company agreement may be proposed only by or with
the
consent of our board of managers. To adopt a proposed amendment, other than
the
amendments discussed below, our board of managers is required to seek written
approval of the holders of the number of units required to approve the amendment
or call a meeting of our unitholders to consider and vote upon the proposed
amendment. Except as described below, an amendment must be approved by a
common
unit majority and a Class A unit majority.
Prohibited
Amendments
No
amendment may be made that would:
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enlarge
the obligations of any unitholder without its consent, unless approved
by
at least a majority of the type or class of member interests so
affected;
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provide
that we are not dissolved upon an election to dissolve our company
by our
board of managers that is approved by a common unit majority and
a Class A
unit majority;
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entitle
members holding common units and/or Class A units to more or less
than one
vote per unit;
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prohibit
the holders of Class A units from acting without a
meeting;
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change
the procedures for notice to members of business to be brought
before a
meeting and nominations to board of
managers;
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require
some percentage other than a majority of votes cast affirmatively
or
negatively by members holding units for approval of matters submitted
for
a member vote;
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allow
the calling of a special meeting by other than a majority of the
board of
managers;
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change
the term of existence of our company;
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give
any person the right to dissolve our company other than our board
of
managers’ right to dissolve our company with the approval of a common unit
majority and a Class A unit majority;
or
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enlarge
the size of our board of managers without the approval of the holders
of
66 2/3% of our Class A units.
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The
provision of our limited liability company agreement preventing the amendments
having the effects described in any of the clauses above can be amended upon
the
approval of the holders of at least 75% of the outstanding common units,
voting
together as a single class, and 75% of the outstanding Class A units, voting
together as a single class.
No
Unitholder Approval
Our
board
of managers may generally make amendments to our limited liability company
agreement without unitholder approval to reflect:
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a
change in our name, the location of our principal place of our
business,
our registered agent or our registered
office;
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the
admission, substitution, withdrawal or removal of members in accordance
with our limited liability company
agreement;
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a
change that our board of managers determines to be necessary or
appropriate for us to qualify or continue our qualification as
a company
in which our members have limited liability under the laws of any
state or
to ensure that neither we, our operating subsidiaries nor any of
its
subsidiaries will be treated as an association taxable as a corporation
or
otherwise taxed as an entity for federal income tax
purposes;
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the
merger of our company or any of its subsidiaries into, or the conveyance
of all of our assets to, a newly formed entity if the sole purpose
of that
merger or conveyance is to effect a mere change in our legal form
into
another limited liability entity;
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an
amendment that is necessary, in the opinion of our counsel, to
prevent us,
members of our board, or our officers, agents or trustees from
in any
manner being subjected to the provisions of the Investment Company
Act of
1940, the Investment Advisors Act of 1940, or “plan asset” regulations
adopted under the Employee Retirement Income Security Act of 1974
(“ERISA”) whether or not substantially similar to plan asset regulations
currently applied or proposed;
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an
amendment that our board of managers determines to be necessary
or
appropriate for the authorization of additional securities or rights
to
acquire securities;
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any
amendment expressly permitted in our limited liability company
agreement
to be made by our board of managers acting
alone;
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an
amendment effected, necessitated or contemplated by a merger agreement
that has been approved under the terms of our limited liability
company
agreement;
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any
amendment that our board of managers determines to be necessary
or
appropriate for the formation by us of, or our investment in, any
corporation, partnership or other entity, as otherwise permitted
by our
limited liability company
agreement;
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a
change in our fiscal year or taxable year and related
changes;
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a
merger, conversion or conveyance effected in accordance with the
limited
liability company agreement; and
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any
other amendments substantially similar to any of the matters described
in
the clauses above.
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In
addition, our board of managers may make amendments to our limited liability
company agreement without unitholder approval if our board of managers
determines that those amendments:
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do
not adversely affect the unitholders (including any particular
class of
unitholders as compared to other classes of unitholders) in any
material
respect;
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are
necessary or appropriate to satisfy any requirements, conditions
or
guidelines contained in any opinion, directive, order, ruling or
regulation of any federal or state agency or judicial authority
or
contained in any federal or state
statute;
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are
necessary or appropriate to facilitate the trading of common units
or to
comply with any rule, regulation, guideline or requirement of any
securities exchange on which the common units are or will be listed
for
trading, compliance with any of which our board of managers deems
to be in
the best interests of us and our common
unitholders;
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are
necessary or appropriate for any action taken by our board of managers
relating to splits or combinations of units under the provisions
of our
limited liability company agreement; or
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are
required to effect the intent expressed in this prospectus or the
intent
of the provisions of our limited liability company agreement or
are
otherwise contemplated by our limited liability company
agreement.
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Opinion
of Counsel and Unitholder Approval
Our
board
of managers will not be required to obtain an opinion of counsel that an
amendment will not result in a loss of limited liability to our unitholders
or
result in our being treated as an entity for federal income tax purposes
if one
of the amendments described above under “—No Unitholder Approval” should occur.
No other amendments to our limited liability company agreement will become
effective without the approval of holders of at least 90% of the common units
and Class A units unless we obtain an opinion of counsel to the effect that
the
amendment will not affect the limited liability under applicable law of any
unitholder of our company.
Any
amendment that would have a material adverse effect on the rights or preferences
of any type or class of outstanding units in relation to other classes of
units
will require the approval of at least a majority of the type or class of
units
so affected. Any amendment that reduces the voting percentage required to
take
any action is required to be approved by the affirmative vote of unitholders
whose aggregate outstanding units constitute not less than the voting
requirement sought to be reduced.
Merger,
Sale or Other Disposition of Assets; Conversion
Our
board
of managers is generally prohibited, without the prior approval of a common
unit
majority and a Class A unit majority from causing us to, among other things,
sell, exchange or otherwise dispose of all or substantially all of our assets
in
a single transaction or a series of related transactions, including by way
of
merger, consolidation or other combination, or approving on our behalf the
sale,
exchange or other disposition of all or substantially all of the assets of
our
subsidiaries, provided that our board of managers may mortgage, pledge,
hypothecate or grant a security interest in all or substantially all of our
assets without that approval. Our board of managers may also sell all or
substantially all of our assets under a foreclosure or other realization
upon
the encumbrances above without that approval.
If
the
conditions specified in the limited liability company agreement are satisfied,
our board of managers may merge our company or any of its subsidiaries into,
or
convey all of our assets to, a newly formed entity if the sole purpose of
that
merger or conveyance is to effect a mere change in our legal form into another
limited liability entity. Additionally, the Company may convert into any
“other
entity” as defined in the Delaware Limited Liability Company Act, whether such
entity is formed under the laws of the State of Delaware or any other state
in
the United States of America. Our unitholders are not entitled to dissenters’
rights of appraisal under the limited liability company agreement or applicable
Delaware law in the event of a merger or consolidation, a sale of all or
substantially all of our assets or any other transaction or event.
Termination
and Dissolution
We
will
continue as a company until terminated under our limited liability company
agreement. We will dissolve upon: (1) the election of our board of managers
to
dissolve us, if approved by a common unit majority and a Class A unit majority;
(2) the sale, exchange or other disposition of all or substantially all of
the
assets and properties of our company and our subsidiaries; or (3) the entry
of a
decree of judicial dissolution of our company.
Liquidation
and Distribution of Proceeds
Upon
our
dissolution, the liquidator authorized to wind up our affairs will, acting
with
all of the powers of our board of managers that the liquidator deems necessary
or desirable in its judgment, liquidate our assets and apply the proceeds
of the
liquidation as provided in “How We Make Cash Distributions—Distributions of Cash
Upon Liquidation.” The liquidator may defer liquidation or distribution of our
assets for a reasonable period of time or distribute assets to unitholders
in
kind if it determines that a sale would be impractical or would cause undue
loss
to our unitholders.
Anti-Takeover
Provisions
Our
limited liability company agreement contains specific provisions that are
intended to discourage a person or group from attempting to take control
of our
company without the approval of our board of managers. Specifically, our
limited
liability company agreement provides that we will elect to have Section 203
of
the DGCL apply to transactions in which an interested common unitholder (as
described below) seeks to enter into a merger or business combination with
us.
Under this provision, such a holder will not be permitted to enter into a
merger
or business combination with us unless:
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prior
to such time, our board of managers approved either the business
combination or the transaction that resulted in the common unitholder’s
becoming an interested common
unitholder;
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upon
consummation of the transaction that resulted in the common unitholder
becoming an interested common unitholder, the interested common
unitholder
owned at least 85% of our outstanding common units at the time
the
transaction commenced, excluding for purposes of determining the
number of
common units outstanding those common units
owned:
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by
persons who are managers and also officers;
and
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by
employee common unit plans in which employee participants do not
have the
right to determine confidentially whether common units held subject
to the
plan will be tendered in a tender or exchange offer;
or
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at
or subsequent to such time the business combination is approved
by our
board of managers and authorized at an annual or special meeting
of our
common unitholders, and not by written consent, by the affirmative
vote of
the holders of at least 66 2/3% of our outstanding voting common
units
that are not owned by the interested common
unitholder.
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Section
203 of the DGCL defines “business combination” to include:
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any
merger or consolidation involving the company and the interested
common
unitholder;
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any
sale, transfer, pledge or other disposition of 10% or more of the
assets
of the company involving the interested common
unitholder;
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subject
to certain exceptions, any transaction that results in the issuance
or
transfer by the company of any common units of the company to the
interested common unitholder;
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any
transaction involving the company that has the effect of increasing
the
proportionate share of the units of any class or series of the
company
beneficially owned by the interested common unitholder;
or
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the
receipt by the interested common unitholder of the benefit of any
loans,
advances, guarantees, pledges or other financial benefits provided
by or
through the company.
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In
general, by reference to Section 203, an “interested common unitholder” is any
person or entity, other than Constellation, CEPM, their affiliates or
transferees, that beneficially owns (or within three years did own) 15% or
more
of the outstanding common units of the company and any entity or person
affiliated with or controlling or controlled by such entity or
person.
The
existence of this provision would be expected to have an anti-takeover effect
with respect to transactions not approved in advance by our board of managers,
including discouraging attempts that might result in a premium over the market
price for common units held by common unitholders.
Our
limited liability agreement also restricts the voting rights of common
unitholders by providing that any units held by a person that owns 20% or
more
of any class of units then outstanding, other than Constellation, CEPM, their
affiliates or transferees and persons who acquire such units with the prior
approval of the board of managers, cannot vote on any matter.
Limited
Call Right
If
at any
time any person owns more than 80% of the then-issued and outstanding common
units, it will have the right, which it may assign in whole or in part to
any of
its affiliates or to us, to acquire all, but not less than all, of the remaining
common units held by unaffiliated persons as of a record date to be selected
by
our board of managers, on at least 10 days but not more than 60 days notice.
The
common unitholders are not entitled to dissenters’ rights of appraisal under the
limited liability company agreement or applicable Delaware law if this limited
call right is exercised. The purchase price in the event of this purchase
is the
greater of:
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the
highest cash price paid by such person for any common units purchased
within the 90 days preceding the date on which such person first
mails
notice of its election to purchase the remaining common units;
and
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the
closing market price of the common units as of the date three days
before
the date the notice is mailed.
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As
a
result of this limited call right, a holder of common units may have his
limited
liability company interests purchased at an undesirable time or price. The
tax
consequences to a common unitholder of the exercise of this call right are
the
same as a sale by that common unitholder of his common units in the market.
Please read “Material Tax Consequences—Disposition of Units.”
Meetings;
Voting
All
notices of meetings of unitholders shall be sent or otherwise given in
accordance with Sections 11.4 and 14.1 of our limited liability company
agreement not less than 10 days nor more than 60 days before the date of
the
meeting. The notice shall specify the place, date and hour of the meeting
and
(i) in the case of a special meeting, the general nature of the business
to be
transacted (no business other than that specified in the notice may be
transacted) or (ii) in the case of the annual meeting, those matters which
the
board of managers, at the time of giving the notice, intends to present for
action by the unitholders (but any proper matter may be presented at the
meeting
for such action). The notice of any meeting at which managers are to be elected
shall include the name of any nominee or nominees who, at the time of the
notice, the board of managers intends to present for election. Any previously
scheduled meeting of the unitholders may be postponed, and any special meeting
of the unitholders may be cancelled, by resolution of the board of managers
upon
public notice given prior to the date previously scheduled for such meeting
of
unitholders.
Units
that are owned by an assignee who is a record holder, but who has not yet
been
admitted as a member, shall be voted at the written direction of the record
holder by a proxy designated by our board of managers. Absent direction of
this
kind, the units will not be voted, except that units held by us on behalf
of
non-citizen assignees shall be voted in the same ratios as the votes of
unitholders on other units are cast.
Any
action required or permitted to be taken by our common unitholders must be
effected at a duly called annual or special meeting of unitholders and may
not
be effected by any consent in writing by such common unitholders.
Special
meetings of the unitholders may only be called by a majority of our board
of
managers. Unitholders may vote either in person or by proxy at meetings.
The
holders of a majority of the outstanding units for which a meeting has been
called represented in person or by proxy shall constitute a quorum unless
any
action by the unitholders requires approval by holders of a greater percentage
of the units, in which case the quorum shall be the greater
percentage.
Each
record holder of a unit has a vote according to his percentage interest in
us,
although additional units having special voting rights could be issued. Please
read “—Issuance of Additional Securities.” Units held in nominee or street name
accounts will be voted by the broker or other nominee in accordance with
the
instruction of the beneficial owner unless the arrangement between the
beneficial owner and its nominee provides otherwise.
Any
notice, demand, request, report or proxy material required or permitted to
be
given or made to record holders of units under our limited liability company
agreement will be delivered to the record holder by us or by the transfer
agent.
Our
limited liability agreement also restricts the voting rights of common
unitholders by providing that any units held by a person that owns 20% or
more
of any class of units then outstanding, other than Constellation, CEPM, their
affiliates or transferees and persons who acquire such units with the prior
approval of the board of managers, cannot vote on any matter.
Non-Citizen
Assignees; Redemption
If
we or
any of our subsidiaries are or become subject to federal, state or local
laws or
regulations that, in the reasonable determination of our board of managers,
create a substantial risk of cancellation or forfeiture of any property that
we
have an interest in because of the nationality, citizenship or other related
status of any unitholder or assignee, we may redeem, upon 30 days’ advance
notice, the units held by the unitholder or assignee at their current market
price. To avoid any cancellation or forfeiture, our board of managers may
require each unitholder or assignee to furnish information about his
nationality, citizenship or related status. If a unitholder or assignee fails
to
furnish information about his nationality, citizenship or other related status
within 30 days after a request for the information or our board of managers
determines after receipt of the information that the unitholder or assignee
is
not an eligible citizen, the unitholder or assignee may be treated as a
non-citizen assignee. In addition to other limitations on the rights of an
assignee who is not a substituted unitholder, a non-citizen assignee does
not
have the right to direct the voting of his units and may not receive
distributions in kind upon our liquidation.
Indemnification
Under
our
limited liability company agreement and subject to specified limitations,
we
will indemnify to the fullest extent permitted by law from and against all
losses, claims, damages or similar events any person who is or was our manager
or officer, or while serving as our manager or officer, is or was serving
as a
tax matters member or, at our request, as a manager, officer, tax matters
member, employee, partner, fiduciary or trustee of us or any of our
subsidiaries. Additionally, we shall indemnify to the fullest extent permitted
by law and authorized by our board of managers, from and against all losses,
claims, damages or similar events any person is or was an employee or agent
(other than an officer) of our company.
Any
indemnification under our limited liability company agreement will only be
out
of our assets. We are authorized to purchase insurance against liabilities
asserted against and expenses incurred by persons for our activities, regardless
of whether we would have the power to indemnify the person against liabilities
under our limited liability company agreement.
Books
and Reports
We
are
required to keep appropriate books of our business at our principal offices.
The
books will be maintained for both tax and financial reporting purposes on
an
accrual basis. For tax and fiscal reporting purposes, our fiscal year is
the
calendar year.
We
will
furnish or make available to record holders of units, within 120 days after
the
close of each fiscal year, an annual report containing audited financial
statements and a report on those financial statements by our independent
public
accountants. Except for our fourth quarter, we will also furnish or make
available summary financial information within 90 days after the close of
each
quarter.
We
will
furnish each record holder of a unit with information reasonably required
for
tax reporting purposes within 90 days after the close of each calendar year.
This information is expected to be furnished in summary form so that some
complex calculations normally required of unitholders can be avoided. Our
ability to furnish this summary information to unitholders will depend on
the
cooperation of unitholders in supplying us with specific information. Every
unitholder will receive information to assist him in determining his federal
and
state tax liability and filing his federal and state income tax returns,
regardless of whether he supplies us with information.
Right
To Inspect Our Books and Records
Our
limited liability company agreement provides that a unitholder can, for a
purpose reasonably related to his interest as a unitholder, upon reasonable
demand and at his own expense, have furnished to him:
· |
a
current list of the name and last known address of each
unitholder;
|
· |
a
copy of our tax returns;
|
· |
information
as to the amount of cash, and a description and statement of the
agreed
value of any other property or services, contributed or to be contributed
by each unitholder and the date on which each became a
unitholder;
|
· |
copies
of our limited liability company agreement, the certificate of
formation
of the company, related amendments and powers of attorney under
which they
have been executed;
|
· |
information
regarding the status of our business and financial condition;
and
|
· |
any
other information regarding our affairs as is just and
reasonable.
|
Our
board
of managers may, and intends to, keep confidential from our unitholders
information that it believes to be in the nature of trade secrets or other
information, the disclosure of which our board of managers believes in good
faith is not in our best interests, information that could damage our company
or
our business, or information that we are required by law or by agreements
with a
third-party to keep confidential.
Registration
Rights
We
have
agreed to register for sale under the Securities Act and applicable state
securities laws any common units or other of our securities held by CEPM,
CEPH
or any of their affiliates if an exemption from the registration requirements
is
not otherwise available. These registration rights continue for two years
following any termination of the special voting rights of the holders of
our
Class A units. We have also agreed to include any of our securities held
by
CEPM, CEPH or their affiliates in any registration statement that we file
to
offer our securities for cash, except an offering relating solely to an employee
benefit plan, for the same period. We are obligated to pay all expenses
incidental to the registration, excluding underwriting discounts and
commissions.
MATERIAL
TAX CONSEQUENCES
This
section is a discussion of the material tax consequences that may be relevant
to
prospective common unitholders who are individual citizens or residents of
the
United States and, unless otherwise noted in the following discussion, is
the
opinion of Andrews Kurth LLP, counsel to us, insofar as it relates to matters
of
United States federal income tax law and legal conclusions with respect to
those
matters. This section is based on current provisions of the Internal Revenue
Code, existing and proposed regulations and current administrative rulings
and
court decisions, all of which are subject to change. Later changes in these
authorities may cause the tax consequences to vary substantially from the
consequences described below. Unless the context otherwise requires, references
in this section to “us” or “we” are references to Constellation Energy Partners
LLC and our limited liability company operating subsidiaries.
This
section does not address all federal income tax matters that affect us or
common
unitholders. Furthermore, this section focuses on common unitholders who
are
individual citizens or residents of the United States and has only limited
application to corporations, estates, trusts, non-resident aliens or other
common unitholders subject to specialized tax treatment, such as tax-exempt
institutions, foreign persons, individual retirement accounts (IRAs), employee
benefit plans, real estate investment trusts (REITs) or mutual funds.
Accordingly, we urge each prospective holder of common units to consult,
and
depend on, his own tax advisor in analyzing the federal, state, local and
foreign tax consequences particular to him of the ownership or disposition
of
our units.
No
ruling
has been or will be requested from the IRS regarding any matter that affects
us
or prospective common unitholders. Instead, we rely on opinions and advice
of
Andrews Kurth LLP. Unlike a ruling, an opinion of counsel represents only
that
counsel’s best legal judgment and does not bind the IRS or the courts.
Accordingly, the opinions and statements made in this discussion may not
be
sustained by a court if contested by the IRS. Any contest of this sort with
the
IRS may materially and adversely impact the market for our units and the
prices
at which our units trade. In addition, the costs of any contest with the
IRS,
principally legal, accounting and related fees, will result in a reduction
in
cash available for distribution to our common unitholders and thus will be
borne
directly by our common unitholders. Furthermore, the tax treatment of us,
or of
an investment in us, may be significantly modified by future legislative
or
administrative changes or court decisions. Any modifications may or may not
be
retroactively applied.
All
statements regarding matters of law and legal conclusions set forth below,
unless otherwise noted, are the opinion of Andrews Kurth LLP and are based
on
the accuracy of the representations made by us. Statements of fact do not
represent opinions of Andrews Kurth LLP.
For
the
reasons described below, Andrews Kurth LLP has not rendered an opinion with
respect to the following specific federal income tax issues:
· |
the
treatment of a common unitholder whose units are loaned to a short
seller
to cover a short sale of units (please read “—Tax Consequences of Unit
Ownership—Treatment of Short
Sales”);
|
· |
whether
our monthly convention for allocating taxable income and losses
is
permitted by existing Treasury regulations (please read “—Disposition of
Units—Allocations Between Transferors and Transferees”);
and
|
· |
whether
our method for depreciating Section 743 adjustments is sustainable
in
certain cases (please read “—Tax Consequences of Unit Ownership—Section
754 Election” and “—Uniformity of
Units”).
|
Partnership
Status
Except
as
discussed in the following paragraph, a limited liability company that has
more
than one member and that has not elected to be treated as a corporation is
treated as a partnership for federal income tax purposes and, therefore,
is not
a taxable entity and incurs no federal income tax liability. Instead, each
partner is required to take into account his share of items of income, gain,
loss and deduction of the partnership in computing his federal income tax
liability, even if no cash distributions are made to him. Distributions by
a
partnership to a partner are generally not taxable to the partner unless
the
amount of cash distributed to him is in excess of his adjusted basis in his
partnership interest.
Section
7704 of the Internal Revenue Code provides that publicly traded partnerships
will, as a general rule, be taxed as corporations. However, an exception,
referred to in this discussion as the “Qualifying Income Exception,” exists with
respect to publicly traded partnerships 90% or more of the gross income of
which
for every taxable year consists of “qualifying income.” Qualifying income
includes income and gains derived from the exploration, development, mining
or
production, processing, transportation and marketing of natural resources,
including oil, natural gas, and products thereof. Other types of qualifying
income include interest (other than from a financial business), dividends,
gains
from the sale of real property and gains from the sale or other disposition
of
capital assets held for the production of income that otherwise constitutes
qualifying income. We estimate that less than 3% of our current gross income
does not constitute qualifying income; however, this estimate could change
from
time to time. Based on and subject to this estimate, the factual representations
made by us, and a review of the applicable legal authorities, Andrews Kurth
LLP
is of the opinion that more than 90% of our current gross income constitutes
qualifying income. The portion of our income that is qualifying income can
change from time to time.
No
ruling
has been or will be sought from the IRS, and the IRS has made no determination
as to our status or the status of our operating subsidiaries for federal
income
tax purposes or whether our operations generate “qualifying income” under
Section 7704 of the Internal Revenue Code. Instead, we will rely on the opinion
of Andrews Kurth LLP. Andrews Kurth LLP is of the opinion, based upon the
Internal Revenue Code, its regulations, published revenue rulings, court
decisions and the representations described below, that we are and will continue
to be classified as a partnership, and each of our operating subsidiaries
will
be disregarded as an entity separate from us, for federal income tax
purposes.
In
rendering its opinion, Andrews Kurth LLP has relied on factual representations
made by us. The representations made by us upon which Andrews Kurth LLP has
relied include:
· |
Neither
we, nor any of our limited liability company subsidiaries, have
elected
nor will we elect to be treated as a corporation;
and
|
· |
For
each taxable year, more than 90% of our gross income has been and
will be
income that Andrews Kurth LLP has opined or will opine is “qualifying
income” within the meaning of Section 7704(d) of the Internal Revenue
Code.
|
If
we
fail to meet the Qualifying Income Exception, other than a failure that is
determined by the IRS to be inadvertent and that is cured within a reasonable
time after discovery, we will be treated as if we had transferred all of
our
assets, subject to liabilities, to a newly formed corporation, on the first
day
of the year in which we fail to meet the Qualifying Income Exception, in
return
for stock in that corporation and then distributed that stock to common
unitholders in liquidation of their interests in us. This deemed contribution
and liquidation would be tax-free to common unitholders and us so long as
we, at
that time, do not have liabilities in excess of the tax basis of our assets.
Thereafter, we would be treated as a corporation for federal income tax
purposes.
If
we
were taxable as a corporation in any taxable year, either as a result of
a
failure to meet the Qualifying Income Exception or otherwise, our items of
income, gain, loss and deduction would be reflected only on our tax return
rather than being passed through to common unitholders, and our net income
would
be taxed to us at corporate rates. In addition, any distribution made to
a
common unitholder would be treated as taxable dividend income to the extent
of
our current or accumulated earnings and profits, or, in the absence of earnings
and profits, a nontaxable return of capital to the extent of the common
unitholder’s tax basis in his units, or taxable capital gain, after the common
unitholder’s tax basis in his units is reduced to zero. Accordingly, taxation as
a corporation would result in a material reduction in a common unitholder’s cash
flow and after-tax return and thus would likely result in a substantial
reduction of the value of the units.
The
remainder of this section is based on Andrews Kurth LLP’s opinion that we are
and will continue to be classified as a partnership for federal income tax
purposes.
Common
Unitholder Status
Common
unitholders who become members of Constellation Energy Partners LLC will
be
treated as partners of Constellation Energy Partners LLC for federal income
tax
purposes. Also, common unitholders whose units are held in street name or
by a
nominee and who have the right to direct the nominee in the exercise of all
substantive rights attendant to the ownership of their units will be treated
as
partners of Constellation Energy Partners LLC for federal income tax
purposes.
A
beneficial owner of units whose units have been transferred to a short seller
to
complete a short sale would appear to lose his status as a partner with respect
to those units for federal income tax purposes. Please read “—Tax Consequences
of Unit Ownership—Treatment of Short Sales.”
Items
of
our income, gain, loss, or deduction are not reportable by a common unitholder
who is not a partner for federal income tax purposes, and any cash distributions
received by a common unitholder who is not a partner for federal income tax
purposes would therefore be fully taxable as ordinary income. These common
unitholders are urged to consult their own tax advisors with respect to their
status as partners in us for federal income tax purposes.
The
references to “common unitholders” in the discussion that follows are to persons
who are treated as partners in Constellation Energy Partners LLC for federal
income tax purposes.
Tax
Consequences of Unit Ownership
Flow-Through
of Taxable Income
We
do not
pay any federal income tax. Instead, each common unitholder is be required
to
report on his income tax return his share of our income, gains, losses and
deductions without regard to whether corresponding cash distributions are
received by him. Consequently, we may allocate income to a common unitholder
even if he has not received a cash distribution. Each common unitholder is
required to include in income his share of our income, gain, loss and deduction
for our taxable year or years ending with or within his taxable year. Our
taxable year ends on December 31.
Treatment
of Distributions
Distributions
made by us to a common unitholder generally are not be taxable to him for
federal income tax purposes to the extent of his tax basis in his units
immediately before the distribution. Cash distributions made by us to a common
unitholder in an amount in excess of his tax basis in his units generally
are
considered to be gain from the sale or exchange of those units, taxable in
accordance with the rules described under “—Disposition of Units” below. To the
extent that cash distributions made by us cause a common unitholder’s “at risk”
amount to be less than zero at the end of any taxable year, he must recapture
any losses deducted in previous years. Please read “—Limitations on
Deductibility of Losses.”
Any
reduction in a common unitholder’s share of our liabilities for which no partner
bears the economic risk of loss, known as “non-recourse liabilities,” will be
treated as a distribution of cash to that common unitholder.
A
decrease in a common unitholder’s percentage interest in us because of our
issuance of additional units will decrease his share of our nonrecourse
liabilities and thus will result in a corresponding deemed distribution of
cash,
which may constitute a non-pro rata distribution. A non-pro rata distribution
of
money or property may result in ordinary income to a common unitholder,
regardless of his tax basis in his units, if the distribution reduces the
common
unitholder’s share of our “unrealized receivables,” including recapture of
intangible drilling costs, depletion and depreciation recapture, and/or
substantially appreciated “inventory items,” both as defined in Section 751 of
the Internal Revenue Code, and collectively, “Section 751 Assets.” To that
extent, he will be treated as having received his proportionate share of
the
Section 751 Assets and having exchanged those assets with us in return for
the
non-pro rata portion of the actual distribution made to him. This latter
deemed
exchange will generally result in the common unitholder’s realization of
ordinary income. That income will equal the excess of (1) the non-pro rata
portion of that distribution over (2) the common unitholder’s tax basis for the
share of Section 751 Assets deemed relinquished in the exchange.
Basis
of Units
A
common
unitholder’s initial tax basis for his units will be the amount he paid for the
units plus his share of our nonrecourse liabilities. That basis will be
increased by his share of our income and by any increases in his share of
our
nonrecourse liabilities. That basis generally will be decreased, but not
below
zero, by distributions to him from us, by his share of our losses, by depletion
deductions taken by him to the extent such deductions do not exceed his
proportionate share of the adjusted tax basis of the underlying producing
properties, by any decreases in his share of our nonrecourse liabilities
and by
his share of our expenditures that are not deductible in computing taxable
income and are not required to be capitalized. A common unitholder’s share of
our nonrecourse liabilities will generally be based on his share of our profits.
Please read “—Disposition of Units—Recognition of Gain or Loss.”
Limitations
on Deductibility of Losses
The
deduction by a common unitholder of his share of our losses is limited to
his
tax basis in his units and, in the case of an individual common unitholder
or a
corporate common unitholder, if more than 50% of the value of its stock is
owned
directly or indirectly by or for five or fewer individuals or some tax-exempt
organizations, to the amount for which the common unitholder is considered
to be
“at risk” with respect to our activities, if that amount is less than his tax
basis. A common unitholder must recapture losses deducted in previous years
to
the extent that distributions cause his at-risk amount to be less than zero
at
the end of any taxable year. Losses disallowed to a common unitholder or
recaptured as a result of these limitations will carry forward and will be
allowable as a deduction in a later year to the extent that his tax basis
or
at-risk amount, whichever is the limiting factor, is subsequently increased.
Upon the taxable disposition of a unit, any gain recognized by a common
unitholder can be offset by losses that were previously suspended by the
at-risk
limitation but may not be offset by losses suspended by the basis limitation.
Any excess loss above that gain previously suspended by the at risk or basis
limitations is no longer utilizable.
In
general, a common unitholder will be at risk to the extent of his tax basis
in
his units, excluding any portion of that basis attributable to his share
of our
nonrecourse liabilities, reduced by any amount of money he borrows to acquire
or
hold his units, if the lender of those borrowed funds owns an interest in
us, is
related to the common unitholder or can look only to the units for repayment.
A
common unitholder’s at-risk amount will increase or decrease as the tax basis of
the common unitholder’s common units increases or decreases, other than tax
basis increases or decreases attributable to increases or decreases in his
share
of our nonrecourse liabilities. Moreover, a common unitholder’s at risk amount
will decrease by the amount of the common unitholder’s depletion deductions and
will increase to the extent of the amount by which the common unitholder’s
percentage depletion deductions with respect to our property exceed the common
unitholder’s share of the basis of that property.
The
at
risk limitation applies on an activity-by-activity basis, and in the case
of oil
and natural gas properties, each property is treated as a separate activity.
Thus, a taxpayer’s interest in each oil or gas property is generally required to
be treated separately so that a loss from any one property would be limited
to
the at risk amount for that property and not the at risk amount for all the
taxpayer’s oil and natural gas properties. It is uncertain how this rule is
implemented in the case of multiple oil and natural gas properties owned
by a
single entity treated as a partnership for federal income tax purposes. However,
for taxable years ending on or before the date on which further guidance
is
published, the IRS will permit aggregation of oil or gas properties we own
in
computing a common unitholder’s at risk limitation with respect to us. If a
common unitholder must compute his at risk amount separately with respect
to
each oil or gas property we own, he may not be allowed to utilize his share
of
losses or deductions attributable to a particular property even though he
has a
positive at risk amount with respect to his units as a whole.
The
passive loss limitation generally provides that individuals, estates, trusts
and
some closely held corporations and personal service corporations are permitted
to deduct losses from passive activities, which are generally defined as
trade
or business activities in which the taxpayer does not materially participate,
only to the extent of the taxpayer’s income from those passive activities. The
passive loss limitation is applied separately with respect to each publicly
traded partnership. Consequently, any losses we generate will be available
to
offset only our passive income generated in the future and will not be available
to offset income from other passive activities or investments, including
our
investments, a common unitholder’s investments in other publicly traded
partnerships, or a common unitholder’s salary or active business income. If we
dispose of all or only a part of our interest in an oil and gas property,
common
unitholders will be able to offset their suspended passive activity losses
from
our activities against the gain, if any, on the disposition. Any previously
suspended losses in excess of the amount of gain recognized will remain
suspended. Notwithstanding whether a natural gas and oil property is a separate
activity, passive losses that are not deductible because they exceed a common
unitholder’s share of income we generate may only be deducted by the common
unitholder in full when he disposes of his entire investment in us in a fully
taxable transaction with an unrelated party. The passive activity loss rules
are
applied after certain other applicable limitations on deductions, including
the
at-risk rules and the tax basis limitation.
A
common
unitholder’s share of our net income may be offset by any of our suspended
passive losses, but it may not be offset by any other current or carryover
losses from other passive activities, including those attributable to other
publicly traded partnerships.
Limitation
on Interest Deductions
The
deductibility of a non-corporate taxpayer’s “investment interest expense” is
generally limited to the amount of that taxpayer’s “net investment income.”
Investment interest expense includes:
· |
interest
on indebtedness properly allocable to property held for
investment;
|
· |
our
interest expense attributable to portfolio income;
and
|
· |
the
portion of interest expense incurred to purchase or carry an interest
in a
passive activity to the extent attributable to portfolio
income.
|
The
computation of a common unitholder’s investment interest expense will take into
account interest on any margin account borrowing or other loan incurred to
purchase or carry a unit.
Net
investment income includes gross income from property held for investment
and
amounts treated as portfolio income under the passive loss rules, less
deductible expenses, other than interest, directly connected with the production
of investment income, but generally does not include gains attributable to
the
disposition of property held for investment. The IRS has indicated that net
passive income earned by a publicly traded partnership will be treated as
investment income to its common unitholders. In addition, the common
unitholder’s share of our portfolio income will be treated as investment
income.
Entity-Level
Collections
If
we are
required or elect under applicable law to pay any federal, state or local
income
tax on behalf of any common unitholder or any former common unitholder, we
are
authorized to pay those taxes from our funds. That payment, if made, will
be
treated as a distribution of cash to the common unitholder on whose behalf
the
payment was made. If the payment is made on behalf of a common unitholder
whose
identity cannot be determined, we are authorized to treat the payment as
a
distribution to all current common unitholders. We are authorized to amend
our
limited liability company agreement in the manner necessary to maintain
uniformity of intrinsic tax characteristics of units and to adjust later
distributions, so that after giving effect to these distributions, the priority
and characterization of distributions otherwise applicable under our limited
liability company agreement is maintained as nearly as is practicable. Payments
by us as described above could give rise to an overpayment of tax on behalf
of a
common unitholder in which event the common unitholder would be required
to file
a claim in order to obtain a credit or refund.
Allocation
of Income, Gain, Loss and Deduction
In
general, if we have a net profit, our items of income, gain, loss and deduction
will be allocated among the common unitholders in accordance with their
percentage interests in us. If we have a net loss for an entire year, the
loss
will be allocated to our common unitholders according to their percentage
interests in us to the extent of their positive capital account
balances.
Specified
items of our income, gain, loss and deduction will be allocated under Section
704(c) of the Internal Revenue Code to account for the difference between
the
tax basis and fair market value of our assets at the time we issue units
in an offering, which assets are referred to in this discussion as
“Contributed Property.” These allocations are required to eliminate the
difference between a partner’s “book” capital account, credited with the fair
market value of Contributed Property, and the “tax” capital account, credited
with the tax basis of Contributed Property, referred to in this discussion
as
the “book-tax disparity.” The effect of these allocations to a common unitholder
who purchases units in such an offering will be essentially the same as if
the
tax basis of our assets were equal to their fair market value at the time
of the
offering. In the event we issue additional units or engage in certain other
transactions in the future, Section 704(c) allocations will be made to all
holders of partnership interests to account for the difference between the
“book” basis for purposes of maintaining capital accounts and the fair market
value of all property held by us at the time of the future transaction. In
addition, items of recapture income will be allocated to the extent possible
to
the common unitholder who was allocated the deduction giving rise to the
treatment of that gain as recapture income in order to minimize the recognition
of ordinary income by other common unitholders. Finally, although we do not
expect that our operations will result in the creation of negative capital
accounts, if negative capital accounts nevertheless result, items of our
income
and gain will be allocated in an amount and manner sufficient to eliminate
the
negative balance as quickly as possible.
An
allocation of items of our income, gain, loss or deduction, other than an
allocation required by Section 704(c), will generally be given effect for
federal income tax purposes in determining a common unitholder’s share of an
item of income, gain, loss or deduction only if the allocation has substantial
economic effect. In any other case, a common unitholder’s share of an item will
be determined on the basis of his interest in us, which will be determined
by
taking into account all the facts and circumstances, including:
· |
his
relative contributions to us;
|
· |
the
interests of all the common unitholders in profits and
losses;
|
· |
the
interest of all the common unitholders in cash flow;
and
|
· |
the
rights of all the common unitholders to distributions of capital
upon
liquidation.
|
Andrews
Kurth LLP is of the opinion that, with the exception of the issues described
in
“—Tax Consequences of Unit Ownership—Section 754 Election,” “—Uniformity of
Units” and “—Disposition of Units—Allocations Between Transferors and
Transferees,” allocations under our limited liability company agreement will be
given effect for federal income tax purposes in determining a common
unitholder’s share of an item of income, gain, loss or deduction.
Treatment
of Short Sales
A
common
unitholder whose units are loaned to a “short seller” to cover a short sale of
units may be considered as having disposed of those units. If so, he would
no
longer be a partner for tax purposes with respect to those units during the
period of the loan and may recognize gain or loss from the disposition. As
a
result, during this period:
· |
none
of our income, gain, loss or deduction with respect to those units
would
be reportable by the common
unitholder;
|
· |
any
cash distributions received by the common unitholder with respect
to those
units would be fully taxable; and
|
· |
all
of these distributions would appear to be ordinary
income.
|
Andrews
Kurth LLP has not rendered an opinion regarding the treatment of a common
unitholder whose units are loaned to a short seller. Therefore, common
unitholders desiring to assure their status as partners and avoid the risk
of
gain recognition are urged to modify any applicable brokerage account agreements
to prohibit their brokers from loaning their units. The IRS has announced
that
it is studying issues relating to the tax treatment of short sales of
partnership interests. Please also read “—Disposition of Units—Recognition of
Gain or Loss.”
Alternative
Minimum Tax
Each
common unitholder is required to take into account his distributive share
of any
items of our income, gain, loss or deduction for purposes of the alternative
minimum tax. The current minimum tax rate for non-corporate taxpayers is
26% on
the first $175,000 of alternative minimum taxable income in excess of the
exemption amount and 28% on any additional alternative minimum taxable income.
Prospective common unitholders are urged to consult their tax advisors with
respect to the impact of an investment in our units on their liability for
the
alternative minimum tax.
Tax
Rates
In
general, the highest effective federal income tax rate for individuals currently
is 35% and the maximum federal income tax rate for net capital gains of an
individual currently is 15% if the asset disposed of was held for more than
12
months at the time of disposition. The capital gains rate is scheduled to
remain
at 15% for years 2008 through 2010, and then increase to 20% beginning January
1, 2011.
Section
754 Election
We
have
made the election permitted by Section 754 of the Internal Revenue Code.
That
election is irrevocable without the consent of the IRS. That election will
generally permit us to adjust a unit purchaser’s tax basis in our assets
(“inside basis”) under Section 743(b) of the Internal Revenue Code to reflect
his purchase price. The Section 743(b) adjustment applies to a person who
purchases units in an offering from the selling unitholder, but does not
apply to a person who purchases units directly from us, and it belongs only
to
the purchaser and not to other common unitholders. Please also read, however,
“—Allocation of Income, Gain, Loss and Deduction” above. For purposes of this
discussion, a common unitholder’s inside basis in our assets has two components:
(1) his share of our tax basis in our assets (“common basis”) and (2) his
Section 743(b) adjustment to that basis.
Treasury
regulations under Section 743 of the Internal Revenue Code require, if the
remedial allocation method is adopted (which we have adopted), a portion
of the
Section 743(b) adjustment attributable to recovery property to be depreciated
over the remaining cost recovery period for the Section 704(c) built-in gain.
Under Treasury Regulation Section 1.167(c)-l(a)(6), a Section 743(b) adjustment
attributable to property subject to depreciation under Section 167 of the
Internal Revenue Code rather than cost recovery deductions under Section
168 is
generally required to be depreciated using either the straight-line method
or
the 150% declining balance method. Under our limited liability company
agreement, we are authorized to take a position to preserve the uniformity
of
units even if that position is not consistent with the Treasury regulations.
Please read “—Uniformity of Units.”
Although
Andrews Kurth LLP is unable to opine on the validity of this approach because
there is no clear authority on this issue, we intend to depreciate the portion
of a Section 743(b) adjustment attributable to unrealized appreciation in
the
value of Contributed Property, to the extent of any unamortized book-tax
disparity, using a rate of depreciation or amortization derived from the
depreciation or amortization method and useful life applied to the unamortized
book-tax disparity of the property, or treat that portion as non-amortizable
to
the extent attributable to property which is not amortizable. This method
is
consistent with the regulations under Section 743 but is arguably inconsistent
with Treasury regulation Section 1.167(c)-1(a)(6), which is not expected
to
directly apply to a material portion of our assets. To the extent a Section
743(b) adjustment is attributable to appreciation in value in excess of the
unamortized book-tax disparity, we will apply the rules described in the
Treasury regulations and legislative history. If we determine that this position
cannot reasonably be taken, we may take a depreciation or amortization position
under which all purchasers acquiring units in the same month would receive
depreciation or amortization, whether attributable to common basis or a Section
743(b) adjustment, based upon the same applicable rate as if they had purchased
a direct interest in our assets. This kind of aggregate approach may result
in
lower annual depreciation or amortization deductions than would otherwise
be
allowable to some common unitholders. Please read “—Uniformity of Units.” A
common unitholder’s tax basis for his common units is reduced by his share of
our deductions (whether or not such deductions were claimed on an individual’s
income tax return) so that any position we take that understates deductions
will
overstate the common unitholder’s basis in his common units. Please read
“—Disposition of Units - Recognition of Gain or Loss.” The IRS may challenge our
position with respect to depreciating or amortizing the Section 743(b)
adjustment we take to preserve the uniformity of the common units. If such
a
challenge were sustained, the gain from the sale of common units might be
increased without the benefit of additional deductions.
A
Section
754 election is advantageous if the transferee’s tax basis in his units is
higher than the units’ share of the aggregate tax basis of our assets
immediately prior to the transfer. In that case, as a result of the election,
the transferee would have, among other items, a greater amount of depletion
and
depreciation deductions and his share of any gain on a sale of our assets
would
be less. Conversely, a Section 754 election is disadvantageous if the
transferee’s tax basis in his units is lower than those units’ share of the
aggregate tax basis of our assets immediately prior to the transfer. Thus,
the
fair market value of the units may be affected either favorably or unfavorably
by the election. A basis adjustment is required regardless of whether a Section
754 election is made in the case of a transfer of an interest in us if we
have a
substantial built-in loss immediately after the transfer, or if we distribute
property and have a substantial basis reduction. Generally a built-in loss
or a
basis reduction is substantial if it exceeds $250,000.
The
calculations involved in the Section 754 election are complex and will be
made
on the basis of assumptions as to the value of our assets and other matters.
For
example, the allocation of the Section 743(b) adjustment among our assets
must
be made in accordance with the Internal Revenue Code. The IRS could seek
to
reallocate some or all of any Section 743(b) adjustment we allocated to our
tangible assets to goodwill instead. Goodwill, an intangible asset, is generally
either non-amortizable or amortizable over a longer period of time or under
a
less accelerated method than our tangible assets. We cannot assure you that
the
determinations we make will not be successfully challenged by the IRS or
that
the resulting deductions will not be reduced or disallowed altogether. Should
the IRS require a different basis adjustment to be made, and should, in our
opinion, the expense of compliance exceed the benefit of the election, we
may
seek permission from the IRS to revoke our Section 754 election. If permission
is granted, a subsequent purchaser of units may be allocated more income
than he
would have been allocated had the election not been revoked.
Tax
Treatment of Operations
Accounting
Method and Taxable Year
We
use
the year ending December 31 as our taxable year and the accrual method of
accounting for federal income tax purposes. Each common unitholder is required
to include in income his share of our income, gain, loss and deduction for
our
taxable year ending within or with his taxable year. In addition, a common
unitholder who has a taxable year ending on a date other than December 31
and
who disposes of all of his units following the close of our taxable year
but
before the close of his taxable year must include his share of our income,
gain,
loss and deduction in income for his taxable year, with the result that he
will
be required to include in income for his taxable year his share of more than
twelve months of our income, gain, loss and deduction. Please read “—Disposition
of Units—Allocations Between Transferors and Transferees.”
Depletion
Deductions
Subject
to the limitations on deductibility of losses discussed above, common
unitholders are entitled to deductions for the greater of either cost depletion
or (if otherwise allowable) percentage depletion with respect to our oil
and
natural gas interests. Although the Internal Revenue Code requires each common
unitholder to compute his own depletion allowance and maintain records of
his
share of the adjusted tax basis of the underlying property for depletion
and
other purposes, we intend to furnish each of our common unitholders with
information relating to this computation for federal income tax
purposes.
Percentage
depletion is generally available with respect to common unitholders who qualify
under the independent producer exemption contained in Section 613A(c) of
the
Internal Revenue Code. For this purpose, an independent producer is a person
not
directly or indirectly involved in the retail sale of oil, natural gas, or
derivative products or the operation of a major refinery. Percentage depletion
is calculated as an amount generally equal to 15% (and, in the case of marginal
production, potentially a higher percentage) of the common unitholder’s gross
income from the depletable property for the taxable year. The percentage
depletion deduction with respect to any property is limited to 100% of the
taxable income of the common unitholder from the property for each taxable
year,
computed without the depletion allowance. A common unitholder that qualifies
as
an independent producer may deduct percentage depletion only to the extent
the
common unitholder’s daily production of domestic crude oil, or the natural gas
equivalent, does not exceed 1,000 barrels. This depletable amount may be
allocated between oil and natural gas production, with 6,000 cubic feet of
domestic natural gas production regarded as equivalent to one barrel of crude
oil. The 1,000 barrel limitation must be allocated among the independent
producer and controlled or related persons and family members in proportion
to
the respective production by such persons during the period in
question.
In
addition to the foregoing limitations, the percentage depletion deduction
otherwise available is limited to 65% of a common unitholder’s total taxable
income from all sources for the year, computed without the depletion allowance,
net operating loss carrybacks, or capital loss carrybacks. Any percentage
depletion deduction disallowed because of the 65% limitation may be deducted
in
the following taxable year if the percentage depletion deduction for such
year
plus the deduction carryover does not exceed 65% of the common unitholder’s
total taxable income for that year. The carryover period resulting from the
65%
net income limitation is indefinite.
Common
unitholders that do not qualify under the independent producer exemption
are
generally restricted to depletion deductions based on cost depletion. Cost
depletion deductions are calculated by (i) dividing the common unitholder’s
share of the adjusted tax basis in the underlying mineral property by the
number
of mineral units (barrels of oil and thousand cubic feet, or Mcf, of natural
gas) remaining as of the beginning of the taxable year and (ii) multiplying
the
result by the number of mineral units sold within the taxable year. The total
amount of deductions based on cost depletion cannot exceed the common
unitholder’s share of the total adjusted tax basis in the property.
All
or a
portion of any gain recognized by a common unitholder as a result of either
the
disposition by us of some or all of our oil and natural gas interests or
the
disposition by the common unitholder of some or all of his units may be taxed
as
ordinary income to the extent of recapture of depletion deductions, except
for
percentage depletion deductions in excess of the basis of the property. The
amount of the recapture is generally limited to the amount of gain recognized
on
the disposition.
The
foregoing discussion of depletion deductions does not purport to be a complete
analysis of the complex legislation and Treasury regulations relating to
the
availability and calculation of depletion deductions by the common unitholders.
We encourage each prospective common unitholder to consult his tax advisor
to
determine whether percentage depletion would be available to him.
Deductions
for Intangible Drilling and Development Costs
We
elect
to currently deduct intangible drilling and development costs (“IDCs”). IDCs
generally include our expenses for wages, fuel, repairs, hauling, supplies
and
other items that are incidental to, and necessary for, the drilling and
preparation of wells for the production of oil, natural gas or geothermal
energy. The option to currently deduct IDCs applies only to those items that
do
not have a salvage value.
Although
we elect to currently deduct IDCs, each common unitholder will have the option
of either currently deducting IDCs or capitalizing all or part of the IDCs
and
amortizing them on a straight-line basis over a 60-month period, beginning
with
the taxable month in which the expenditure is made. If a common unitholder
makes
the election to amortize the IDCs over a 60-month period, no IDC preference
amount will result for alternative minimum tax purposes.
Integrated
oil companies must capitalize 30% of all their IDCs (other than IDCs paid
or
incurred with respect to oil and natural gas wells located outside of the
United
States) and amortize these IDCs over 60 months beginning in the month in
which
those costs are paid or incurred. If the taxpayer ceases to be an integrated
oil
company, it must continue to amortize those costs as long as it continues
to own
the property to which the IDCs relate. An “integrated oil company” is a taxpayer
that has economic interests in crude oil deposits and also carries on
substantial retailing or refining operations. An oil or gas producer is deemed
to be a substantial retailer or refiner if it is subject to the rules
disqualifying retailers and refiners from taking percentage depletion. In
order
to qualify as an “independent producer” that is not subject to these IDC
deduction limits, a common unitholder, either directly or indirectly through
certain related parties, may not be involved in the refining of more than
75,000
barrels of oil (or the equivalent amount of natural gas) on average for any
day
during the taxable year or in the retail marketing of oil and natural gas
products exceeding $5 million per year in the aggregate.
IDCs
previously deducted that are allocable to property (directly or through
ownership of an interest in a partnership) and that would have been included
in
the adjusted basis of the property had the IDC deduction not been taken are
recaptured to the extent of any gain realized upon the disposition of the
property or upon the disposition by a common unitholder of interests in us.
Recapture is generally determined at the common unitholder level. Where only
a
portion of the recapture property is sold, any IDCs related to the entire
property are recaptured to the extent of the gain realized on the portion
of the
property sold. In the case of a disposition of an undivided interest in a
property, a proportionate amount of the IDCs with respect to the property
is
treated as allocable to the transferred undivided interest to the extent
of any
gain recognized. See “—Disposition of Units—Recognition of Gain or
Loss.”
Deduction
for United States Production Activities
Subject
to the limitations on the deductibility of losses discussed above and the
limitation discussed below, common unitholders will be entitled to a deduction,
herein referred to as the Section 199 deduction, equal to a specified percentage
of our qualified production activities income that is allocated to such common
unitholder. The percentages are 6% for qualified production activities income
generated in the years 2008 and 2009; and 9% thereafter.
Qualified
production activities income is generally equal to gross receipts from domestic
production activities reduced by cost of goods sold allocable to those receipts,
other expenses directly associated with those receipts, and a share of other
deductions, expenses and losses that are not directly allocable to those
receipts or another class of income. The products produced must be manufactured,
produced, grown or extracted in whole or in significant part by the taxpayer
in
the United States.
For
a
partnership, the Section 199 deduction is determined at the partner level.
To
determine his Section 199 deduction, each common unitholder will aggregate
his
share of the qualified production activities income allocated to him from
us
with the common unitholder’s qualified production activities income from other
sources. Each common unitholder must take into account his distributive share
of
the expenses allocated to him from our qualified production activities
regardless of whether we otherwise have taxable income. However, our expenses
that otherwise would be taken into account for purposes of computing the
Section
199 deduction are only taken into account if and to the extent the common
unitholder’s share of losses and deductions from all of our activities is not
disallowed by the basis rules, the at-risk rules or the passive activity
loss
rules. Please read “—Tax Consequences of Unit Ownership—Limitations on
Deductibility of Losses.”
The
amount of a common unitholder’s Section 199 deduction for each year is limited
to 50% of the IRS Form W-2 wages paid by the common unitholder during the
calendar year that are deducted in arriving at qualified production activities
income. Each common unitholder is treated as having been allocated IRS Form
W-2
wages from us equal to the common unitholder’s allocable share of our wages that
are deducted in arriving at our qualified production activities income for
that
taxable year. It is not anticipated that we or our subsidiaries will pay
material wages that will be allocated to our common unitholders.
This
discussion of the Section 199 deduction does not purport to be a complete
analysis of the complex legislation and Treasury authority relating to the
calculation of domestic production gross receipts, qualified production
activities income, or IRS Form W-2 Wages, or how such items are allocated
by us
to common unitholders. Each prospective common unitholder is encouraged to
consult his tax advisor to determine whether the Section 199 deduction would
be
available to him.
Lease
Acquisition Costs
The
cost
of acquiring oil and natural gas leaseholder or similar property interests
is a
capital expenditure that must be recovered through depletion deductions if
the
lease is productive. If a lease is proved worthless and abandoned, the cost
of
acquisition less any depletion claimed may be deducted as an ordinary loss
in
the year the lease becomes worthless. Please read “Tax Treatment of
Operations—Depletion Deductions.”
Geophysical
Costs
Geophysical
costs paid or incurred in connection with the exploration for, or development
of, oil or gas within the United States are allowed as a deduction ratably
over
the 24-month period beginning on the date that such expense was paid or
incurred.
Operating
and Administrative Costs
Amounts
paid for operating a producing well are deductible as ordinary business
expenses, as are administrative costs to the extent they constitute ordinary
and
necessary business expenses which are reasonable in amount.
Tax
Basis, Depreciation and Amortization
The
tax
basis of our assets, such as casing, tubing, tanks, pumping units and other
similar property, will be used for purposes of computing depreciation and
cost
recovery deductions and, ultimately, gain or loss on the disposition of these
assets. The federal income tax burden associated with the difference between
the
fair market value of our assets and their tax basis immediately prior to
(i)
this offering will be borne by our existing common unitholders, and (ii)
any
other offering will be borne by our common unitholders as of that time. Please
read “—Tax Consequences of Unit Ownership—Allocation of Income, Gain, Loss and
Deduction.”
To
the
extent allowable, we may elect to use the depreciation and cost recovery
methods
that will result in the largest deductions being taken in the early years
after
assets are placed in service. Property we subsequently acquire or construct
may
be depreciated using accelerated methods permitted by the Internal Revenue
Code.
If
we
dispose of depreciable property by sale, foreclosure, or otherwise, all or
a
portion of any gain, determined by reference to the amount of depreciation
previously deducted and the nature of the property, may be subject to the
recapture rules and taxed as ordinary income rather than capital gain.
Similarly, a common unitholder who has taken cost recovery or depreciation
deductions with respect to property we own will likely be required to recapture
some or all of those deductions as ordinary income upon a sale of his interest
in us. Please read “—Tax Consequences of Unit Ownership—Allocation of Income,
Gain, Loss and Deduction” and “—Disposition of Units—Recognition of Gain or
Loss.”
The
costs
incurred in selling our units (called “syndication expenses”) must be
capitalized and cannot be deducted currently, ratably or upon our termination.
There are uncertainties regarding the classification of costs as organization
expenses, which we may be able to amortize, and as syndication expenses,
which
we may not amortize. The underwriting discounts and commissions we incur
will be
treated as syndication expenses.
Valuation
and Tax Basis of Our Properties
The
federal income tax consequences of the ownership and disposition of units
will
depend in part on our estimates of the relative fair market values and the
tax
bases of our assets. Although we may from time to time consult with professional
appraisers regarding valuation matters, we will make many of the relative
fair
market value estimates ourselves. These estimates and determinations of basis
are subject to challenge and will not be binding on the IRS or the courts.
If
the estimates of fair market value or basis are later found to be incorrect,
the
character and amount of items of income, gain, loss or deduction previously
reported by common unitholders might change, and common unitholders might
be
required to adjust their tax liability for prior years and incur interest
and
penalties with respect to those adjustments.
Disposition
of Units
Recognition
of Gain or Loss
Gain
or
loss will be recognized on a sale of units equal to the difference between
the
common unitholder’s amount realized and the common unitholder’s tax basis for
the units sold. A common unitholder’s amount realized will equal the sum of the
cash or the fair market value of other property he receives plus his share
of
our nonrecourse liabilities. Because the amount realized includes a common
unitholder’s share of our nonrecourse liabilities, the gain recognized on the
sale of units could result in a tax liability in excess of any cash received
from the sale.
Prior
distributions from us in excess of cumulative net taxable income for a unit
that
decreased a common unitholder’s tax basis in that unit will, in effect, become
taxable income if the unit is sold at a price greater than the common
unitholder’s tax basis in that unit, even if the price received is less than his
original cost.
Except
as
noted below, gain or loss recognized by a common unitholder, other than a
“dealer” in units, on the sale or exchange of a unit held for more than one year
will generally be taxable as capital gain or loss. A portion of this gain
or
loss, which may be substantial, however, will be separately computed and
taxed
as ordinary income or loss under Section 751 of the Internal Revenue Code
to the
extent attributable to assets giving rise to “unrealized receivables” or
“inventory items” that we own. The term “unrealized receivables” includes
potential recapture items, including depreciation, depletion, and IDC recapture.
Ordinary income attributable to unrealized receivables and inventory items
may
exceed net taxable gain realized on the sale of a unit and may be recognized
even if there is a net taxable loss realized on the sale of a unit. Thus,
a
common unitholder may recognize both ordinary income and a capital loss upon
a
sale of units. Net capital loss may offset capital gains and no more than
$3,000
of ordinary income, in the case of individuals, and may only be used to offset
capital gain in the case of corporations.
The
IRS
has ruled that a partner who acquires interests in a partnership in separate
transactions must combine those interests and maintain a single adjusted
tax
basis for all those interests. Upon a sale or other disposition of less than
all
of those interests, a portion of that tax basis must be allocated to the
interests sold using an “equitable apportionment” method. Treasury regulations
under Section 1223 of the Internal Revenue Code allow a selling common
unitholder who can identify units transferred with an ascertainable holding
period to elect to use the actual holding period of the units transferred.
Thus,
according to the ruling, a common unitholder will be unable to select high
or
low basis units to sell as would be the case with corporate stock, but,
according to the regulations, may designate specific units sold for purposes
of
determining the holding period of units transferred. A common unitholder
electing to use the actual holding period of units transferred must consistently
use that identification method for all subsequent sales or exchanges of units.
A
common unitholder considering the purchase of additional units or a sale
of
units purchased in separate transactions is urged to consult his tax advisor
as
to the possible consequences of this ruling and those Treasury
regulations.
Specific
provisions of the Internal Revenue Code affect the taxation of some financial
products and securities, including partnership interests, by treating a taxpayer
as having sold an “appreciated” partnership interest, one in which gain would be
recognized if it were sold, assigned or terminated at its fair market value,
if
the taxpayer or related persons enter(s) into:
· |
an
offsetting notional principal contract;
or
|
· |
a
futures or forward contract with respect to the partnership interest
or
substantially identical property.
|
Moreover,
if a taxpayer has previously entered into a short sale, an offsetting notional
principal contract or a futures or forward contract with respect to the
partnership interest, the taxpayer will be treated as having sold that position
if the taxpayer or a related person then acquires the partnership interest
or
substantially identical property. The Secretary of the Treasury is also
authorized to issue regulations that treat a taxpayer who enters into
transactions or positions that have substantially the same effect as the
preceding transactions as having constructively sold the financial
position.
Allocations
Between Transferors and Transferees
In
general, our taxable income or loss will be determined annually, will be
prorated on a monthly basis and will be subsequently apportioned among the
common unitholders in proportion to the number of units owned by each of
them as
of the opening of the applicable exchange on the first business day of the
month
(the “Allocation Date”). However, gain or loss realized on a sale or other
disposition of our assets other than in the ordinary course of business will
be
allocated among the common unitholders on the Allocation Date in the month
in
which that gain or loss is recognized. As a result, a common unitholder
transferring units may be allocated income, gain, loss and deduction realized
after the date of transfer.
Although
simplifying conventions are contemplated by the Code and most publicly traded
partnerships use similar simplifying conventions, the use of this method
may not
be permitted under existing Treasury regulations. Accordingly, Andrews Kurth
LLP
is unable to opine on the validity of this method of allocating income and
deductions between common unitholders. If this method is not allowed under
the
Treasury regulations, or only applies to transfers of less than all of the
common unitholder’s interest, our taxable income or losses might be reallocated
among the common unitholders. We are authorized to revise our method of
allocation between common unitholders, as well as among common unitholders
whose
interests vary during a taxable year, to conform to a method permitted under
future Treasury regulations.
A
common
unitholder who owns units at any time during a quarter and who disposes of
them
prior to the record date set for a cash distribution for that quarter will
be
allocated items of our income, gain, loss and deductions attributable to
that
quarter but will not be entitled to receive that cash distribution.
Notification
Requirements
A
common
unitholder who sells any of his units, other than through a broker, generally
is
required to notify us in writing of that sale within 30 days after the sale
(or,
if earlier, January 15 of the year following the sale). A person who purchases
units is required to notify us in writing of that purchase within 30 days
after
the purchase, unless a broker or nominee will satisfy such requirement. We
are
required to notify the IRS of any such transfers of units and to furnish
specified information to the transferor and transferee. Failure to notify
us of
a transfer of units may lead to the imposition of substantial
penalties.
Constructive
Termination
We
will
be considered to have terminated for tax purposes if there is a sale or exchange
of 50% or more of the total interests in our capital and profits within a
twelve-month period. A constructive termination results in the closing of
our
taxable year for all common unitholders. In the case of a common unitholder
reporting on a taxable year other than a fiscal year ending December 31,
the
closing of our taxable year may result in more than 12 months of our taxable
income or loss being includable in his taxable income for the year of
termination. A constructive termination occurring on a date other than December
31 will result in us filing two tax returns (and common unitholders receiving
two Schedule K-1s) for one calendar year and the cost of the preparation
of
these returns will be borne by all common unitholders. We would be required
to
make new tax elections after a termination, including a new election under
Section 754 of the Internal Revenue Code, and a termination would result
in a
deferral of our deductions for depreciation. A termination could also result
in
penalties if we were unable to determine that the termination had occurred.
Moreover, a termination might either accelerate the application of, or subject
us to, any tax legislation enacted before the termination.
Uniformity
of Units
Because
we cannot match transferors and transferees of units, we must maintain
uniformity of the economic and tax characteristics of the units to a purchaser
of these units. In the absence of uniformity, we may be unable to completely
comply with a number of federal income tax requirements, both statutory and
regulatory. A lack of uniformity can result from a literal application of
Treasury Regulation Section 1.167(c)-1(a)(6). Any non-uniformity could have
a
negative impact on the value of the units. Please read “—Tax Consequences of
Unit Ownership—Section 754 Election.”
We
intend
to depreciate the portion of a Section 743(b) adjustment attributable to
unrealized appreciation in the value of Contributed Property, to the extent
of
any unamortized book-tax disparity, using a rate of depreciation or amortization
derived from the depreciation or amortization method and useful life applied
to
the unamortized book-tax disparity of that property, or treat that portion
as
non-amortizable, to the extent attributable to property which is not
amortizable, consistent with the regulations under Section 743 of the Internal
Revenue Code. This method is consistent with the Treasury regulations applicable
to property depreciable under the accelerated cost recovery system or the
modified accelerated cost recovery system, which we expect will apply to
substantially all, if not all, of our depreciable property. We also intend
to
use this method with respect to property that we own, if any, depreciable
under
Section 167 of the Internal Revenue Code, even though that position may be
inconsistent with Treasury regulation Section 1.167(c)-1(a)(6). We do not
expect
Section 167 to apply to a material portion, if any, of our assets. Please
read
“—Tax Consequences of Unit Ownership—Section 754 Election.” To the extent that
the Section 743(b) adjustment is attributable to appreciation in value in
excess
of the unamortized book-tax disparity, we will apply the rules described
in the
Treasury regulations and legislative history. If we determine that this position
cannot reasonably be taken, we may adopt a depreciation and amortization
position under which all purchasers acquiring units in the same month would
receive depreciation and amortization deductions, whether attributable to
a
common basis or Section 743(b) adjustment, based upon the same applicable
rate
as if they had purchased a direct interest in our property. If we adopt this
position, it may result in lower annual deductions than would otherwise be
allowable to some common unitholders and risk the loss of depreciation and
amortization deductions not taken in the year that these deductions are
otherwise allowable. We will not adopt this position if we determine that
the
loss of depreciation and amortization deductions will have a material adverse
effect on the common unitholders. If we choose not to utilize this aggregate
method, we may use any other reasonable depreciation and amortization method
to
preserve the uniformity of the intrinsic tax characteristics of any units
that
would not have a material adverse effect on the common unitholders. Our counsel,
Andrews Kurth LLP, is unable to opine on the validity of any of these positions.
The IRS may challenge any method of depreciating the Section 743(b) adjustment
described in this paragraph. If this challenge were sustained, the uniformity
of
units might be affected, and the gain from the sale of units might be increased
without the benefit of additional deductions. Please read “—Disposition of
Units—Recognition of Gain or Loss.”
Tax-Exempt
Organizations and Other Investors
Ownership
of units by employee benefit plans, other tax-exempt organizations, non-resident
aliens, foreign corporations and other foreign persons raises issues unique
to
those investors and, as described below, may have substantially adverse tax
consequences to them.
Employee
benefit plans and most other organizations exempt from federal income tax,
including individual retirement accounts and other retirement plans, are
subject
to federal income tax on unrelated business taxable income. Virtually all
of our
income allocated to a common unitholder that is a tax-exempt organization
will
be unrelated business taxable income and will be taxable to them.
A
regulated investment company, or “mutual fund,” is required to derive at least
90% of its gross income from certain permitted sources. Income from the
ownership of units in a “qualified publicly traded partnership” is generally
treated as income from a permitted source. We expect that we will meet the
definition of a qualified publicly traded partnership.
Non-resident
aliens and foreign corporations, trusts or estates that own units will be
considered to be engaged in business in the United States because of the
ownership of units. As a consequence they will be required to file federal
tax
returns to report their share of our income, gain, loss or deduction and
pay
federal income tax at regular rates on their share of our net income or gain.
Under rules applicable to publicly traded partnerships, we will withhold
tax, at
the highest effective applicable rate, from cash distributions made quarterly
to
foreign common unitholders. Each foreign common unitholder must obtain a
taxpayer identification number from the IRS and submit that number to our
transfer agent on a Form W-8 BEN or applicable substitute form in order to
obtain credit for these withholding taxes. A change in applicable law may
require us to change these procedures.
In
addition, because a foreign corporation that owns units will be treated as
engaged in a United States trade or business, that corporation may be subject
to
the United States branch profits tax at a rate of 30%, in addition to regular
federal income tax, on its share of our income and gain, as adjusted for
changes
in the foreign corporation’s “U.S. net equity,” that is effectively connected
with the conduct of a United States trade or business. That tax may be reduced
or eliminated by an income tax treaty between the United States and the country
in which the foreign corporate common unitholder is a “qualified resident.” In
addition, this type of common unitholder is subject to special information
reporting requirements under Section 6038C of the Internal Revenue
Code.
Under
a
ruling issued by the IRS, a foreign common unitholder who sells or otherwise
disposes of a unit will be subject to federal income tax on gain realized
on the
sale or disposition of that unit to the extent the gain is effectively connected
with a United States trade or business of the foreign common unitholder.
Because
a foreign unitholder is considered to be engaged in business in the United
States by virtue of the ownership of units, under this ruling a foreign
unitholder who sells or otherwise disposes of a unit generally will be subject
to federal income tax on gain realized on the sale or disposition of the
unit.
Apart from the ruling, a foreign common unitholder will not be taxed or subject
to withholding upon the sale or disposition of a unit if he has owned less
than
5% in value of the units during the five-year period ending on the date of
the
disposition and if the units are regularly traded on an established securities
market at the time of the sale or disposition.
Administrative
Matters
Information
Returns and Audit Procedures
We
intend
to furnish to each common unitholder, within 90 days after the close of each
calendar year, specific tax information, including a Schedule K-1, which
describes his share of our income, gain, loss and deduction for our preceding
taxable year. In preparing this information, which will not be reviewed by
counsel, we will take various accounting and reporting positions, some of
which
have been mentioned earlier, to determine each common unitholder’s share of
income, gain, loss and deduction.
We
cannot
assure you that those positions will yield a result that conforms to the
requirements of the Internal Revenue Code, Treasury regulations or
administrative interpretations of the IRS. Neither we nor counsel can assure
prospective common unitholders that the IRS will not successfully contend
in
court that those positions are impermissible. Any challenge by the IRS could
negatively affect the value of the units.
The
IRS
may audit our federal income tax information returns. Adjustments resulting
from
an IRS audit may require each common unitholder to adjust a prior year’s tax
liability and possibly may result in an audit of his own return. Any audit
of a
common unitholder’s return could result in adjustments not related to our
returns as well as those related to our returns.
Partnerships
generally are treated as separate entities for purposes of federal tax audits,
judicial review of administrative adjustments by the IRS and tax settlement
proceedings. The tax treatment of partnership items of income, gain, loss
and
deduction are determined in a partnership proceeding rather than in separate
proceedings with the partners. The Internal Revenue Code requires that one
partner be designated as the “Tax Matters Partner” for these purposes. The
limited liability company agreement appoints CEPM as our Tax Matters Partner,
subject to redetermination by our board of managers from time to
time.
The
Tax
Matters Partner will make some elections on our behalf and on behalf of common
unitholders. In addition, the Tax Matters Partner can extend the statute
of
limitations for assessment of tax deficiencies against common unitholders
for
items in our returns. The Tax Matters Partner may bind a common unitholder
with
less than a 1% profits interest in us to a settlement with the IRS unless
that
common unitholder elects, by filing a statement with the IRS, not to give
that
authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial
review, by which all the common unitholders are bound, of a final partnership
administrative adjustment and, if the Tax Matters Partner fails to seek judicial
review, judicial review may be sought by any common unitholder having at
least a
1% interest in profits or by any group of common unitholders having in the
aggregate at least a 5% interest in profits. However, only one action for
judicial review will go forward, and each common unitholder with an interest
in
the outcome may participate.
A
common
unitholder must file a statement with the IRS identifying the treatment of
any
item on his federal income tax return that is not consistent with the treatment
of the item on our return. Intentional or negligent disregard of this
consistency requirement may subject a holder of common units to substantial
penalties.
Nominee
Reporting
Persons
who hold an interest in us as a nominee for another person are required to
furnish to us:
· |
the
name, address and taxpayer identification number of the beneficial
owner
and the nominee;
|
· |
a
statement regarding whether the beneficial owner
is:
|
· |
a
person that is not a United States
person,
|
· |
a
foreign government, an international organization or any wholly-owned
agency or instrumentality of either of the foregoing,
or
|
· |
the
amount and description of units held, acquired or transferred for
the
beneficial owner; and
|
· |
specific
information including the dates of acquisitions and transfers,
means of
acquisitions and transfers, and acquisition cost for purchases,
as well as
the amount of net proceeds from
sales.
|
Brokers
and financial institutions are required to furnish additional information,
including whether they are United States persons and specific information
on
units they acquire, hold or transfer for their own account. A penalty of
$50 per
failure, up to a maximum of $100,000 per calendar year, is imposed by the
Internal Revenue Code for failure to report that information to us. The nominee
is required to supply the beneficial owner of the units with the information
furnished to us.
Accuracy-related
Penalties
An
additional tax equal to 20% of the amount of any portion of an underpayment
of
tax that is attributable to one or more specified causes, including negligence
or disregard of rules or regulations, substantial understatements of income
tax
and substantial valuation misstatements, is imposed by the Internal Revenue
Code. No penalty will be imposed, however, for any portion of an underpayment
if
it is shown that there was a reasonable cause for that portion and that the
taxpayer acted in good faith regarding that portion.
A
substantial understatement of income tax in any taxable year exists if the
amount of the understatement exceeds the greater of 10% of the tax required
to
be shown on the return for the taxable year or $5,000. The amount of any
understatement subject to penalty generally is reduced if any portion is
attributable to a position adopted on the return:
· |
for
which there is, or was, “substantial authority,”
or
|
· |
as
to which there is a reasonable basis and the relevant facts of
that
position are disclosed on the
return.
|
We
believe we will not be classified as a tax shelter. If any item of income,
gain,
loss or deduction included in the distributive shares of common unitholders
could result in that kind of an “understatement” of income for which no
“substantial authority” exists, we would be required to disclose the pertinent
facts on our return. In addition, we will make a reasonable effort to furnish
sufficient information for common unitholders to make adequate disclosure
on
their returns to avoid liability for this penalty. More stringent rules would
apply to an understatement of tax resulting from ownership of units if we
were
classified as a “tax shelter.”
A
substantial valuation misstatement exists if the value of any property, or
the
adjusted basis of any property, claimed on a tax return is 150% or more of
the
amount determined to be the correct amount of the valuation or adjusted basis.
No penalty is imposed unless the portion of the underpayment attributable
to a
substantial valuation misstatement exceeds $5,000 ($10,000 for a corporation
other than an S Corporation or a personal holding company). If the valuation
claimed on a return is 200% or more than the correct valuation, the penalty
imposed increases to 40%.
Reportable
Transactions
If
we
were to engage in a “reportable transaction,” we (and possibly you and others)
would be required to make a detailed disclosure of the transaction to the
IRS. A
transaction may be a reportable transaction based upon any of several factors,
including the fact that it is a type of transaction publicly identified by
the
IRS as a “listed transaction” or that it produces certain kinds of losses in
excess of $2 million. Our participation in a reportable transaction could
increase the likelihood that our federal income tax information return (and
possibly your tax return) is audited by the IRS. Please read “—Information
Returns and Audit Procedures” above.
Moreover,
if we were to participate in a listed transaction or a reportable transaction
(other than a listed transaction) with a significant purpose to avoid or
evade
tax, you could be subject to the following provisions of the American Jobs
Creation Act of 2004:
· |
accuracy-related
penalties with a broader scope, significantly narrower exceptions,
and
potentially greater amounts than described above at “—Accuracy-related
Penalties,”
|
· |
for
those persons otherwise entitled to deduct interest on federal
tax
deficiencies, non-deductibility of interest on any resulting tax
liability, and
|
· |
in
the case of a listed transaction, an extended statute of
limitations.
|
We
do not
expect to engage in any reportable transactions.
State,
Local and Other Tax Considerations
In
addition to federal income taxes, you will be subject to other taxes, including
state and local income taxes, unincorporated business taxes, and estate,
inheritance or intangible taxes that may be imposed by the various jurisdictions
in which we do business or own property or in which you are a resident. We
currently do business and own property in Kansas, Maryland, Oklahoma and
Alabama. We are registered to do business in Texas. We may also own property
or
do business in other states in the future. Although an analysis of those
various
taxes is not presented here, each prospective common unitholder should consider
their potential impact on his investment in us. You may not be required to
file
a return and pay taxes in some states because your income from that state
falls
below the filing and payment requirement. You will be required, however,
to file
state income tax returns and to pay state income taxes in many of the states
in
which we may do business or own property, and you may be subject to penalties
for failure to comply with those requirements. In some states, tax losses
may
not produce a tax benefit in the year incurred and also may not be available
to
offset income in subsequent taxable years. Some of the states may require
us, or
we may elect, to withhold a percentage of income from amounts to be distributed
to a common unitholder who is not a resident of the state. Withholding, the
amount of which may be greater or less than a particular common unitholder’s
income tax liability to the state, generally does not relieve a nonresident
common unitholder from the obligation to file an income tax return. Amounts
withheld may be treated as if distributed to common unitholders for purposes
of
determining the amounts distributed by us. Please read “—Tax Consequences of
Unit Ownership—Entity-Level Collections.” Based on current law and our estimate
of our future operations, we anticipate that any amounts required to be withheld
will not be material.
It
is the
responsibility of each common unitholder to investigate the legal and tax
consequences, under the laws of pertinent states and localities, of his
investment in us. Andrews Kurth LLP has not rendered an opinion on the state
local, or foreign tax consequences of an investment in us. We strongly recommend
that each prospective common unitholder consult, and depend on, his own tax
counsel or other advisor with regard to those matters. It is the responsibility
of each common unitholder to file all tax returns, that may be required of
him.
INVESTMENT
IN OUR COMPANY BY EMPLOYEE BENEFIT PLANS
An
investment in us by an employee benefit plan is subject to additional
considerations because the investments of these plans are subject to the
fiduciary responsibility and prohibited transaction provisions of ERISA and
restrictions imposed by Section 4975 of the Internal Revenue Code. For these
purposes, the term “employee benefit plan” includes, but is not limited to,
qualified pension, profit-sharing and stock bonus plans, Keogh plans, simplified
employee pension plans and tax deferred annuities or IRAs established or
maintained by an employer or employee organization. Among other things, the
person with investment discretion with respect to the assets of an employee
benefit plan, often called a fiduciary, should consider:
· |
whether
the investment is prudent under Section 404(a)(1)(B) of
ERISA;
|
· |
whether
in making the investment, that plan will satisfy the diversification
requirements of Section 404(a)(l)(C) of ERISA;
and
|
· |
whether
the investment will result in recognition of unrelated business
taxable
income by the plan and, if so, the potential after-tax investment
return.
|
A
plan
fiduciary should determine whether an investment in us is authorized by the
appropriate governing instrument and is a proper investment for the
plan.
Section
406 of ERISA and Section 4975 of the Internal Revenue Code prohibits employee
benefit plans, and IRAs that are not considered part of an employee benefit
plan, from engaging in specified transactions involving “plan assets” with
parties that are “parties in interest” under ERISA or “disqualified persons”
under the Internal Revenue Code with respect to the plan.
In
addition to considering whether the purchase of common units is a prohibited
transaction, a fiduciary of an employee benefit plan should consider whether
the
plan will, by investing in us, be deemed to own an undivided interest in
our
assets, with the result that CEPM also would be a fiduciary of the plan and
our
operations would be subject to the regulatory restrictions of ERISA, including
its prohibited transaction rules, as well as the prohibited transaction rules
of
the Internal Revenue Code.
The
Department of Labor regulations provide guidance with respect to whether
the
assets of an entity in which employee benefit plans acquire equity interests
would be deemed “plan assets” under some circumstances. Under these regulations,
an entity’s assets would not be considered to be “plan assets” if, among other
things:
· |
the
equity interests acquired by employee benefit plans are publicly
offered
securities—i.e., the equity interests are widely held by 100 or more
investors independent of the issuer and each other, freely transferable
and registered under some provisions of the federal securities
laws;
|
· |
the
entity is an “operating company,”--i.e., it is primarily engaged in the
production or sale of a product or service other than the investment
of
capital either directly or through a majority owned subsidiary
or
subsidiaries; or
|
· |
there
is no significant investment by benefit plan investors, which is
defined
to mean that less than 25% of the value of each class of equity
interest,
disregarding some interests held by CEPM, its affiliates, and some
other
persons, is held by the employee benefit plans referred to above,
IRAs and
other employee benefit plans not subject to ERISA, including governmental
plans.
|
Our
assets should not be considered “plan assets” under these regulations because it
is expected that the investment will satisfy the requirements in the first
bullet above.
Plan
fiduciaries contemplating a purchase of our common units should consult with
their own counsel regarding the consequences under ERISA and the Internal
Revenue Code in light of the serious penalties imposed on persons who engage
in
prohibited transactions or other violations.
PLAN
OF DISTRIBUTION
We
are
registering the common units on behalf of the selling unitholder. As used
in
this prospectus, “selling unitholder” includes donees and pledgees selling
common units received from a named selling unitholder after the date of this
prospectus.
Under
this prospectus, the selling unitholder intends to offer our securities to
the
public:
· |
through
one or more broker-dealers;
|
· |
through
underwriters; and
|
The
selling unitholder may price the common units offered from time to
time:
· |
at
market prices prevailing at the time of any sale under this registration
statement;
|
· |
at
prices related to market prices; or
|
We
will
pay the costs and expenses of the registration and offering of the common
units
offered hereby. We will not pay any underwriting fees, discounts and selling
commissions allocable to each selling unitholder’s sale of its respective
securities, which will be paid by the selling unitholder. Broker-dealers
may act
as agent or may purchase securities as principal and thereafter resell the
securities from time to time:
· |
in
or through one or more transactions (which may involve crosses
and block
transactions) or distributions;
|
· |
on
the New York Stock Exchange;
|
· |
in
the over-the-counter market; or
|
· |
in
private transactions.
|
Broker-dealers
or underwriters may receive compensation in the form of underwriting discounts
or commissions and may receive commissions from purchasers of the securities
for
whom they may act as agents. If any broker-dealer purchases the securities
as
principal, it may effect resales of the securities from time to time to or
through other broker-dealers, and other broker-dealers may receive compensation
in the form of concessions or commissions from the purchasers of securities
for
whom they may act as agents.
To
the
extent required, the names of the specific managing underwriter or underwriters,
if any, as well as other important information, will be set forth in prospectus
supplements. In that event, the discounts and commissions the selling unitholder
will allow or pay to the underwriters, if any, and the discounts and commissions
the underwriters may allow or pay to dealers or agents, if any, will be set
forth in, or may be calculated from, the prospectus supplements. Any
underwriters, brokers, dealers and agents who participate in any sale of
the
securities may also engage in transactions with, or perform services for,
us or
our affiliates in the ordinary course of their businesses.
In
addition, the selling unitholder has advised us that they may sell the common
units in compliance with Rule 144, if available, or pursuant to other available
exemptions from the registration requirements under the Securities Act, rather
than pursuant to this prospectus.
To
the
extent required, this prospectus may be amended or supplemented from time
to
time to describe a specific plan of distribution.
We
have
agreed to indemnify the selling unitholder and each underwriter, selling
agent
or other securities professional, if any, against certain liabilities to
which
they may become subject in connection with the sale of the common units owned
by
the selling unitholder and registered under this prospectus, including
liabilities arising under the Securities Act of 1933.
SELLING
UNITHOLDER
This
prospectus covers the offer and sale of up to 5,918,894 common units by the
selling unitholder identified below. These common units represent securities
received by the selling unitholder upon conversion of its limited liability
company interests in us immediately prior to the closing of our initial public
offering in November 2006. The total amount of common units that may be sold
hereunder will not exceed the number of units offered hereby. Please read
“Plan
of Distribution.”
The
following table sets forth information about the maximum number of common
units
that may be offered from time to time by each selling unitholder under this
prospectus. The selling unitholder identified below may currently hold or
acquire at any time common units in addition to those registered hereby.
Accordingly, we cannot give an estimate as to the amount of units that will
be
held by the selling unitholder upon termination of this offering.
Information
concerning the selling unitholder may change from time to time and, if
necessary, we will supplement this prospectus accordingly.
Selling
Unitholder
|
Total
Number of
Common
Units Beneficially Owned
|
Percentage
of (2)
Units
Outstanding
|
Number
of Units That May Be Sold
|
Number
of Units Beneficially Owned After Offering(3)
|
Constellation
Energy Partners Holdings, LLC (1)
|
5,918,894
|
27%
|
5,918,894
|
—
|
(1)
|
According
to Schedule 13D dated December 5, 2006 (the “Schedule 13D”) filed jointly
by Constellation Energy Group, Inc. (“CEG”) and Constellation Energy
Partners Holdings, LLC (“CEPH”), CEPH is the record and beneficial owner
of 5,918,894 common units of Constellation Energy Partners LLC
(“CEP”).
CEG, which indirectly owns 100% of CEPH’s outstanding limited liability
company interests, may be deemed to be the beneficial owner of
5,918,894
common units.
|
(2)
|
Calculated
based on 21,904,106 common units outstanding as of December 31,
2007.
|
(3)
|
Assumes
all units are sold.
|
LEGAL
MATTERS
Certain
legal matters in connection with the securities will be passed upon for us
by
Andrews Kurth LLP, Houston, Texas. If certain legal matters in connection
with
an offering of the securities made by this prospectus and a related prospectus
supplement are passed on by counsel for the underwriters of such offering,
that
counsel will be named in the applicable prospectus supplement related to
that
offering.
EXPERTS
The
financial statements of Constellation Energy Partners LLC as of December
31,
2006 and 2005, for the year ended December 31, 2006 and for the period February
7, 2005 (inception) through December 31, 2005 and of Everlast Energy LLC
as of
and for the year ended December 31, 2004 and for the period January 1, 2005
through June 12, 2005, incorporated in this prospectus by reference to the
Annual Report on Form 10-K of Constellation Energy Partners LLC for the year
ended December 31, 2006, the audited historical statements of direct revenues
and direct operating expenses of the natural gas and oil properties acquired
from EnergyQuest Resources, LP and the audited historical financial statements
of Kansas Processing EQR, LLC, included as Exhibit 99.1 pages F-1 through
F-5
and Exhibit 99.2 pages F-1 through F-8, respectively, in Constellation Energy
Partners LLC’s Current Report on Form 8-K/A dated July 3, 2007 and the
statements of revenues and direct operating expenses of certain oil and gas
properties acquired from Newfield Exploration Mid-Continent Inc., included
as
Exhibit 99.1 pages 1 through 7 in Constellation Energy Partners LLC’s Current
Report on Form 8-K/A dated October 12, 2007, have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.
The
financial statements of AMVEST Osage, Inc. as of July 31, 2006 and 2005 and
for
each of the three years in the period ended July 31, 2006, incorporated in
this
Form S-3 Registration Statement by reference from Constellation Energy Partners
LLC’s Current Report on Form 8-K/A filed on September 14, 2007 have been audited
by Deloitte & Touche LLP, independent auditors as stated in their report
(which report expresses an unqualified opinion on the financial statements
and
includes an explanatory paragraph relating to supplemental information),
which
is incorporated herein by reference, and has been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
Certain
information included or incorporated by reference in this prospectus regarding
our estimated quantities of natural gas reserves was prepared by Netherland,
Sewell & Associates, Inc.
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed a registration statement with the SEC under the Securities Act of 1933,
as
amended, that registers the offer and sale of the securities covered by this
prospectus. The registration statement, including the attached exhibits,
contains additional relevant information about us. In addition, we file annual,
quarterly and other reports and other information with the SEC. You may read
and
copy any document we file with the SEC at the SEC’s Public Reference Room at 100
F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the SEC’s Public
Reference Room. The SEC maintains an Internet site that contains reports,
proxy
and information statements and other information regarding issuers that file
electronically with the SEC. Our SEC filings are available on the SEC’s web site
at http://www.sec.gov. You also can obtain information about us at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
The
SEC
allows us to “incorporate by reference” the information we have filed with the
SEC. This means that we can disclose important information to you without
actually including the specific information in this prospectus by referring
you
to other documents filed separately with the SEC. The information incorporated
by reference is an important part of this prospectus. Information that we
later
provide to the SEC, and which is deemed to be “filed” with the SEC, will
automatically update information previously filed with the SEC, and may replace
information in this prospectus and information previously filed with the
SEC.
We
incorporate by reference in this prospectus the following documents that
we have
previously filed with the SEC:
· |
Annual
Report on Form 10-K (File No. 1-33147) for the year ended December
31,
2006 filed on March 12, 2007;
|
· |
Quarterly
Reports on Form 10-Q (File No. 1-33147) for the quarter ended March
31,
2007 filed on May 10, 2007, for the quarter ended June 30, 2007
filed on
August 10, 2007 and for the quarter ended September 30, 2007 filed on
November 14, 2007;
|
· |
Current
Reports on Form 8-K (File No. 1-33147) filed on March 9, 2007
(except for
the information under Item 7.01 and the related exhibit), April
24, 2007,
May 25, 2007, July 2, 2007, July 16, 2007, July 26, 2007, August
3, 2007,
August 6, 2007, August 17, 2007, September 26, 2007, October
18, 2007,
November 19, 2007, November 26, 2007, December 27, 2007, December 28,
2007, January 9, 2008 and January 29,
2008;
|
· |
Current
Reports on Form 8-K/A (File No. 1-33147) filed on July 5, 2007,
September
14, 2007 and October 12, 2007; and
|
· |
The
description of our common units contained in our registration statement
on
Form 8-A (File No. 1-33147) filed on November 13,
2006.
|
These
reports contain important information about us, our financial condition and
our
results of operations.
Nothing
in this prospectus shall be deemed to incorporate information furnished to,
but
not filed with, the SEC pursuant to Item 2.02 or Item 7.01 of Form 8-K (or
corresponding information furnished under Item 9.01 or included as an
exhibit).
We
make
available free of charge on or through our Internet website, http://www.constellationenergypartners.com,
our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on
Form 8-K and amendments to these reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after
we
electronically file such material with, or furnish it to, the SEC. Information
contained on our Internet website is not part of this prospectus.
You
may
obtain any of the documents incorporated by reference in this prospectus
from
the SEC through the SEC’s website at the address provided above. You also may
request a copy of any document incorporated by reference in this prospectus
(excluding any exhibits to those documents, unless the exhibit is specifically
incorporated by reference in this document), at no cost, by visiting our
Internet website at http://www.constellationenergypartners.com,
or by
writing or calling us at the following address:
Investor
Relations
Constellation
Energy Partners LLC
111
Market Place
Baltimore,
Maryland 21202
Telephone:
(410) 864-6440
You
should rely only on the information incorporated by reference or provided
in
this prospectus. We have not authorized anyone else to provide you with any
information. You should not assume that the information incorporated by
reference or provided in this prospectus is accurate as of any date other
than
the date on the front of each document.
APPENDIX
A
GLOSSARY
OF TERMS
Adjusted
Operating Surplus
for any
period means:
(a) |
Operating
Surplus generated with respect to that period; less
|
(b) |
any
net increase in working capital borrowings with respect to that
period
(excluding any such borrowings to the extent the proceeds are distributed
to the record holder of the Class D interests); less
|
(c) |
any
net reduction in cash reserves for operating expenditures with
respect to
that period not relating to an operating expenditure made with
respect to
that period; plus
|
(d) |
any
net decrease in working capital borrowings with respect to that
period;
plus
|
(e) |
any
net increase in cash reserves for operating expenditures made with
respect
to that period required by any debt instrument for the repayment
of
principal, interest or premium.
|
Available
Cash
means,
for any quarter ending prior to liquidation:
(i) all
cash
and cash equivalents of Constellation Energy Partners LLC and its subsidiaries
(or the Company’s proportionate share of cash and cash equivalents in the case
of subsidiaries that are not wholly-owned) on hand at the end of that quarter;
and
(ii) all
additional cash and cash equivalents of Constellation Energy Partners LLC
and
its subsidiaries (or the Company’s proportionate share of cash and cash
equivalents in the case of subsidiaries that are not wholly-owned) on hand
on
the date of determination of available cash for that quarter resulting from
working capital borrowings made subsequent to the end of such
quarter,
(b) |
less
the amount of any cash reserves established by the board of managers
(or
the Company’s proportionate share of cash reserves in the case of
subsidiaries that are not wholly-owned)
to
|
(i) provide
for the proper conduct of the business of Constellation Energy Partners LLC
and
its subsidiaries (including reserves for future capital expenditures including
drilling and acquisitions and for anticipated future credit needs) subsequent
to
such quarter,
(ii) comply
with applicable law or any loan agreement, security agreement, mortgage,
debt
instrument or other agreement or obligation to which Constellation Energy
Partners LLC or any of its subsidiaries is a party or by which it is bound
or
its assets are subject; or
(iii) provide
funds for distributions (1) to our unitholders or (2) in respect of our Class
D
interests or management incentive interests with respect to any one or more
of
the next four quarters;
provided,
however,
that
the Board of Managers may not establish cash reserves pursuant to (iii) above
if
the effect of such reserves would be that the Company is unable to distribute
the Initial Quarterly Distribution on all Common Units and Class A Units
with
respect to such Quarter; and provided
further,
that
disbursements made by us or any of our subsidiaries or cash reserves
established, increased or reduced after the end of that quarter but on or
before
the date of determination of available cash for that quarter shall be deemed
to
have been made, established, increased or reduced, for purposes of determining
available cash, within that quarter if board of managers so
determines.
Bcf.
One
billion cubic feet.
Capital
Surplus
is
generated by:
(a) |
borrowings
other than working capital
borrowings;
|
(b) |
sales
of debt and equity securities; and
|
(c) |
sales
or other disposition of assets for cash, other than inventory,
accounts
receivable and other current assets sold in the ordinary course
of
business or as a part of normal retirements or replacements of
assets.
|
Exploitation.
A
drilling or other project which may target proved or unproved reserves (such
as
probable or possible reserves), but which generally has a lower risk than
that
associated with exploration projects.
Mcf.
One
thousand cubic feet.
Mcf/d.
One
thousand cubic feet per day.
Operating
expenditures means
all
expenditures of Constellation Energy Partners LLC and its subsidiaries (or
Constellation Energy Partners LLC’s proportionate share in the case of
subsidiaries that are not wholly-owned), including taxes, amounts paid for
services under the management services agreement, payments made in the ordinary
course of business under commodity hedge contracts (other than payments in
connection with termination of same prior to its termination date), provided
that with respect to amounts paid in connection with the initial purchase
or
placing of a commodity hedge contract, such amounts shall be amortized over
the
life of the applicable commodity hedge contract and upon its termination,
if
earlier, manager and officer compensation, compensation paid to our board
of
managers, repayment of working capital borrowings, debt service payments,
and
estimated maintenance capital expenditures, provided that operating expenditures
will not include:
repayment
of working capital borrowings deducted from operating surplus pursuant to
subparagraph (h) of the definition of operating surplus when such repayment
actually occurs;
· |
payments
(including prepayments) of principal of and premium on indebtedness,
other
than working capital borrowings;
|
· |
capital
expenditures made for acquisitions or for capital improvements,
or
expansion capital expenditures;
|
· |
actual
maintenance capital expenditures;
|
· |
investment
capital expenditures;
|
· |
payment
of transaction expenses relating to interim capital transactions;
or
|
· |
distributions
to members (including distributions in respect of our Class D interests
and management incentive
interests).
|
Where
capital expenditures are made in part for acquisitions or for capital
improvements and in part for other purposes, our board of managers, with
the
concurrence of the conflicts committee, shall determine the allocation between
the amounts paid for each.
Operating
surplus for
any
period means:
(a) |
$20.0
million (if we choose to distribute as operating surplus up to
$20.0
million of cash we receive in the future from non-operating sources
such
as asset sales, issuances of securities and long-term borrowings);
plus
|
(b) |
all
of our cash receipts after the closing of our initial public offering,
excluding cash from (1) borrowings that are not working capital
borrowings, (2) sales of equity and debt securities and (3) sales
or other
dispositions of assets outside the ordinary course of business;
plus
|
(c) |
working
capital borrowings made after the end of a quarter but before the
date of
determination of operating surplus for the quarter;
plus
|
(d) |
cash
distributions paid on equity issued to finance all or a portion
of the
construction, replacement or improvement of a capital asset (such
as
equipment or reserves) during the period beginning on the date
that the
group member enters into a binding obligation to commence the
construction, acquisition or improvement of a capital improvement
or
replacement of a capital asset and ending on the earlier to occur
of the
date the capital improvement or capital asset commences commercial
service
or the date that it is abandoned or disposed of;
plus
|
(e) |
if
the right to receive distributions (other than distributions in
liquidation) on the Class D interests terminates before December
31, 2012,
the excess of the amount of the original $8.0 million contribution
by CHI
for the Class D interests over the cumulative cash distributions
paid on
the Class D interests before such termination shall be included in
operating surplus, such inclusion to occur over a series of quarters
with
the amount included in each quarter to be equal to the amount of
the
payment a group member makes to the Trust in respect of the NPI
for such
quarter that would not have been paid but for termination of the
sharing
arrangement; less
|
(f) |
our
operating expenditures after the closing of our initial public
offering;
less
|
(g) |
the
amount of cash reserves established by our board of managers to
provide
funds for future operating expenditures;
less
|
(h) |
all
working capital borrowings not repaid within twelve months after
having
been incurred.
|
Working
capital borrowings.
Borrowings used solely for working capital purposes or to pay distributions
to
members made pursuant to a credit facility, commercial paper facility or
other
similar financing arrangement, provided that when it is incurred it is the
intent of the borrower to repay such borrowings within 12 months from other
than
Working Capital Borrowings.
Working
interest. The
operating interest that gives the owner the right to drill, produce and conduct
operating activities on the property and a share of production.
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
Set
forth
below are the expenses expected to be incurred in connection with the issuance
and distribution of the securities registered hereby. With the exception of
the
SEC registration fee and the FINRA filing fee, the amounts set forth below
are
estimates.
SEC
registration fee
|
|
$
|
45,470
|
|
FINRA
filing fee
|
|
|
75,500
|
|
Printing
and engraving expenses
|
|
|
15,000
|
|
Accounting
and consulting fees and expenses
|
|
|
40,000
|
|
Legal
fees and expenses
|
|
|
25,000
|
|
Transfer
agent and registrar fees
|
|
|
5,000
|
|
Miscellaneous
|
|
|
25,000
|
|
Total
|
|
$
|
230,970
|
|
Item
15. Indemnification of Managers and Officers.
The
section of the prospectus entitled “The Limited Liability Company
Agreement—Indemnification” discloses that we will generally indemnify officers,
managers and affiliates of our board of managers to the fullest extent permitted
by the law against all losses, claims, damages or similar events and is
incorporated herein by this reference. Subject to any terms, conditions or
restrictions set forth in the limited liability company agreement, Section
18-108 of the Delaware Limited Liability Act empowers a Delaware limited
liability company to indemnify and hold harmless any member or other persons
from and against all claims and demands whatsoever.
To
the
extent that the indemnification provisions of our limited liability company
agreement purport to include indemnification for liabilities arising under
the
Securities Act of 1933, in the opinion of the SEC, such indemnification is
contrary to public policy and is therefore unenforceable.
Item
16. Exhibits and Financial Statement Schedules.
Exhibit
Number
|
|
Description
|
|
|
|
1.1*
|
|
-
Form
of Underwriting Agreement.
|
|
|
|
2.1
|
|
-
Purchase
and Sale Agreement, dated as of March 8, 2007, between EnergyQuest
Resources, L.P., Oklahoma Processing EQR, LLC and Constellation Energy
Partners, LLC (incorporated herein by reference to Exhibit 2.1 to
the
Current Report on Form 8-K (File No. 1-33147) filed by Constellation
Energy Partners LLC on April 24, 2007).
|
|
|
|
2.2
|
|
- Purchase
and Sale Agreement, dated as of March 8, 2007, between EnergyQuest
Resources, L.P., Oklahoma Processing EQR, LLC, Kansas Production
EQR, LLC
and Kansas Processing EQR, LLC and Constellation Energy Partners
LLC
(incorporated herein by reference to Exhibit 2.2 to the Current Report
on
Form 8-K (File No. 1-33147) filed by Constellation Energy Partners
LLC on
April 24, 2007).
|
|
|
|
2.3
|
|
- Agreement
of Merger dated as of July 12, 2007, among AMVEST Osage, Inc., AMVEST
Oil
& Gas, Inc. and CEP Mid-Continent LLC, f/k/a CEP Cherokee Basin LLC
(incorporated herein by reference to Exhibit 2.1 to the Current Report
on
Form 8-K (File No. 1-33147) filed by Constellation Energy Partners
LLC on
July 26, 2007).
|
2.4
|
|
- Purchase
and Sale Agreement dated as of August 2, 2007, between Newfield
Exploration Mid-Continent Inc. and Constellation Energy Partners
LLC
(incorporated by reference to Exhibit 2.1 to the Current Report on
Form
8-K (File No. 1-33147) filed by Constellation Energy Partners LLC
on
September 26, 2007).
|
|
|
|
2.5
|
|
- Nominee
Agreement, dated as of September 21, 2007, by and between Newfield
Exploration Mid-Continent Inc. and CEP Mid-Continent LLC (incorporated
by
reference to Exhibit 2.2 to the Current Report on Form 8-K (File
No.
1-33147) filed by Constellation Energy Partners LLC on September
26,
2007).
|
|
|
|
4.1+
|
|
- Form
of Senior Debt Indenture.
|
|
|
|
4.2+
|
|
- Form
of Subordinated Debt Indenture.
|
|
|
|
4.3*
|
|
- Form
of Senior Debt Securities.
|
|
|
|
4.4*
|
|
- Form
of Subordinated Debt Securities.
|
|
|
|
5.1+
|
|
- Opinion
of Andrews Kurth LLP as to the legality of the securities being
registered.
|
|
|
|
5.2+
|
|
- Opinion
of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C. relating to
the legality of Guarantees of Debt Securities by the Oklahoma Subsidiary
Guarantors. |
|
|
|
8.1+
|
|
- Opinion
of Andrews Kurth LLP relating to tax matters.
|
|
|
|
12.1+
|
|
- Computation
of Ratio of Earnings to Fixed Charges.
|
|
|
|
23.1+
|
|
- Consent
of PricewaterhouseCoopers LLP.
|
|
|
|
23.2+
|
|
- Consent
of Deloitte & Touche LLP.
|
|
|
|
23.3+
|
|
- Consent
of Netherland, Sewell & Associates, Inc.
|
|
|
|
23.4+
|
|
-
Consent
of Andrews Kurth LLP (contained in Exhibit 5.1).
|
|
|
|
23.5+
|
|
- Consent
of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C. (contained in
Exhibit 5.2). |
|
|
|
23.6+
|
|
- Consent
of Andrews Kurth LLP (contained in Exhibit 8.1).
|
|
|
|
24.1+
|
|
- Powers
of Attorney (included on the signature pages).
|
|
|
|
25.1**
|
|
- Form
T-1 Statement of Eligibility and Qualification with respect to the
Senior
Debt Indenture.
|
|
|
|
25.2**
|
|
- Form
T-1 Statement of Eligibility and Qualification with respect to the
Subordinated Debt Indenture.
|
* |
To
be filed as an exhibit to a Current Report on Form 8-K or in a
post-effective amendment to this registration
statement.
|
** |
To
be filed in accordance with the requirements of Section 305(b)(2)
of the
Trust Indenture Act and Rule 5b-3
thereunder.
|
Item
17. UNDERTAKINGS.
|
(a) |
The
undersigned registrant hereby
undertakes:
|
(1)
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i)
To
include any prospectus required by section 10(a)(3) of the Securities Act of
1933;
(ii)
To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding
the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement.
(iii)
To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
Provided,
however,
that
paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the Commission
by
the registrant pursuant to section 13 or 15(d) of the Securities Exchange Act
of
1934 that are incorporated by reference in the registration statement, or is
contained in a form of prospectus filed pursuant to Rule 424(b) that is part
of
the registration statement.
(2)
That
for the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3)
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4)
That,
for the purpose of determining liability under the Securities Act of 1933 to
any
purchaser:
(i)
Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed
to
be part of the registration statement as of the date the filed prospectus was
deemed part of and included in the registration statement: and
(ii)
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7)
as
part of a registration statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose
of
providing the information required by section 10(a) of the Securities Act of
1933 shall be deemed to be part of and included in the registration statement
as
of the earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an underwriter,
such
date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall
be
deemed to be the initial bona fide offering thereof. Provided, however, that
no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of
the
registration statement will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that was made
in
the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective
date.
(5)
That,
for the purpose of determining liability of the registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities,
the
undersigned registrant undertakes that in a primary offering of securities
of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if
the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i)
Any
preliminary prospectus or prospectus of the undersigned registrant relating
to
the offering required to be filed pursuant to Rule 424;
(ii)
Any
free writing prospectus relating to the offering prepared by or on behalf of
the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii)
The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv)
Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b) The
undersigned registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be
the initial bona fide offering thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction of the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The
undersigned registrant hereby undertakes:
(1)
For
purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus or any prospectus supplement
filed as part of this registration statement in reliance on Rule 430A and
contained in a form of prospectus or prospectus supplement filed by the
registrant pursuant to Rule 424(b)( 1) or (4) or 497(h) under the Securities
Act
shall be deemed to be part of this registration statement as of the time it
was
declared effective.
(2)
For
the purpose of determining any liability under the Securities Act of 1933,
each
post-effective amendment that contains a form of prospectus or prospectus
supplement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(e) Each
undersigned registrant hereby undertakes to file an application for the purpose
of determining the eligibility of the trustee under each of its indentures
to
act under subsection (a) of Section 310 of the Trust Indenture Act of 1939,
as
amended (the “Act”) in accordance with the rules and regulations prescribed by
the SEC under section 305(b)(2) of the Act.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, on January 28,
2008.
|
|
|
|
Constellation
Energy Partners LLC
|
|
|
|
|
By: |
/s/ Felix J. Dawson |
|
Felix
J. Dawson
Chief
Executive Officer and President
|
POWER
OF ATTORNEY
Each
person whose signature appears below appoints Andrew C. Kidd and Lisa J.
Mellencamp, and each of them, any of whom may act without the joinder of the
other, as his true and lawful attorneys-in-fact and agents, with full power
of
substitution and resubstitution, for him and in his name, place and stead,
in
any and all capacities, to sign any and all amendments (including post-effective
amendments thereto) to this Registration Statement and any Registration
Statement (including any amendment thereto) for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to
do
and perform each and every act and thing requisite and necessary to be done,
as
fully to all intents and purposes as he might or would do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any
of
them of their or his substitute and substitutes, may lawfully do or cause to
be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities
and
on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Felix J. Dawson
Felix
J. Dawson
|
|
Chairman
of the Board, Chief Executive Officer and President (Principal Executive
Officer) and Manager
|
|
January 28,
2008
|
|
|
|
|
|
|
|
|
|
|
/s/
Angela A. Minas
Angela
A. Minas
|
|
Chief
Financial Officer (Principal Financial Officer) and Chief Accounting
Officer and Treasurer (Principal Accounting Officer)
|
|
January
28, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
Richard H. Bachmann
Richard
H. Bachmann
|
|
Manager
|
|
January
28, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
John R. Collins
John
R. Collins
|
|
Manager
|
|
January
28, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
Richard S. Langdon
Richard
S. Langdon
|
|
Manager
|
|
January
28, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
John N. Seitz
John
N. Seitz
|
|
Manager
|
|
January
28, 2008
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, on January 28,
2008.
|
|
|
|
|
|
|
|
|
By: |
/s/ Felix J. Dawson |
|
Felix
J. Dawson
Chief
Executive Officer and
President
|
POWER
OF ATTORNEY
Each
person whose signature appears below appoints Andrew C. Kidd and Lisa J.
Mellencamp, and each of them, any of whom may act without the joinder of the
other, as his true and lawful attorneys-in-fact and agents, with full power
of
substitution and resubstitution, for him and in his name, place and stead,
in
any and all capacities, to sign any and all amendments (including post-effective
amendments thereto) to this Registration Statement and any Registration
Statement (including any amendment thereto) for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to
do
and perform each and every act and thing requisite and necessary to be done,
as
fully to all intents and purposes as he might or would do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any
of
them of their or his substitute and substitutes, may lawfully do or cause to
be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities
and
on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Felix J. Dawson
Felix
J. Dawson
|
|
Chief
Executive Officer, President and Director
|
|
January
28, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
John R. Collins
John
R. Collins
|
|
Director
|
|
January
28, 2008
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, on January 28,
2008.
|
|
|
|
Northeast
Shelf Energy, L.L.C.
|
|
|
|
|
By: |
/s/ Felix J. Dawson |
|
Felix
J. Dawson
Chief
Executive Officer and
President
|
POWER
OF ATTORNEY
Each
person whose signature appears below appoints Andrew C. Kidd and Lisa J.
Mellencamp, and each of them, any of whom may act without the joinder of the
other, as his true and lawful attorneys-in-fact and agents, with full power
of
substitution and resubstitution, for him and in his name, place and stead,
in
any and all capacities, to sign any and all amendments (including post-effective
amendments thereto) to this Registration Statement and any Registration
Statement (including any amendment thereto) for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to
do
and perform each and every act and thing requisite and necessary to be done,
as
fully to all intents and purposes as he might or would do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any
of
them of their or his substitute and substitutes, may lawfully do or cause to
be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities
and
on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Felix J. Dawson
Felix
J. Dawson
|
|
Chief
Executive Officer, President and Director
|
|
January
28, 2008
|
|
|
|
|
|
/s/
John R. Collins
John
R. Collins
|
|
Director
|
|
January
28, 2008
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, on January 28,
2008.
|
|
|
|
Mid-Continent
Oilfield Supply, L.L.C.
|
|
|
|
|
By: |
/s/ Felix J. Dawson |
|
Felix
J. Dawson
Chief
Executive Officer and
President
|
POWER
OF ATTORNEY
Each
person whose signature appears below appoints Andrew C. Kidd and Lisa J.
Mellencamp, and each of them, any of whom may act without the joinder of the
other, as his true and lawful attorneys-in-fact and agents, with full power
of
substitution and resubstitution, for him and in his name, place and stead,
in
any and all capacities, to sign any and all amendments (including post-effective
amendments thereto) to this Registration Statement and any Registration
Statement (including any amendment thereto) for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to
do
and perform each and every act and thing requisite and necessary to be done,
as
fully to all intents and purposes as he might or would do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any
of
them of their or his substitute and substitutes, may lawfully do or cause to
be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities
and
on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Felix J. Dawson
Felix
J. Dawson
|
|
Chief
Executive Officer, President and Director
|
|
January
28, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
John R. Collins
John
R. Collins
|
|
Director
|
|
January
28, 2008
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, on January 28,
2008.
|
|
|
|
Robinson’s
Bend Marketing II, LLC
|
|
|
|
|
By: |
/s/ Felix J. Dawson |
|
Felix
J. Dawson
Chief
Executive Officer and
President
|
POWER
OF ATTORNEY
Each
person whose signature appears below appoints Andrew C. Kidd and Lisa J.
Mellencamp, and each of them, any of whom may act without the joinder of the
other, as his true and lawful attorneys-in-fact and agents, with full power
of
substitution and resubstitution, for him and in his name, place and stead,
in
any and all capacities, to sign any and all amendments (including post-effective
amendments thereto) to this Registration Statement and any Registration
Statement (including any amendment thereto) for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to
do
and perform each and every act and thing requisite and necessary to be done,
as
fully to all intents and purposes as he might or would do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any
of
them of their or his substitute and substitutes, may lawfully do or cause to
be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities
and
on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Felix J. Dawson
Felix
J. Dawson
|
|
Chief
Executive Officer, President and Director
|
|
January
28, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
John R. Collins
John
R. Collins
|
|
Director
|
|
January
28, 2008
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, on January 28,
2008.
|
|
|
|
Robinson’s
Bend Operating II,
LLC
|
|
|
|
|
By: |
/s/ Felix J. Dawson |
|
Felix
J. Dawson
Chief
Executive Officer and
President
|
POWER
OF ATTORNEY
Each
person whose signature appears below appoints Andrew C. Kidd and Lisa J.
Mellencamp, and each of them, any of whom may act without the joinder of the
other, as his true and lawful attorneys-in-fact and agents, with full power
of
substitution and resubstitution, for him and in his name, place and stead,
in
any and all capacities, to sign any and all amendments (including post-effective
amendments thereto) to this Registration Statement and any Registration
Statement (including any amendment thereto) for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to
do
and perform each and every act and thing requisite and necessary to be done,
as
fully to all intents and purposes as he might or would do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any
of
them of their or his substitute and substitutes, may lawfully do or cause to
be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities
and
on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Felix J. Dawson
Felix
J. Dawson
|
|
Chief
Executive Officer, President and Director
|
|
January
28, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
John R. Collins
John
R. Collins
|
|
Director
|
|
January
28, 2008
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, on January 28,
2008.
|
|
|
|
Robinson’s
Bend Production II,
LLC
|
|
|
|
|
By: |
/s/ Felix J. Dawson |
|
Felix
J. Dawson
Chief
Executive Officer and
President
|
POWER
OF ATTORNEY
Each
person whose signature appears below appoints Andrew C. Kidd and Lisa J.
Mellencamp, and each of them, any of whom may act without the joinder of the
other, as his true and lawful attorneys-in-fact and agents, with full power
of
substitution and resubstitution, for him and in his name, place and stead,
in
any and all capacities, to sign any and all amendments (including post-effective
amendments thereto) to this Registration Statement and any Registration
Statement (including any amendment thereto) for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to
do
and perform each and every act and thing requisite and necessary to be done,
as
fully to all intents and purposes as he might or would do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any
of
them of their or his substitute and substitutes, may lawfully do or cause to
be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities
and
on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Felix J.
Dawson
Felix
J. Dawson
|
|
Chief
Executive Officer, President and Director
|
|
January
28, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
John R. Collins
John
R. Collins
|
|
Director
|
|
January
28, 2008
|
EXHIBIT
LIST
Exhibit
Number
|
|
Description
|
|
|
|
1.1*
|
|
-
Form
of Underwriting Agreement.
|
|
|
|
2.1
|
|
-
Purchase
and Sale Agreement, dated as of March 8, 2007, between EnergyQuest
Resources, L.P., Oklahoma Processing EQR, LLC and Constellation Energy
Partners, LLC (incorporated herein by reference to Exhibit 2.1 to
the
Current Report on Form 8-K (File No. 1-33147) filed by Constellation
Energy Partners LLC on April 24, 2007).
|
|
|
|
2.2
|
|
- Purchase
and Sale Agreement, dated as of March 8, 2007, between EnergyQuest
Resources, L.P., Oklahoma Processing EQR, LLC, Kansas Production
EQR, LLC
and Kansas Processing EQR, LLC and Constellation Energy Partners
LLC
(incorporated herein by reference to Exhibit 2.2 to the Current Report
on
Form 8-K (File No. 1-33147) filed by Constellation Energy Partners
LLC on
April 24, 2007).
|
|
|
|
2.3
|
|
- Agreement
of Merger dated as of July 12, 2007, among AMVEST Osage, Inc., AMVEST
Oil
& Gas, Inc. and CEP Mid-Continent LLC, f/k/a CEP Cherokee Basin LLC
(incorporated herein by reference to Exhibit 2.1 to the Current Report
on
Form 8-K (File No. 1-33147) filed by Constellation Energy Partners
LLC on
July 26, 2007).
|
|
|
|
2.4
|
|
- Purchase
and Sale Agreement dated as of August 2, 2007, between Newfield
Exploration Mid-Continent Inc. and Constellation Energy Partners
LLC
(incorporated by reference to Exhibit 2.1 to the Current Report on
Form
8-K (File No. 1-33147) filed by Constellation Energy Partners LLC
on
September 26, 2007).
|
|
|
|
2.5
|
|
- Nominee
Agreement, dated as of September 21, 2007, by and between Newfield
Exploration Mid-Continent Inc. and CEP Mid-Continent LLC (incorporated
by
reference to Exhibit 2.2 to the Current Report on Form 8-K (File
No.
1-33147) filed by Constellation Energy Partners LLC on September
26,
2007).
|
|
|
|
4.1+
|
|
- Form
of Senior Debt Indenture.
|
|
|
|
4.2+
|
|
- Form
of Subordinated Debt Indenture.
|
|
|
|
4.3*
|
|
- Form
of Senior Debt Securities.
|
|
|
|
4.4*
|
|
- Form
of Subordinated Debt Securities.
|
|
|
|
5.1+
|
|
- Opinion
of Andrews Kurth LLP as to the legality of the securities being
registered.
|
|
|
|
5.2+
|
|
- Opinion
of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C. relating
to the legality of Guarantees of Debt Securities by the Oklahoma
Subsidiary Guarantors. |
|
|
|
8.1+
|
|
- Opinion
of Andrews Kurth LLP relating to tax matters.
|
|
|
|
12.1+
|
|
- Computation
of Ratio of Earnings to Fixed Charges.
|
|
|
|
23.1+
|
|
- Consent
of PricewaterhouseCoopers LLP.
|
|
|
|
23.2+
|
|
- Consent
of Deloitte & Touche LLP.
|
|
|
|
23.3+
|
|
- Consent
of Netherland, Sewell & Associates, Inc.
|
|
|
|
23.4+
|
|
-
Consent
of Andrews Kurth LLP (contained in Exhibit 5.1).
|
|
|
|
23.5+
|
|
-
Consent
of Hall, Estill, Hardwick, Gable, Golden & Nelson,
P.C. (contained in Exhibit 5.2).
|
|
|
|
23.6+
|
|
- Consent
of Andrews Kurth LLP (contained in Exhibit 8.1).
|
|
|
|
24.1+
|
|
- Powers
of Attorney (included on the signature
pages).
|
25.1**
|
|
- Form
T-1 Statement of Eligibility and Qualification with respect to the
Senior
Debt Indenture.
|
|
|
|
25.2**
|
|
- Form
T-1 Statement of Eligibility and Qualification with respect to the
Subordinated Debt Indenture.
|
* |
To
be filed as an exhibit to a Current Report on Form 8-K or in a
post-effective amendment to this registration
statement.
|
** |
To
be filed in accordance with the requirements of Section 305(b)(2)
of the
Trust Indenture Act and Rule 5b-3
thereunder.
|
EXHIBIT
4.1
CONSTELLATION
ENERGY PARTNERS LLC
AND
[_________________________]
Trustee
____________________________________________
INDENTURE
DATED
AS OF ___________, 20__
____________________________________________
SENIOR
DEBT SECURITIES
CONSTELLATION
ENERGY PARTNERS LLC
RECONCILIATION
AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED,
AND
INDENTURE, DATED AS OF ___________,
20__
TRUST
INDENTURE ACT SECTION
|
INDENTURE
SECTION
|
|
|
|
|
Section
310(a)(1)
|
6.9
|
(a)(2)
|
6.9
|
(a)(3)
|
Not
Applicable
|
(a)(4)
|
Not
Applicable
|
(a)(5)
|
6.9
|
(b)
|
6.8
|
|
|
Section
311
|
6.13
|
|
|
Section
312(a)
|
7.1,
7.2(a)
|
(b)
|
7.2(b)
|
(c)
|
7.2(c)
|
|
|
Section
313(a)
|
7.3
|
(b)
|
*
|
(c)
|
*
|
(d)
|
7.3
|
|
|
Section
314(a)
|
7.4
|
(a)(4)
|
10.5
|
(b)
|
Not
Applicable
|
(c)(1)
|
1.3
|
(c)(2)
|
1.3
|
(c)(3)
|
Not
Applicable
|
(d)
|
Not
Applicable
|
(e)
|
1.3
|
|
|
Section
315(a)
|
6.1(a)
|
(b)
|
6.2
|
(c)
|
6.1(b)
|
(d)
|
6.1(c)
|
(d)(1)
|
6.1(a)(1)
|
(d)(2)
|
6.1(c)(2)
|
(d)(3)
|
6.1(c)(3)
|
(e)
|
5.14
|
|
|
Section
316(a)
|
1.1,
1.2
|
(a)(1)(A)
|
5.2,
5.12
|
(a)(1)(B)
|
5.13
|
(a)(2)
|
Not
Applicable
|
(b)
|
5.8
|
(c)
|
1.5(f)
|
TRUST
INDENTURE ACT SECTION
|
INDENTURE
SECTION
|
|
|
|
|
Section
317(a)(1)
|
5.3
|
(a)(2)
|
5.4
|
(b)
|
10.3
|
|
|
Section
318(a)
|
1.8
|
NOTE:
This reconciliation and tie shall not, for any purpose, be deemed to be a part
of the Indenture.
*
Deemed
included pursuant to Section 318(c) of the Trust Indenture Act
TABLE
OF CONTENTS
|
|
Page
|
|
|
|
|
|
|
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
|
1
|
Section 1.1.
|
Definitions
|
1
|
Section 1.2.
|
Incorporation
by Reference of Trust Indenture Act
|
8
|
Section 1.3.
|
Compliance
Certificates and Opinions
|
8
|
Section 1.4.
|
Form
of Documents Delivered to Trustee
|
8
|
Section 1.5.
|
Acts
of Holders; Record Dates
|
9
|
Section 1.6.
|
Notices,
Etc., to Trustee, Company and Guarantors
|
10
|
Section 1.7.
|
Notice
to Holders; Waiver
|
11
|
Section 1.8.
|
Conflict
with Trust Indenture Act
|
11
|
Section 1.9.
|
Effect
of Headings and Table of Contents
|
11
|
Section 1.10.
|
Successors
and Assigns
|
11
|
Section 1.11.
|
Separability
Clause
|
11
|
Section 1.12.
|
Benefits
of Indenture
|
11
|
Section 1.13.
|
Governing
Law
|
12
|
Section 1.14.
|
Legal
Holidays
|
12
|
Section 1.15.
|
Securities
in a Composite Currency, Currency Unit or Foreign Currency
|
12
|
Section 1.16.
|
Payment
in Required Currency; Judgment Currency
|
12
|
Section 1.17.
|
Language
of Notices, Etc.
|
13
|
Section 1.18.
|
Incorporators,
Shareholders, Officers and Directors of the Company and the Guarantors
Exempt from Individual Liability
|
13
|
|
|
|
ARTICLE TWO
SECURITY FORMS
|
13
|
Section 2.1.
|
Forms
Generally
|
13
|
Section 2.2.
|
Form
of Face of Security
|
14
|
Section 2.3.
|
Form
of Reverse of Security
|
16
|
Section 2.4.
|
Global
Securities
|
20
|
Section 2.5.
|
Form
of Trustee’s Certificate of Authentication
|
21
|
|
|
|
ARTICLE THREE
THE SECURITIES
|
22
|
Section 3.1.
|
Amount
Unlimited; Issuable in Series
|
22
|
Section 3.2.
|
Denominations
|
24
|
Section 3.3.
|
Execution,
Authentication, Delivery and Dating
|
24
|
Section 3.4.
|
Temporary
Securities
|
26
|
Section 3.5.
|
Registration,
Registration of Transfer and Exchange
|
26
|
Section 3.6.
|
Mutilated,
Destroyed, Lost and Stolen Securities
|
29
|
Section 3.7.
|
Payment
of Interest; Interest Rights Preserved
|
29
|
Section 3.8.
|
Persons
Deemed Owners
|
30
|
Section 3.9.
|
Cancellation
|
31
|
Section 3.10.
|
Computation
of Interest
|
31
|
Section 3.11.
|
CUSIP
or CINS Numbers
|
31
|
|
|
|
ARTICLE FOUR
SATISFACTION AND DISCHARGE
|
31
|
Section 4.1.
|
Satisfaction
and Discharge of Indenture
|
31
|
Section 4.2.
|
Application
of Trust Money
|
32
|
ARTICLE FIVE
REMEDIES
|
33
|
Section 5.1.
|
Events
of Default
|
33
|
Section 5.2.
|
Acceleration
of Maturity; Rescission and Annulment
|
34
|
Section 5.3.
|
Collection
of Indebtedness and Suits for Enforcement by Trustee
|
34
|
Section 5.4.
|
Trustee
May File Proofs of Claim
|
35
|
Section 5.5.
|
Trustee
May Enforce Claims Without Possession of Securities
|
36
|
Section 5.6.
|
Application
of Money Collected
|
36
|
Section 5.7.
|
Limitation
on Suits
|
36
|
Section 5.8.
|
Unconditional
Right of Holders to Receive Principal, Premium and
Interest
|
37
|
Section 5.9.
|
Restoration
of Rights and Remedies
|
37
|
Section 5.10.
|
Rights
and Remedies Cumulative
|
37
|
Section 5.11.
|
Delay
or Omission Not Waiver
|
37
|
Section 5.12.
|
Control
by Holders
|
38
|
Section 5.13.
|
Waiver
of Past Defaults
|
38
|
Section 5.14.
|
Undertaking
for Costs
|
38
|
Section 5.15.
|
Waiver
of Stay or Extension Laws
|
38
|
|
|
|
ARTICLE SIX
THE TRUSTEE
|
39
|
Section 6.1.
|
Certain
Duties and Responsibilities
|
39
|
Section 6.2.
|
Notice
of Defaults
|
40
|
Section 6.3.
|
Certain
Rights of Trustee
|
40
|
Section 6.4.
|
Not
Responsible for Recitals or Issuance of Securities
|
41
|
Section 6.5.
|
May
Hold Securities
|
41
|
Section 6.6.
|
Money
Held in Trust
|
42
|
Section 6.7.
|
Compensation
and Reimbursement
|
42
|
Section 6.8.
|
Disqualification;
Conflicting Interests
|
42
|
Section 6.9.
|
Corporate
Trustee Required; Eligibility
|
43
|
Section 6.10.
|
Resignation
and Removal; Appointment of Successor
|
43
|
Section 6.11.
|
Acceptance
of Appointment by Successor
|
44
|
Section 6.12.
|
Merger,
Conversion, Consolidation or Succession to Business
|
45
|
Section 6.13.
|
Preferential
Collection of Claims Against Company
|
45
|
Section 6.14.
|
Appointment
of Authenticating Agent
|
46
|
|
|
|
ARTICLE SEVEN
HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY
|
47
|
Section 7.1.
|
Company
to Furnish Trustee Names and Addresses of Holders
|
47
|
Section 7.2.
|
Preservation
of Information; Communications to Holders
|
47
|
Section 7.3.
|
Reports
by Trustee
|
48
|
Section 7.4.
|
Reports
by Company
|
49
|
|
|
|
ARTICLE EIGHT
CONSOLIDATION, AMALGAMATION, MERGER AND SALE
|
49
|
Section 8.1.
|
Company
May Consolidate, Etc., Only on Certain Terms
|
49
|
Section 8.2.
|
Successor
Substituted
|
50
|
|
|
|
ARTICLE NINE
AMENDMENT, SUPPLEMENT AND WAIVER
|
50
|
Section 9.1.
|
Without
Consent of Holders
|
50
|
Section 9.2.
|
With
Consent of Holders
|
52
|
Section 9.3.
|
Execution
of Supplemental Indentures
|
53
|
Section 9.4.
|
Effect
of Supplemental Indentures
|
53
|
Section 9.5.
|
Conformity
with Trust Indenture Act
|
53
|
Section 9.6.
|
Reference
in Securities to Supplemental Indentures
|
54
|
ARTICLE TEN
COVENANTS
|
54
|
Section 10.1.
|
Payment
of Principal, Premium and Interest
|
54
|
Section 10.2.
|
Maintenance
of Office or Agency
|
54
|
Section 10.3.
|
Money
for Securities Payments to Be Held in Trust
|
54
|
Section 10.4.
|
Existence
|
55
|
Section 10.5.
|
Statement
by Officers as to Default
|
56
|
Section 10.6.
|
Additional
Amounts
|
56
|
|
|
|
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
|
57
|
Section 11.1.
|
Applicability
of Article
|
57
|
Section 11.2.
|
Election
to Redeem; Notice to Trustee
|
57
|
Section 11.3.
|
Selection
by Trustee of Securities to Be Redeemed
|
57
|
Section 11.4.
|
Notice
of Redemption
|
58
|
Section 11.5.
|
Deposit
of Redemption Price
|
58
|
Section 11.6.
|
Securities
Payable on Redemption Date
|
58
|
Section 11.7.
|
Securities
Redeemed in Part
|
59
|
|
|
|
ARTICLE TWELVE
SINKING FUNDS
|
59
|
Section 12.1.
|
Applicability
of Article
|
59
|
Section 12.2.
|
Satisfaction
of Sinking Fund Payments with Securities
|
59
|
Section 12.3.
|
Redemption
of Securities for Sinking Fund
|
59
|
|
|
|
ARTICLE THIRTEEN
DEFEASANCE
|
60
|
Section 13.1.
|
Option
to Effect Legal Defeasance or Covenant Defeasance
|
60
|
Section 13.2.
|
Legal
Defeasance and Discharge
|
60
|
Section 13.3.
|
Covenant
Defeasance
|
61
|
Section 13.4.
|
Conditions
to Legal or Covenant Defeasance
|
61
|
Section 13.5.
|
Deposited
Money and U.S. Government Obligations to be Held in Trust, Other
Miscellaneous Provisions
|
62
|
Section 13.6.
|
Repayment
|
63
|
Section 13.7.
|
Reinstatement
|
63
|
|
|
|
ARTICLE FOURTEEN
GUARANTEE OF SECURITIES
|
63
|
Section 14.1.
|
Securities
Guarantee
|
63
|
Section 14.2.
|
Limitation
on Guarantor Liability
|
65
|
Section 14.3.
|
Execution
and Delivery of Securities Guarantee Notation
|
65
|
NOTE:
This table of contents shall not, for any purpose, be deemed to be a part of
the
Indenture.
PARTIES
INDENTURE,
dated as of ____________, 20__, among CONSTELLATION ENERGY PARTNERS LLC,
a
limited liability company duly organized and existing under the laws of
the
State of Delaware (herein called the “Company”), the GUARANTORS (as defined
hereinafter) and [________________________], a [____________________],
as
trustee (the “Trustee”).
RECITALS
OF THE COMPANY:
The
Company has duly authorized the execution and delivery of this Indenture
to
provide for the issuance from time to time of its unsecured senior debentures,
notes or other evidences of indebtedness (herein called the “Securities”), which
may but are not required to be guaranteed by the Guarantor, to be issued
in one
or more series as provided in this Indenture.
All
things necessary to make this Indenture a valid agreement of the Company
and of
the Guarantors, in accordance with its terms, have been done.
This
Indenture is subject to the provisions of the Trust Indenture Act that
are
required to be a part of this Indenture and, to the extent applicable,
shall be
governed by such provisions.
NOW,
THEREFORE, THIS INDENTURE WITNESSETH:
For
and
in consideration of the premises and the purchase of the Securities by
the
Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof,
as
follows:
ARTICLE ONE
DEFINITIONS
AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. Definitions.
For
all
purposes of this Indenture, except as otherwise expressly provided or unless
the
context otherwise requires:
(a) the
terms
defined in this Article have the meanings assigned to them in this Article
and
include the plural as well as the singular;
(b) all
terms
used in this Indenture that are defined in the Trust Indenture Act, defined
by a
Trust Indenture Act reference to another statute or defined by an SEC rule
under
the Trust Indenture Act have the meanings so assigned to them;
(c) all
accounting terms not otherwise defined herein have the meanings assigned
to them
in accordance with GAAP;
(d) 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;
(e) the
words
“Article” and “Section” refer to an Article and Section, respectively, of this
Indenture; and
(f) the
word
“includes” and its derivatives means “includes, but is not limited to” and
corresponding derivative definitions.
Certain
terms, used principally in Article Six,
are
defined in that Article.
“Act”,
when used with respect to any Holder, has the meaning specified in Section 1.5.
“Additional
Defeasible Provision” means a covenant or other provision contained that is (a)
made part of this Indenture pursuant to a supplemental indenture hereto,
a Board
Resolution or an Officer’s Certificate delivered pursuant to Section 3.1,
and (b)
pursuant to the terms set forth in such supplemental indenture, Board Resolution
or Officer’s Certificate, made subject to the provisions of Article Thirteen.
“Affiliate”
of any specified Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control
with
such specified Person. For purposes of this definition, “control,” as used with
respect to any Person, means the possession, directly or indirectly, of
the
power to direct or cause the direction of the management or policies of
such
Person, whether through the ownership of voting securities, by agreement
or
otherwise. For purposes of this definition, the terms “controlling,” “controlled
by” and “under common control with” have correlative meanings.
“Authenticating
Agent” means any Person authorized by the Trustee to act on behalf of the
Trustee to authenticate Securities.
“Banking
Day” means, in respect of any city, any date on which commercial banks are open
for business in that city.
“Bankruptcy
Law” means any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law.
“Board
of
Directors” means:
(1)
with
respect to a corporation, the board of directors of the corporation or
any
committee thereof duly authorized to act on behalf of such board;
(2)
with
respect to a partnership, the Board of Directors of the general partner
of the
partnership;
(3)
with
respect to a limited liability company, the managing member or members
or any
controlling committee of managers or members thereof or any board or committee
serving a similar management function; and
(4)
with
respect to any other Person, the board or committee of such Person serving
a
management function similar to those described in clauses (1), (2) or (3)
of
this definition.
“Board
Resolution” means a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Company, the principal financial officer of
the
Company or a Guarantor, any other authorized officer of the Company or
a
Guarantor, or a person duly authorized by any of them, in each case as
applicable, to have been duly adopted by the Board of Directors and to
be in
full force and effect on the date of such certification, and delivered
to the
Trustee. Where any provision of this Indenture refers to action to be taken
pursuant to a Board Resolution (including the establishment of any series
of the
Securities and the forms and terms thereof), such action may be taken by
any
committee, officer or employee of the Company or a Guarantor, as applicable,
authorized to take such action by the Board of Directors as evidenced by
a Board
Resolution.
“Business
Day”, when used with respect to any Place of Payment or other location, means,
except as otherwise provided as contemplated by Section 3.1
with
respect to any series of Securities, each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in that Place
of
Payment or other location are authorized or obligated by law, executive
order or
regulation to close.
“CINS”
means CUSIP International Numbering System.
“Code”
means the United States Internal Revenue Code of 1986, as amended.
“Company”
means the Person named as the “Company” in the first paragraph of this
instrument until a successor or resulting Person shall have become such
pursuant
to the applicable provisions of this Indenture, and thereafter “Company” shall
mean such successor or resulting Person.
“Company
Request” or “Company Order” means, in the case of the Company, a written request
or order signed in the name of the Company by its Chairman of the Board,
its
Chief Executive Officer, its Chief Financial Officer, its President, any
of its
Vice Presidents or any other duly authorized officer of the Company or
any
person duly authorized by any of them, and delivered to the Trustee and,
in the
case of a Guarantor, a written request or order signed in the name of such
Guarantor by its Chairman of the Board, its Chief Executive Officer, its
President, any of its Vice Presidents or any other duly authorized officer
of
such Guarantor or any person duly authorized by any of them, and delivered
to
the Trustee.
“Corporate
Trust Office” means the office of the Trustee at its address specified in
Section 1.6
or such
other address as to which the Trustee may give notice to the
Company.
“corporation”
when used in reference to the Trustee or any prospective Trustee, shall
include
any corporation, company, association, partnership, limited partnership,
limited
liability company, joint-stock company and trust, in each case, satisfying
the
requirements of Section 310(a)(1) of the Trust Indenture
Act.
“Covenant
Defeasance” has the meaning specified in Section 13.3.
“CUSIP”
means the Committee on Uniform Securities Identification
Procedures.
“Custodian”
means any receiver, trustee, assignee, liquidator or similar official under
any
Bankruptcy Law.
“Debt”
means any obligation created or assumed by any Person for the repayment
of money
borrowed and any purchase money obligation created or assumed by such Person
and
any guarantee of the foregoing.
“Default”
means, with respect to a series of Securities, any event that is, or after
notice or lapse of time or both would be, an Event of Default.
“Defaulted
Interest” has the meaning specified in Section 3.7.
“Definitive
Security” means a security other than a Global Security or a temporary
Security.
“Depositary”
means, with respect to the Securities of any series issuable or issued
in whole
or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary
for
such Securities as contemplated by Section 3.1,
until a
successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter shall mean or include each
Person
which is a Depositary hereunder, and if at any time there is more than
one such
Person, shall be a collective reference to such Persons.
“Dollar”
or “$” means the coin or currency of the United States of America, which at the
time of payment is legal tender for the payment of public and private
debts.
“Event
of
Default” has the meaning specified in Section 5.1.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Foreign
Currency” means a currency used by the government of a country other than the
United States of America.
“GAAP”
means generally accepted accounting principles in the United States of
America
as in effect from time to time, including those set forth in the opinions
and
pronouncements of the Accounting Principles Board of the American Institute
of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity
as
approved by a significant segment of the accounting profession. All ratios
and
computations based on GAAP contained in the indenture will be computed
in
conformity with GAAP.
“Global
Security” means a Security in global form that evidences all or part of a series
of Securities and is authenticated and delivered to, and registered in
the name
of, the Depositary for the Securities of such series or its
nominee.
“Guarantor”
means each Person that becomes a guarantor of any Securities pursuant to
the
applicable provisions of this Indenture.
“Holder”
means a Person in whose name a Security is registered in the Security
Register.
“Indenture”
means this instrument as originally executed or as it may from time to
time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof, including, for all purposes
of this instrument, and any such supplemental indenture, the provisions
of the
Trust Indenture Act that are deemed to be part of and govern this instrument
and
any such supplemental indenture, respectively. The term “Indenture” also shall
include the terms of particular series of Securities established as contemplated
by Section 3.1.
“interest”,
when used with respect to an Original Issue Discount Security which by
its terms
bears interest only after Maturity, means interest payable after
Maturity.
“Interest
Payment Date”, when used with respect to any Security, means the Stated Maturity
of an installment of interest on such Security.
“Judgment
Currency” has the meaning specified in Section 1.16.
“Legal
Defeasance” has the meaning specified in Section 13.2.
“mandatory
sinking fund payment” has the meaning specified in Section 12.1.
“Maturity”,
when used with respect to any Security, means the date on which the principal
of
such Security or an installment of principal becomes due and payable as
therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
“Notice
of Default” means a written notice of the kind specified in Section 5.1(c)
or
Section 5.1(d).
“Officer’s
Certificate” means, in the case of the Company, a certificate signed by the
Chairman of the Board, the Chief Executive Officer, the Chief Financial
Officer,
the President, any Vice President or any other duly authorized officer
of the
Company, or a person duly authorized by any of them, and delivered to the
Trustee and, in the case of a Guarantor, a certificate signed by the Chairman
of
the Board, the Chief Executive Officer, the President, any Vice President
or any
other duly authorized officer of such Guarantor, or a person duly authorized
by
any of them, and delivered to the Trustee.
“Opinion
of Counsel” means a written opinion of counsel, who may be an employee of or
counsel for the Company or a Guarantor, as the case may be, and who shall
be
reasonably acceptable to the Trustee.
“optional
sinking fund payment” has the meaning specified in Section 12.1.
“Original
Issue Discount Security” means any Security which 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 5.2.
“Outstanding”,
when used with respect to Securities, means, as of the date of determination,
all Securities theretofore authenticated and delivered under this Indenture,
except:
(a) Securities
theretofore canceled by the Trustee or delivered to the Trustee for
cancellation;
(b) Securities
for whose payment or redemption money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent (other than
the
Company) in trust or set aside and segregated in trust by the Company (if
the
Company shall act as its own Paying Agent) for the Holders of such Securities;
provided,
however,
that,
if such Securities are to be redeemed, notice of such redemption has been
duly
given pursuant to this Indenture or provision therefor satisfactory to
the
Trustee has been made;
(c) Securities
which have been paid pursuant to Section 3.6
or in
exchange for or in lieu of which other Securities have been authenticated
and
delivered pursuant to this Indenture, other than any such Securities in
respect
of which there shall have been presented to the Trustee proof satisfactory
to it
that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company; and
(d) Securities,
except to the extent provided in Section 13.2
and
Section 13.3,
with
respect to which the Company has effected Legal Defeasance or Covenant
Defeasance as provided in Article Thirteen,
which
Legal Defeasance or Covenant Defeasance then continues in effect;
provided,
however,
that in
determining whether the Holders of the requisite principal amount of the
Outstanding Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, (i) the principal amount of an Original
Issue Discount Security that shall be deemed to be Outstanding shall be
the
amount of the principal thereof that would be due and payable as of the
date of
such determination upon acceleration of the Maturity thereof on such date
pursuant to Section 5.2,
(ii) the principal amount of a Security denominated in one or more
currencies or currency units other than U.S. dollars shall be the U.S.
dollar
equivalent of such currencies or currency units, determined in the manner
provided as contemplated by Section 3.1
on the
date of original issuance of such Security or by Section 1.15,
if not
otherwise so provided pursuant to Section 3.1,
of the
principal amount (or, in the case of an Original Issue Discount Security,
the
U.S. dollar equivalent (as so determined) on the date of original issuance
of
such Security of the amount determined as provided in clause (i) above)
of such
Security, and (iii) Securities owned by the Company, any Guarantor or any other
obligor upon the Securities or any Affiliate of the Company or of such
other
obligor shall be disregarded and deemed not to be Outstanding, except that,
in
determining whether the Trustee shall be protected in relying upon any
such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned as described in clause (iii) of the immediately preceding
sentence 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
to act with respect to such Securities and that the pledgee is not the
Company,
a Guarantor or any other obligor upon the Securities or any Affiliate of
the
Company or of such other obligor.
“Paying
Agent” means any Person authorized by the Company to pay the principal of and
any premium or interest on any Securities on behalf of the Company.
“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 or formula for determining the rate or rates of interest
thereon, if any, the Stated Maturity or Stated Maturities thereof, the
original
issue date or dates thereof, the redemption provisions, if any, with respect
thereto, and any other terms specified as contemplated by Section 3.1
with
respect thereto, are to be determined by the Company upon the issuance
of such
Securities.
“Person”
means any individual, corporation, company, limited liability company,
partnership, limited partnership, joint venture, association, joint-stock
company, trust, other entity, 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, unless
otherwise specifically provided for with respect to such series as contemplated
by Section 3.1,
the
office or agency of the Company and such other place or places where, subject
to
the provisions of Section 10.2,
the
principal of and any premium and interest on the Securities of that series
are
payable as contemplated by Section 3.1.
“Predecessor
Security” of any particular Security means every previous Security evidencing
all or a portion of the same debt as that evidenced by such particular
Security;
and, for the purposes of this definition, any Security authenticated and
delivered under Section 3.6
in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall
be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen
Security.
“Redemption
Date”, when used with respect to any Security to be redeemed, means the date
fixed for such redemption by or pursuant to this Indenture.
“Redemption
Price”, when used with respect to any Security to be redeemed, means the price
at which it is to be redeemed pursuant to this Indenture.
“Regular
Record Date” for the interest payable on any Interest Payment Date on the
Securities of any series means the date specified for that purpose as
contemplated by Section 3.1.
“Required
Currency” has the meaning specified in Section 1.16.
“Responsible
Officer” when used with respect to the Trustee, means any officer within the
Corporate Trust Administration of the Trustee (or any successor group of
the
Trustee) or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and
also
means, with respect to a particular corporate trust matter, any other officer
to
whom such matter is referred because of his knowledge of and familiarity
with
the particular subject.
“SEC”
means the Securities and Exchange Commission, as from time to time constituted,
created under the Exchange Act, or, if at any time after the execution
of this
instrument such commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing
such
duties at such time.
“Securities”
has the meaning stated in the first recital of this Indenture and more
particularly means any Securities authenticated and delivered under this
Indenture.
“Securities
Guarantee” means each guarantee of the obligations of the Company under this
Indenture and the Securities by a Guarantor in accordance with the provisions
hereof.
“Security
Register” and “Security Registrar” have the respective meanings specified in
Section 3.5.
“Special
Record Date” for the payment of any Defaulted Interest means a date fixed by the
Trustee pursuant to Section 3.7.
“Stated
Maturity”, when used with respect to any Security or any installment of
principal thereof or interest thereon, means the date specified in such
Security
as the fixed date on which the principal of such Security or such installment
of
principal or interest is due and payable.
“Trustee”
means the Person named as the “Trustee” in the first paragraph of this
instrument until a successor Trustee shall have become such pursuant to
the
applicable provisions of this Indenture, and thereafter “Trustee” shall 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 Securities of that
series.
“Trust
Indenture Act” means the Trust Indenture Act of 1939, as amended, as in force at
the date as of which this instrument was executed, except as provided in
Section 9.5;
provided,
however,
that if
the Trust Indenture Act of 1939 is amended after such date, “Trust Indenture
Act” means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
“U.S.
Person” shall have the meaning assigned to such term in Section 7701(a)(30) of
the Code.
“U.S.
Government Obligations” means securities which are (a) direct obligations of the
United States for the payment of which its full faith and credit is pledged,
or
(b) obligations of a Person controlled or supervised by and acting as an
agency
or instrumentality of the United States, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States,
each of
which are not callable or redeemable at the option of the issuer
thereof.
“Vice
President”, when used with respect to the Company, the Guarantor 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.”
Section 1.2. Incorporation
by Reference of Trust Indenture Act.
Whenever
this Indenture refers to a provision of the Trust Indenture Act, the provision
is incorporated by reference in and made a part of this Indenture. The
following
Trust Indenture Act terms used in this Indenture have the following
meanings:
“commission”
means the SEC.
“indenture
securities” means the Securities.
“indenture
security holder” means a Holder.
“indenture
to be qualified” means this Indenture.
“indenture
trustee” or “institutional trustee” means the Trustee.
“obligor”
on the indenture securities means the Company, the Guarantor (if applicable)
or
any other obligor on the indenture securities.
All
terms
used in this Indenture that are defined by the Trust Indenture Act, defined
by a
Trust Indenture Act reference to another statute or defined by an SEC rule
under
the Trust Indenture Act have the meanings so assigned to them.
Section 1.3. Compliance
Certificates and Opinions.
Upon
any
application or request by the Company or a Guarantor to the Trustee to
take any
action under any provision of this Indenture, the Company or such Guarantor,
as
the case may be, shall furnish to the Trustee an Officer’s Certificate stating
that all conditions precedent, if any, 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, if any,
have
been complied with, except that in the case of any such application or
request
as to which the furnishing of such documents is specifically required by
any
provision of this Indenture relating to such particular application or
request,
no additional certificate or opinion need be furnished except as required
under
Section 314(c) of the Trust Indenture Act.
Every
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (except for certificates provided for in
Section 10.5)
shall
include:
(a) a
statement that each individual signing such certificate or opinion has
read such
covenant or condition and the definitions herein relating thereto;
(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 each such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether such covenant or condition has been complied
with; and
(d) a
statement as to whether, in the opinion of each such individual, such condition
or covenant has been complied with.
Section 1.4. Form
of
Documents Delivered to Trustee.
In
any
case where several matters are required to be certified by, or covered
by an
opinion of, any specified Person, it is not necessary that all such matters
be
certified by, or covered by the opinion of, only one such Person, or that
they
be so certified or covered by only one document, but one such Person may
certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an
opinion
as to such matters in one or several documents.
Any
certificate or opinion of an officer of the Company or a Guarantor may
be based,
insofar as it relates to legal matters, upon a certificate or opinion of,
or
representations by, counsel, unless such officer knows or, in the exercise
of
reasonable care, should know that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based
are
erroneous. Any such certificate or opinion of counsel may be based, insofar
as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company or the Guarantor,
as
the case may be, stating that the information with respect to such factual
matters is in the possession of the Company or the Guarantor, as the case
may
be, unless such counsel knows that the certificate or opinion or representations
with respect to such matters are erroneous.
Where
any
Person is required to make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments under
this
Indenture, they may, but need not, be consolidated and form one
instrument.
Section 1.5. Acts
of
Holders; Record Dates.
(a) Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed (either physically or by means of a facsimile or an electronic
transmission, provided
that
such electronic transmission is transmitted through the facilities of a
Depositary) by such Holders 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
and,
where it is hereby expressly required, to the Company or the Guarantors.
Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the “Act” of the Holders signing
such instrument or instruments. Proof of execution of any such instrument
or of
a writing appointing any such agent shall be sufficient for any purpose
of this
Indenture and (subject to Section 315 of the Trust Indenture Act) conclusive
in
favor of the Trustee, the Company and, if applicable, the Guarantors, if
made in
the manner provided in this Section.
(b) The
fact
and date of the execution by any Person of any such instrument or writing
may be
proved by the affidavit of a witness of such execution or by a certificate
of a
notary public or other officer authorized by law to take acknowledgments
of
deeds, certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is by a
signer
acting in a capacity other than his individual capacity, such certificate
or
affidavit shall also constitute sufficient proof of his authority. The
fact and
date of the execution of any such instrument or writing, or the authority
of the
Person executing the same, may also be proved in any other manner which
the
Trustee deems sufficient.
(c) The
ownership, principal amount and serial numbers of Securities held by any
Person,
and the date of commencement of such Person’s holding of same, shall be proved
by the Security Register.
(d) Any
request, demand, authorization, direction, notice, consent, waiver or other
Act
of the Holder of any Security shall bind every future Holder of the same
Security and the Holder of every Security issued upon the registration
of
transfer thereof or in exchange therefor or in lieu thereof in respect
of
anything done, omitted or suffered to be done by the Trustee, the Company
or, if
applicable, the Guarantors in reliance thereon, regardless of whether notation
of such action is made upon such Security.
(e) Without
limiting the foregoing, a Holder entitled to give or take any action hereunder
with regard to any particular Security may do so with regard to all or
any part
of the principal amount of such Security or by one or more duly appointed
agents
each of which may do so pursuant to such appointment with regard to all
or any
different part of such principal amount.
(f) The
Company may set any day as the record date for the purpose of determining
the
Holders of Outstanding Securities of any series entitled to give or take
any
request, demand, authorization, direction, notice, consent, waiver or other
Act
provided or permitted by this Indenture to be given or taken by Holders
of
Securities of such series, but the Company shall have no obligation to
do so.
With regard to any record date set pursuant to this paragraph, the Holders
of
Outstanding Securities of the relevant series on such record date (or their
duly
appointed agents), and only such Persons, shall be entitled to give or
take the
relevant action, regardless of whether such Holders remain Holders after
such
record date.
Section 1.6. Notices,
Etc., to Trustee, Company and Guarantors.
(a) Any
notice or communication by the Company, any of the Guarantors or the Trustee
to
the others is duly given if in writing and delivered in Person or mailed
by
first class mail (registered or certified, return receipt requested), telecopier
or overnight air courier guaranteeing next day delivery, to the others’
address:
If
to the
Company and/or any Guarantor:
|
c/o |
Constellation
Energy Partners LLC
|
One
Allen
Center, Suite 3300
Houston,
Texas 77002
Facsimile:
(713) 369-3906
Attention:
Angela Minas
If
to the
Trustee:
[___________________]
[___________________]
[___________________]
[___________________]
Facsimile:
[___________________]
Attention:
[___________________]
(b) The
Company, the Guarantors or the Trustee, by notice to the others, may designate
additional or different addresses for subsequent notices or
communications.
(c) All
notices and communications (other than those sent to Holders) shall be
deemed to
have been duly given: at the time delivered by hand, if personally delivered;
three Business Days after being deposited in the mail, postage prepaid,
if
mailed; when receipt acknowledged, if telecopied; and the next Business
Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Section 1.7. Notice
to
Holders; Waiver.
Where
this Indenture provides for notice to Holders of any event, such notice
shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid, to each Holder affected by such
event,
at his address as it appears in the Security Register, not later than the
latest
date, and not earlier than the earliest date, prescribed for the giving
of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to
any
particular Holder shall affect the sufficiency of such notice with respect
to
other Holders. Any notice mailed to a Holder in the manner herein prescribed
shall be conclusively deemed to have been received by such Holder, regardless
of
whether such Holder actually receives such notice.
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 regular mail service or by reason of any
other
cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
Section 1.8. Conflict
with Trust Indenture Act.
If
any
provision hereof limits, qualifies or conflicts with a provision of the
Trust
Indenture Act that is required under such Act to be a part of and govern
this
Indenture, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act
that may
be so modified or excluded, the latter provision shall be deemed to apply
to
this Indenture as so modified or excluded, as the case may be.
Section 1.9. Effect
of
Headings and Table of Contents.
The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.10. Successors
and Assigns.
All
covenants and agreements in this Indenture by each of the Company and the
Guarantors shall bind their respective successors and assigns, whether
so
expressed or not.
Section 1.11. Separability
Clause.
In
case
any provision in this Indenture or in the Securities or, if applicable,
the
Securities Guarantee shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any
way be
affected or impaired thereby.
Section 1.12. Benefits
of Indenture.
Nothing
in this Indenture or in the Securities or, if applicable, the Securities
Guarantee, express or implied, shall give to any Person, other than the
parties
hereto and their successors hereunder and the Holders, any benefit or any
legal
or equitable right, remedy or claim under this Indenture.
Section 1.13. Governing
Law.
THIS
INDENTURE, THE SECURITIES AND THE SECURITIES GUARANTEE SHALL BE GOVERNED
BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Section 1.14. Legal
Holidays.
In
any
case where any Interest Payment Date, Redemption Date or Stated Maturity
of any
Security shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture or of the Securities
or,
if applicable, the Securities Guarantee (other than a provision of the
Securities of any series or, if applicable, the Securities Guarantee that
specifically states that such provision shall apply in lieu of this Section 1.14))
payment of interest or principal and any premium need not be made at such
Place
of Payment on such date, but may be made on the next succeeding Business
Day at
such Place of Payment with the same force and effect as if made on the
Interest
Payment Date or Redemption Date, or at the Stated Maturity, provided
that no
interest shall accrue for the period from and after such Interest Payment
Date,
Redemption Date or Stated Maturity, as the case may be.
Section 1.15. Securities
in a Composite Currency, Currency Unit or Foreign Currency.
Unless
otherwise specified in an Officer’s Certificate delivered pursuant to
Section 3.1
of this
Indenture with respect to a particular series of Securities, whenever for
purposes of this Indenture any action may be taken by the Holders of a
specified
percentage in aggregate principal amount of Securities of all series or
all
series affected by a particular action at the time Outstanding and, at
such
time, there are Outstanding Securities of any series which are denominated
in a
coin, currency or currencies other than Dollars (including, but not limited
to,
any composite currency, currency units or Foreign Currency), then the principal
amount of Securities of such series which shall be deemed to be Outstanding
for
the purpose of taking such action shall be that amount of Dollars that
could be
obtained for such amount at the Market Exchange Rate. For purposes of this
Section 1.15,
the
term “Market Exchange Rate” shall mean the noon Dollar buying rate in The City
of New York for cable transfers of such currency or currencies as published
by
the Federal Reserve Bank of New York, as of the most recent available date.
If
such Market Exchange Rate is not so available for any reason with respect
to
such currency, the Trustee shall use, in its sole discretion and without
liability on its part, such quotation of the Federal Reserve Bank of
New York as of the most recent available date, or quotations or rates of
exchange from one or more major banks in The City of New York or in the
country
of issue of the currency in question, which for purposes of euros shall
be
Brussels, Belgium, or such other quotations or rates of exchange as the
Trustee
shall deem appropriate. The provisions of this paragraph shall apply in
determining the equivalent principal amount in respect of Securities of
a series
denominated in a currency other than Dollars in connection with any action
taken
by Holders of Securities pursuant to the terms of this Indenture.
All
decisions and determinations of the Trustee regarding the Market Exchange
Rate
or any alternative determination provided for in the preceding paragraph
shall
be in its sole discretion and shall, in the absence of manifest error,
be
conclusive to the extent permitted by law for all purposes and irrevocably
binding upon the Issuer and all Holders.
Section 1.16. Payment
in Required Currency; Judgment Currency.
Each
of
the Company and the Guarantors agrees, to the fullest extent that it may
effectively do so under applicable law, that (a) if for the purpose of
obtaining
judgment in any court it is necessary to convert the sum due in respect
of the
principal of or interest on the Securities of any series (the “Required
Currency”) into a currency in which a judgment will be rendered (the “Judgment
Currency”), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of
New
York the Required Currency with the Judgment Currency on the day on which
final
unappealable judgment is entered, unless such day is not a Banking Day,
then, to
the extent permitted by applicable law, the rate of exchange used shall
be the
rate at which in accordance with normal banking procedures the Trustee
could
purchase in The City of New York the Required Currency with the Judgment
Currency on the Banking Day next preceding the day on which final unappealable
judgment is entered and (b) its obligations under this Indenture to make
payments in the Required Currency (i) shall not be discharged or satisfied
by
any tender, or any recovery pursuant to any judgment (regardless of whether
entered in accordance with subclause (a)), in any currency other than the
Required Currency, except to the extent that such tender or recovery shall
result in the actual receipt, by the payee, of the full amount of the Required
Currency expressed to be payable in respect of such payments, (ii) shall
be
enforceable as an alternative or additional cause of action for the purpose
of
recovering in the Required Currency the amount, if any, by which such actual
receipt shall fall short of the full amount of the Required Currency so
expressed to be payable and (iii) shall not be affected by judgment being
obtained for any other sum due under this Indenture.
Section 1.17. Language
of Notices, Etc.
Any
request, demand, authorization, direction, notice, consent, waiver or Act
required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the
country
of publication.
Section 1.18. Incorporators,
Shareholders, Officers and Directors of the Company and the Guarantors
Exempt
from Individual Liability.
No
recourse under or upon any obligation, covenant or agreement of or contained
in
this Indenture or of or contained in any Security or, if applicable, the
Securities Guarantee, or for any claim based thereon or otherwise in respect
thereof, or in any Security or, if applicable, the Securities Guarantee,
or
because of the creation of any indebtedness represented thereby, shall
be had
against any incorporator, shareholder, member, officer, manager or director,
as
such, past, present or future, of the Company, any Guarantor or any successor
Person, either directly or through the Company, any Guarantor or any successor
Person, whether by virtue of any constitution, statute or rule of law,
or by the
enforcement of any assessment or penalty or otherwise, it being expressly
understood that all such liability is hereby expressly waived and released
as a
condition of, and as a part of the consideration for, the execution of
this
Indenture and the issue of the Securities.
ARTICLE TWO
SECURITY
FORMS
Section 2.1. Forms
Generally.
The
Securities of each series and, if applicable, the notation thereon relating
to
the Securities Guarantee, shall be in substantially the form set forth
in this
Article Two,
or in
such other form or forms as shall be established by or pursuant to a Board
Resolution 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 such letters,
numbers
or other marks of identification and such legends or endorsements placed
thereon
as may be required to comply with the rules of any securities exchange
or as
may, consistently herewith, be determined by the officers executing such
Securities and, if applicable, the Securities Guarantee, as evidenced by
their
execution thereof.
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
thereof.
If the form of Securities of any series is established by action taken
pursuant
to a Board Resolution, a copy of an appropriate record of such action shall
be
certified by an authorized officer or other authorized person on behalf
of the
Company and delivered to the Trustee at or prior to the delivery of the
Company
Order contemplated by Section 3.3
for the
authentication and delivery of such Securities.
The
forms
of Global Securities of any series shall have such provisions and legends
as are
customary for Securities of such series in global form, including without
limitation any legend required by the Depositary for the Securities of
such
series.
Section 2.2. Form
of Face of Security.
[If
the Security is an Original Issue Discount Security, insert—FOR
PURPOSES OF SECTION 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF
1986, AS
AMENDED, THE AMOUNT OF THE ORIGINAL ISSUE DISCOUNT IS . . . . . . . .,
THE ISSUE
DATE IS . . . . . ., 20. . . [AND] [,] THE YIELD TO MATURITY IS . . . .
. . . .
[,] [AND THE ORIGINAL ISSUE DISCOUNT FOR THE SHORT ACCRUAL PERIOD IS .
. . . . .
. . AND THE METHOD USED TO DETERMINE THE YIELD THEREFOR IS . . . .
.]]
[Insert
any other legend required by the Code or the regulations
thereunder.]
[If
a
Global Security,—insert legend required by Section 2.4
of
the Indenture]
[If
applicable, insert —UNLESS
THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED
IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR
OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
CONSTELLATION
ENERGY PARTNERS LLC
[TITLE
OF
SECURITY]
No
. . . . . . .
[CUSIP
No. ]
|
U.S.
$. . . . . .
|
CONSTELLATION
ENERGY PARTNERS LLC, a limited liability company duly organized under the
laws
of the State of Delaware (herein called the “Company”, which term includes any
successor or resulting Person under the Indenture hereinafter referred
to), for
value received, hereby promises to pay to .......... . . . . . . . . .
. . . . .
. . . . . . . ., or registered assigns, the principal sum of . . . .
................................................ United States Dollars
on
........................................ [If
the Security is to bear interest prior to Maturity, insert—,
and to
pay interest thereon from . . . . . . . . . . or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on . . . . . . and . . . . . . in each year, commencing . . . . . ., at
the rate
of . . . . % per annum, until the principal hereof is paid or made available
for
payment [if
applicable, insert—,
and at
the rate of ___% per annum on any overdue principal and premium and on
any
installment of interest (to the extent that the payment of such interest
shall
be legally enforceable)]. The interest so payable, and punctually paid
or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record
Date
for such interest, which shall be the . . . . or . . . . (regardless of
whether
a Business Day), as the case may be, next preceding such Interest Payment
Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either
be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record
Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less
than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities
exchange
on which the Securities of this series may be listed, and upon such notice
as
may be required by such exchange, all as more fully provided in said
Indenture].
[If
the Security is not to bear interest prior to Maturity, insert—The
principal of this Security shall not bear interest except in the case of
a
default in payment of principal upon acceleration, upon redemption or at
Stated
Maturity and in such case the overdue principal of this Security shall
bear
interest at the rate of . . . .% per annum (to the extent that the payment
of
such interest shall be legally enforceable), which shall accrue from the
date of
such default in payment to the date payment of such principal has been
made or
duly provided for. Interest on any overdue principal shall be payable on
demand.
Any such interest on any overdue principal that is not so paid on demand
shall
bear interest at the rate of . . . . % per annum (to the extent that the
payment
of such interest shall be legally enforceable), which shall accrue from
the date
of such demand for payment to the date payment of such interest has been
made or
duly provided for, and such interest shall also be payable on
demand.]
[If
a
Global Security, insert—Payment
of the principal of (and premium, if any) and [if
applicable, insert—any such]
interest on this Security will be made by transfer of immediately available
funds to a bank account in ___________ designated by the Holder in such
coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts [state other
currency].]
[If
a
Definitive Security, insert—Payment
of the principal of (and premium, if any) and [if
applicable, insert—any
such]
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in _______________, in such coin or currency
of the
United States of America as at the time of payment is legal tender for
payment
of public and private debts] [state other currency] [or subject to any
laws or
regulations applicable thereto and to the right of the Company (as provided
in
the Indenture) to rescind the designation of any such Paying Agent, at
the
[main] offices of ________________ in _____________, or at such other offices
or
agencies as the Company may designate, by [United States Dollar] [state
other
currency] check drawn on, or transfer to a [United States Dollar] account
maintained by the payee with, a bank in The City of New York (so long as
the
applicable Paying Agency has received proper transfer instructions in writing
at
least ___ days prior to the payment date)] [if
applicable, insert—;
provided,
however,
that
payment of interest may be made at the option of the Company by [United
States
Dollar] [state other currency] check mailed to the addresses of the Persons
entitled thereto as such addresses shall appear in the Security Register]
[or by
transfer to a [United States Dollar] [state other currency] account maintained
by the payee with a bank in The City of New York [state other Place of
Payment]
(so long as the applicable Paying Agent has received proper transfer
instructions in writing by the record date prior to the applicable Interest
Payment Date)].]
Reference
is hereby made to the further provisions of this Security set forth on
the
reverse hereof, which further provisions shall for all purposes have the
same
effect as if set forth at this place.
Unless
the certificate of authentication hereon has been executed by the Trustee
referred to on the reverse hereof by manual signature, this Security shall
not
be entitled to any benefit under the Indenture or be valid or obligatory
for any
purpose.
IN
WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated:
|
CONSTELLATION
ENERGY PARTNERS LLC
|
|
|
|
|
|
|
|
|
By:
|
|
|
Section 2.3. Form
of
Reverse of Security.
This
Security is one of a duly authorized issue of senior securities of the
Company
(herein called the “Securities”), issued and to be issued in one or more series
under an Indenture, dated as of ______, 20__ (herein called the “Indenture”),
between the Company, the Guarantors and [_________________], as Trustee
(herein
called the “Trustee”, which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference
is hereby made for a statement, of the respective rights, limitations of
rights,
duties and immunities thereunder of the Company, the Guarantors, the Trustee
and
the Holders of the Securities and of the terms upon which the Securities
are,
and are to be, authenticated and delivered. As provided in the Indenture,
the
Securities may be issued in one or more series, which different series
may be
issued in various aggregate principal amounts, may mature at different
times,
may bear interest, if any, at different rates, may be subject to different
redemption provisions, if any, may be subject to different sinking, purchase
or
analogous funds, if any, may be subject to different covenants and Events
of
Default and may otherwise vary as in the Indenture provided or permitted.
This
Security is one of the series designated on the face hereof [, limited
in
aggregate principal amount to $ . . . . . . . . . . ].
This
security is the general, unsecured, senior obligation of the Company
[if
applicable, insert—and
is
guaranteed pursuant to a guarantee (the “Securities Guarantee”) by [insert
name of each Guarantor]
(the
“Guarantors”). The Securities Guarantee is the general, unsecured, senior
obligation of each Guarantor.]
[If
applicable, insert—The
Securities of this series are subject to redemption upon not less than
... days’
notice by mail, [if
applicable, insert,
—(1)
on .
. . . . . . . . . . . . . in any year commencing with the year . . . .
and
ending with the year . . . . through operation of the sinking fund for
this
series at a Redemption Price equal to 100% of the principal amount, and
(2) ] at
any time [on or after . . . . . . . . . ., 20. . . ], as a whole or in
part, at
the election of the Company, at the following Redemption Prices (expressed
as
percentages of the principal amount): If redeemed [on or before . . . .
. . . .
. . . . . . . , . . . . . %, and if redeemed] during the 12-month period
beginning . . . . . . . . of the years indicated,
Year
|
Redemption
Price
|
Year
|
Redemption
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
thereafter at a Redemption Price equal to . . . . . % of the principal
amount,
together in the case of any such redemption [if
applicable, insert—(whether
through operation of the sinking fund or otherwise)] with accrued interest
to
the Redemption Date, but interest installments whose Stated Maturity is
on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business
on the
relevant record dates referred to on the face hereof, all as provided in
the
Indenture.]
[If
applicable, insert—The
Securities of this series are subject to redemption upon not less than...
nor
more than ... days’ notice by mail, (1) on . . . . . . . . in any year
commencing with the year . . . . and ending with the year . . . . through
operation of the sinking fund for this series at the Redemption Prices
for
redemption through operation of the sinking fund (expressed as percentages
of
the principal amount) set forth in the table below, and (2) at anytime
[on or
after . . . . . . . . . . ], as a whole or in part, at the election of
the
Company, at the Redemption Prices for redemption otherwise than through
operation of the sinking fund (expressed as percentages of the principal
amount)
set forth in the table below: If redeemed during the 12-month period beginning
.
. . . . . . . . . . . . . of the years indicated,
Year
|
Redemption
Price For
Redemption
Through
Operation
of the Sinking Fund
|
Redemption
Price for
Redemption
Otherwise Than
Through
Operation of the
Sinking
Fund
|
|
|
|
|
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and
thereafter at a Redemption Price equal to . . . . % of the principal amount,
together in the case of any such redemption (whether through operation
of the
sinking fund or otherwise) with accrued interest to the Redemption Date,
but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
record dates referred to on the face hereof, all as provided in the
Indenture.]
[If
applicable, insert—Notwithstanding
the foregoing, the Company may not, prior to . . . . . . . . . ., redeem
any
Securities of this series as contemplated by [clause (2) of] the preceding
paragraph as a part of, or in anticipation of, any refunding operation
by the
application, directly or indirectly, of moneys borrowed having an interest
cost
to the Company (calculated in accordance with generally accepted financial
practice) of less than . . . .% per annum.]
[If
applicable, insert—The
sinking fund for this series provides for the redemption on . . . . . .
. . . .
. . in each year beginning with the year . . . . and ending with the year
. . .
. of [not less than] $ . . . . . . . . . . . . [ (“mandatory sinking fund”) and
not more than $ . . . . . . . . . . . . ] aggregate principal amount of
Securities of this series. [Securities of this series acquired or redeemed
by
the Company otherwise than through [mandatory] sinking fund payments may
be
credited against subsequent [mandatory] sinking fund payments otherwise
required
to be made [If
applicable, insert-—
in the
inverse order in which they become due].]
[If
the Securities are subject to redemption in part of any kind,
insert—In
the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will
be
issued in the name of the Holder hereof upon the cancellation
hereof.]
[If
applicable, insert—The
Securities of this series are not redeemable prior to Stated
Maturity.]
[If
the Security is not an Original Issue Discount Security,—If
an
Event of Default with respect to Securities of this series shall occur
and be
continuing, the principal of the Securities of this series may be declared
due
and payable in the manner and with the effect provided in the
Indenture.]
[If
the Security is an Original Issue Discount Security,—If
an
Event of Default with respect to Securities of this series shall occur
and be
continuing, an amount of principal of the Securities of this series may
be
declared due and payable in the manner and with the effect provided in
the
Indenture. Such amount shall be equal to —insert
formula for determining the amount.
Upon
payment (i) of the amount of principal so declared due and payable and
(ii) of
interest on any overdue principal and overdue interest (in each case to
the
extent that the payment of such interest shall be legally enforceable),
all of
the Company’s obligations in respect of the payment of the principal of and
interest, if any, on the Securities of this series shall
terminate.]
The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company
[If
applicable, insert—and
the
Guarantors] and the rights of the Holders of the Securities of each series
to be
affected under the Indenture at any time by the Company [If
applicable, insert—and
the
Guarantors] and the Trustee with the consent of the Holders of a majority
in
principal amount of the Securities at the time Outstanding of each series
to be
affected. The Indenture also contains provisions permitting the Holders
of
specified percentages in principal amount of the Securities of each series
at
the time Outstanding, on behalf of the Holders of all Securities of such
series,
to waive compliance by the Company [If
applicable, insert—and
the
Guarantors] with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver
by the
Holder of this Security shall be conclusive and binding upon such Holder
and
upon all future Holders of this Security and of any Security issued upon
the
registration of transfer hereof or in exchange herefor or in lieu hereof,
regardless of whether notation of such consent or waiver is made upon this
Security.
No
reference herein to the Indenture and no provision of this Security or
of the
Indenture shall alter or impair the obligation of the Company, which is
absolute
and unconditional, to pay the principal of (and premium, if any) and interest
on
this Security at the times, place(s) and rate, and in the coin or currency,
herein prescribed.
[If
a
Global Security, insert—This
Global Security or portion hereof may not be exchanged for Definitive Securities
of this series except in the limited circumstances provided in the Indenture.
The holders of beneficial interests in this Global Security will not be
entitled
to receive physical delivery of Definitive Securities except as described
in the
Indenture and will not be considered the Holders thereof for any purpose
under
the Indenture.]
[If
a
Definitive Security, insert—As
provided in the Indenture and subject to certain limitations therein set
forth,
the transfer of this Security is registerable in the Security Register,
upon
surrender of this Security for registration of transfer at the office or
agency
of the Company in [if
applicable, insert—any
place
where the principal of and any premium and interest on this Security are
payable] [if
applicable, insert—The
City
of New York [, or, subject to any laws or regulations applicable thereto
and to
the right of the Company (limited as provided in the Indenture) to rescind
the
designation of any such transfer agent, at the [main] offices of _______________
in ________________ or at such other offices or agencies as the Company
may
designate]], duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar
duly
executed by, the Holder hereof or his attorney duly authorized in writing,
and
thereupon one or more new Securities of this series and of like tenor,
of
authorized denominations and for the same aggregate principal amount, will
be
issued to the designated transferee or transferees.]
The
Securities of this series are issuable only in registered form without
coupons
in denominations of U.S. $ . . . . . . . . and any integral multiple thereof.
As
provided in the Indenture and subject to certain limitations therein set
forth,
Securities of this series are exchangeable for a like aggregate principal
amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax
or
other governmental charge payable in connection therewith.
Prior
to
due presentment of this Security for registration of transfer, the Company,
[If
applicable, insert—any
Guarantor,] the Trustee and any agent of the Company [If
applicable, insert—,
a
Guarantor] or the Trustee may treat the Person in whose name this Security
is
registered as the owner hereof for all purposes, regardless of whether
this
Security be overdue, and none of the Company, [If
applicable, insert—the
Guarantors,] the Trustee nor any such agent shall be affected by notice
to the
contrary.
No
recourse under or upon any obligation, covenant or agreement of or contained
in
the Indenture or of or contained in any Security, [If
applicable, insert—,
or the
Securities Guarantee endorsed thereon,] or for any claim based thereon
or
otherwise in respect thereof, or in any Security [If
applicable, insert—or
in the
Securities Guarantee], or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, shareholder,
member,
officer, manager or director, as such, past, present or future, of the
Company
[If
applicable, insert—or
any
Guarantor] or of any successor Person, either directly or through the Company
[If
applicable, insert—or
any
Guarantor] or any successor Person, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment, penalty
or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released by the acceptance hereof and as a condition
of,
and as part of the consideration for, the Securities and the execution
of the
Indenture.
The
Indenture provides that the Company [If
applicable, insert—and
the
Guarantors] (a) will be discharged from any and all obligations in respect
of
the Securities (except for certain obligations described in the Indenture),
or
(b) need not comply with certain restrictive covenants of the Indenture, in
each case if the Company [If
applicable, insert—or
a
Guarantor] deposits, in trust, with the Trustee money or U.S. Government
Obligations (or a combination thereof) which through the payment of interest
thereon and principal thereof in accordance with their terms will provide
money,
in an amount sufficient to pay all the principal of and interest on the
Securities, but such money need not be segregated from other funds except
to the
extent required by law.
Except
as
otherwise defined herein, all terms used in this Security which are defined
in
the Indenture shall have the meanings assigned to them in the
Indenture.
[If
a
Definitive Security, insert as a separate page—
FOR
VALUE
RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
_______________________________________________________________
(Please
Print or Typewrite Name and Address of Assignee)
the
within instrument of CONSTELLATION ENERGY PARTNERS LLC and does hereby
irrevocably constitute and appoint ___________________ Attorney to transfer
said
instrument on the books of the within-named Company, with full power of
substitution in the premises.
Please
Insert Social Security or Other Identifying Number of Assignee:
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.]
[If
a
Security to which Article Fourteen
has
been made applicable, insert the following Form of Notation on such Security
relating to the Securities Guarantee—
Each
of
the Guarantors (which term includes any successor Person in such capacity
under
the Indenture), has fully, unconditionally and absolutely guaranteed, to
the
extent set forth in the Indenture and subject to the provisions in the
Indenture, the due and punctual payment of the principal of, and premium,
if
any, and interest on the Securities of this series and all other amounts
due and
payable under the Indenture and the Securities of this series by the
Company.
The
obligations of the Guarantors to the Holders of Securities of this series
and to
the Trustee pursuant to the Securities Guarantee and the Indenture are
expressly
set forth in Article Fourteen
of the
Indenture and reference is hereby made to the Indenture for the precise
terms of
the Securities Guarantee.
|
Guarantors:
|
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|
|
|
|
[NAME
OF EACH GUARANTOR]
|
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By:
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]
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Section 2.4. Global
Securities.
Every
Global Security authenticated and delivered hereunder shall bear a legend
in
substantially the following form:
THIS
SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE
THEREOF.
THIS SECURITY MAY NOT BE TRANSFERRED TO, OR REGISTERED OR EXCHANGED FOR
SECURITIES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN THE DEPOSITARY
OR A
NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
EVERY
SECURITY AUTHENTICATED AND DELIVERED UPON REGISTRATION OF TRANSFER OF,
OR IN
EXCHANGE FOR OR IN LIEU OF, THIS SECURITY SHALL BE A GLOBAL SECURITY SUBJECT
TO
THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES.
If
Securities of a series are issuable in whole or in part in the form of
one or
more Global Securities, as specified as contemplated by Section 3.1,
then,
notwithstanding clause (i) of Section 3.1
and the
provisions of Section 3.2,
any
Global Security shall represent such of the Outstanding Securities of such
series as shall be specified therein and may provide that it shall represent
the
aggregate amount of Outstanding Securities from time to time endorsed thereon
and that the aggregate amount of Outstanding Securities represented thereby
may
from time to time be reduced or increased, as the case may be, to reflect
exchanges. Any endorsement of a Global Security to reflect the amount,
or any
reduction or increase in the amount, of Outstanding Securities represented
thereby shall be made in such manner and upon instructions given by such
Person
or Persons as shall be specified therein or in a Company Order. Subject
to the
provisions of Section 3.3,
Section 3.4
and
Section 3.5,
the
Trustee shall deliver and redeliver any Global Security in the manner and
upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order. Any instructions by the Company with respect
to
endorsement or delivery or redelivery of a Global Security shall be in
a Company
Order (which need not comply with Section 1.3
and need
not be accompanied by an Opinion of Counsel).
The
provisions of the last sentence of Section 3.3
shall
apply to any Security represented by a Global Security if such Security
was
never issued and sold by the Company and the Company delivers to the Trustee
the
Global Security together with a Company Order (which need not comply with
Section 1.3
and need
not be accompanied by an Opinion of Counsel) with regard to the reduction
or
increase, as the case may be, in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 3.3.
Section 2.5. Form
of
Trustee’s Certificate of Authentication.
The
Trustee’s certificate(s) of authentication shall be in substantially the
following form:
This
is
one of the Securities of the series designated [insert
title of applicable series]
referred to in the within-mentioned Indenture.
|
[______________________],
|
|
as
Trustee
|
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By:
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Authorized
Officer
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ARTICLE THREE
THE
SECURITIES
Section 3.1. 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. There shall be established
in or
pursuant to a Board Resolution, and set forth, or determined in the manner
provided, in an Officer’s Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any
series,
(a) the
title
of the Securities of the series (which shall distinguish the Securities
of the
series from all other Securities and which may be part of a series of Securities
previously issued);
(b) any
limit
upon the aggregate principal amount of the Securities of the series which
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 3.4,
Section 3.5,
Section 3.6,
Section 9.6
or
Section 11.7
and
except for any Securities which, pursuant to Section 3.3,
are
deemed never to have been authenticated and delivered hereunder);
(c) the
Person to whom any interest on a Security of the series shall be payable,
if
other than the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record
Date
for such interest;
(d) the
date
or dates on which the principal of the Securities of the series is payable
or
the method of determination thereof;
(e) the
rate
or rates at which the Securities of the series shall bear interest, if
any, or
the formula, method or provision pursuant to which such rate or rates are
determined, the date or dates from which such interest shall accrue or
the
method of determination thereof, the Interest Payment Dates on which such
interest shall be payable and the Regular Record Date for the interest
payable
on any Interest Payment Date;
(f) the
place
or places where, subject to the provisions of Section 10.2,
the
principal of and any premium and interest on Securities of the series shall
be
payable, Securities of the series may be surrendered for registration of
transfer, Securities of the series may be surrendered for exchange and
notices,
and demands to or upon the Company in respect of the Securities of the
series
and this Indenture may be served;
(g) the
period or periods within which, the price or prices at which and the terms
and
conditions upon which Securities of the series may be redeemed, in whole
or in
part, at the option of the Company;
(h) the
obligation, if any, of the Company to redeem or purchase Securities of
the
series pursuant to any sinking fund or analogous provisions or at the option
of
a Holder thereof and the period or periods within which, the price or prices
at
which and the terms and conditions upon which Securities of the series
shall be
redeemed or purchased, in whole or in part, pursuant to such
obligation;
(i) if
other
than denominations of $1,000 and any integral multiple thereof, the
denominations in which Securities of the series shall be issuable;
(j) whether
payment of principal of and premium, if any, and interest, if any, on the
Securities of the series shall be without deduction for taxes, assessments
or
governmental charges paid by Holders of the series;
(k) if
other
than the principal amount thereof, the portion of the principal amount
of
Securities of the series which shall be payable upon declaration of acceleration
of the Maturity thereof pursuant to Section 5.2;
(l) if
the
amount of payments of principal of and any premium or interest on the Securities
of the series may be determined with reference to an index, the manner
in which
such amounts shall be determined;
(m) if
and as
applicable, that the Securities of the series shall be issuable in whole
or in
part in the form of one or more Global Securities and, in such case, the
Depositary or Depositaries for such Global Security or Global Securities
and any
circumstances other than those set forth in Section 3.5
in which
any such Global Security may be transferred to, and registered and exchanged
for
Securities registered in the name of, a Person other than the Depositary
for
such Global Security or a nominee thereof and in which any such transfer
may be
registered;
(n) any
deletions from, modifications of or additions to the Events of Default
set forth
in Section 5.1
or the
covenants of the Company set forth in Article Ten
with
respect to the Securities of such series;
(o) whether
and under what circumstances the Company will pay additional amounts on
the
Securities of the series held by a Person who is not a U.S. Person in respect
of
any tax, assessment or governmental charge withheld or deducted and, if
so,
whether the Company will have the option to redeem the Securities of the
series
rather than pay such additional amounts;
(p) if
the
Securities of the 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;
(q) if
the
Securities of the series are to be convertible into or exchangeable for
any
other security or property of the Company, including, without limitation,
securities of another Person held by the Company or its Affiliates and,
if so,
the terms thereof;
(r) if
other
than as provided in Section 13.2
and
Section 13.3,
the
means of Legal Defeasance or Covenant Defeasance as may be specified for
the
Securities of the series;
(s) if
other
than the Trustee, the identity of the initial Security Registrar and any
initial
Paying Agent;
(t) whether
the Securities of the series will be guaranteed pursuant to the Securities
Guarantee set forth in Article Fourteen,
any
modifications to the terms of Article Fourteen
applicable to the Securities of such series and the applicability of any
other
guarantees; and
(u) 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 in or pursuant to
the Board
Resolution referred to above and (subject to Section 3.3)
set
forth, or determined in the manner provided, in the Officer’s Certificate
referred to above or in any such indenture supplemental hereto.
All
Securities of any one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the
Holders, for increases in the aggregate principal amount of such series
of
Securities and issuances of additional Securities of such series or for
the
establishment of additional terms with respect to the Securities of such
series.
If
any of
the terms of the series are established by action taken by or pursuant
to a
Board Resolution, a copy of an appropriate record of such action shall
be
certified by an authorized officer or other authorized person on behalf
of the
Company and, if applicable, the Guarantors and delivered to the Trustee
at or
prior to the delivery of the Officer’s Certificate setting forth, or providing
the manner for determining, the terms of the series.
With
respect to Securities of a series subject to a Periodic Offering, such
Board
Resolution or Officer’s Certificate may provide general terms for Securities of
such series and provide either that the specific terms of particular Securities
of such series shall be specified in a Company Order or that such terms
shall be
determined by the Company and, if applicable, the Guarantors or one or
more
agents thereof designated in an Officer’s Certificate, in accordance with a
Company Order.
Section 3.2. Denominations.
The
Securities of each series shall be issuable in registered form without
coupons
in such denominations as shall be specified as contemplated by Section 3.1.
In the
absence of any such provisions with respect to the Securities of any series,
the
Securities of such series shall be issuable in denominations of $1,000
and any
integral multiple thereof.
Section 3.3. Execution,
Authentication, Delivery and Dating.
The
Securities shall be executed on behalf of the Company by its Chairman of
the
Board, its Chief Executive Officer, its President, its Chief Financial
Officer
or any of its Vice Presidents and need not be attested. The signature of
any of
these officers on the Securities may be manual or facsimile. Any Securities
Guarantee endorsed on the Securities shall be executed on behalf of the
applicable Guarantor by its Chairman of the Board, its Chief Executive
Officer,
its President, its Chief Financial Officer or any of its Vice Presidents
and
need not be attested.
Securities
and any Securities Guarantee bearing the manual or facsimile signatures
of
individuals who were at any time the proper officers of the Company or
a
Guarantor, as the case may be, shall bind the Company or such Guarantor,
as the
case may be, notwithstanding that such individuals or any of them have
ceased to
hold such offices prior to the authentication and delivery of such Securities
or
did not hold such offices at the date of such Securities.
At
any
time and from time to time after the execution and delivery of this Indenture,
the Company may deliver Securities of any series executed by the Company
to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities, and the Trustee in accordance with the
Company
Order shall authenticate and deliver such Securities; provided,
however,
that in
the case of Securities offered in a Periodic Offering, the Trustee shall
authenticate and deliver such Securities from time to time in accordance
with
such other procedures (including, without limitation, the receipt by the
Trustee
of oral or electronic instructions from the Company or its duly authorized
agents, thereafter promptly confirmed in writing) acceptable to the Trustee
as
may be specified by or pursuant to a Company Order delivered to the Trustee
prior to the time of the first authentication of Securities of such series.
If
the forms or terms of the Securities of the series have been established
in or
pursuant to one or more Board Resolutions as permitted by Section 2.1
and
Section 3.1,
in
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall
be
entitled to receive such documents as it may reasonably request. The Trustee
shall also be entitled to receive, and (subject to Section 6.1)
shall
be fully protected in relying upon, an Opinion of Counsel stating,
(a) if
the
form or forms of such Securities has been established in or pursuant to
a Board
Resolution as permitted by Section 2.1,
that
each such form has been established in conformity with the provisions of
this
Indenture;
(b) if
the
terms of such Securities have been, or in the case of Securities of a series
offered in a Periodic Offering will be, established in or pursuant to a
Board
Resolution as permitted by Section 3.1,
that
such terms have been, or in the case of Securities of a series offered
in a
Periodic Offering will be, established in conformity with the provisions
of this
Indenture, subject, in the case of Securities of a series offered in a
Periodic
Offering, to any conditions specified in such Opinion of Counsel;
and
(c) that
such
Securities when authenticated and delivered by the Trustee and issued by
the
Company in the manner and subject to any conditions and assumptions specified
in
such Opinion of Counsel, will constitute valid and legally binding obligations
of the Company and, if applicable, the Guarantors, enforceable in accordance
with their terms, subject to the following limitations: (i) bankruptcy,
insolvency, moratorium, reorganization, liquidation, fraudulent conveyance
or
transfer and other similar laws of general applicability relating to or
affecting the enforcement of creditors’ rights, or to general equity principles,
(ii) the availability of equitable remedies being subject to the discretion
of
the court to which application therefor is made; and (iii) such other usual
and
customary matters as shall be specified in such Opinion of Counsel.
If
such
form or forms or terms have been so established, the Trustee shall not
be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee’s own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding
the provisions of Section 3.1
and of
the preceding paragraph, if all Securities of a series are not to be originally
issued at one time, it shall not be necessary to deliver the Officer’s
Certificate otherwise required pursuant to Section 3.1
or the
Company Order and Opinion of Counsel otherwise required pursuant to such
preceding paragraph at or prior to the time of authentication of each Security
of such series if such documents are delivered at or prior to the authentication
upon original issuance of the first Security of such series to be
issued.
With
respect to Securities of a series offered in a Periodic Offering, the Trustee
may rely, as to the authorization by the Company of any of such Securities,
on
the form or forms and terms thereof and the legality, validity, binding
effect
and enforceability thereof, upon the Opinion of Counsel and the other documents
delivered pursuant to Section 2.1
and
Section 3.1
and this
Section, as applicable, in connection with the first authentication of
Securities of such series.
Each
Security shall be dated the date of its authentication.
No
Security, nor any Securities Guarantee endorsed thereon, shall be entitled
to
any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the Trustee by
manual
signature of an authorized officer, and such certificate upon any Security
shall
be conclusive evidence, and the only evidence, that such Security has been
duly
authenticated and delivered hereunder and is entitled to the benefits of
this
Indenture. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the
Company,
and the Company shall deliver such Security to the Trustee for cancellation
as
provided in Section 3.9
for all
purposes of this Indenture such Security shall be deemed never to have
been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
Section 3.4. Temporary
Securities.
Pending
the preparation of Definitive Securities of any series, the Company may
execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the
tenor
of the Definitive Securities in lieu of which they are issued and with
such
appropriate insertions, omissions, substitutions and other variations as
the
officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If
temporary Securities of any series are issued, the Company will cause Definitive
Securities of that series to be prepared without unreasonable delay. After
the
preparation of Definitive Securities of such series, the temporary Securities
of
such series shall be exchangeable for Definitive Securities of such series
upon
surrender of the temporary Securities of such series at the office or agency
of
the Company in a Place of Payment for that series, without charge to the
Holder.
Upon surrender for cancellation of any one or more temporary Securities
of any
series the Company shall execute and the Trustee shall authenticate and
deliver
in exchange therefor a like principal amount of Definitive Securities of
the
same series and tenor of authorized denominations. Until so exchanged the
temporary Securities of any series shall in all respects be entitled to
the same
benefits under this Indenture as Definitive Securities of such
series.
Section 3.5. Registration,
Registration of Transfer and Exchange.
The
Company shall cause to be kept at the office or agency of the Company in
a Place
of Payment required by Section 10.2
a
register (the register maintained in such office being herein sometimes
referred
to as the “Security Register”) in which, subject to such reasonable regulations
as it may prescribe, the Company shall provide for the registration of
Securities and of transfers of Securities. The Trustee is hereby appointed
as
the initial “Security Registrar” for the purpose of registering Securities and
transfers of Securities as herein provided, and its corporate trust office,
which, at the date hereof, is located at [_______________________], is
the
initial office or agency where the Securities Register will be maintained.
The
Company may at any time replace such Security Registrar, change such office
or
agency or act as its own Security Registrar. The Company will give prompt
written notice to the Trustee of any change of the Security Registrar or
of the
location of such office or agency.
Upon
surrender for registration of transfer of any Security of any series at
the
office or agency maintained pursuant to Section 10.2
for such
purpose, the Company and, if applicable, the Guarantors shall execute,
and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Securities, with an endorsement of the
Securities Guarantee, if applicable, executed by the Guarantors, of the
same
series and tenor, of any authorized denominations and of a like aggregate
principal amount.
At
the
option of the Holder, Securities of any series (except a Global Security)
may be
exchanged for other Securities of the same series and tenor, of any authorized
denominations and of a like aggregate principal amount, upon surrender
of the
Securities to be exchanged at such office or agency. Whenever any Securities
are
so surrendered for exchange, the Company and, if applicable, the Guarantors
shall execute and the Trustee shall authenticate and deliver, the Securities,
with an endorsement of the Securities Guarantee, if applicable, executed
by the
Guarantors, which the Holder making the exchange is entitled to
receive.
All
Securities issued upon any registration of transfer or exchange of Securities
shall be the valid obligations of the Company and, if applicable, the Guarantors
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer
or
exchange.
Every
Security presented or surrendered for registration of transfer or for exchange
shall (if so required by the Company or the Trustee) be duly endorsed,
or be
accompanied by a written instrument of transfer in form satisfactory to
the
Company and the Security Registrar duly executed, by the Holder thereof
or his
attorney duly authorized in writing.
No
service charge shall be made for any registration of transfer or exchange
of
Securities, but the Company 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 or exchange of Securities, other than exchanges
pursuant to Section 3.4,
Section 9.6
or
Section 11.7
not
involving any transfer.
The
Company shall not be required (a) to issue, register the transfer of or
exchange
Securities of any series during a period beginning at, the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
of
that series selected for redemption under Section 11.3
and
ending at the close of business on the day of such mailing, or (b) to register
the transfer of or exchange any Security so selected for redemption in
whole or
in part, except the unredeemed portion of any Security being redeemed in
part.
Notwithstanding
any other provisions of this Indenture and except as otherwise specified
with
respect to any particular series of Securities as contemplated by Section 3.1,
a
Global Security representing all or a portion 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. Every Security authenticated and delivered upon registration
of,
transfer of, or in exchange for or in lieu of, a Global Security shall
be a
Global Security except as provided in the two paragraphs immediately
following.
If
at any
time the Depositary for any Securities of a series represented by one or
more
Global Securities notifies the Company 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 to continue as Depositary under
Section 3.1
or
ceases to be a clearing agency registered under the Exchange Act, the Company
shall appoint a successor Depositary with respect to such Securities. If
a
successor Depositary for such Securities is not appointed by the Company
within
90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company’s election pursuant to Section 3.1
that
such Securities be represented by one or more Global Securities shall no
longer
be effective and the Company and, if applicable, the Guarantors will execute
and
the Trustee, upon receipt of a Company Order for the authentication and
delivery
of Definitive Securities of such series, will authenticate and deliver,
Securities, with an endorsement of the Securities Guarantee, if applicable,
executed by the Guarantors, of such series in definitive registered form
without
coupons, 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 registered
in the
names of such Persons as the Depositary shall direct.
The
Company 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
Company and, if applicable, the Guarantors will execute and the Trustee,
upon
receipt of a Company Order for the authentication and delivery of the Definitive
Securities of such series, will authenticate and deliver, Securities, with
an
endorsement of the Securities Guarantee, if applicable, executed by the
Guarantors, of such series in definitive registered form without coupons,
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 registered
in the
names of such Persons as the Depositary shall direct.
If
specified by the Company pursuant to Section 3.1
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 and tenor in definitive registered
form
on such terms as are acceptable to the Company, the Trustee and such Depositary.
Thereupon, the Company and, if applicable, the Guarantors shall execute,
and the
Trustee, upon receipt of a Company Order for the authentication and delivery
of
Securities in definitive registered form, shall authenticate and deliver,
without service charge,
(a) to
the
Person specified by such Depositary a new Security or Securities, with
an
endorsement of the Securities Guarantee, if applicable, executed by the
Guarantors, of the same series and tenor, 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
(b) to
such
Depositary a new Global Security, with an endorsement of the Securities
Guarantee, if applicable, executed by the Guarantors, 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 (a) above.
Every
Person who takes or holds any beneficial interest in a Global Security
agrees
that:
(a) the
Company, the Guarantors (if applicable) and the Trustee may deal with the
Depositary as sole owner of the Global Security and as the authorized
representative of such Person;
(b) such
Person’s rights in the Global Security shall be exercised only through the
Depositary and shall be limited to those established by law and agreement
between such Person and the Depositary and/or direct and indirect participants
of the Depositary;
(c) the
Depositary and its participants make book-entry transfers of beneficial
ownership among, and receive and transmit distributions of principal and
interest on the Global Securities to, such Persons in accordance with their
own
procedures; and
(d) none
of
the Company, the Guarantors (if applicable), the Trustee, nor any agent
of any
of them will have any responsibility or liability for any aspect of the
records
relating to or payments made on account of beneficial ownership interests
of a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Section 3.6. Mutilated,
Destroyed, Lost and Stolen Securities.
If
any
mutilated Security is surrendered to the Trustee, together with, in proper
cases, such security or indemnity as may be required by the Company, the
Guarantors (if applicable) or the Trustee to save each of them and any
agent of
any of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security, with an
endorsement of the Securities Guarantee, if applicable, executed by the
Guarantors, of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If
there
shall be delivered to the Company, the Guarantors (if applicable) and the
Trustee (a) evidence to their satisfaction of the destruction, loss or
theft of any Security and (b) such security or indemnity as may be required
by
them to save each of them and any agent of either of them harmless, then,
in the
absence of notice to the Company or the Trustee that such Security has
been
acquired by a bona fide purchaser, the Company and, if applicable, the
Guarantors shall execute and upon its request the Trustee shall authenticate
and
deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security,
with an endorsement of the Securities Guarantee, if applicable, executed
by the
Guarantors, of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
In
case
any such mutilated, destroyed, lost or stolen Security has become or is
about to
become due and payable, the Company in its discretion may, instead of issuing
a
new Security, pay such Security.
Upon
the
issuance of any new Security under this Section, the Company 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) connected therewith.
Every
new
Security of any series issued pursuant to this Section in lieu of any destroyed,
lost or stolen Security shall constitute an original additional contractual
obligation of the Company and, if applicable, the Guarantors, regardless
of
whether the destroyed, lost or stolen Security shall be at any time enforceable
by anyone, and shall be entitled to all the benefits of this Indenture
equally
and proportionately with any and all other Securities of that series duly
issued
hereunder.
The
provisions of this Section are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or
payment
of mutilated, destroyed, lost or stolen Securities.
Section 3.7. Payment
of Interest; Interest Rights Preserved.
Except
as
otherwise provided as contemplated by Section 3.1
with
respect to any series of Securities, interest on any Security which is
payable,
and is punctually paid or duly provided for, on any Interest Payment Date
shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record
Date
for such interest.
Any
interest on any Security of any series which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
“Defaulted Interest”) shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and
such
Defaulted Interest may be paid by the Company, at its election in each
case, as
provided in clause (a) or (b) below:
(a) The
Company may elect to make payment of any Defaulted Interest to the Persons
in
whose names the Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security of such series
and the
date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit
of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon, the Trustee shall fix a Special Record Date for the payment
of such
Defaulted Interest which shall be not more than 15 days and not less than
10
days prior to the date of the proposed payment and not less than 10 days
after
the receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date and, in the
name
and at the expense of the Company, shall cause notice of the proposed payment
of
such Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder of Securities of such series
at his
address as it appears in the Security Register, not less than 10 days prior
to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
of
such series (or their respective Predecessor Securities) are registered
at the
close of business on such Special Record Date and shall no longer be payable
pursuant to the following clause (b).
(b) The
Company may make payment of any Defaulted Interest on the Securities of
any
series in any other lawful manner not inconsistent with the requirements
of any
securities exchange on which such Securities may be listed, and upon such
notice
as may be required by such exchange, if, after notice given by the Company
to
the Trustee of the proposed payment pursuant to this clause, such manner
of
payment shall be deemed practicable by the Trustee.
Subject
to the foregoing provisions of this Section, each Security delivered under
this
Indenture upon registration of transfer of or in exchange for or in lieu
of any
other Security shall carry the rights to interest accrued and unpaid, and
to
accrue, which were carried by such other Security.
Section 3.8. Persons
Deemed Owners.
Except
as
otherwise provided as contemplated by Section 3.1
with
respect to any series of Securities, prior to due presentment of a Security
for
registration of transfer, the Company, the Trustee and, if applicable,
the
Guarantors and any agent thereof may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and any premium and (subject to Section 3.5
and
Section 3.7)
any
interest on such Security and for all other purposes whatsoever, regardless
of
whether such Security be overdue, and none of the Company, the Trustee
nor, if
applicable, the Guarantors nor any agent of any of them shall be affected
by
notice to the contrary.
No
holder
of any beneficial interest in any Global Security held on its behalf by
a
Depositary shall have any rights under this Indenture with respect to such
Global Security, and such Depositary may be treated by the Company, the
Trustee,
and, if applicable, the Guarantors and any agent of thereof as the owner
of such
Global Security for all purposes whatsoever.
Section 3.9. Cancellation
All
Securities surrendered for payment, redemption, registration of transfer
or
exchange or for credit against any sinking fund payment shall, if surrendered
to
any Person other than the Trustee, be delivered to the Trustee and shall
be
promptly canceled by it. The Company may at any time deliver to the Trustee
for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver
to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the
Company
has not issued and sold, and all Securities so delivered shall be promptly
canceled by the Trustee. No Securities shall be authenticated in lieu of
or in
exchange for any Securities canceled as provided in this Section, except
as
expressly permitted by this Indenture. All canceled Securities held by
the
Trustee shall be disposed of in accordance with its customary practices,
and the
Trustee shall thereafter deliver to the Company a certificate with respect
to
such disposition from time to time upon written request.
Section 3.10. Computation
of Interest
Except
as
otherwise specified as contemplated by Section 3.1
for
Securities of any series, interest on the Securities of each series shall
be
computed on the basis of a year of twelve 30-day months.
Section 3.11. CUSIP
or
CINS Numbers.
The
Company in issuing the Securities may use “CUSIP” or “CINS” numbers (if then
generally in use, and in addition to the other identification numbers printed
on
the Securities), and, if so, the Trustee shall use “CUSIP” or “CINS” numbers in
notices of redemption as a convenience to Holders; provided,
however,
that
any such notice may state that no representation is made as to the correctness
of such “CUSIP” or “CINS” 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 “CUSIP” or
“CINS” numbers.
ARTICLE FOUR
SATISFACTION
AND DISCHARGE
Section 4.1. Satisfaction
and Discharge of Indenture.
This
Indenture shall cease to be of further effect and will be discharged with
respect to the Securities of any series (except as to any surviving rights
of
registration of transfer or exchange of Securities and certain rights of
the
Trustee, in each case, herein expressly provided for), and the Trustee,
upon
Company Request and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture
with
respect to such Securities, when:
(a) either
(i) all
such
Securities theretofore authenticated and delivered (other than (A) such
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 3.6,
and (B)
such Securities for whose payment money has theretofore been deposited
in trust
or segregated and held in trust by the Company and thereafter repaid to
the
Company or discharged from such trust, as provided in Section 10.3)
have
been delivered to the Trustee for cancellation; or
(ii) all
such
Securities not theretofore delivered to the Trustee for
cancellation
(A) have
become due and payable, or
(B) will
become due and payable at their Stated Maturity within one year, or
(C) are
to be
called for redemption within one year under arrangements satisfactory to
the
Trustee for the giving of notice of redemption by the Trustee in the name,
and
at the expense, of the Company,
and
the
Company, in the case of (A), (B) or (C) above, has deposited or caused
to be
deposited with the Trustee as trust funds in trust for such purpose an
amount
sufficient to pay and discharge the entire indebtedness on such Securities
not
theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest to the date of such deposit (in the case
of
Securities which have become due and payable) or to the Stated Maturity
or
Redemption Date, as the case may be, together with instructions from the
Company
irrevocably directing the Trustee to apply such funds to the payment thereof
at
maturity or redemption, as the case may be;
(b) the
Company has paid or caused to be paid all other sums payable hereunder
by the
Company with respect to such Securities; and
(c) the
Company has delivered to the Trustee an Officer’s Certificate and an Opinion of
Counsel, which, taken together, state that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
with
respect to such Securities have been complied with.
Notwithstanding
the satisfaction and discharge of this Indenture with respect to the Securities
of any series, (x) the obligations of the Company to the Trustee under
Section 6.7,
the
obligations of the Trustee to any Authenticating Agent under Section 6.14
and the
right of the Trustee to resign under Section 6.10
shall
survive, and (y) if money shall have been deposited with the Trustee pursuant
to
clause (a) of this Section, the obligations of the Company and the Trustee
under
Section 4.2,
Section 6.6
and
Section 10.2
and the
last paragraph of Section 10.3
shall
survive.
Section 4.2. Application
of Trust Money.
Subject
to the provisions of the last paragraph of Section 10.3,
all
money deposited with the Trustee pursuant to Section 4.1
shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through
any
Paying Agent (including the Company acting as its own Paying Agent) as
the
Trustee may determine, to the Persons entitled thereto, of the principal
and any
premium and interest for whose payment such money has been deposited with
the
Trustee.
ARTICLE FIVE
REMEDIES
Section 5.1. Events
of
Default.
“Event
of
Default”, wherever used herein with respect to Securities of any series, means
any one of the following events (whatever the reason for such Event of
Default
and whether it shall be voluntary or involuntary or be effected by operation
of
law or pursuant to any judgment, decree or order of any court or any order,
rule
or regulation of any administrative or governmental body):
(a) default
in the payment of any interest upon any Security of that series when it
becomes
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, on) any Security
of that
series at its Maturity; or
(c) default
in the performance, or breach, of any covenant set forth in Article Ten
in this
Indenture (other than a covenant a default in whose performance or whose
breach
is elsewhere in this Section specifically dealt with or which has expressly
been
included in this Indenture solely for the benefit of series of Securities
other
than that series), and continuance of such default or breach for a period
of 90
days after there has been given, by registered or certified mail, to the
Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25%
in principal amount of the Outstanding Securities of that series a written
notice specifying such default or breach and requiring it to be remedied
and
stating that such notice is a “Notice of Default” hereunder; or
(d) default
in the performance, or breach, of any covenant in this Indenture (other
than a
covenant in Article Ten
or any
other covenant a default in whose performance or whose breach is elsewhere
in
this Section specifically dealt with or which has expressly been included
in
this Indenture solely for the benefit of series of Securities other than
that
series), and continuance of such default or breach for a period of 180
days
after there has been given, by registered or certified mail, to the Company
by
the Trustee or to the Company and the Trustee by the Holders of at least
25% in
principal amount of the Outstanding Securities of that series a written
notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a “Notice of Default” hereunder; or
(e) the
Company pursuant to or within the meaning of any Bankruptcy Law
(i) commences a voluntary case, (ii) consents to the entry of any order for
relief against it in an involuntary case, (iii) consents to the appointment
of a
Custodian of it or for all or substantially all of its property, or (iv)
makes a
general assignment for the benefit of its creditors; or
(f) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy
Law
that (i) is for relief against the Company in an involuntary case, (ii)
appoints
a Custodian of the Company or for all or substantially all of its property,
or
(iii) orders the liquidation of the Company; and the order or decree remains
unstayed and in effect for 30 consecutive days; or
(g) default
in the deposit of any sinking fund payment when due; or
(h) any
other
Event of Default provided with respect to Securities of that series in
accordance with Section 3.1.
Section 5.2. Acceleration
of Maturity; Rescission and Annulment.
If
an
Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee
or the
Holders of a specified percentage in aggregate principal amount of the
Outstanding Securities of that series may declare the principal amount
(or, if
the Securities of that series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of that
series)
of all of the Securities of that series to be due and payable immediately,
by a
notice in writing to the Company (and to the Trustee if given by Holders),
and
upon any such declaration such principal amount (or specified amount) shall
become immediately due and payable. Notwithstanding the foregoing, if an
Event
of Default specified in clause (e)
or
(f)
of
Section 5.1
occurs,
the Securities of any series at the time Outstanding shall be due and payable
immediately without further action or notice.
At
any
time after such a declaration of acceleration with respect to Securities
of any
series has been made and before a judgment or decree for payment of the
money
due has been obtained by the Trustee as hereinafter in this Article Five
provided, the Holders of a majority in principal amount of the Outstanding
Securities of that series, by written notice to the Company and the Trustee,
may
rescind and annul such declaration and its consequences if:
(a) the
Company or, if applicable, one or more of the Guarantors has paid or deposited
with the Trustee a sum sufficient to pay:
(i) all
overdue interest on all Securities of that series,
(ii) the
principal of (and premium, if any, on) any Securities of that series which
have
become due otherwise than by such declaration of acceleration and any interest
thereon at the rate or rates prescribed therefor in such
Securities,
(iii) to
the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate or rates prescribed therefor in such Securities, and
(iv) all
sums
paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel;
and
(b) all
Events of Default with respect to Securities of that series, other than
the
non-payment of the principal of Securities of that series which have become
due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 5.13.
No
such
rescission shall affect any subsequent default or impair any right consequent
thereon.
Section 5.3. Collection
of Indebtedness and Suits for Enforcement by Trustee.
The
Company covenants that if:
(a) default
is made in the payment of any installment of interest on any Security when
such
interest becomes due and payable and such default continues for a period
of 30
days, or
(b) default
is made in the payment of the principal of (or premium, if any, on) any
Security
at the Maturity thereof,
the
Company will, upon demand of the Trustee, pay to it, for the benefit of
the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent
that
payment of such interest shall be legally enforceable, interest on any
overdue
principal and any premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such
further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances
of
the Trustee, its agents and counsel.
If
the
Company fails to pay such amounts forthwith upon such demand, the Trustee,
in
its own name and as trustee of an express trust, may institute a judicial
proceeding for the collection of the sums so due and unpaid, may prosecute
such
proceeding to judgment or final decree and may enforce the same against
the
Company or, if applicable, the Guarantors or any other obligor upon such
Securities and collect the moneys adjudged or decreed to be payable in
the
manner provided by law out of the property of the Company or, if applicable,
the
Guarantors or any other obligor upon such Securities, wherever
situated.
If
an
Event of Default with respect to Securities of any series occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce
its
rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual
to
protect and enforce any such rights, whether for the specific enforcement
of any
covenant or agreement in this Indenture or in aid of the exercise of any
power
granted herein, or to enforce any other proper remedy.
Section 5.4. Trustee
May File Proofs of Claim.
In
case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or, if applicable, any Guarantor or
any other
obligor upon the Securities, their property or their creditors, the Trustee
(irrespective of whether the principal of the Securities 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 on the Company or, if applicable,
the Guarantors for the payment of overdue principal or interest) shall
be
entitled and empowered, by intervention in such proceeding or
otherwise,
(a) to
file
and prove a claim for the whole amount of principal (and premium, if any)
and
interest owing and unpaid in respect of the Securities and to file such
other
papers or documents as may be necessary or advisable in order to have the
claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the
Holders allowed in such judicial proceeding, and
(b) to
collect and receive any moneys or other property payable or deliverable
on any
such claims and to distribute the same;
and
any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by
each
Holder to make such payments to the Trustee and, if the Trustee shall consent
to
the making of such payments directly to the Holders, to pay to the Trustee
any
amount due it for the reasonable compensation, expenses, disbursements
and
advances of the Trustee, its agents and counsel, and any other amounts
due the
Trustee under Section 6.7.
No
provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any
plan of
reorganization, compromise, arrangement, adjustment or composition affecting
the
Securities or, if applicable, the Securities Guarantee or the rights of
any
Holder thereof or to authorize the Trustee to vote in respect of the claim
of
any Holder in any such proceeding; provided,
however,
that
the Trustee may, on behalf of the Holders, vote for the election of a trustee
in
bankruptcy or similar official and be a member of a creditors’ or other similar
committee.
Section 5.5. Trustee
May Enforce Claims Without Possession of Securities.
All
rights of action and claims under this Indenture or the Securities may
be
prosecuted and enforced by the Trustee without the possession of any of
the
Securities or the production thereof in any proceeding relating thereto,
and any
such proceeding instituted by the Trustee shall be brought in its own name
as
trustee of an express trust, and any recovery of judgment shall, after
provision
for the payment of the reasonable compensation, expenses, disbursements
and
advances of the Trustee, its agents and counsel, be for the ratable benefit
of
the Holders of the Securities in respect of which such judgment has been
recovered.
Section 5.6. Application
of Money Collected.
Any
money
collected by the Trustee pursuant to this Article Five
shall be
applied in the following order, at the date or dates fixed by the Trustee
and,
in case of the distribution of such money on account of principal or any
premium
or interest, upon presentation of the Securities and the notation thereon
of the
payment if only partially paid and upon surrender thereof if fully
paid:
FIRST:
To
the payment of all amounts due the Trustee under Section 6.7;
SECOND:
To the payment of the amounts then due and unpaid for principal of and
any
premium and interest on the Securities in respect of which or for the benefit
of
which such money has been collected, ratably, without preference or priority
of
any kind, according to the amounts due and payable on such Securities for
principal and any premium and interest, respectively; and
THIRD:
The balance, if any, to the Company.
Section 5.7. Limitation
on Suits.
No
Holder
of any Security of any series shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture (including, if applicable,
the Securities Guarantee), or for the appointment of a receiver or trustee,
or
for any other remedy hereunder, unless:
(a) such
Holder has previously given written notice to the Trustee of a continuing
Event
of Default with respect to the Securities of that series;
(b) the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(c) such
Holder or Holders have offered to the Trustee reasonable indemnity against
the
costs, expenses and liabilities to be incurred in compliance with such
request;
(d) the
Trustee for 60 days after its receipt of such notice, request and offer
of
indemnity has failed to institute any such proceeding; and
(e) no
direction inconsistent with such written request has been given to the
Trustee
during such 60-day period by the Holders of a majority in principal amount
of
the Outstanding Securities of that series;
it
being
understood and intended that no one or more of such Holders shall have
any right
in any manner whatever by virtue of, or by availing of, any provision of
this
Indenture to affect, disturb or prejudice the rights of any other of such
Holders, or to obtain or to seek to obtain priority or preference over
any other
of such Holders or to enforce any right under this Indenture, except in
the
manner herein provided and for the equal and ratable benefit of all such
Holders.
Section 5.8. Unconditional
Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding
any other provision in this Indenture, the Holder of any Security shall
have the
right, which is absolute and unconditional, to receive payment of the principal
of and any premium and (subject to Section 3.5
and
Section 3.7)
interest on such Security on the Stated Maturity or Maturities expressed
in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights
shall
not be impaired without the consent of such Holder.
Section 5.9. Restoration
of Rights and Remedies.
If
the
Trustee or any Holder has instituted any proceeding to enforce any right
or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee
or to
such Holder, then and in every such case, subject to any determination
in such
proceeding, the Company, the Guarantors, the Trustee and the Holders shall
be
restored severally and respectively to their former positions hereunder
and
thereafter all rights and remedies of the Trustee and the Holders shall
continue
as though no such proceeding had been instituted.
Section 5.10. Rights
and Remedies Cumulative.
Except
as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities in the last paragraph of Section 3.6,
no
right or remedy herein conferred upon or reserved to the Trustee or to
the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and
in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment
of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11. Delay
or
Omission Not Waiver.
To
fullest extent permitted by applicable law, no delay or omission of the
Trustee
or of any Holder of any Securities to exercise any right or remedy accruing
upon
any Event of Default shall impair any such right or remedy or constitute
a
waiver of any such Event of Default or an acquiescence therein. Every right
and
remedy given by this Article Five
or by
law to the Trustee or to the Holders may be exercised from time to time,
and as
often as may be deemed expedient, by the Trustee or by the Holders, as
the case
may be.
Section 5.12. Control
by Holders.
The
Holders of not less than a majority in principal amount of the Outstanding
Securities of any series 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
the
Securities of such series; provided,
however,
that:
(a) such
direction shall not be in conflict with any rule of law or with this
Indenture;
(b) the
Trustee may take any other action deemed proper by the Trustee which is
not
inconsistent with such direction; and
(c) subject
to the provisions of Section 6.1,
the
Trustee shall have the right to decline to follow any such direction if
the
Trustee in good faith shall determine that the proceeding so directed would
involve the Trustee in personal liability.
Section 5.13. Waiver
of
Past Defaults.
By
written notice to the Company and the Trustee, the Holders of not less
than a
majority in principal amount of the Outstanding Securities of any series
may on
behalf of the Holders of all the Securities of such series waive any past
default hereunder with respect to such series and its consequences,
except:
(a) a
continuing default in the payment of the principal of or any premium or
interest
on any Security of such series, or
(b) a
default
in respect of a covenant or provision hereof which under Article Nine
cannot
be modified or amended without the consent of the Holder of each Outstanding
Security of such series affected.
Upon
any
such waiver, such default shall cease to exist, and any Event of Default
arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture, but no such waiver shall extend to any subsequent or other default
or
impair any right consequent thereon.
Section 5.14. Undertaking
for 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,
suffered or omitted by it as Trustee, the filing by any party litigant,
other
than the Trustee, in such suit of an undertaking to pay the costs of such
suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys’ fees, 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 5.14
shall
not apply to any suit instituted by the Company, to any suit instituted
by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding
in
the aggregate more than 10% in principal amount of the Outstanding Securities
of
any series, or to any suit instituted by any Holder for the enforcement
of the
payment of the principal of (or premium, if any) or interest on any Security
on
or after the Stated Maturity or Maturities expressed in such Security (or,
in
the case of redemption, on or after the Redemption Date).
Section 5.15. Waiver
of
Stay or Extension Laws.
Each
of
the Company and the Guarantors covenants (to the extent that it may lawfully
do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law
wherever enacted, now or at any time hereafter in force, which may affect
the
covenants or the performance of this Indenture; and each of the Company
and the
Guarantors (to the extent that it may lawfully do so) hereby expressly
waives
all benefit or advantage of any such law and covenants that it will not
hinder,
delay or impede the execution of any power herein granted to the Trustee,
but
will suffer and permit the execution of every such power as though no such
law
had been enacted.
ARTICLE SIX
THE
TRUSTEE
Section 6.1. Certain
Duties and Responsibilities.
(a) Except
during the continuance of an Event of Default,
(i) the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and as are provided by the Trust
Indenture Act, and no implied covenants or obligations shall be read into
this
Indenture against the Trustee; and
(ii) in
the
absence of bad faith on its part, the Trustee may conclusively rely, as
to the
truth of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and conforming to
the
requirements of this Indenture; but in the case of any such 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 they conform to the requirements of this
Indenture.
(b) In
case
an Event of Default has occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by this Indenture, and use the
same
degree of care and skill in their exercise, as a prudent man would exercise
or
use under the circumstances in the conduct of his own affairs.
(c) 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 willful misconduct, except that
(i) this
Subsection shall not be construed to limit the effect of Subsection (a)
of this
Section;
(ii) the
Trustee shall not be liable for any error of judgment made in good faith
by a
Responsible Officer, unless it shall be proved that the Trustee was negligent
in
ascertaining the pertinent facts;
(iii) 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
of a
majority in principal amount of the Outstanding Securities of any series,
given
pursuant to Section 5.12,
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 with respect to the Securities of such
series;
and
(iv) no
provision of this Indenture shall require the Trustee to expend or risk
its own
funds or otherwise incur any financial liability in the performance of
any of
its duties hereunder, or in the exercise of any of its rights or powers,
if it
shall have reasonable grounds for believing that repayment of such funds
or
adequate indemnity against such risk or liability is not reasonably assured
to
it.
(d) Regardless
of whether therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to
the Trustee shall be subject to the provisions of this Section.
Section 6.2. Notice
of
Defaults.
Within
90
days after the occurrence of any Default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders
of
Securities of such series, as their names and addresses appear in the Security
Register, notice of such Default hereunder known to the Trustee, unless
such
Default shall have been cured or waived; provided,
however,
that,
except in the case of a Default in the payment of the principal of or any
premium or interest on any Security of such series or in the payment of
any
sinking fund installment with respect to Securities of such series, the
Trustee
may withhold from Holders of Securities notice of any continuing Default
or
Event of Default if the Trustee in good faith determines that the withholding
of
such notice is in the interest of the Holders of Securities of such series;
and,
provided,
further,
that in
the case of any Default of the character specified in Section 5.1(c)
with
respect to Securities of such series, no such notice to Holders shall be
given
until at least 90 days after the occurrence thereof and that in the case
of any
Default of the character specified in Section 5.1(d)
with
respect to Securities of such series, no such notice to Holders shall be
given
until at least 180 days after the occurrence thereof.
Section 6.3. Certain
Rights of Trustee.
Subject
to the provisions of Section 6.1:
(a) the
Trustee may conclusively rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness 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 or direction of the Company or a Guarantor mentioned herein shall
be
sufficiently evidenced by a Company Request or Company Order (other than
delivery of any Security to the Trustee for authentication and delivery
pursuant
to Section 3.3,
which
shall be sufficiently evidenced as provided therein) and any resolution
of the
Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever
in the administration of this Indenture the Trustee shall deem it desirable
that
a matter be proved or established prior to taking, suffering or omitting
any
action hereunder, the Trustee (unless other evidence be herein specifically
prescribed) shall be entitled to receive and may, in the absence of bad
faith on
its part, rely upon an Officer’s Certificate;
(d) the
Trustee may consult with counsel and the advice of such counsel or any
Opinion
of Counsel shall be full and complete authorization and protection in respect
of
any action taken, suffered or omitted by it hereunder in good faith and
in
reliance thereon;
(e) the
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the
Holders
pursuant to this Indenture, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or
direction;
(f) 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, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in
its
discretion, may make such further inquiry or investigation into such facts
or
matters as it may see fit, and, if the Trustee shall determine to make
such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney;
(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 and the
Trustee
shall not be responsible for any misconduct or negligence on the part of
any
agent or attorney appointed with due care by it hereunder and shall not
be
responsible for the supervision of officers and employees of such agents
or
attorneys;
(h) the
Trustee may request that the Company and, if applicable, the Guarantors
deliver
an Officer’s Certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take specified actions pursuant to
this
Indenture, which Officer’s Certificate may be signed by any person authorized to
sign an Officer’s Certificate, including any person specified as so authorized
in any such certificate previously delivered and not superseded;
(i) the
Trustee shall be entitled to the rights and protections afforded to the
Trustee
pursuant to this Article Six
in
acting as a Paying Agent or Security Registrar hereunder; and
(j) the
Trustee shall not be deemed to have notice of any Default or Event of Default
unless a Responsible Officer of the Trustee has actual knowledge thereof
or
unless written notice of any event which is in fact such a default is received
by the Trustee at the Corporate Trust Office of the Trustee, and such notice
references the Notes and this Indenture.
Section 6.4. Not
Responsible for Recitals or Issuance of Securities.
The
recitals contained herein and in the Securities, except the Trustee’s
certificates of authentication, shall be taken as the statements of the
Company
or, if applicable, the Guarantors, and the Trustee or any Authenticating
Agent
assumes no responsibility for their correctness. Neither the Trustee nor
any
Authenticating Agent makes any representations as to the validity or sufficiency
of this Indenture or of the Securities. The Trustee or any Authenticating
Agent
shall not be accountable for the use or application by the Company of Securities
or the proceeds thereof.
Section 6.5. May
Hold
Securities.
The
Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar
or
any other agent of the Company or, if applicable, any Guarantor, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to Sections 310(b) and 311 of the Trust Indenture Act and
Section 6.8,
Section 6.9
and
Section 6.13,
may
otherwise deal with the Company or, if applicable, the Guarantors with
the same
rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent,
Security Registrar or such other agent.
Section 6.6. Money
Held in Trust.
Money
held by the Trustee in trust hereunder need not be segregated from other
funds
except to the extent required by law. The Trustee shall be under no liability
for interest on any money received by it hereunder except as otherwise
agreed in
writing with the Company or, if applicable, one or more of the
Guarantors.
Section 6.7. Compensation
and Reimbursement.
The
Company agrees:
(a) to
pay to
the Trustee from time to time reasonable compensation for all services
rendered
by it hereunder (which compensation shall not be limited by any provision
of law
in regard to the compensation of a trustee of an express trust);
(b) except
as
otherwise expressly provided herein, to reimburse the Trustee upon its
request
for all reasonable expenses, disbursements and advances incurred or made
by the
Trustee in accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents
and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to
indemnify each of the Trustee and its officers, directors, agents and employees
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence or willful misconduct on its part, arising out of or
in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against
any
claim or liability in connection with the exercise or performance of any
of its
powers or duties hereunder.
As
security for the performance of the obligations of the Company under this
Section the Trustee shall have a lien prior to the Securities upon all
property
and funds held or collected by the Trustee as such, except funds held in
trust
for the payment of principal of (and premium, if any) or interest on particular
Securities.
Without
limiting any rights available to the Trustee under applicable law, when
the
Trustee incurs expenses or renders services in connection with an Event
of
Default specified in Section 5.1(e)
or
Section 5.1(f),
the
expenses (including the reasonable charges and expenses of its counsel)
and the
compensation for the services of the Trustee are intended to constitute
expenses
of administration under any applicable Bankruptcy Law.
The
provisions of this Section 6.7
shall
survive the satisfaction and discharge of this Indenture and the Legal
Defeasance of the Securities.
Section 6.8. Disqualification;
Conflicting Interests.
Reference
is made to Section 310(b) of the Trust Indenture Act. There shall be excluded
from the operation of Section 310(b)(1) of the Trust Indenture Act this
Indenture with respect to the Securities of more than one series.
Section 6.9. Corporate
Trustee Required; Eligibility.
There
shall at all times be a Trustee hereunder which shall be a corporation
organized
and doing business under the laws of the United States of America, any
State
thereof or the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus required
by the
Trust Indenture Act, subject to supervision or examination by Federal or
State
authority. If such corporation publishes reports of condition at least
annually,
pursuant to law or to the requirements of said 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.
The
Trustee shall not be an obligor upon the Securities or an Affiliate thereof.
If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and
with
the effect hereinafter specified in this Article Six.
Section 6.10. Resignation
and Removal; Appointment of Successor.
(a) No
resignation or removal of the Trustee and no appointment of a successor
Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 6.11.
(b) The
Trustee may resign at any time with respect to the Securities of one or
more
series by giving written notice thereof to the Company. If the instrument
of
acceptance by a successor Trustee required by Section 6.11
shall
not have been delivered to the Trustee within 30 days after the giving
of such
notice of resignation, the resigning Trustee may petition any court of
competent
jurisdiction for the appointment of a successor Trustee with respect to
the
Securities of such series.
(c) The
Trustee may be removed at any time with respect to the Securities of any
series
by Act of the Holders of a majority in principal amount of the Outstanding
Securities of such series, delivered to the Trustee and to the
Company.
(d) If
at any
time:
(i) the
Trustee shall fail to comply with Section 310(b) of the Trust Indenture
Act
after written request therefor by the Company or by any Holder who has
been a
bona fide Holder of a Security for at least six months, or
(ii) the
Trustee shall cease to be eligible under Section 6.9
and
shall fail to resign after written request therefor by the Company or by
any
such Holder, or
(iii) the
Trustee shall become incapable of acting or shall be adjudged a bankrupt
or
insolvent or a receiver 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, (A) the Company by a Board Resolution
may
remove the Trustee with respect to all Securities, or (B) subject to
Section 5.14,
any
Holder who has been a bona fide Holder of a Security 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 with respect to
all
Securities and the appointment of a successor Trustee or Trustees.
(e) If
the
Trustee shall resign, be removed or become incapable of acting, or if a
vacancy
shall occur in the office of Trustee for any cause, with respect to the
Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees with respect to the Securities
of that or those series (it being understood that any such successor Trustee
may
be appointed with respect to the Securities of one or more or all of such
series
and that at any time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with the applicable
requirements of Section 6.11.
If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series delivered
to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 6.11,
become
the successor Trustee with respect to the Securities of such series and
to that
extent supersede the successor Trustee appointed by the Company. If no
successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Company or the Holders and accepted appointment in the
manner
required by Section 6.11,
any
Holder who has been a bona fide Holder of a Security 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 appointment of a successor
Trustee
with respect to the Securities of such series.
(f) The
Company shall give notice of each resignation and each removal of the Trustee
with respect to the Securities of any series and each appointment of a
successor
Trustee with respect to the Securities of any series to all Holders of
Securities of such series in the manner provided in Section 1.7.
Each
notice shall include the name of the successor Trustee with respect to
the
Securities of such series and the address of its Corporate Trust Office.
Section 6.11. Acceptance
of Appointment by Successor.
(a) In
case
of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee so appointed shall execute, acknowledge
and deliver to the Company, the Guarantors (if applicable) and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with
all the rights, powers, trusts and duties of the retiring Trustee; but,
on the
request of the Company or, if applicable, any Guarantor or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute
and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer
and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder.
(b) In
case
of the appointment hereunder of a successor Trustee with respect to the
Securities of one or more (but not all) series, the Company, the Guarantors
(if
applicable), the retiring Trustee and each successor Trustee with respect
to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such appointment
and which (i) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and to vest in, each successor Trustee all
the
rights, powers, trusts and duties of the retiring Trustee with respect
to the
Securities of that or those series to which the appointment of such successor
Trustee relates, (ii) if the retiring Trustee is not retiring with respect
to
all Securities, shall contain such provisions as shall be deemed necessary
or
desirable to confirm that all the rights, powers, trusts and duties of
the
retiring Trustee with respect to the Securities of that or those series
as to
which the retiring Trustee is not retiring shall continue to be vested
in the
retiring Trustee, and (iii) 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 hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery
of
such supplemental indenture the resignation or removal of the retiring
Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested
with
all the rights, powers, trusts and duties of the retiring Trustee with
respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company, any Guarantor
(if
applicable) or any successor Trustee, such retiring Trustee shall duly
assign,
transfer and deliver to such successor Trustee all property and money held
by
such retiring Trustee hereunder with respect to the Securities of that
or those
series to which the appointment of such successor Trustee relates.
(c) Upon
request of any such successor Trustee, the Company and, if applicable,
the
Guarantors shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers
and
trusts referred to in paragraph (a) or (b) of this Section, as the case
may
be.
(d) No
successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under
this
Article and the Trust Indenture Act.
Section 6.12. Merger,
Conversion, Consolidation or Succession to Business.
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 all or substantially all the corporate trust business of
the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article Six,
without
the execution or filing of any paper or any further act on the part of
any of
the parties hereto. In case any Securities shall have been authenticated,
but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same
effect
as if such successor Trustee had itself authenticated such
Securities.
Section 6.13. Preferential
Collection of Claims Against Company.
Reference
is made to Section 311 of the Trust Indenture Act. For purposes of Section
311(b) of the Trust Indenture Act,
(a) the
term
“cash transaction” means 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;
(b) the
term
“self-liquidating paper” means any draft, bill of exchange, acceptance or
obligation which is made, drawn, negotiated or incurred by the Company
or, if
applicable, any Guarantor for the purpose of financing the purchase, processing,
manufacturing, 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 Company or, if applicable,
such Guarantor arising from the making, drawing, negotiating or incurring
of the
draft, bill of exchange, acceptance or obligation.
Section 6.14. Appointment
of Authenticating Agent.
The
Trustee may appoint an Authenticating Agent or Agents with respect to one
or
more series of Securities which shall be authorized to act on behalf of
the
Trustee to authenticate Securities of such series issued upon exchange,
registration of transfer or partial redemption thereof or pursuant to
Section 3.6,
and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated
by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or 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
and a certificate of authentication executed on behalf of the Trustee by
an
Authenticating Agent. Each Authenticating Agent shall be acceptable to
the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating
Agent,
having a combined capital and surplus of not less than $50,000,000 and
subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually,
pursuant
to law or to the requirements of said supervising or examining authority,
then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus
as
set forth in its most recent report of condition so published. If at any
time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any
corporation into which an 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 such Authenticating Agent shall be
a party,
or any corporation succeeding to all or substantially all of the corporate
agency or corporate trust business of an Authenticating Agent, shall continue
to
be an Authenticating Agent, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper
or any
further act on the part of the Trustee or the Authenticating Agent.
An
Authenticating Agent may resign at any time by giving written notice thereof
to
the Trustee and to the Company and, if applicable, the Guarantors. 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 Company
and, if
applicable, the Guarantors. Upon receiving such a notice of resignation
or upon
such a termination, or in case at any time such Authenticating Agent shall
cease
to be eligible in accordance with the provisions of this Section, the Trustee
may appoint a successor Authenticating Agent which shall be acceptable
to the
Company and, if applicable, the Guarantors and shall mail written notice
of such
appointment by first-class mail, postage prepaid, to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve,
as
their names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall
become
vested with all the rights, powers and duties of its predecessor hereunder,
with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions
of
this Section.
Except
with respect to an Authenticating Agent appointed at the request of the
Company
or, if applicable, the Guarantors, the Trustee agrees to pay to each
Authenticating Agent from time to time reasonable compensation for its
services
under this Section 6.14,
and the
Trustee shall be entitled to be reimbursed by the Company or, if applicable,
the
Guarantors for such payments, subject to the provisions of Section 6.7.
If
an
appointment with respect to one or more series is made pursuant to this
Section 6.14,
the
Securities of such series may have endorsed thereon, in addition to the
Trustee’s certificate of authentication, an alternate certificate of
authentication in the following form:
This
is
one of the Securities of the series designated therein referred to in the
within-mentioned Indenture.
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[_________________________________________],
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As
Trustee
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By:
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As
Authenticating Agent
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By:
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Authorized
Officer
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ARTICLE SEVEN
HOLDERS’
LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1. Company
to Furnish Trustee Names and Addresses of Holders.
The
Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually,
not more than 15 days after each Regular Record Date for a series of Securities,
a list for such series of Securities, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Securities of such
series
as of such Regular Record Date, and
(b) at
such
other times as the Trustee may request in writing, within 30 days after
the
receipt by the Company of any such request, a list of similar form and
content
as of a date not more than 15 days prior to the time such list is furnished;
provided,
however,
that if
and so long as the Trustee shall be the Security Registrar, no such list
need be
furnished with respect to such series of Securities.
Section 7.2. Preservation
of Information; Communications to Holders.
(a) The
Trustee shall preserve, in as current a form as is reasonably practicable,
the
names and addresses of Holders contained in the most recent list furnished
to
the Trustee as provided in Section 7.1
and the
names and addresses of Holders received by the Trustee in its capacity
as
Security Registrar. The Trustee may destroy any list furnished to it as
provided
in Section 7.1
upon
receipt of a new list so furnished.
(b) If
three
or more Holders (herein 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 with respect to their rights under this
Indenture
or under the Securities and 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
such applicants access to the information preserved at the time by the
Trustee
in accordance with Section 7.2(a),
or
(ii) inform
such applicants as to the approximate number of Holders whose names and
addresses appear in the information preserved at the time by the Trustee
in
accordance with Section 7.2(a),
and as
to the approximate cost of mailing to such Holders the form of proxy or
other
communication, if any, specified in such application.
If
the
Trustee shall elect not to afford such applicants access to such information,
the Trustee shall, upon the written request of such applicants, mail to
each
Holder whose name and address appear in the information preserved at the
time by
the Trustee in accordance with Section 7.2(a)
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 SEC, 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 interest of the Holders
or
would be in violation of applicable law. Such written statement shall specify
the basis of such opinion. If the SEC, 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 SEC 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 Holders 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) Every
Holder of Securities, by receiving and holding the same, agrees with the
Company, the Guarantors (if applicable) and the Trustee that none of the
Company, the Guarantors (if applicable) nor the Trustee nor any agent of
any of
them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance
with
Section 7.2(b),
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 Section 7.2(b).
Section 7.3. Reports
by Trustee.
Any
Trustee’s report required pursuant to Section 313(a) of the Trust Indenture Act
shall be dated as of May 15, and shall be transmitted within 60 days after
May
15 of each year (but in all events at intervals of not more than 12 months),
commencing with the year 20__, by mail to all Holders, as their names and
addresses appear in the Security Register. A copy of each such report shall,
at
the time of such transmission to Holders, be filed by the Trustee with
each
stock exchange upon which any Securities are listed, with the SEC and with
the
Company. The Company will notify the Trustee when any Securities are listed
on
any stock exchange.
Section 7.4.
Reports by Company.
So
long
as clauses (1), (2) and (3) of Section 314(a) of the Trust Indenture Act
(or any
successor provisions of law) are applicable to this Indenture, the Company
shall:
(a) file
with
the Trustee, within 15 days after the Company files the same with the SEC,
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 SEC may from
time to
time by rules and regulations prescribe) which the Company may be required
to
file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange
Act; or, if the Company is not required to file information, documents
or
reports pursuant to either of said Sections, then it shall file with the
Trustee
and the SEC, in accordance with rules and regulations prescribed from time
to
time by the SEC, such of the supplementary and periodic information, documents
and reports which may be required pursuant to Section 13 of the Exchange
Act in
respect of a security listed and registered on a national securities exchange
as
may be prescribed from time to time in such rules and regulations;
(b) file
with
the Trustee and the SEC, in accordance with rules and regulations prescribed
from time to time by the SEC, such additional information, documents and
reports
with respect to compliance by the Company with the conditions and covenants
of
this Indenture as may be required from time to time by such rules and
regulations; and
(c) transmit
by mail to all Holders, as their names and addresses appear in the Security
Register, within 30 days after the filing thereof with the Trustee, such
summaries of any information, documents and reports required to be filed
by the
Company pursuant to clauses (a) and (b) of this Section as may be required
by
rules and regulations prescribed from time to time by the SEC.
ARTICLE EIGHT
CONSOLIDATION,
AMALGAMATION, MERGER AND SALE
Section 8.1. Company
May Consolidate, Etc., Only on Certain Terms.
The
Company shall not consolidate or merge with or into any other Person or
sell,
convey, transfer, lease or otherwise dispose of all or substantially all
of the
properties and assets of the Company and, if applicable, the Guarantors
on a
consolidated basis to any other Person unless:
(a) either:
(i) the Company is the surviving Person; or (ii) the Person formed by or
surviving any such consolidation, amalgamation or merger or resulting from
such
conversion (if other than the Company) or to which such sale, assignment,
transfer, conveyance or other disposition has been made is a corporation,
limited liability company or limited partnership organized or existing
under the
laws of the United States, any state of the United States or the District
of
Columbia;
(b) the
Person formed by or surviving any such conversion, consolidation, amalgamation
or merger (if other than the Company) or the Person to which such sale,
assignment, transfer, conveyance or other disposition has been made assumes
all
the obligations of the Company under the Securities and this Indenture
pursuant
to agreements reasonably satisfactory to the Trustee;
(c) immediately
after giving effect to such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default,
shall have occurred and be continuing; and
(d) the
Company has delivered to the Trustee an Officer’s Certificate and an Opinion of
Counsel, each stating that such consolidation, amalgamation, merger, conveyance,
sale, transfer or lease and such supplemental indenture, if any, comply
with
this Article Eight
and that
all conditions precedent herein provided for relating to such transaction
have
been complied with.
Section 8.2. Successor
Substituted.
Upon
any
consolidation or merger of the Company with or into any other Person or
any
sale, conveyance, transfer, lease or other disposition of all or substantially
all of the properties and assets of the Company and, if applicable, the
Guarantors on a consolidated basis in accordance with Section 8.1,
the
successor or resulting Person formed by or resulting upon such consolidation
or
merger (if other than the Company) or to which such sale, conveyance, transfer,
lease or other disposition is made shall succeed to, and be substituted
for, and
may exercise every right and power of, the Company under this Indenture
with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Company
and each
of the Guarantors shall be relieved of all obligations and covenants under
this
Indenture and the Securities.
ARTICLE NINE
AMENDMENT,
SUPPLEMENT
AND WAIVER
Section 9.1. Without
Consent of Holders.
The
Company, the Guarantors and the Trustee may amend or supplement this indenture,
the Securities Guarantees or the Securities without the consent of any
holder of
a Security:
(a) to
cure
any ambiguity or to correct or supplement any provision herein that may
be
inconsistent with any other provision herein; or
(b) to
evidence the succession of another Person to the Company and the assumption
by
any such successor of the covenants of the Company herein and, to the extent
applicable, to the Securities; or
(c) to
provide for uncertificated Securities in addition to or in place of certificated
Securities; provided
that the
uncertificated Securities are issued in registered form for purposes of
Section
163(f) of the Code, or in the manner such that the uncertificated Securities
are
described in Section 163(f)(2)(B) of the Code; or
(d) to
add a
Securities Guarantee and cause any Person to become a Guarantor, and/or
to
evidence the succession of another Person to a Guarantor and the assumption
by
any such successor of the Securities Guarantee of such Guarantor herein
and, to
the extent applicable, endorsed upon any Securities of any series;
or
(e) to
secure
the Securities of any series; or
(f) to
add to
the covenants of the Company such further covenants, restrictions, conditions
or
provisions as the Company shall consider to be appropriate for the benefit
of
the Holders of all or any series of Securities (and if such covenants,
restrictions, conditions or provisions are to be for the benefit of less
than
all series of Securities, stating that such covenants are expressly being
included solely for the benefit of such series) or to surrender any right
or
power herein conferred upon the Company 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,
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; or
(g) to
make
any change to any provision of this Indenture that does not adversely affect
the
rights or interests of any Holder of Securities; or
(h) provide
for the issuance of additional Securities in accordance with the provisions
set
forth in this Indenture on the date of this Indenture; or
(i) to
add
any additional Defaults or Events of Default in respect of all or any series
of
Securities; or
(j) to
add
to, change or eliminate any of the provisions of this Indenture to such
extent
as shall be necessary to permit or facilitate the issuance of Securities
in
bearer form, registrable or not registrable as to principal, and with or
without
interest coupons; or
(k) to
change
or eliminate any of the provisions of this Indenture; provided
that any
such change or elimination shall become effective only when there is no
Security
Outstanding of any series created prior to the execution of such supplemental
indenture that is entitled to the benefit of such provision; or
(l) to
establish the form or terms of Securities of any series as permitted by
Section 2.1
and
Section 3.1,
including to reopen any series of any Securities as permitted under Section 3.1;
or
(m) 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(b);
or
(n) to
conform the text of the indenture (and/or any supplemental indenture) or
any
debt securities issued thereunder to any provision of a description of
such debt
securities appearing in a prospectus or prospectus supplement or an offering
memorandum or offering circular to the extent that such provision was intended
to be a verbatim recreation of a provision of the indenture (and/or any
supplemental indenture) or any debt securities issued thereunder;
or
(o) to
modify, eliminate or add to the provisions of this Indenture to such extent
as
shall be necessary to effect the qualification of this Indenture under
the Trust
Indenture Act or under any similar federal statute subsequently enacted,
and to
add to this Indenture such other provisions as may be expressly required
under
the Trust Indenture Act.
Upon
the
request of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental indenture,
the
Trustee is hereby authorized to join with the Company and any Guarantor
in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations that may be therein contained and to accept
the
conveyance, transfer, assignment, mortgage, charge or pledge of any property
thereunder, but the Trustee shall not be obligated to enter into any such
supplemental indenture that affects the Trustee’s own rights, duties or
immunities under this Indenture or otherwise.
Section 9.2. With
Consent of Holders.
The
Company and the Trustee may amend or supplement this Indenture, the Securities
Guarantees and the Securities with the consent of the Holders of a majority
in
aggregate principal amount of the Outstanding Securities of each series
of
Securities affected by such amendment or supplemental indenture, with each
such
series voting as a separate class (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer for
Securities) and, subject to Section 5.8
and
Section 5.13
hereof,
any existing Default or Event of Default or compliance with any provision
of
this Indenture, the Securities Guarantees or the Securities may be waived
with
respect to each series of Securities with the consent of the Holders of
a
majority in principal amount of the Outstanding Securities of such series
voting
as a separate class (including consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Securities).
Upon
the
request of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental indenture,
and
upon the filing with the Trustee of evidence satisfactory to the Trustee
of the
consent of the Holders of Securities as aforesaid, and upon receipt by
the
Trustee of the documents described in Section 6.3
hereof,
the Trustee will join with the Company and the Guarantors in the execution
of
such amended or supplemental indenture unless such amended or supplemental
indenture directly affects the Trustee’s own rights, duties or immunities under
this Indenture or otherwise, in which case the Trustee may in its discretion,
but will not be obligated to, enter into such amended or supplemental
Indenture.
It
is not
necessary for the consent of the Holders of Securities under this Section 9.2
to
approve the particular form of any proposed amendment, supplement or waiver,
but
it is sufficient if such consent approves the substance of the proposed
amendment, supplement or waiver.
After
an
amendment, supplement or waiver under this Section 9.2
becomes
effective, the Company will mail to the Holders of Securities affected
thereby a
notice briefly describing the amendment, supplement or waiver. Any failure
of
the Company to mail such notice, or any defect therein, will not, however,
in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver. Subject to Section 5.8
and
Section 5.13
hereof,
the application of or compliance with, either generally or in any particular
instance, of any provision of this Indenture, the Securities or the Securities
Guarantees may be waived as to each series of Securities by the Holders
of a
majority in aggregate principal amount of the Outstanding Securities of
such
series. However, without the consent of each Holder affected, an amendment,
supplement or waiver under this Section 9.2
may not
(with respect to any Securities held by a non-consenting Holder):
(a) change
the Stated Maturity of the principal of, or any installment of principal
of or
interest on, any Security, or reduce the principal amount thereof or the
rate of
interest thereon or any premium payable upon the redemption thereof, or
reduce
the amount of the principal of an Original Issue Discount Security that
would be
due and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 5.2,
or
change any Place of Payment where, or the coin or currency in which, any
Security or any premium or the interest thereon is payable, or impair the
right
to institute suit for the enforcement of any such payment on or after the
Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or
(b) reduce
the percentage in principal amount of the Outstanding Securities of any
series,
the consent of whose Holders is required for any such supplemental indenture,
or
the consent of whose Holders is required for any waiver (of compliance
with
certain provisions of this Indenture or certain defaults hereunder and
their
consequences) provided for in this Indenture, or
(c) modify
any of the provisions of this Section 9.2,
Section 5.8,
Section 5.13
or
Section 10.6,
except
to increase any such percentage or to provide that certain other provisions
of
this Indenture cannot be modified or waived without the consent of the
Holder of
each Outstanding Security affected thereby, provided,
however,
that
this clause (c) shall not be deemed to require the consent of any Holder
with
respect to changes in the references to “the Trustee” and concomitant changes in
this Section, or the deletion of this proviso, in accordance with the
requirements of Section 6.11(b)
and
Section 9.1(i);
or
(d) waive
a
redemption payment with respect to any Security; provided,
however,
that
any purchase or repurchase of Securities shall not be deemed a redemption
of the
Securities; or
(e) release
any Guarantor from any of its obligations under its Securities Guarantee
or this
Indenture, except in accordance with the terms of this Indenture (as
supplemented by any supplemental indenture); or
(f) make
any
change in the foregoing amendment and waiver provisions.
A
supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture that has expressly been included solely for
the
benefit of one or more particular series of Securities, or that modifies
the
rights of the Holders of Securities of such series with respect to such
covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
Section 9.3. Execution
of Supplemental Indentures.
In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the
trusts
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.1)
shall
be fully protected in relying upon, an Opinion of Counsel stating that
the
execution of such supplemental indenture is authorized or permitted by
this
Indenture. The Trustee may, but 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.
Section 9.4. Effect
of
Supplemental Indentures.
Upon
the
execution of any supplemental indenture under this Article Nine,
this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 9.5. Conformity
with Trust Indenture Act.
Every
supplemental indenture executed pursuant to this Article Nine
shall
conform to the requirements of the Trust Indenture Act as then in
effect.
Section 9.6. Reference
in Securities to Supplemental Indentures.
Securities
of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Nine
may, and
shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If
the
Company shall so determine, new Securities of any series so modified as
to
conform, in the opinion of the Trustee and the Company, to any such supplemental
indenture may be prepared and executed by the Company and authenticated
and
delivered by the Trustee in exchange for Outstanding Securities of such
series.
ARTICLE TEN
COVENANTS
Section 10.1. Payment
of Principal, Premium and Interest.
The
Company covenants and agrees for the benefit of each series of Securities
that
it will duly and punctually pay the principal of and any premium and interest
on
the Securities of that series in accordance with the terms of the Securities
and
this Indenture.
Section 10.2. Maintenance
of Office or Agency.
The
Company will maintain in the United States, an office or agency (which
may be an
office of the Trustee or Registrar or agent of the Trustee or Registrar)
where
Securities of that series may be presented or surrendered for payment,
where
Securities of that series may be surrendered for registration of transfer
or
exchange and where notices and demands to or upon the Company in respect
of the
Securities of that series and this Indenture may be served. The Company
will
give prompt written notice to the Trustee of the location, and any change
in the
location, of such office or agency. If at any time the Company shall fail
to
maintain any such required office or agency or shall fail to furnish the
Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee.
The
Company may also from time to time designate one or more other offices
or
agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind
such
designations. The Company will give prompt written notice to the Trustee
of any
such designation or rescission and of any change in the location of any
such
other office or agency.
Except
as
otherwise specified with respect to a series of Securities as contemplated
by
Section 3.1,
the
Company hereby initially designates the office of the Trustee located at
[_______________________], as the Company’s office or agency for each such
purpose for each series of Securities.
Section 10.3. Money
for
Securities Payments to Be Held in Trust.
If
the
Company shall at any time act as its own Paying Agent, with respect to
any
series of Securities, it will, on or before each due date of the principal
of
and any premium or interest on any of the Securities of that series, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of
as herein
provided and will promptly notify the Trustee of its action or failure
so to
act.
Whenever
the Company shall have one or more Paying Agents for any series of Securities,
it will, prior to each due date of the principal of and any premium or
interest
on any Securities of that series, deposit with a Paying Agent a sum sufficient
to pay the principal and any premium or interest so becoming due, such
sum to be
held in trust for the benefit of the Persons entitled to such principal,
premium
or interest, and (unless such Paying Agent is the Trustee) the Company
will
promptly notify the Trustee of its action or failure so to act. For purposes
of
this Section 10.3,
should
a due date for principal of and any premium or interest on, or sinking
fund
payment with respect to any series of Securities not be on a Business Day,
such
payment shall be due on the next Business Day without any interest for
the
period from the due date until such Business Day.
The
Company will cause each Paying Agent for any series of Securities other
than the
Trustee to execute and deliver to the Trustee an instrument in which such
Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will:
(a) hold
all
sums held by it for the payment of the principal of and any premium or
interest
on Securities of that series in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of
as herein provided;
(b) give
the
Trustee notice of any Default by the Company (or any other obligor upon
the
Securities of that series) in the making of any payment of principal and
any
premium or interest on the Securities of that series; and
(c) at
any
time during the continuance of any such Default, upon the written request
of the
Trustee, forthwith pay to the Trustee all sums so held in trust by such
Paying
Agent.
The
Company and, if applicable, the Guarantors may at any time, for the purpose
of
obtaining the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay, to the
Trustee
all sums held in trust by the Company or such Paying Agent, such sums to
be held
by the Trustee upon the same trusts as those upon which such sums were
held by
the Company or such Paying Agent; and, upon such payment by any Paying
Agent to
the Trustee, such Paying Agent shall be released from all further liability
with
respect to such money.
Subject
to any applicable escheat or abandoned property laws, any money deposited
with
the Trustee or any Paying Agent, or then held by the Company, in trust
for the
payment of the principal of and any premium or interest on any Security
of any
series and remaining unclaimed for one year after such principal and any
premium
or interest has become due and payable shall be paid to the Company on
Company
Request, or (if then held by the Company) shall be discharged from such
trust;
and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability
of the
Trustee or such Paying Agent with respect to such trust money, and all
liability
of the Company as trustee thereof, shall thereupon cease; provided,
however,
that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once,
in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The
City of
New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
such
publication, any unclaimed balance of such money then remaining will be
repaid
to the Company.
Section 10.4. Existence.
Subject
to Article Eight,
the
Company and, if any Securities of a series to which Article Fourteen
has been
made applicable are Outstanding, each Guarantor will do or cause to be
done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided,
however,
that
the Company and, if applicable, each Guarantor shall not be required to
preserve
any such right or franchise if the Board of Directors shall determine that
the
preservation thereof is no longer desirable in the conduct of the business
of
the Company or such Guarantor, as the case may be.
Section 10.5. Statement
by Officers as to Default.
Annually,
within 150 days after the close of each fiscal year beginning with the
first
fiscal year during which one or more series of Securities are Outstanding,
the
Company and, if any Securities of a series to which Article Fourteen
has been
made applicable are Outstanding, each Guarantor will deliver to the Trustee
a
brief certificate (which need not include the statements set forth in
Section 1.3)
from
the principal executive officer, principal financial officer or principal
accounting officer of the Company and, if applicable, such Guarantor as
to his
or her knowledge of the Company’s or such Guarantor’s, as the case may be,
compliance (without regard to any period of grace or requirement of notice
provided herein) with all conditions and covenants under the Indenture
and, if
the Company or such Guarantor, as the case may be, shall be in Default,
specifying all such Defaults and the nature and status thereof of which
such
officer has knowledge.
Section 10.6. Additional
Amounts.
If
the
Securities of a series provide for the payment of additional amounts (as
provided in Section 3.1(o)),
at
least 10 days prior to the first Interest Payment Date with respect to
that
series of Securities and at least 10 days prior to each date of payment
of
principal of, premium, if any, or interest on the Securities of that series
if
there has been a change with respect to the matters set forth in the
below-mentioned Officer’s Certificate, the Company shall furnish to the Trustee
and the principal Paying Agent, if other than the Trustee, an Officer’s
Certificate instructing the Trustee and such Paying Agent whether such
payment
of principal of, premium, if any, or interest on the Securities of that
series
shall be made to holders of the Securities of that series without withholding
or
deduction for or on account of any tax, assessment or other governmental
charge
described in the Securities of that series. If any such withholding or
deduction
shall be required, then such Officer’s Certificate shall specify by country the
amount, if any, required to be withheld or deducted on such payments to
such
holders and shall certify the fact that additional amounts will be payable
and
the amounts so payable to each holder, and the Company shall pay to the
Trustee
or such Paying Agent the additional amounts required to be paid by this
Section.
The Company covenants to indemnify the Trustee and any Paying Agent for,
and to
hold them harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by any of them in reliance on any Officer’s
Certificate furnished pursuant to this Section 10.6.
Whenever
in this Indenture there is mentioned, in any context, the payment of the
principal of or any premium, interest or any other amounts on, or in respect
of,
any Securities of any series, such mention shall be deemed to include mention
of
the payment of additional amounts provided by the terms of such series
established hereby or pursuant hereto to the extent that, in such context,
additional amounts are, were or would be payable in respect thereof pursuant
to
such terms, and express mention of the payment of additional amounts (if
applicable) in any provision hereof shall not be construed as excluding
the
payment of additional amounts in those provisions hereof where such express
mention is not made.
ARTICLE ELEVEN
REDEMPTION
OF SECURITIES
Section 11.1. Applicability
of Article.
Securities
of any series which are redeemable before their Stated Maturity shall be
redeemable in accordance with their terms and (except as otherwise specified
as
contemplated by Section 3.1
for
Securities of any series) in accordance with this Article Eleven.
Section 11.2. Election
to Redeem; Notice to Trustee.
The
election of the Company to redeem any Securities shall be evidenced by
a Board
Resolution. In case of any redemption at the election of the Company of
less
than all the Securities of any series, the Company shall, at least 15 days
prior
to the last date for the giving of notice of such redemption (unless a
shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities of such series
to be
redeemed and, if applicable, of the tenor of the Securities to be redeemed.
In
the case of any redemption of Securities (a) prior to the expiration of
any
restriction on such redemption provided in the terms of such Securities
or
elsewhere in this Indenture or (b) pursuant to an election of the Company
that
is subject to a condition specified in the terms of the Securities of the
series
to be redeemed, the Company shall furnish the Trustee with an Officer’s
Certificate evidencing compliance with such restriction or
condition.
Section 11.3. Selection
by Trustee of Securities to Be Redeemed.
If
less
than all the Securities of any series are to be redeemed (unless all of
the
Securities of such series and of a specified tenor are to be redeemed),
the
particular Securities to be redeemed shall be selected not more than 45
days
prior to the Redemption Date by the Trustee, from the Outstanding Securities
of
such series not previously called for redemption, by such method as the
Trustee
shall deem fair and appropriate and which may provide for the selection
for
redemption of portions (equal to the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series.
The
Trustee shall promptly notify the Company in writing of the Securities
selected
for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed. If the Securities
of
any series to be redeemed consist of Securities having different dates
on which
the principal is payable or different rates of interest, or different methods
by
which interest may be determined or have any other different tenor or terms,
then the Company may, by written notice to the Trustee, direct that the
Securities of such series to be redeemed shall be selected from among the
groups
of such Securities having specified tenor or terms and the Trustee shall
thereafter select the particular Securities to be redeemed in the manner
set
forth in the preceding paragraph from among the group of such Securities
so
specified.
For
all
purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the
case of
any Securities redeemed or to be redeemed only in part, to the portion
of the
principal amount of such Securities which has been or is to be
redeemed.
Section 11.4. Notice
of
Redemption.
Notice
of
redemption shall be given by first-class mail, postage prepaid, mailed
not less
than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of
Securities to be redeemed, at his address appearing in the Security
Register.
All
notices of redemption shall state:
(a) the
Redemption Date,
(b) the
Redemption Price, or if not then ascertainable, the manner of calculation
thereof,
(c) if
less
than all the Outstanding Securities of any series are to be redeemed, the
identification (and, in the case of partial redemption, the principal amounts)
of the particular Securities to be redeemed,
(d) that
on
the Redemption Date the Redemption Price will become due and payable upon
each
such Security to be redeemed and, if applicable, that interest thereon
will
cease to accrue on and after said date,
(e) the
place
or places where such Securities are to be surrendered for payment of the
Redemption Price, and
(f) that
the
redemption is for a sinking fund, if such is the case.
Notice
of
redemption of Securities to be redeemed at the election of the Company
shall be
given by the Company or, at the Company’s request, by the Trustee in the name
and at the expense of the Company.
Section 11.5. Deposit
of Redemption Price.
Prior
to
any Redemption Date, the Company shall deposit with the Trustee or with
a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold
in trust as provided in Section 10.3)
an
amount of money sufficient to pay the Redemption Price of, and (except
if the
Redemption Date shall be an Interest Payment Date) accrued interest on,
all the
Securities which are to be redeemed on that date.
Section 11.6. Securities
Payable on Redemption Date.
Notice
of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption
Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security
for
redemption in accordance with said notice, such Security shall be paid
by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided,
however,
that
unless otherwise specified with respect to Securities of any series as
contemplated in Section 3.1,
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on
the
relevant record dates according to their terms and the provisions of
Section 3.7.
If
any
Security called for redemption shall not be so paid upon surrender thereof
for
redemption, the principal (and premium, if any) shall, until paid, bear
interest
from the Redemption Date at the rate prescribed therefor in the
Security.
Section 11.7. Securities
Redeemed in Part.
Any
Security which is to be redeemed only in part shall be surrendered at a
Place of
Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory
to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and tenor, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal
of
the Security so surrendered.
ARTICLE TWELVE
SINKING
FUNDS
Section 12.1. Applicability
of Article.
The
provisions of this Article Twelve
shall be
applicable to any sinking fund for the retirement of Securities of a
series
except as otherwise specified as contemplated by Section 3.1
for
Securities of such series.
The
minimum amount of any sinking fund payment provided for by the terms
of
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 Securities of any series is herein referred to as an “optional sinking
fund payment.” If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as
provided
in Section 12.2.
Each
sinking fund payment shall be applied to the redemption of Securities
of any
series as provided for by the terms of Securities of such series.
Section 12.2. Satisfaction
of Sinking Fund Payments with Securities.
The
Company (a) may deliver Outstanding Securities of a series (other than
any
previously called for redemption) and (b) may apply as a credit Securities
of a
series which have been redeemed either at the election of the Company
pursuant
to the terms of such Securities or through the application of permitted
optional
sinking fund payments pursuant to the terms of such Securities, in each
case in
satisfaction of all or any part of any sinking fund payment with respect
to the
Securities of such series required to be made pursuant to the terms of
such
Securities as provided for by the terms of such series; provided
that
such Securities have not been previously so credited. Such Securities
shall be
received and credited for such purpose by the Trustee at the Redemption
Price
specified in such Securities for redemption through operation of the
sinking
fund and the amount of such sinking fund payment shall be reduced
accordingly.
Section 12.3. Redemption
of Securities for Sinking Fund.
Not
less
than 45 days prior to each sinking fund payment date for any series of
Securities (unless a shorter period shall be satisfactory to the Trustee),
the
Company will deliver to the Trustee an Officer’s Certificate specifying the
amount of the next ensuing sinking fund payment for that series pursuant
to the
terms of that series, the portion thereof, if any, which is to be satisfied
by
payment of cash and the portion thereof, if any, which is to be satisfied
by
delivering and crediting Securities of that series pursuant to Section 12.2
and
stating the basis for such credit and that such Securities have not been
previously so credited, and will also deliver to the Trustee any Securities
to
be so delivered. Not less than 30 days before each such sinking fund
payment
date the Trustee shall select the Securities to be redeemed upon such
sinking
fund payment date in the manner specified in Section 11.3
and
cause notice of the redemption thereof to be given in the name of and
at the
expense of the Company in the manner provided in Section 11.4.
Such
notice having been duly given, the redemption of such Securities shall
be made
upon the terms and in the manner stated in Section 11.6
and
Section 11.7.
ARTICLE THIRTEEN
DEFEASANCE
Section 13.1. Option
to
Effect Legal Defeasance or Covenant Defeasance.
The
Company may, at the option of its Board of Directors evidenced by a resolution
set forth in an Officers’ Certificate, and at any time, elect to have either
Section 13.2
or
Section 13.3
hereof
be applied to all outstanding Securities upon compliance with the conditions
set
forth below in this Article Thirteen.
Section 13.2. Legal
Defeasance
and
Discharge.
Upon
the
Company’s exercise under Section 13.1
hereof
of the option applicable to this Section 13.2,
the
Company and each of the Guarantors will, subject to the satisfaction
of the
conditions set forth in Section 13.4
hereof,
be deemed to have been discharged from their obligations with respect
to all
outstanding Securities (including the Securities Guarantees) on the date
the
conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For
this purpose, Legal Defeasance means that the Company and the Guarantors
will be
deemed to have paid and discharged the entire Debt represented by the
outstanding Securities (including the Securities Guarantees), which will
thereafter be deemed to be “outstanding” only for the purposes of Section 13.5
hereof
and the other sections of this Indenture referred to in clauses (a) and
(b)
below, and to have satisfied all their other obligations under such Securities,
the Securities Guarantees and this Indenture (and the Trustee, on demand
of and
at the expense of the Company, shall execute proper instruments acknowledging
the same), except for the following provisions which will survive until
otherwise terminated or discharged hereunder:
(a) the
rights of Holders of Outstanding Securities to receive payments in respect
of
the principal of, or interest or premium, if any, on such Securities
when such
payments are due from the trust referred to in Section 13.4
hereof;
(b) the
Company’s obligations with respect to such Securities under Section 3.4,
Section 3.5,
Section 3.6,
Section 10.2
and
Section 10.3
hereof;
(c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder
and the
Company’s and the Guarantors’ obligations in connection therewith;
and
(d) this
Article Thirteen.
Subject
to compliance with this Article Thirteen,
the
Company may exercise its option under this Section 13.2
notwithstanding the prior exercise of its option under Section 13.3
hereof.
Section 13.3. Covenant
Defeasance.
Upon
the
Company’s exercise under Section 13.1
hereof
of the option applicable to this Section 13.3,
the
Company and each of the Guarantors will, subject to the satisfaction
of the
conditions set forth in Section 13.4
hereof,
be released from each of their obligations under the covenants contained
in
Section 7.4,
Section 8.1
and
Section 10.4
hereof
as well as any Additional Defeasible Provisions (such release and termination
hereinafter referred to as “Covenant
Defeasance”),
and
the Securities will thereafter be deemed not “outstanding” for the purposes of
any direction, waiver, consent or declaration or act of Holders (and
the
consequences of any thereof) in connection with such covenants, but will
continue to be deemed “outstanding” for all other purposes hereunder (it being
understood that such Securities will not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect
to the
outstanding Securities and Securities Guarantees, the Company and the
Guarantors
may omit to comply with and will have no liability in respect of any
term,
condition or limitation set forth in any such covenant, whether directly
or
indirectly, by reason of any reference elsewhere herein to any such covenant
or
by reason of any reference in any such covenant to any other provision
herein or
in any other document and such omission to comply will not constitute
a Default
or an Event of Default under Section 5.1
hereof,
but, except as specified above, the remainder of this Indenture and such
Securities and Securities Guarantees will be unaffected thereby. In addition,
upon the Company’s exercise under Section 13.1
hereof
of the option applicable to this Section 13.3
hereof,
subject to the satisfaction of the conditions set forth in Section 13.4
hereof,
Section 5.1(c)
and
Section 5.1(d)
hereof
and will not constitute Events of Default.
Section 13.4. Conditions
to Legal or Covenant Defeasance.
In
order
to exercise either Legal Defeasance or Covenant Defeasance under either
Section 13.2
or
Section 13.3
hereof:
(a) the
Company must irrevocably deposit with the Trustee, in trust, for the
benefit of
the Holders of the Securities, cash in U.S. dollars, non-callable U.S.
Government Obligations, or a combination of cash in U.S. dollars and
non-callable U.S. Government Obligations, in such amounts as will be
sufficient,
in the opinion of a nationally recognized investment bank, appraisal
firm, or
firm of independent public accountants to pay the principal of, or interest
and
premium, if any, on the Outstanding Securities on the stated date for
payment
thereof or on the applicable redemption date, as the case may be, and
the
Company must specify whether the Securities are being defeased to such
stated
date for payment or to a particular redemption date;
(b) in
the
case of an election under Section 13.2
hereof,
the Company must deliver to the Trustee an Opinion of Counsel confirming
that:
(i) the
Company has received from, or there has been published by, the Internal
Revenue
Service a ruling; or
(ii) since
the
Issue Date, there has been a change in the applicable federal income
tax
law,
in
either
case to the effect that, and based thereon such Opinion of Counsel will
confirm
that, the Holders of the Outstanding Securities will not recognize income,
gain
or loss for federal income tax purposes as a result of such Legal Defeasance
and
will be subject to federal income tax on the same amounts, in the same
manner
and at the same times as would have been the case if such Legal Defeasance
had
not occurred;
(c) in
the
case of an election under Section 13.3
hereof,
the Company must deliver to the Trustee an Opinion of Counsel confirming
that
the Holders of the Outstanding Securities will not recognize income,
gain or
loss for federal income tax purposes as a result of such Covenant Defeasance
and
will be subject to federal income tax on the same amounts, in the same
manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) no
Default or Event of Default has occurred and is continuing on the date
of such
deposit (other than a Default or Event of Default resulting from the
borrowing
of funds to be applied to such deposit);
(e) the
deposit will not result in a breach or violation of, or constitute a
default
under, any other instrument to which the Company or any Guarantor is
a party or
by which the Company or any Guarantor is bound;
(f) such
Legal Defeasance or Covenant Defeasance will not result in a breach or
violation
of, or constitute a default under, any material agreement or instrument
(other
than this Indenture) to which the Company or any of its Subsidiaries
is a party
or by which the Company or any of its Subsidiaries is bound;
(g) the
Company must deliver to the Trustee an Officers’ Certificate stating that the
deposit was not made by the Company with the intent of preferring the
Holders of
Securities over the other creditors of the Company with the intent of
defeating,
hindering, delaying or defrauding any other creditors of the Company
or
others;
(h) the
Company must deliver to the Trustee an Officers’ Certificate, stating that all
conditions precedent set forth in clauses (a) through (g) of this Section 13.4
have
been complied with; and
(i) the
Company must deliver to the Trustee an Opinion of Counsel (which Opinion
of
Counsel may be subject to customary assumptions, qualifications and exclusions),
stating that all conditions precedent set forth in clauses (b), (c) and
(e) of
this Section 13.4
have
been complied with; provided
that the
Opinion of Counsel with respect to clause (e) of this Section 13.4
may be
to the knowledge of such counsel.
Section 13.5. Deposited
Money and U.S. Government Obligations to be Held in
Trust,
Other
Miscellaneous Provisions.
Subject
to Section 13.6
hereof,
all money and non-callable U.S. Government Obligation (including the
proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 13.5,
the
“Trustee”)
pursuant to Section 13.4
hereof
in respect of the Outstanding Securities will be held in trust and applied
by
the Trustee, in accordance with the provisions of such Securities and
this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine,
to
the Holders of such Securities of all sums due and to become due thereon
in
respect of principal, premium, if any, and interest, but such money need
not be
segregated from other funds except to the extent required by law.
The
Company will pay and indemnify the Trustee against any tax, fee or other
charge
imposed on or assessed against the cash or non-callable U.S. Government
Obligations deposited pursuant to Section 13.4
hereof
or the principal and interest received in respect thereof other than
any such
tax, fee or other charge which by law is for the account of the Holders
of the
Outstanding Securities.
Notwithstanding
anything in this Article Thirteen
to the
contrary, the Trustee will deliver or pay to the Company from time to
time upon
the request of the Company any money or non-callable U.S. Government
Obligations
held by it as provided in Section 13.4
hereof
which, in the opinion of a nationally recognized firm of independent
public
accountants expressed in a written certification thereof delivered to
the
Trustee (which may be the opinion delivered under Section 13.4(a)
hereof),
are in excess of the amount thereof that would then be required to be
deposited
to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 13.6. Repayment.
Any
money
deposited with the Trustee or any Paying Agent, or then held by the Company,
in
trust for the payment of the principal of, premium, if any, or interest
on any
Security and remaining unclaimed for two years after such principal,
premium, if
any, or interest has become due and payable shall be paid to the Company
on its
request or (if then held by the Company) will be discharged from such
trust; and
the Holder of such Security will thereafter be permitted to look only
to the
Company for payment thereof, and all liability of the Trustee or such
Paying
Agent with respect to such trust money, and all liability of the Company
as
trustee thereof, will thereupon cease; provided,
however,
that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once,
in the
New York Times and The Wall Street Journal (national edition), notice
that such
money remains unclaimed and that, after a date specified therein, which
will not
be less than 30 days from the date of such notification or publication,
any
unclaimed balance of such money then remaining will be repaid to the
Company.
Section 13.7. Reinstatement.
If
the
Trustee or Paying Agent is unable to apply any United States dollars
or
non-callable U.S. Government Obligations in accordance with Section 13.2
or
Section 13.3
hereof,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting
such
application, then the Company’s and the Guarantors’ obligations under this
Indenture and the Securities and the Securities Guarantees will be revived
and
reinstated as though no deposit had occurred pursuant to Section 13.2
or
Section 13.3
hereof
until such time as the Trustee or Paying Agent is permitted to apply
all such
money in accordance with Section 13.2
or
Section 13.3
hereof,
as the case may be; provided,
however,
that,
if the Company makes any payment of principal of, premium, if any, or
interest
on any Note following the reinstatement of its obligations, the Company
will be
subrogated to the rights of the Holders of such Securities to receive
such
payment from the money held by the Trustee or Paying Agent.
ARTICLE FOURTEEN
GUARANTEE
OF SECURITIES
Section 14.1. Securities
Guarantee.
(a) Subject
to the other provisions of this Article Fourteen,
each of
the Guarantors hereby jointly and severally, guarantees to each Holder
of a
Security of each series to which this Article Fourteen
has been
made applicable as provided in Section 3.1(t)
(the
Securities of such series being referred to herein as the “Guaranteed
Securities”) (which Security has been authenticated and delivered by the
Trustee), and to the Trustee and its successors and assigns, irrespective
of the
validity and enforceability of this Indenture, the Guaranteed Securities,
the
obligations of the Company hereunder or thereunder, that:
(i) the
principal of, premium, if any, and interest on the Guaranteed Securities
will be
promptly paid in full when due, whether at maturity, by acceleration,
redemption
or otherwise, and interest on the overdue principal of and interest
on the
Guaranteed Securities, if any, if lawful, and all other obligations
of the
Company to the Holders of Guaranteed Securities, or the Trustee hereunder
or
thereunder will be promptly paid in full or performed, all in accordance
with
the terms hereof and thereof; and
(ii) in
case
of any extension of time of payment or renewal of any Guaranteed Securities
or
any of such other obligations, that same will be promptly paid in full
when due
or performed in accordance with the terms of the extension or renewal,
whether
at stated maturity, by acceleration or otherwise.
Failing
payment when due of any amount so guaranteed or any performance so
guaranteed
for whatever reason, the Guarantors will be jointly and severally obligated
to
pay the same immediately. Each Guarantor agrees that this is a guarantee
of
payment and not a guarantee of collection.
(b) To
the
extent permissible under applicable law, the
obligations of the Guarantors under this Securities Guarantee are unconditional,
irrespective of the validity, regularity or enforceability of the Guaranteed
Securities or this Indenture, the absence of any action to enforce
the same, any
waiver or consent by any Holder of the Guaranteed Securities with respect
to any
provisions hereof or thereof, the recovery of any judgment against
the Company,
any action to enforce the same or any other circumstance which might
otherwise
constitute a legal or equitable discharge or defense of a guarantor.
To the
extent permitted by applicable law, each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the
event of
insolvency or bankruptcy of the Company, any right to require a proceeding
first
against the Company, protest, notice and all demands whatsoever and
covenant
that this Securities Guarantee will not be discharged except by complete
performance of the obligations contained in the Guaranteed Securities
and this
Indenture.
(c) If
any
Holder or the Trustee is required by any court or otherwise to return
to the
Company, the Guarantors or any custodian, trustee, liquidator or other
similar
official acting in relation to either the Company or the Guarantors,
any amount
paid by either to the Trustee or such Holder, this Securities Guarantee,
to the
extent theretofore discharged, will be reinstated in full force and
effect.
(d) Each
Guarantor agrees that it will not be entitled to any right of subrogation
in
relation to the Holders in respect of any obligations guaranteed hereby
until
payment in full of all obligations guaranteed hereby. Each Guarantor
further
agrees that, to the extent permitted by applicable law, as between
the
Guarantors, on the one hand, and the Holders of Guaranteed Securities
and the
Trustee, on the other hand, (1) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Five
hereof
for the purposes of this Securities Guarantee, notwithstanding any
stay,
injunction or other prohibition preventing such acceleration in respect
of the
obligations guaranteed hereby, and (2) in the event of any declaration
of
acceleration of such obligations as provided in Article Five
hereof,
such obligations (regardless of whether due and payable) will forthwith
become
due and payable by the Guarantors for the purpose of this Securities
Guarantee.
The Guarantors will have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the
rights of
the Holders under the Securities Guarantee.
Section 14.2. Limitation
on Guarantor Liability.
Each
Guarantor, and by its acceptance of Guaranteed Securities, each Holder
thereof,
hereby confirms that it is the intention of all such parties that the
Securities
Guarantee of such Guarantor not constitute a fraudulent transfer or
conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act,
the
Uniform Fraudulent Transfer Act or any similar federal or state law
to the
extent applicable to any Securities Guarantee. To effectuate the foregoing
intention, the Trustee, to the extent permitted under applicable law,
the
Holders and each Guarantor hereby irrevocably agree that the obligations
of such
Guarantor will be limited to the maximum amount that will, after giving
effect
to such maximum amount and all other contingent and fixed liabilities
of such
Guarantor that are relevant under such laws, and after giving effect
to any
collections from, rights to receive contribution from or payments made
by or on
behalf of any other Guarantor in respect of the obligations of such
other
Guarantor under this Article Fourteen,
result
in the obligations of such Guarantor under its Securities Guarantee
not
constituting a fraudulent transfer or conveyance.
Section 14.3. Execution
and Delivery of Securities Guarantee Notation.
To
evidence its Securities Guarantee set forth in Section 14.1
hereof,
each Guarantor hereby agrees that a notation of such Securities Guarantee
substantially in the form set forth in Section 2.3
or
established pursuant to a Board Resolution or in a supplemental indenture,
in
accordance with the provisions of Section 2.1,
will be
endorsed by an officer of such Guarantor on each Guaranteed Security
authenticated and delivered by the Trustee and that this Indenture
will be
executed on behalf of such Guarantor by one of its officers.
Each
Guarantor hereby agrees that its Securities Guarantee set forth in
Section 14.1
hereof
will remain in full force and effect notwithstanding any failure to
endorse on
each Guaranteed Security a notation of such Securities Guarantee.
If
an
officer whose signature is on this Indenture or on the Securities Guarantee
no
longer holds that office at the time the Trustee authenticates the
Guaranteed
Security on which a Securities Guarantee is endorsed, the Securities
Guarantee
will be valid nevertheless.
The
delivery of any Guaranteed Security by the Trustee, after the authentication
thereof hereunder, will constitute due delivery of the Securities Guarantee
of
such Guaranteed Security set forth in this Indenture on behalf of the
Guarantors.
*
*
*
This
instrument may be executed in any number of counterparts, each of
which so
executed shall be deemed to be an original, but all such counterparts
shall
together constitute but one and the same instrument.
IN
WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly
executed, as of the day and year first above written.
|
CONSTELLATION
ENERGY PARTNERS LLC
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By:
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Name:
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Title:
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[_______________________]
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By:
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Name:
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Title:
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EXHIBIT
4.2
CONSTELLATION
ENERGY PARTNERS LLC
AND
[__________________________]
Trustee
____________________________________________
INDENTURE
DATED
AS OF ________ __, 20__
____________________________________________
SUBORDINATED
DEBT SECURITIES
CONSTELLATION
ENERGY PARTNERS LLC
RECONCILIATION
AND TIE BETWEEN TRUST
INDENTURE
ACT OF 1939, AS AMENDED,
AND
INDENTURE, DATED AS OF __________, 20__
TRUST
INDENTURE ACT SECTION
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INDENTURE
SECTION
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Section
310(a)(1)
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6.9
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(a)(2)
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6.9
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(a)(3)
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Not
Applicable
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(a)(4)
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Not
Applicable
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(a)(5)
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6.9
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(b)
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6.8
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Section
311
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6.13
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Section
312(a)
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7.1,
7.2(a)
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(b)
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7.2(b)
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(c)
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7.2(c)
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Section
313(a)
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7.3
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(b)
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*
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(c)
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*
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(d)
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7.3
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Section
314(a)
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7.4
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(a)(4)
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10.5
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(b)
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Not
Applicable
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(c)(1)
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1.3
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(c)(2)
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1.3
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(c)(3)
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Not
Applicable
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(d)
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Not
Applicable
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(e)
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1.3
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Section
315(a)
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6.1(a)
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(b)
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6.2
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(c)
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6.1(b)
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(d)
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6.1(c)
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(d)(1)
|
6.1(a)(1)
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(d)(2)
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6.1(c)(2)
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(d)(3)
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6.1(c)(3)
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(e)
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5.14
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Section
316(a)
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1.1,
1.2
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(a)(1)(A)
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5.2,
5.12
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(a)(1)(B)
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5.13
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(a)(2)
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Not
Applicable
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(b)
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5.8
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(c)
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1.5(f)
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Section
317(a)(1)
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5.3
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(a)(2)
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5.4
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(b)
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10.3
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Section
318(a)
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1.8
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NOTE:
This reconciliation and tie shall not, for any purpose, be deemed to be a part
of the Indenture.
*
Deemed
included pursuant to Section 318(c) of the Trust Indenture Act
TABLE
OF CONTENTS
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1
|
Section 1.1.
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Definitions
|
1
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Section 1.2.
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Incorporation
by Reference of Trust Indenture Act
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8
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Section 1.3.
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Compliance
Certificates and Opinions
|
9
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Section 1.4.
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Form
of Documents Delivered to Trustee
|
9
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Section 1.5.
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Acts
of Holders; Record Dates
|
10
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Section 1.6.
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Notices,
Etc., to Trustee, Company and Guarantors
|
11
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Section 1.7.
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Notice
to Holders; Waiver
|
11
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Section 1.8.
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Conflict
with Trust Indenture Act
|
12
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Section 1.9.
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Effect
of Headings and Table of Contents
|
12
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Section 1.10.
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Successors
and Assigns
|
12
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Section 1.11.
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Separability
Clause
|
12
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Section 1.12.
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Benefits
of Indenture
|
12
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Section 1.13.
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Governing
Law
|
12
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Section 1.14.
|
Legal
Holidays
|
12
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Section 1.15.
|
Securities
in a Composite Currency, Currency Unit or Foreign Currency
|
13
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Section 1.16.
|
Payment
in Required Currency; Judgment Currency
|
13
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Section 1.17.
|
Language
of Notices, Etc.
|
14
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Section 1.18.
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Incorporators,
Shareholders, Officers and Directors of the Company and the Guarantors
Exempt from Individual Liability
|
14
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ARTICLE TWO
SECURITY FORMS
|
14
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Section 2.1.
|
Forms
Generally
|
14
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Section 2.2.
|
Form
of Face of Security
|
14
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Section 2.3.
|
Form
of Reverse of Security
|
17
|
Section 2.4.
|
Global
Securities
|
21
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Section 2.5.
|
Form
of Trustee’s Certificate of Authentication
|
22
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ARTICLE THREE
THE SECURITIES
|
22
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Section 3.1.
|
Amount
Unlimited; Issuable in Series
|
22
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Section 3.2.
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Denominations
|
25
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Section 3.3.
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Execution,
Authentication, Delivery and Dating
|
25
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Section 3.4.
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Temporary
Securities
|
27
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Section 3.5.
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Registration,
Registration of Transfer and Exchange
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27
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Section 3.6.
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Mutilated,
Destroyed, Lost and Stolen Securities
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29
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Section 3.7.
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Payment
of Interest; Interest Rights Preserved
|
30
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Section 3.8.
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Persons
Deemed Owners
|
31
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Section 3.9.
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Cancellation
|
31
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Section 3.10.
|
Computation
of Interest
|
32
|
Section 3.11.
|
CUSIP
or CINS Numbers
|
32
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
|
32
|
Section 4.1.
|
Satisfaction
and Discharge of Indenture
|
32
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Section 4.2.
|
Application
of Trust Money
|
33
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|
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ARTICLE FIVE
REMEDIES
|
33
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Section 5.1.
|
Events
of Default
|
33
|
Section 5.2.
|
Acceleration
of Maturity; Rescission and Annulment
|
34
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Section 5.3.
|
Collection
of Indebtedness and Suits for Enforcement by Trustee
|
35
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Section 5.4.
|
Trustee
May File Proofs of Claim
|
36
|
Section 5.5.
|
Trustee
May Enforce Claims Without Possession of Securities
|
36
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Section 5.6.
|
Application
of Money Collected
|
37
|
Section 5.7.
|
Limitation
on Suits
|
37
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Section 5.8.
|
Unconditional
Right of Holders to Receive Principal, Premium and
Interest
|
37
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Section 5.9.
|
Restoration
of Rights and Remedies
|
38
|
Section 5.10.
|
Rights
and Remedies Cumulative
|
38
|
Section 5.11.
|
Delay
or Omission Not Waiver
|
38
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Section 5.12.
|
Control
by Holders
|
38
|
Section 5.13.
|
Waiver
of Past Defaults
|
39
|
Section 5.14.
|
Undertaking
for Costs
|
39
|
Section 5.15.
|
Waiver
of Stay or Extension Laws
|
39
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ARTICLE SIX
THE TRUSTEE
|
40
|
Section 6.1.
|
Certain
Duties and Responsibilities
|
40
|
Section 6.2.
|
Notice
of Defaults
|
41
|
Section 6.3.
|
Certain
Rights of Trustee
|
41
|
Section 6.4.
|
Not
Responsible for Recitals or Issuance of Securities
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42
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Section 6.5.
|
May
Hold Securities
|
42
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Section 6.6.
|
Money
Held in Trust
|
42
|
Section 6.7.
|
Compensation
and Reimbursement
|
43
|
Section 6.8.
|
Disqualification;
Conflicting Interests
|
43
|
Section 6.9.
|
Corporate
Trustee Required; Eligibility
|
43
|
Section 6.10.
|
Resignation
and Removal; Appointment of Successor
|
44
|
Section 6.11.
|
Acceptance
of Appointment by Successor
|
45
|
Section 6.12.
|
Merger,
Conversion, Consolidation or Succession to Business
|
46
|
Section 6.13.
|
Preferential
Collection of Claims Against Company
|
46
|
Section 6.14.
|
Appointment
of Authenticating Agent
|
46
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ARTICLE SEVEN
HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY
|
48
|
Section 7.1.
|
Company
to Furnish Trustee Names and Addresses of Holders
|
48
|
Section 7.2.
|
Preservation
of Information; Communications to Holders
|
48
|
Section 7.3.
|
Reports
by Trustee
|
49
|
Section 7.4.
|
Reports
by Company
|
49
|
|
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ARTICLE EIGHT
CONSOLIDATION, AMALGAMATION, MERGER AND SALE
|
50
|
Section 8.1.
|
Company
May Consolidate, Etc., Only on Certain Terms
|
50
|
Section 8.2.
|
Successor
Substituted
|
51
|
|
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ARTICLE NINE
AMENDMENT, SUPPLEMENT AND WAIVER
|
51
|
Section 9.1.
|
Without
Consent of Holders
|
51
|
Section 9.2.
|
With
Consent of Holders
|
53
|
Section 9.3.
|
Execution
of Supplemental Indentures
|
54
|
Section 9.4.
|
Effect
of Supplemental Indentures
|
54
|
Section 9.5.
|
Conformity
with Trust Indenture Act
|
54
|
Section 9.6.
|
Reference
in Securities to Supplemental Indentures
|
54
|
|
|
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ARTICLE TEN
COVENANTS
|
55
|
Section 10.1.
|
Payment
of Principal, Premium and Interest
|
55
|
Section 10.2.
|
Maintenance
of Office or Agency
|
55
|
Section 10.3.
|
Money
for Securities Payments to Be Held in Trust
|
55
|
Section 10.4.
|
Existence
|
56
|
Section 10.5.
|
Statement
by Officers as to Default
|
57
|
Section 10.6.
|
Additional
Amounts
|
57
|
|
|
|
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
|
57
|
Section 11.1.
|
Applicability
of Article
|
57
|
Section 11.2.
|
Election
to Redeem; Notice to Trustee
|
58
|
Section 11.3.
|
Selection
by Trustee of Securities to Be Redeemed
|
58
|
Section 11.4.
|
Notice
of Redemption
|
58
|
Section 11.5.
|
Deposit
of Redemption Price
|
59
|
Section 11.6.
|
Securities
Payable on Redemption Date
|
59
|
Section 11.7.
|
Securities
Redeemed in Part
|
59
|
|
|
|
ARTICLE TWELVE
SINKING FUNDS
|
60
|
Section 12.1.
|
Applicability
of Article
|
60
|
Section 12.2.
|
Satisfaction
of Sinking Fund Payments with Securities
|
60
|
Section 12.3.
|
Redemption
of Securities for Sinking Fund
|
60
|
|
|
|
ARTICLE THIRTEEN
DEFEASANCE
|
61
|
Section 13.1.
|
Option
to Effect Legal Defeasance or Covenant Defeasance
|
61
|
Section 13.2.
|
Legal
Defeasance and Discharge
|
61
|
Section 13.3.
|
Covenant
Defeasance
|
61
|
Section 13.4.
|
Conditions
to Legal or Covenant Defeasance
|
62
|
Section 13.5.
|
Deposited
Money and U.S. Government Obligations to be Held in Trust, Other
Miscellaneous Provisions
|
63
|
Section 13.6.
|
Repayment
|
64
|
Section 13.7.
|
Reinstatement
|
64
|
|
|
|
ARTICLE FOURTEEN
GUARANTEE OF SECURITIES
|
64
|
Section 14.1.
|
Securities
Guarantee
|
64
|
Section 14.2.
|
Limitation
on Guarantor Liability
|
65
|
Section 14.3.
|
Execution
and Delivery of Securities Guarantee Notation
|
66
|
|
|
|
ARTICLE FIFTEEN
SUBORDINATION OF SECURITIES
|
66
|
Section 15.1.
|
Securities
Subordinated to Senior Debt
|
66
|
Section 15.2.
|
No
Payment on Securities in Certain Circumstances
|
66
|
Section 15.3.
|
Payment
over Proceeds upon Dissolution, Etc
|
67
|
Section 15.4.
|
Subrogation
|
69
|
Section 15.5.
|
Obligations
of Company Unconditional
|
69
|
Section 15.6.
|
Notice
to Trustee
|
70
|
Section 15.7.
|
Reliance
on Judicial Order or Certificate of Liquidating Agent
|
70
|
Section 15.8.
|
Trustee’s
Relation to Senior Debt
|
71
|
Section 15.9.
|
Subordination
Rights Not Impaired by Acts or Omissions of the Company or Holders
of
Senior Debt
|
71
|
Section 15.10.
|
Holders
Authorize Trustee to Effectuate Subordination of
Securities
|
71
|
Section 15.11.
|
Not
to Prevent Events of Default
|
71
|
Section 15.12.
|
Trustee’s
Compensation Not Prejudiced.
|
71
|
Section 15.13.
|
No
Waiver of Subordination Provisions
|
72
|
Section 15.14.
|
Payments
May Be Paid Prior to Dissolution
|
72
|
Section 15.15.
|
Trust
Moneys Not Subordinated
|
72
|
|
|
|
ARTICLE SIXTEEN
SUBORDINATION OF SECURITIES GUARANTEES
|
72
|
Section 16.1.
|
Securities
Guarantees Subordinated to Guarantor Senior Debt
|
72
|
Section 16.2.
|
No
Payment on Securities Guarantees in Certain Circumstances
|
73
|
Section 16.3.
|
Payment
over Proceeds upon Dissolution, Etc
|
74
|
Section 16.4.
|
Subrogation
|
75
|
Section 16.5.
|
Obligations
of Guarantor Unconditional
|
75
|
Section 16.6.
|
Notice
to Trustee
|
76
|
Section 16.7.
|
Reliance
on Judicial Order or Certificate of Liquidating Agent
|
77
|
Section 16.8.
|
Trustee's
Relation to Guarantor Senior Debt
|
77
|
Section 16.9.
|
Subordination
Rights Not Impaired by Acts or Omissions of a Guarantor or Holders
of
Guarantor Senior Debt
|
77
|
Section 16.10.
|
Holders
Authorize Trustee to Effectuate Subordination of Securities
Guarantees
|
77
|
Section 16.11.
|
Not
to Prevent Events of Default
|
78
|
Section 16.12.
|
Trustee's
Compensation Not Prejudiced
|
78
|
Section 16.13.
|
No
Waiver of Subordination Provisions
|
78
|
Section 16.14.
|
Payments
May Be Paid Prior to Dissolution
|
78
|
NOTE:
This table of contents shall not, for any purpose, be deemed to be a part
of the
Indenture.
PARTIES
INDENTURE,
dated as of ________ __, 20__, among CONSTELLATION ENERGY PARTNERS LLC, a
limited liability company duly organized and existing under the laws of the
State of Delaware (herein called the “Company”), the GUARANTORS (as defined
hereinafter) and [_______________________],
a
[____________________], as trustee (the “Trustee”).
RECITALS
OF THE COMPANY:
The
Company has duly authorized the execution and delivery of this Indenture
to
provide for the issuance from time to time of its unsecured subordinated
debentures, notes or other evidences of indebtedness (herein called the
“Securities”), which may but are not required to be guaranteed by the Guarantor,
to be issued in one or more series as provided in this Indenture.
All
things necessary to make this Indenture a valid agreement of the Company
and of
the Guarantors, in accordance with its terms, have been done.
This
Indenture is subject to the provisions of the Trust Indenture Act that are
required to be a part of this Indenture and, to the extent applicable, shall
be
governed by such provisions.
NOW,
THEREFORE, THIS INDENTURE WITNESSETH:
For
and
in consideration of the premises and the purchase of the Securities by the
Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof,
as
follows:
ARTICLE ONE
DEFINITIONS
AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. Definitions.
For
all
purposes of this Indenture, except as otherwise expressly provided or unless
the
context otherwise requires:
(a) the
terms
defined in this Article have the meanings assigned to them in this Article
and
include the plural as well as the singular;
(b) all
terms
used in this Indenture that are defined in the Trust Indenture Act, defined
by a
Trust Indenture Act reference to another statute or defined by an SEC rule
under
the Trust Indenture Act have the meanings so assigned to them;
(c) all
accounting terms not otherwise defined herein have the meanings assigned
to them
in accordance with GAAP;
(d) 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;
(e) the
words
“Article” and “Section” refer to an Article and Section, respectively, of this
Indenture; and
(f) the
word
“includes” and its derivatives means “includes, but is not limited to” and
corresponding derivative definitions.
Certain
terms, used principally in Article Six,
are
defined in that Article.
“Act”,
when used with respect to any Holder, has the meaning specified in Section 1.5.
“Additional
Defeasible Provision” means a covenant or other provision contained that is (a)
made part of this Indenture pursuant to a supplemental indenture hereto,
a Board
Resolution or an Officer’s Certificate delivered pursuant to Section 3.1,
and (b)
pursuant to the terms set forth in such supplemental indenture, Board Resolution
or Officer’s Certificate, made subject to the provisions of Article Thirteen.
“Affiliate”
of any specified Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specified Person. For purposes of this definition, “control,” as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement
or
otherwise. For purposes of this definition, the terms “controlling,” “controlled
by” and “under common control with” have correlative meanings.
“Authenticating
Agent” means any Person authorized by the Trustee to act on behalf of the
Trustee to authenticate Securities.
“Banking
Day” means, in respect of any city, any date on which commercial banks are open
for business in that city.
“Bankruptcy
Law” means any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law.
“Board
of
Directors” means:
(1)
with
respect to a corporation, the board of directors of the corporation or any
committee thereof duly authorized to act on behalf of such board;
(2)
with
respect to a partnership, the Board of Directors of the general partner of
the
partnership;
(3)
with
respect to a limited liability company, the managing member or members or
any
controlling committee of managers or members thereof or any board or committee
serving a similar management function; and
(4)
with
respect to any other Person, the board or committee of such Person serving
a
management function similar to those described in clauses (1), (2) or (3)
of
this definition.
“Board
Resolution” means a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Company, the principal financial officer of the
Company or a Guarantor, any other authorized officer of the Company or a
Guarantor, or a person duly authorized by any of them, in each case as
applicable, to have been duly adopted by the Board of Directors and to be
in
full force and effect on the date of such certification, and delivered to
the
Trustee. Where any provision of this Indenture refers to action to be taken
pursuant to a Board Resolution (including the establishment of any series
of the
Securities and the forms and terms thereof), such action may be taken by
any
committee, officer or employee of the Company or a Guarantor, as applicable,
authorized to take such action by the Board of Directors as evidenced by
a Board
Resolution.
“Business
Day”, when used with respect to any Place of Payment or other location, means,
except as otherwise provided as contemplated by Section 3.1
with
respect to any series of Securities, each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in that Place
of
Payment or other location are authorized or obligated by law, executive order
or
regulation to close.
“CINS”
means CUSIP International Numbering System.
“Code”
means the United States Internal Revenue Code of 1986, as amended.
“Company”
means the Person named as the “Company” in the first paragraph of this
instrument until a successor or resulting Person shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter “Company” shall
mean such successor or resulting Person.
“Company
Request” or “Company Order” means, in the case of the Company, a written request
or order signed in the name of the Company by its Chairman of the Board,
its
Chief Executive Officer, its Chief Financial Officer, its President, any
of its
Vice Presidents or any other duly authorized officer of the Company or any
person duly authorized by any of them, and delivered to the Trustee and,
in the
case of a Guarantor, a written request or order signed in the name of such
Guarantor by its Chairman of the Board, its Chief Executive Officer, its
President, any of its Vice Presidents or any other duly authorized officer
of
such Guarantor or any person duly authorized by any of them, and delivered
to
the Trustee.
“Corporate
Trust Office” means the office of the Trustee at its address specified in
Section 1.6
or such
other address as to which the Trustee may give notice to the
Company.
“corporation”
when used in reference to the Trustee or any prospective Trustee, shall
include
any corporation, company, association, partnership, limited partnership,
limited
liability company, joint-stock company and trust, in each case, satisfying
the
requirements of Section 310(a)(1) of the Trust Indenture
Act.
“Covenant
Defeasance” has the meaning specified in Section 13.3.
“CUSIP”
means the Committee on Uniform Securities Identification
Procedures.
“Custodian”
means any receiver, trustee, assignee, liquidator or similar official under
any
Bankruptcy Law.
“Debt”
means any obligation created or assumed by any Person for the repayment of
money
borrowed and any purchase money obligation created or assumed by such Person
and
any guarantee of the foregoing.
“Default”
means, with respect to a series of Securities, any event that is, or after
notice or lapse of time or both would be, an Event of Default.
“Defaulted
Interest” has the meaning specified in Section 3.7.
“Definitive
Security” means a security other than a Global Security or a temporary
Security.
“Depositary”
means, with respect to the Securities of any series issuable or issued in
whole
or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary
for
such Securities as contemplated by Section 3.1,
until a
successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter shall mean or include each Person
which is a Depositary hereunder, and if at any time there is more than one
such
Person, shall be a collective reference to such Persons.
“Designated
Guarantor Senior Debt” shall have the meaning given to such term in any Board
Resolution or indenture supplemental hereto.
“Designated
Senior Debt” shall have the meaning given to such term in any Board Resolution
or indenture supplemental hereto.
“Dollar”
or “$” means the coin or currency of the United States of America, which at the
time of payment is legal tender for the payment of public and private
debts.
“Event
of
Default” has the meaning specified in Section 5.1.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Foreign
Currency” means a currency used by the government of a country other than the
United States of America.
“GAAP”
means generally accepted accounting principles in the United States of America
as in effect from time to time, including those set forth in the opinions
and
pronouncements of the Accounting Principles Board of the American Institute
of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity
as
approved by a significant segment of the accounting profession. All ratios
and
computations based on GAAP contained in the indenture will be computed in
conformity with GAAP.
“Global
Security” means a Security in global form that evidences all or part of a series
of Securities and is authenticated and delivered to, and registered in the
name
of, the Depositary for the Securities of such series or its
nominee.
“Guarantor”
means each Person that becomes a guarantor of any Securities pursuant to
the
applicable provisions of this Indenture.
“Guarantor
Senior Debt” means, unless otherwise provided with respect to the Securities of
a series as contemplated by Section 3.1,
(a) all
Debt of a Guarantor, whether currently outstanding or hereafter issued, unless,
by the terms of the instrument creating or evidencing such Debt, it is
provided
that
such Debt is not superior in right of payment to the Securities Guarantee
or to
other Debt which is pari
passu
with or
subordinated to the Securities Guarantee, and (b) any modifications, refunding,
deferrals, renewals or extensions of any such Debt or securities, notes or
other
evidence of Debt issued in exchange for such Debt; provided
that in
no event shall “Guarantor Senior Debt” include (i) Debt of a Guarantor owed or
owing to any Subsidiary of such Guarantor or any officer, director or employee
of such Guarantor or any Subsidiary of such Guarantor, (ii) Debt to trade
creditors or (iii) any liability for taxes owed or owing by a
Guarantor.
“Holder”
means a Person in whose name a Security is registered in the Security
Register.
“Indenture”
means this instrument as originally executed or as it may from time to time
be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof, including, for all purposes
of this instrument, and any such supplemental indenture, the provisions of
the
Trust Indenture Act that are deemed to be part of and govern this instrument
and
any such supplemental indenture, respectively. The term “Indenture” also shall
include the terms of particular series of Securities established as contemplated
by Section 3.1.
“interest”,
when used with respect to an Original Issue Discount Security which by its
terms
bears interest only after Maturity, means interest payable after
Maturity.
“Interest
Payment Date”, when used with respect to any Security, means the Stated Maturity
of an installment of interest on such Security.
“Judgment
Currency” has the meaning specified in Section 1.16.
“Legal
Defeasance” has the meaning specified in Section 13.2.
“mandatory
sinking fund payment” has the meaning specified in Section 12.1.
“Maturity”,
when used with respect to any Security, means the date on which the principal
of
such Security or an installment of principal becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
“Notice
of Default” means a written notice of the kind specified in Section 5.1(c)
or
Section 5.1(d).
“Officer’s
Certificate” means, in the case of the Company, a certificate signed by the
Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer,
the President, any Vice President or any other duly authorized officer of
the
Company, or a person duly authorized by any of them, and delivered to the
Trustee and, in the case of a Guarantor, a certificate signed by the Chairman
of
the Board, the Chief Executive Officer, the President, any Vice President
or any
other duly authorized officer of such Guarantor, or a person duly authorized
by
any of them, and delivered to the Trustee.
“Opinion
of Counsel” means a written opinion of counsel, who may be an employee of or
counsel for the Company or a Guarantor, as the case may be, and who shall
be
reasonably acceptable to the Trustee.
“optional
sinking fund payment” has the meaning specified in Section 12.1.
“Original
Issue Discount Security” means any Security which 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 5.2.
“Outstanding”,
when used with respect to Securities, means, as of the date of determination,
all Securities theretofore authenticated and delivered under this Indenture,
except:
(a) Securities
theretofore canceled by the Trustee or delivered to the Trustee for
cancellation;
(b) Securities
for whose payment or redemption money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company (if
the
Company shall act as its own Paying Agent) for the Holders of such Securities;
provided,
however,
that,
if such Securities are to be redeemed, notice of such redemption has been
duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(c) Securities
which have been paid pursuant to Section 3.6
or in
exchange for or in lieu of which other Securities have been authenticated
and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory
to it
that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company; and
(d) Securities,
except to the extent provided in Section 13.2
and
Section 13.3,
with
respect to which the Company has effected Legal Defeasance or Covenant
Defeasance as provided in Article Thirteen,
which
Legal Defeasance or Covenant Defeasance then continues in effect;
provided,
however,
that in
determining whether the Holders of the requisite principal amount of the
Outstanding Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, (i) the principal amount of an Original
Issue Discount Security that shall be deemed to be Outstanding shall be the
amount of the principal thereof that would be due and payable as of the date
of
such determination upon acceleration of the Maturity thereof on such date
pursuant to Section 5.2,
(ii) the principal amount of a Security denominated in one or more
currencies or currency units other than U.S. dollars shall be the U.S. dollar
equivalent of such currencies or currency units, determined in the manner
provided as contemplated by Section 3.1
on the
date of original issuance of such Security or by Section 1.15,
if not
otherwise so provided pursuant to Section 3.1,
of the
principal amount (or, in the case of an Original Issue Discount Security,
the
U.S. dollar equivalent (as so determined) on the date of original issuance
of
such Security of the amount determined as provided in clause (i) above) of
such
Security, and (iii) Securities owned by the Company, any Guarantor or any
other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that,
in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned as described in clause (iii) of the immediately preceding
sentence 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
to act with respect to such Securities and that the pledgee is not the Company,
a Guarantor or any other obligor upon the Securities or any Affiliate of
the
Company or of such other obligor.
“Paying
Agent” means any Person authorized by the Company to pay the principal of and
any premium or interest on any Securities on behalf of the Company.
“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 or formula for determining the rate or rates of interest
thereon, if any, the Stated Maturity or Stated Maturities thereof, the original
issue date or dates thereof, the redemption provisions, if any, with respect
thereto, and any other terms specified as contemplated by Section 3.1
with
respect thereto, are to be determined by the Company upon the issuance of
such
Securities.
“Person”
means any individual, corporation, company, limited liability company,
partnership, limited partnership, joint venture, association, joint-stock
company, trust, other entity, 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, unless
otherwise specifically provided for with respect to such series as contemplated
by Section 3.1,
the
office or agency of the Company and such other place or places where, subject
to
the provisions of Section 10.2,
the
principal of and any premium and interest on the Securities of that series
are
payable as contemplated by Section 3.1.
“Predecessor
Security” of any particular Security means every previous Security evidencing
all or a portion of the same debt as that evidenced by such particular Security;
and, for the purposes of this definition, any Security authenticated and
delivered under Section 3.6
in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall
be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen
Security.
“Redemption
Date”, when used with respect to any Security to be redeemed, means the date
fixed for such redemption by or pursuant to this Indenture.
“Redemption
Price”, when used with respect to any Security to be redeemed, means the price
at which it is to be redeemed pursuant to this Indenture.
“Regular
Record Date” for the interest payable on any Interest Payment Date on the
Securities of any series means the date specified for that purpose as
contemplated by Section 3.1.
“Required
Currency” has the meaning specified in Section 1.16.
“Responsible
Officer” when used with respect to the Trustee, means any officer within the
Corporate Trust Administration of the Trustee (or any successor group of
the
Trustee) or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer
to
whom such matter is referred because of his knowledge of and familiarity
with
the particular subject.
“SEC”
means the Securities and Exchange Commission, as from time to time constituted,
created under the Exchange Act, or, if at any time after the execution of
this
instrument such commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.
“Securities”
has the meaning stated in the first recital of this Indenture and more
particularly means any Securities authenticated and delivered under this
Indenture.
“Securities
Guarantee” means each guarantee of the obligations of the Company under this
Indenture and the Securities by a Guarantor in accordance with the provisions
hereof.
“Security
Register” and “Security Registrar” have the respective meanings specified in
Section 3.5.
“Senior
Debt” means (a) all Debt of the Company, whether currently outstanding or
hereafter issued, unless, by the terms of the instrument creating or evidencing
such Debt, it is provided
that
such Debt is not superior in right of payment to the Securities, and (b)
any
modifications, refunding, deferrals, renewals or extensions of any such Debt
or
securities, notes or other evidence of Debt issued in exchange for such Debt;
provided
that in
no event shall “Senior Debt” include (i) Debt of the Company owed or owing to
any Subsidiary of the Company or any officer, director or employee of the
Company or any Subsidiary of the Company, (ii) Debt to trade creditors or
(iii)
any liability for taxes owned or owing by the Company.
“Special
Record Date” for the payment of any Defaulted Interest means a date fixed by the
Trustee pursuant to Section 3.7.
“Stated
Maturity”, when used with respect to any Security or any installment of
principal thereof or interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such installment
of
principal or interest is due and payable.
“Subsidiary”
means (a) a corporation more than 50% of the outstanding voting stock of
which
is owned, directly or indirectly, by the Company or by one or more other
Subsidiaries, or by the Company and one or more other Subsidiaries or (b)
any
partnership or similar business organization more than 50% of the ownership
interests having ordinary voting power of which shall at the time be so owned.
For the purposes of this definition, “voting stock” means capital stock or
equity interests which ordinarily have voting power for the election of
directors, whether at all times or only so long as no senior class of stock
has
such voting power by reason of any contingency.
“Trustee”
means the Person named as the “Trustee” in the first paragraph of this
instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter “Trustee” shall 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 Securities of that
series.
“Trust
Indenture Act” means the Trust Indenture Act of 1939, as amended, as in force at
the date as of which this instrument was executed, except as provided in
Section 9.5;
provided,
however,
that if
the Trust Indenture Act of 1939 is amended after such date, “Trust Indenture
Act” means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
“U.S.
Person” shall have the meaning assigned to such term in Section 7701(a)(30) of
the Code.
“U.S.
Government Obligations” means securities which are (a) direct obligations of the
United States for the payment of which its full faith and credit is pledged,
or
(b) obligations of a Person controlled or supervised by and acting as an
agency
or instrumentality of the United States, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States, each
of
which are not callable or redeemable at the option of the issuer
thereof.
“Vice
President”, when used with respect to the Company, the Guarantor 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.”
Section 1.2. Incorporation
by Reference of Trust Indenture Act.
Whenever
this Indenture refers to a provision of the Trust Indenture Act, the provision
is incorporated by reference in and made a part of this Indenture. The following
Trust Indenture Act terms used in this Indenture have the following
meanings:
“commission”
means the SEC.
“indenture
securities” means the Securities.
“indenture
security holder” means a Holder.
“indenture
to be qualified” means this Indenture.
“indenture
trustee” or “institutional trustee” means the Trustee.
“obligor”
on the indenture securities means the Company, the Guarantor (if applicable)
or
any other obligor on the indenture securities.
All
terms
used in this Indenture that are defined by the Trust Indenture Act, defined
by a
Trust Indenture Act reference to another statute or defined by an SEC rule
under
the Trust Indenture Act have the meanings so assigned to them.
Section 1.3. Compliance
Certificates and Opinions.
Upon
any
application or request by the Company or a Guarantor to the Trustee to take
any
action under any provision of this Indenture, the Company or such Guarantor,
as
the case may be, shall furnish to the Trustee an Officer’s Certificate stating
that all conditions precedent, if any, 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, if any,
have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by
any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished except as required
under
Section 314(c) of the Trust Indenture Act.
Every
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (except for certificates provided for in
Section 10.5)
shall
include:
(a) a
statement that each individual signing such certificate or opinion has read
such
covenant or condition and the definitions herein relating thereto;
(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 each such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether such covenant or condition has been complied
with; and
(d) a
statement as to whether, in the opinion of each such individual, such condition
or covenant has been complied with.
Section 1.4. Form
of Documents Delivered to Trustee.
In
any
case where several matters are required to be certified by, or covered by
an
opinion of, any specified Person, it is not necessary that all such matters
be
certified by, or covered by the opinion of, only one such Person, or that
they
be so certified or covered by only one document, but one such Person may
certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any
certificate or opinion of an officer of the Company or a Guarantor may be
based,
insofar as it relates to legal matters, upon a certificate or opinion of,
or
representations by, counsel, unless such officer knows or, in the exercise
of
reasonable care, should know that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based
are
erroneous. Any such certificate or opinion of counsel may be based, insofar
as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company or the Guarantor,
as
the case may be, stating that the information with respect to such factual
matters is in the possession of the Company or the Guarantor, as the case
may
be, unless such counsel knows that the certificate or opinion or representations
with respect to such matters are erroneous.
Where
any
Person is required to make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments under this
Indenture, they may, but need not, be consolidated and form one
instrument.
Section 1.5. Acts
of Holders; Record Dates.
(a) Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed (either physically or by means of a facsimile or an electronic
transmission, provided
that
such electronic transmission is transmitted through the facilities of a
Depositary) by such Holders 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
and,
where it is hereby expressly required, to the Company or the Guarantors.
Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the “Act” of the Holders signing
such instrument or instruments. Proof of execution of any such instrument
or of
a writing appointing any such agent shall be sufficient for any purpose of
this
Indenture and (subject to Section 315 of the Trust Indenture Act) conclusive
in
favor of the Trustee, the Company and, if applicable, the Guarantors, if
made in
the manner provided in this Section.
(b) The
fact
and date of the execution by any Person of any such instrument or writing
may be
proved by the affidavit of a witness of such execution or by a certificate
of a
notary public or other officer authorized by law to take acknowledgments
of
deeds, certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is by a signer
acting in a capacity other than his individual capacity, such certificate
or
affidavit shall also constitute sufficient proof of his authority. The fact
and
date of the execution of any such instrument or writing, or the authority
of the
Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The
ownership, principal amount and serial numbers of Securities held by any
Person,
and the date of commencement of such Person’s holding of same, shall be proved
by the Security Register.
(d) Any
request, demand, authorization, direction, notice, consent, waiver or other
Act
of the Holder of any Security shall bind every future Holder of the same
Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee, the Company
or, if
applicable, the Guarantors in reliance thereon, regardless of whether notation
of such action is made upon such Security.
(e) Without
limiting the foregoing, a Holder entitled to give or take any action hereunder
with regard to any particular Security may do so with regard to all or any
part
of the principal amount of such Security or by one or more duly appointed
agents
each of which may do so pursuant to such appointment with regard to all or
any
different part of such principal amount.
(f) The
Company may set any day as the record date for the purpose of determining
the
Holders of Outstanding Securities of any series entitled to give or take
any
request, demand, authorization, direction, notice, consent, waiver or other
Act
provided or permitted by this Indenture to be given or taken by Holders of
Securities of such series, but the Company shall have no obligation to do
so.
With regard to any record date set pursuant to this paragraph, the Holders
of
Outstanding Securities of the relevant series on such record date (or their
duly
appointed agents), and only such Persons, shall be entitled to give or take
the
relevant action, regardless of whether such Holders remain Holders after
such
record date.
Section 1.6. Notices,
Etc., to Trustee, Company and Guarantors.
(a) Any
notice or communication by the Company, any of the Guarantors or the Trustee
to
the others is duly given if in writing and delivered in Person or mailed
by
first class mail (registered or certified, return receipt requested), telecopier
or overnight air courier guaranteeing next day delivery, to the others’
address:
If
to the
Company and/or any Guarantor:
|
c/o |
Constellation
Energy Partners LLC
One
Allen Center, Suite 3300
Houston,
Texas 77002
Facsimile:
(713) 369-3906
Attention:
Angela Minas
|
If
to the
Trustee:
[___________________________]
[___________________________]
[___________________________]
[___________________________]
Facsimile:
[__________________]
Attention:
[__________________]
(b) The
Company, the Guarantors or the Trustee, by notice to the others, may designate
additional or different addresses for subsequent notices or
communications.
(c) All
notices and communications (other than those sent to Holders) shall be deemed
to
have been duly given: at the time delivered by hand, if personally delivered;
three Business Days after being deposited in the mail, postage prepaid, if
mailed; when receipt acknowledged, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Section 1.7. Notice
to Holders; Waiver.
Where
this Indenture provides for notice to Holders of any event, such notice shall
be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid, to each Holder affected by such
event,
at his address as it appears in the Security Register, not later than the
latest
date, and not earlier than the earliest date, prescribed for the giving of
such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect
to
other Holders. Any notice mailed to a Holder in the manner herein prescribed
shall be conclusively deemed to have been received by such Holder, regardless
of
whether such Holder actually receives such notice.
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 regular mail service or by reason of any other
cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
Section 1.8. Conflict
with Trust Indenture Act.
If
any
provision hereof limits, qualifies or conflicts with a provision of the Trust
Indenture Act that is required under such Act to be a part of and govern
this
Indenture, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that
may
be so modified or excluded, the latter provision shall be deemed to apply
to
this Indenture as so modified or excluded, as the case may be.
Section 1.9. Effect
of Headings and Table of Contents.
The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.10. Successors
and Assigns.
All
covenants and agreements in this Indenture by each of the Company and the
Guarantors shall bind their respective successors and assigns, whether so
expressed or not.
Section 1.11. Separability
Clause.
In
case
any provision in this Indenture or in the Securities or, if applicable, the
Securities Guarantee shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any
way be
affected or impaired thereby.
Section 1.12. Benefits
of Indenture.
Nothing
in this Indenture or in the Securities or, if applicable, the Securities
Guarantee, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, the holders of Senior Debt and the
Holders, any benefit or any legal or equitable right, remedy or claim under
this
Indenture.
Section 1.13. Governing
Law.
THIS
INDENTURE, THE SECURITIES AND THE SECURITIES GUARANTEE SHALL BE GOVERNED
BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Section 1.14. Legal
Holidays.
In
any
case where any Interest Payment Date, Redemption Date or Stated Maturity
of any
Security shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture or of the Securities
or,
if applicable, the Securities Guarantee (other than a provision of the
Securities of any series or, if applicable, the Securities Guarantee that
specifically states that such provision shall apply in lieu of this Section 1.14))
payment of interest or principal and any premium need not be made at such
Place
of Payment on such date, but may be made on the next succeeding Business
Day at
such Place of Payment with the same force and effect as if made on the Interest
Payment Date or Redemption Date, or at the Stated Maturity, provided
that no
interest shall accrue for the period from and after such Interest Payment
Date,
Redemption Date or Stated Maturity, as the case may be.
Section 1.15. Securities
in a Composite Currency, Currency Unit or Foreign Currency.
Unless
otherwise specified in an Officer’s Certificate delivered pursuant to
Section 3.1
of this
Indenture with respect to a particular series of Securities, whenever for
purposes of this Indenture any action may be taken by the Holders of a specified
percentage in aggregate principal amount of Securities of all series or all
series affected by a particular action at the time Outstanding and, at such
time, there are Outstanding Securities of any series which are denominated
in a
coin, currency or currencies other than Dollars (including, but not limited
to,
any composite currency, currency units or Foreign Currency), then the principal
amount of Securities of such series which shall be deemed to be Outstanding
for
the purpose of taking such action shall be that amount of Dollars that could
be
obtained for such amount at the Market Exchange Rate. For purposes of this
Section 1.15,
the
term “Market Exchange Rate” shall mean the noon Dollar buying rate in The City
of New York for cable transfers of such currency or currencies as published
by
the Federal Reserve Bank of New York, as of the most recent available date.
If
such Market Exchange Rate is not so available for any reason with respect
to
such currency, the Trustee shall use, in its sole discretion and without
liability on its part, such quotation of the Federal Reserve Bank of New
York as
of the most recent available date, or quotations or rates of exchange from
one
or more major banks in The City of New York or in the country of issue of
the
currency in question, which for purposes of euros shall be Brussels, Belgium,
or
such other quotations or rates of exchange as the Trustee shall deem
appropriate. The provisions of this paragraph shall apply in determining
the
equivalent principal amount in respect of Securities of a series denominated
in
a currency other than Dollars in connection with any action taken by Holders
of
Securities pursuant to the terms of this Indenture.
All
decisions and determinations of the Trustee regarding the Market Exchange
Rate
or any alternative determination provided for in the preceding paragraph
shall
be in its sole discretion and shall, in the absence of manifest error, be
conclusive to the extent permitted by law for all purposes and irrevocably
binding upon the Issuer and all Holders.
Section 1.16. Payment
in Required Currency; Judgment Currency.
Each
of
the Company and the Guarantors agrees, to the fullest extent that it may
effectively do so under applicable law, that (a) if for the purpose of obtaining
judgment in any court it is necessary to convert the sum due in respect of
the
principal of or interest on the Securities of any series (the “Required
Currency”) into a currency in which a judgment will be rendered (the “Judgment
Currency”), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of
New
York the Required Currency with the Judgment Currency on the day on which
final
unappealable judgment is entered, unless such day is not a Banking Day, then,
to
the extent permitted by applicable law, the rate of exchange used shall be
the
rate at which in accordance with normal banking procedures the Trustee could
purchase in The City of New York the Required Currency with the Judgment
Currency on the Banking Day next preceding the day on which final unappealable
judgment is entered and (b) its obligations under this Indenture to make
payments in the Required Currency (i) shall not be discharged or satisfied
by
any tender, or any recovery pursuant to any judgment (regardless of whether
entered in accordance with subclause (a)), in any currency other than the
Required Currency, except to the extent that such tender or recovery shall
result in the actual receipt, by the payee, of the full amount of the Required
Currency expressed to be payable in respect of such payments, (ii) shall
be
enforceable as an alternative or additional cause of action for the purpose
of
recovering in the Required Currency the amount, if any, by which such actual
receipt shall fall short of the full amount of the Required Currency so
expressed to be payable and (iii) shall not be affected by judgment being
obtained for any other sum due under this Indenture.
Section 1.17. Language
of Notices, Etc.
Any
request, demand, authorization, direction, notice, consent, waiver or Act
required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the country
of publication.
Section 1.18. Incorporators,
Shareholders, Officers and Directors of the Company and the Guarantors Exempt
from Individual Liability.
No
recourse under or upon any obligation, covenant or agreement of or contained
in
this Indenture or of or contained in any Security or, if applicable, the
Securities Guarantee, or for any claim based thereon or otherwise in respect
thereof, or in any Security or, if applicable, the Securities Guarantee,
or
because of the creation of any indebtedness represented thereby, shall be
had
against any incorporator, shareholder, member, officer, manager or director,
as
such, past, present or future, of the Company, any Guarantor or any successor
Person, either directly or through the Company, any Guarantor or any successor
Person, whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, it being expressly
understood that all such liability is hereby expressly waived and released
as a
condition of, and as a part of the consideration for, the execution of this
Indenture and the issue of the Securities.
ARTICLE TWO
SECURITY
FORMS
Section 2.1. Forms
Generally.
The
Securities of each series and, if applicable, the notation thereon relating
to
the Securities Guarantee, shall be in substantially the form set forth in
this
Article Two,
or in
such other form or forms as shall be established by or pursuant to a Board
Resolution 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 such letters, numbers
or other marks of identification and such legends or endorsements placed
thereon
as may be required to comply with the rules of any securities exchange or
as
may, consistently herewith, be determined by the officers executing such
Securities and, if applicable, the Securities Guarantee, as evidenced by
their
execution thereof.
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 thereof.
If the form of Securities of any series is established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall
be
certified by an authorized officer or other authorized person on behalf of
the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 3.3
for the
authentication and delivery of such Securities.
The
forms
of Global Securities of any series shall have such provisions and legends
as are
customary for Securities of such series in global form, including without
limitation any legend required by the Depositary for the Securities of such
series.
Section 2.2. Form
of Face of Security.
[If
the Security is an Original Issue Discount Security, insert—FOR
PURPOSES OF SECTION 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986,
AS
AMENDED, THE AMOUNT OF THE ORIGINAL ISSUE DISCOUNT IS . . . . . . . ., THE
ISSUE
DATE IS . . . . . ., 20. . . [AND] [,] THE YIELD TO MATURITY IS . . . . .
. . .
[,] [AND THE ORIGINAL ISSUE DISCOUNT FOR THE SHORT ACCRUAL PERIOD IS . .
. . . .
. . AND THE METHOD USED TO DETERMINE THE YIELD THEREFOR IS . . . .
.]]
[Insert
any other legend required by the Code or the regulations
thereunder.]
[If
a
Global Security,—insert legend required by Section 2.4
of
the Indenture]
[If
applicable, insert —UNLESS
THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR
OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
CONSTELLATION
ENERGY PARTNERS LLC
[TITLE
OF
SECURITY]
No
. . . . . . .
|
|
U.S.
$. . . . . .
|
[CUSIP
No. ]
CONSTELLATION
ENERGY PARTNERS LLC, a limited liability company duly organized under the
laws
of the State of Delaware (herein called the “Company”, which term includes any
successor or resulting Person under the Indenture hereinafter referred to),
for
value received, hereby promises to pay to .......... . . . . . . . . . .
. . . .
. . . . . . . ., or registered assigns, the principal sum of . . . .
................................................ United States Dollars on
........................................ [If
the Security is to bear interest prior to Maturity, insert—,
and to
pay interest thereon from . . . . . . . . . . or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on . . . . . . and . . . . . . in each year, commencing . . . . . ., at the
rate
of . . . . % per annum, until the principal hereof is paid or made available
for
payment [if
applicable, insert—,
and at
the rate of ___% per annum on any overdue principal and premium and on any
installment of interest (to the extent that the payment of such interest
shall
be legally enforceable)]. The interest so payable, and punctually paid or
duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record
Date
for such interest, which shall be the . . . . or . . . . (regardless of whether
a Business Day), as the case may be, next preceding such Interest Payment
Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either
be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date
for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than
10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice
as
may be required by such exchange, all as more fully provided in said
Indenture].
[If
the Security is not to bear interest prior to Maturity, insert—The
principal of this Security shall not bear interest except in the case of
a
default in payment of principal upon acceleration, upon redemption or at
Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of . . . .% per annum (to the extent that the payment
of
such interest shall be legally enforceable), which shall accrue from the
date of
such default in payment to the date payment of such principal has been made
or
duly provided for. Interest on any overdue principal shall be payable on
demand.
Any such interest on any overdue principal that is not so paid on demand
shall
bear interest at the rate of . . . . % per annum (to the extent that the
payment
of such interest shall be legally enforceable), which shall accrue from the
date
of such demand for payment to the date payment of such interest has been
made or
duly provided for, and such interest shall also be payable on
demand.]
[If
a
Global Security, insert—Payment
of the principal of (and premium, if any) and [if
applicable, insert—any such]
interest on this Security will be made by transfer of immediately available
funds to a bank account in ___________ designated by the Holder in such coin
or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts [state other
currency].]
[If
a
Definitive Security, insert—Payment
of the principal of (and premium, if any) and [if
applicable, insert—any
such]
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in _______________, in such coin or currency
of the
United States of America as at the time of payment is legal tender for payment
of public and private debts] [state other currency] [or subject to any laws
or
regulations applicable thereto and to the right of the Company (as provided
in
the Indenture) to rescind the designation of any such Paying Agent, at the
[main] offices of ________________ in _____________, or at such other offices
or
agencies as the Company may designate, by [United States Dollar] [state other
currency] check drawn on, or transfer to a [United States Dollar] account
maintained by the payee with, a bank in The City of New York (so long as
the
applicable Paying Agency has received proper transfer instructions in writing
at
least ___ days prior to the payment date)] [if
applicable, insert —;
provided,
however,
that
payment of interest may be made at the option of the Company by [United States
Dollar] [state other currency] check mailed to the addresses of the Persons
entitled thereto as such addresses shall appear in the Security Register]
[or by
transfer to a [United States Dollar] [state other currency] account maintained
by the payee with a bank in The City of New York [state other Place of Payment]
(so long as the applicable Paying Agent has received proper transfer
instructions in writing by the record date prior to the applicable Interest
Payment Date)].]
Reference
is hereby made to the further provisions of this Security set forth on the
reverse hereof, which further provisions shall for all purposes have the
same
effect as if set forth at this place.
Unless
the certificate of authentication hereon has been executed by the Trustee
referred to on the reverse hereof by manual signature, this Security shall
not
be entitled to any benefit under the Indenture or be valid or obligatory
for any
purpose.
IN
WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated:
|
CONSTELLATION
ENERGY PARTNERS LLC |
|
|
|
|
By: |
|
Section 2.3. Form
of Reverse of Security.
This
Security is one of a duly authorized issue of subordinated securities of
the
Company (herein called the “Securities”), issued and to be issued in one or more
series under an Indenture, dated as of ________ __, 20__ (herein called the
“Indenture”), between the Company, the Guarantors and [_____________________],
as
Trustee (herein called the “Trustee”, which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental
thereto
reference is hereby made for a statement, of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Guarantors,
the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. As provided in
the
Indenture, the Securities may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may mature at
different times, may bear interest, if any, at different rates, may be subject
to different redemption provisions, if any, may be subject to different sinking,
purchase or analogous funds, if any, may be subject to different covenants
and
Events of Default and may otherwise vary as in the Indenture provided or
permitted. This Security is one of the series designated on the face
hereof [, limited in aggregate principal amount to $ . . . . . . . .
. . ].
This
security is the general, unsecured, subordinated obligation of the Company
[if
applicable, insert—and
is
guaranteed pursuant to a guarantee (the “Securities Guarantee”) by [insert
name of each Guarantor]
(the
“Guarantors”). The Securities Guarantee is the general, unsecured, subordinated
obligation of each Guarantor.]
[If
applicable, insert—The
Securities of this series are subject to redemption upon not less than ...
days’
notice by mail, [if
applicable, insert,
—(1)
on .
. . . . . . . . . . . . . in any year commencing with the year . . . . and
ending with the year . . . . through operation of the sinking fund for this
series at a Redemption Price equal to 100% of the principal amount, and (2)
] at
any time [on or after . . . . . . . . . ., 20. . . ], as a whole or in part,
at
the election of the Company, at the following Redemption Prices (expressed
as
percentages of the principal amount): If redeemed [on or before . . . . .
. . .
. . . . . . . , . . . . . %, and if redeemed] during the 12-month period
beginning . . . . . . . . of the years indicated,
Year
|
Redemption
Price
|
Year
|
Redemption
Price
|
and
thereafter at a Redemption Price equal to . . . . . % of the principal amount,
together in the case of any such redemption [if
applicable, insert—(whether
through operation of the sinking fund or otherwise)] with accrued interest
to
the Redemption Date, but interest installments whose Stated Maturity is on
or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business
on the
relevant record dates referred to on the face hereof, all as provided in
the
Indenture.]
[If
applicable, insert—The
Securities of this series are subject to redemption upon not less than...
nor
more than ... days’ notice by mail, (1) on . . . . . . . . in any year
commencing with the year . . . . and ending with the year . . . . through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages
of
the principal amount) set forth in the table below, and (2) at anytime [on
or
after . . . . . . . . . . ], as a whole or in part, at the election of the
Company, at the Redemption Prices for redemption otherwise than through
operation of the sinking fund (expressed as percentages of the principal
amount)
set forth in the table below: If redeemed during the 12-month period beginning
.
. . . . . . . . . . . . . of the years indicated,
Year
|
Redemption
Price For Redemption Through Operation of the Sinking
Fund
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Redemption
Price for Redemption Otherwise Than Through Operation of the Sinking
Fund
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and
thereafter at a Redemption Price equal to . . . . % of the principal amount,
together in the case of any such redemption (whether through operation of
the
sinking fund or otherwise) with accrued interest to the Redemption Date,
but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
record dates referred to on the face hereof, all as provided in the
Indenture.]
[If
applicable, insert—Notwithstanding
the foregoing, the Company may not, prior to . . . . . . . . . ., redeem
any
Securities of this series as contemplated by [clause (2) of] the preceding
paragraph as a part of, or in anticipation of, any refunding operation by
the
application, directly or indirectly, of moneys borrowed having an interest
cost
to the Company (calculated in accordance with generally accepted financial
practice) of less than . . . .% per annum.]
[If
applicable, insert—The
sinking fund for this series provides for the redemption on . . . . . . .
. . .
. . in each year beginning with the year . . . . and ending with the year
. . .
. of [not less than] $ . . . . . . . . . . . . [ (“mandatory sinking fund”) and
not more than $ . . . . . . . . . . . . ] aggregate principal amount of
Securities of this series. [Securities of this series acquired or redeemed
by
the Company otherwise than through [mandatory] sinking fund payments may
be
credited against subsequent [mandatory] sinking fund payments otherwise required
to be made [If
applicable, insert-—
in the
inverse order in which they become due].]
[If
the Securities are subject to redemption in part of any kind,
insert—In
the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation
hereof.]
[If
applicable, insert—The
Securities of this series are not redeemable prior to Stated
Maturity.]
[If
the Security is not an Original Issue Discount Security,—If
an
Event of Default with respect to Securities of this series shall occur and
be
continuing, the principal of the Securities of this series may be declared
due
and payable in the manner and with the effect provided in the
Indenture.]
[If
the Security is an Original Issue Discount Security,—If
an
Event of Default with respect to Securities of this series shall occur and
be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to —insert
formula for determining the amount.
Upon
payment (i) of the amount of principal so declared due and payable and (ii)
of
interest on any overdue principal and overdue interest (in each case to the
extent that the payment of such interest shall be legally enforceable), all
of
the Company’s obligations in respect of the payment of the principal of and
interest, if any, on the Securities of this series shall
terminate.]
`
The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company
[If
applicable, insert—and
the
Guarantors] and the rights of the Holders of the Securities of each series
to be
affected under the Indenture at any time by the Company [If
applicable, insert—and
the
Guarantors] and the Trustee with the consent of the Holders of a majority
in
principal amount of the Securities at the time Outstanding of each series
to be
affected. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series
at
the time Outstanding, on behalf of the Holders of all Securities of such
series,
to waive compliance by the Company [If
applicable, insert—and
the
Guarantors] with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by
the
Holder of this Security shall be conclusive and binding upon such Holder
and
upon all future Holders of this Security and of any Security issued upon
the
registration of transfer hereof or in exchange herefor or in lieu hereof,
regardless of whether notation of such consent or waiver is made upon this
Security.
No
reference herein to the Indenture and no provision of this Security or of
the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of (and premium, if any) and interest
on
this Security at the times, place(s) and rate, and in the coin or currency,
herein prescribed.
[If
a
Global Security, insert—This
Global Security or portion hereof may not be exchanged for Definitive Securities
of this series except in the limited circumstances provided in the Indenture.
The holders of beneficial interests in this Global Security will not be entitled
to receive physical delivery of Definitive Securities except as described
in the
Indenture and will not be considered the Holders thereof for any purpose
under
the Indenture.]
[If
a
Definitive Security, insert—As
provided in the Indenture and subject to certain limitations therein set
forth,
the transfer of this Security is registerable in the Security Register, upon
surrender of this Security for registration of transfer at the office or
agency
of the Company in [if
applicable, insert—any
place
where the principal of and any premium and interest on this Security are
payable] [if
applicable, insert—The
City
of New York [, or, subject to any laws or regulations applicable thereto
and to
the right of the Company (limited as provided in the Indenture) to rescind
the
designation of any such transfer agent, at the [main] offices of _______________
in ________________ or at such other offices or agencies as the Company may
designate]], duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing,
and
thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, will
be
issued to the designated transferee or transferees.]
The
Securities of this series are issuable only in registered form without coupons
in denominations of U.S. $ . . . . . . . . and any integral multiple thereof.
As
provided in the Indenture and subject to certain limitations therein set
forth,
Securities of this series are exchangeable for a like aggregate principal
amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax
or
other governmental charge payable in connection therewith.
Prior
to
due presentment of this Security for registration of transfer, the Company,
[If
applicable, insert—any
Guarantor,] the Trustee and any agent of the Company [If
applicable, insert—,
a
Guarantor] or the Trustee may treat the Person in whose name this Security
is
registered as the owner hereof for all purposes, regardless of whether this
Security be overdue, and none of the Company, [If
applicable, insert—the
Guarantors,] the Trustee nor any such agent shall be affected by notice to
the
contrary.
This
Security is subordinated in right of payment to Senior Debt [If
applicable, insert-and
the
Securities Guarantee is subordinated in right of payment to Guarantor Senior
Debt], to the extent and in the manner provided in the Indenture.
No
recourse under or upon any obligation, covenant or agreement of or contained
in
the Indenture or of or contained in any Security, [If
applicable, insert—,
or the
Securities Guarantee endorsed thereon,] or for any claim based thereon or
otherwise in respect thereof, or in any Security [If
applicable, insert—or
in the
Securities Guarantee], or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, shareholder,
member,
officer, manager or director, as such, past, present or future, of the Company
[If
applicable, insert—or
any
Guarantor] or of any successor Person, either directly or through the Company
[If
applicable, insert—or
any
Guarantor] or any successor Person, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment, penalty
or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released by the acceptance hereof and as a condition
of,
and as part of the consideration for, the Securities and the execution of
the
Indenture.
The
Indenture provides that the Company [If
applicable, insert—and
the
Guarantors] (a) will be discharged from any and all obligations in respect
of
the Securities (except for certain obligations described in the Indenture),
or
(b) need not comply with certain restrictive covenants of the Indenture, in
each case if the Company [If
applicable, insert—or
a
Guarantor] deposits, in trust, with the Trustee money or U.S. Government
Obligations (or a combination thereof) which through the payment of interest
thereon and principal thereof in accordance with their terms will provide
money,
in an amount sufficient to pay all the principal of and interest on the
Securities, but such money need not be segregated from other funds except
to the
extent required by law.
Except
as
otherwise defined herein, all terms used in this Security which are defined
in
the Indenture shall have the meanings assigned to them in the
Indenture.
[If
a
Definitive Security, insert as a separate page—
FOR
VALUE
RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
_______________________________________________________________
(Please
Print or Typewrite Name and Address of Assignee)
the
within instrument of CONSTELLATION ENERGY PARTNERS LLC and does hereby
irrevocably constitute and appoint ___________________ Attorney to transfer
said
instrument on the books of the within-named Company, with full power of
substitution in the premises.
Please
Insert Social Security or Other Identifying Number of Assignee:
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.]
[If
a
Security to which Article Fourteen
has
been made applicable, insert the following Form of Notation on such Security
relating to the Securities Guarantee—
Each
of
the Guarantors (which term includes any successor Person in such capacity
under
the Indenture), has fully, unconditionally and absolutely guaranteed, to
the
extent set forth in the Indenture and subject to the provisions in the
Indenture, the due and punctual payment of the principal of, and premium,
if
any, and interest on the Securities of this series and all other amounts
due and
payable under the Indenture and the Securities of this series by the
Company.
The
obligations of the Guarantors to the Holders of Securities of this series
and to
the Trustee pursuant to the Securities Guarantee and the Indenture are expressly
set forth in Article Fourteen
of the
Indenture and reference is hereby made to the Indenture for the precise terms
of
the Securities Guarantee.
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Guarantors:
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|
|
|
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[NAME
OF EACH GUARANTOR]
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By:
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] |
Section 2.4. Global
Securities.
Every
Global Security authenticated and delivered hereunder shall bear a legend
in
substantially the following form:
THIS
SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.
THIS SECURITY MAY NOT BE TRANSFERRED TO, OR REGISTERED OR EXCHANGED FOR
SECURITIES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN THE DEPOSITARY
OR A
NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
EVERY
SECURITY AUTHENTICATED AND DELIVERED UPON REGISTRATION OF TRANSFER OF, OR
IN
EXCHANGE FOR OR IN LIEU OF, THIS SECURITY SHALL BE A GLOBAL SECURITY SUBJECT
TO
THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES.
If
Securities of a series are issuable in whole or in part in the form of one
or
more Global Securities, as specified as contemplated by Section 3.1,
then,
notwithstanding clause (i) of Section 3.1
and the
provisions of Section 3.2,
any
Global Security shall represent such of the Outstanding Securities of such
series as shall be specified therein and may provide that it shall represent
the
aggregate amount of Outstanding Securities from time to time endorsed thereon
and that the aggregate amount of Outstanding Securities represented thereby
may
from time to time be reduced or increased, as the case may be, to reflect
exchanges. Any endorsement of a Global Security to reflect the amount, or
any
reduction or increase in the amount, of Outstanding Securities represented
thereby shall be made in such manner and upon instructions given by such
Person
or Persons as shall be specified therein or in a Company Order. Subject to
the
provisions of Section 3.3,
Section 3.4
and
Section 3.5,
the
Trustee shall deliver and redeliver any Global Security in the manner and
upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order. Any instructions by the Company with respect to
endorsement or delivery or redelivery of a Global Security shall be in a
Company
Order (which need not comply with Section 1.3
and need
not be accompanied by an Opinion of Counsel).
The
provisions of the last sentence of Section 3.3
shall
apply to any Security represented by a Global Security if such Security was
never issued and sold by the Company and the Company delivers to the Trustee
the
Global Security together with a Company Order (which need not comply with
Section 1.3
and need
not be accompanied by an Opinion of Counsel) with regard to the reduction
or
increase, as the case may be, in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 3.3.
Section 2.5. Form
of Trustee’s Certificate of Authentication.
The
Trustee’s certificate(s) of authentication shall be in substantially the
following form:
This
is
one of the Securities of the series designated [insert
title of applicable series]
referred to in the within-mentioned Indenture.
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[_______________________],
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as
Trustee
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By:
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Authorized
Officer
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ARTICLE THREE
THE
SECURITIES
Section 3.1. 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. There shall be established
in or
pursuant to a Board Resolution, and set forth, or determined in the manner
provided, in an Officer’s Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any
series,
(a) the
title
of the Securities of the series (which shall distinguish the Securities of
the
series from all other Securities and which may be part of a series of Securities
previously issued);
(b) any
limit
upon the aggregate principal amount of the Securities of the series which
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 3.4,
Section 3.5,
Section 3.6,
Section 9.6
or
Section 11.7
and
except for any Securities which, pursuant to Section 3.3,
are
deemed never to have been authenticated and delivered hereunder);
(c) the
Person to whom any interest on a Security of the series shall be payable,
if
other than the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record
Date
for such interest;
(d) the
date
or dates on which the principal of the Securities of the series is payable
or
the method of determination thereof;
(e) the
rate
or rates at which the Securities of the series shall bear interest, if any,
or
the formula, method or provision pursuant to which such rate or rates are
determined, the date or dates from which such interest shall accrue or the
method of determination thereof, the Interest Payment Dates on which such
interest shall be payable and the Regular Record Date for the interest payable
on any Interest Payment Date;
(f) the
place
or places where, subject to the provisions of Section 10.2,
the
principal of and any premium and interest on Securities of the series shall
be
payable, Securities of the series may be surrendered for registration of
transfer, Securities of the series may be surrendered for exchange and notices,
and demands to or upon the Company in respect of the Securities of the series
and this Indenture may be served;
(g) the
period or periods within which, the price or prices at which and the terms
and
conditions upon which Securities of the series may be redeemed, in whole
or in
part, at the option of the Company;
(h) the
obligation, if any, of the Company to redeem or purchase Securities of the
series pursuant to any sinking fund or analogous provisions or at the option
of
a Holder thereof and the period or periods within which, the price or prices
at
which and the terms and conditions upon which Securities of the series shall
be
redeemed or purchased, in whole or in part, pursuant to such
obligation;
(i) if
other
than denominations of $1,000 and any integral multiple thereof, the
denominations in which Securities of the series shall be issuable;
(j) whether
payment of principal of and premium, if any, and interest, if any, on the
Securities of the series shall be without deduction for taxes, assessments
or
governmental charges paid by Holders of the series;
(k) if
other
than the principal amount thereof, the portion of the principal amount of
Securities of the series which shall be payable upon declaration of acceleration
of the Maturity thereof pursuant to Section 5.2;
(l) if
the
amount of payments of principal of and any premium or interest on the Securities
of the series may be determined with reference to an index, the manner in
which
such amounts shall be determined;
(m) if
and as
applicable, that the Securities of the series shall be issuable in whole
or in
part in the form of one or more Global Securities and, in such case, the
Depositary or Depositaries for such Global Security or Global Securities
and any
circumstances other than those set forth in Section 3.5
in which
any such Global Security may be transferred to, and registered and exchanged
for
Securities registered in the name of, a Person other than the Depositary
for
such Global Security or a nominee thereof and in which any such transfer
may be
registered;
(n) any
deletions from, modifications of or additions to the Events of Default set
forth
in Section 5.1
or the
covenants of the Company set forth in Article Ten
with
respect to the Securities of such series;
(o) whether
and under what circumstances the Company will pay additional amounts on the
Securities of the series held by a Person who is not a U.S. Person in respect
of
any tax, assessment or governmental charge withheld or deducted and, if so,
whether the Company will have the option to redeem the Securities of the
series
rather than pay such additional amounts;
(p) if
the
Securities of the 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;
(q) if
the
Securities of the series are to be convertible into or exchangeable for any
other security or property of the Company, including, without limitation,
securities of another Person held by the Company or its Affiliates and, if
so,
the terms thereof;
(r) if
other
than as provided in Section 13.2
and
Section 13.3,
the
means of Legal Defeasance or Covenant Defeasance as may be specified for
the
Securities of the series;
(s) if
other
than the Trustee, the identity of the initial Security Registrar and any
initial
Paying Agent;
(t) whether
the Securities of the series will be guaranteed pursuant to the Securities
Guarantee set forth in Article Fourteen,
any
modifications to the terms of Article Fourteen
applicable to the Securities of such series and the applicability of any
other
guarantees; and
(u) 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 in or pursuant to the
Board
Resolution referred to above and (subject to Section 3.3)
set
forth, or determined in the manner provided, in the Officer’s Certificate
referred to above or in any such indenture supplemental hereto.
All
Securities of any one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the
Holders, for increases in the aggregate principal amount of such series of
Securities and issuances of additional Securities of such series or for the
establishment of additional terms with respect to the Securities of such
series.
If
any of
the terms of the series are established by action taken by or pursuant to
a
Board Resolution, a copy of an appropriate record of such action shall be
certified by an authorized officer or other authorized person on behalf of
the
Company and, if applicable, the Guarantors and delivered to the Trustee at
or
prior to the delivery of the Officer’s Certificate setting forth, or providing
the manner for determining, the terms of the series.
With
respect to Securities of a series subject to a Periodic Offering, such Board
Resolution or Officer’s Certificate may provide general terms for Securities of
such series and provide either that the specific terms of particular Securities
of such series shall be specified in a Company Order or that such terms shall
be
determined by the Company and, if applicable, the Guarantors or one or more
agents thereof designated in an Officer’s Certificate, in accordance with a
Company Order.
Section 3.2. Denominations.
The
Securities of each series shall be issuable in registered form without coupons
in such denominations as shall be specified as contemplated by Section 3.1.
In the
absence of any such provisions with respect to the Securities of any series,
the
Securities of such series shall be issuable in denominations of $1,000 and
any
integral multiple thereof.
Section 3.3. Execution,
Authentication, Delivery and Dating.
The
Securities shall be executed on behalf of the Company by its Chairman of
the
Board, its Chief Executive Officer, its President, its Chief Financial Officer
or any of its Vice Presidents and need not be attested. The signature of
any of
these officers on the Securities may be manual or facsimile. Any Securities
Guarantee endorsed on the Securities shall be executed on behalf of the
applicable Guarantor by its Chairman of the Board, its Chief Executive Officer,
its President, its Chief Financial Officer or any of its Vice Presidents
and
need not be attested.
Securities
and any Securities Guarantee bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company or a
Guarantor, as the case may be, shall bind the Company or such Guarantor,
as the
case may be, notwithstanding that such individuals or any of them have ceased
to
hold such offices prior to the authentication and delivery of such Securities
or
did not hold such offices at the date of such Securities.
At
any
time and from time to time after the execution and delivery of this Indenture,
the Company may deliver Securities of any series executed by the Company
to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities; provided,
however,
that in
the case of Securities offered in a Periodic Offering, the Trustee shall
authenticate and deliver such Securities from time to time in accordance
with
such other procedures (including, without limitation, the receipt by the
Trustee
of oral or electronic instructions from the Company or its duly authorized
agents, thereafter promptly confirmed in writing) acceptable to the Trustee
as
may be specified by or pursuant to a Company Order delivered to the Trustee
prior to the time of the first authentication of Securities of such series.
If
the forms or terms of the Securities of the series have been established
in or
pursuant to one or more Board Resolutions as permitted by Section 2.1
and
Section 3.1,
in
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive such documents as it may reasonably request. The Trustee
shall also be entitled to receive, and (subject to Section 6.1)
shall
be fully protected in relying upon, an Opinion of Counsel stating,
(a) if
the
form or forms of such Securities has been established in or pursuant to a
Board
Resolution as permitted by Section 2.1,
that
each such form has been established in conformity with the provisions of
this
Indenture;
(b) if
the
terms of such Securities have been, or in the case of Securities of a series
offered in a Periodic Offering will be, established in or pursuant to a Board
Resolution as permitted by Section 3.1,
that
such terms have been, or in the case of Securities of a series offered in
a
Periodic Offering will be, established in conformity with the provisions
of this
Indenture, subject, in the case of Securities of a series offered in a Periodic
Offering, to any conditions specified in such Opinion of Counsel;
and
(c) that
such
Securities when authenticated and delivered by the Trustee and issued by
the
Company in the manner and subject to any conditions and assumptions specified
in
such Opinion of Counsel, will constitute valid and legally binding obligations
of the Company and, if applicable, the Guarantors, enforceable in accordance
with their terms, subject to the following limitations: (i) bankruptcy,
insolvency, moratorium, reorganization, liquidation, fraudulent conveyance
or
transfer and other similar laws of general applicability relating to or
affecting the enforcement of creditors’ rights, or to general equity principles,
(ii) the availability of equitable remedies being subject to the discretion
of
the court to which application therefor is made; and (iii) such other usual
and
customary matters as shall be specified in such Opinion of Counsel.
If
such
form or forms or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee’s own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding
the provisions of Section 3.1
and of
the preceding paragraph, if all Securities of a series are not to be originally
issued at one time, it shall not be necessary to deliver the Officer’s
Certificate otherwise required pursuant to Section 3.1
or the
Company Order and Opinion of Counsel otherwise required pursuant to such
preceding paragraph at or prior to the time of authentication of each Security
of such series if such documents are delivered at or prior to the authentication
upon original issuance of the first Security of such series to be
issued.
With
respect to Securities of a series offered in a Periodic Offering, the Trustee
may rely, as to the authorization by the Company of any of such Securities,
on
the form or forms and terms thereof and the legality, validity, binding effect
and enforceability thereof, upon the Opinion of Counsel and the other documents
delivered pursuant to Section 2.1
and
Section 3.1
and this
Section, as applicable, in connection with the first authentication of
Securities of such series.
Each
Security shall be dated the date of its authentication.
No
Security, nor any Securities Guarantee endorsed thereon, shall be entitled
to
any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the Trustee by
manual
signature of an authorized officer, and such certificate upon any Security
shall
be conclusive evidence, and the only evidence, that such Security has been
duly
authenticated and delivered hereunder and is entitled to the benefits of
this
Indenture. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation
as
provided in Section 3.9
for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
Section 3.4. Temporary
Securities.
Pending
the preparation of Definitive Securities of any series, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the
tenor
of the Definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as
the
officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If
temporary Securities of any series are issued, the Company will cause Definitive
Securities of that series to be prepared without unreasonable delay. After
the
preparation of Definitive Securities of such series, the temporary Securities
of
such series shall be exchangeable for Definitive Securities of such series
upon
surrender of the temporary Securities of such series at the office or agency
of
the Company in a Place of Payment for that series, without charge to the
Holder.
Upon surrender for cancellation of any one or more temporary Securities of
any
series the Company shall execute and the Trustee shall authenticate and deliver
in exchange therefor a like principal amount of Definitive Securities of
the
same series and tenor of authorized denominations. Until so exchanged the
temporary Securities of any series shall in all respects be entitled to the
same
benefits under this Indenture as Definitive Securities of such
series.
Section 3.5. Registration,
Registration of Transfer and Exchange.
The
Company shall cause to be kept at the office or agency of the Company in
a Place
of Payment required by Section 10.2
a
register (the register maintained in such office being herein sometimes referred
to as the “Security Register”) in which, subject to such reasonable regulations
as it may prescribe, the Company shall provide for the registration of
Securities and of transfers of Securities. The Trustee is hereby appointed
as
the initial “Security Registrar” for the purpose of registering Securities and
transfers of Securities as herein provided, and its corporate trust office,
which, at the date hereof, is located at [_______________________________________________],
is the
initial office or agency where the Securities Register will be maintained.
The
Company may at any time replace such Security Registrar, change such office
or
agency or act as its own Security Registrar. The Company will give prompt
written notice to the Trustee of any change of the Security Registrar or
of the
location of such office or agency.
Upon
surrender for registration of transfer of any Security of any series at the
office or agency maintained pursuant to Section 10.2
for such
purpose, the Company and, if applicable, the Guarantors shall execute, and
the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Securities, with an endorsement of the
Securities Guarantee, if applicable, executed by the Guarantors, of the same
series and tenor, of any authorized denominations and of a like aggregate
principal amount.
At
the
option of the Holder, Securities of any series (except a Global Security)
may be
exchanged for other Securities of the same series and tenor, of any authorized
denominations and of a like aggregate principal amount, upon surrender of
the
Securities to be exchanged at such office or agency. Whenever any Securities
are
so surrendered for exchange, the Company and, if applicable, the Guarantors
shall execute and the Trustee shall authenticate and deliver, the Securities,
with an endorsement of the Securities Guarantee, if applicable, executed
by the
Guarantors, which the Holder making the exchange is entitled to
receive.
All
Securities issued upon any registration of transfer or exchange of Securities
shall be the valid obligations of the Company and, if applicable, the Guarantors
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer
or
exchange.
Every
Security presented or surrendered for registration of transfer or for exchange
shall (if so required by the Company or the Trustee) be duly endorsed, or
be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed, by the Holder thereof or
his
attorney duly authorized in writing.
No
service charge shall be made for any registration of transfer or exchange
of
Securities, but the Company 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 or exchange of Securities, other than exchanges
pursuant to Section 3.4,
Section 9.6
or
Section 11.7
not
involving any transfer.
The
Company shall not be required (a) to issue, register the transfer of or exchange
Securities of any series during a period beginning at, the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
of
that series selected for redemption under Section 11.3
and
ending at the close of business on the day of such mailing, or (b) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except the unredeemed portion of any Security being redeemed in
part.
Notwithstanding
any other provisions of this Indenture and except as otherwise specified
with
respect to any particular series of Securities as contemplated by Section 3.1,
a
Global Security representing all or a portion 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. Every Security authenticated and delivered upon registration
of,
transfer of, or in exchange for or in lieu of, a Global Security shall be
a
Global Security except as provided in the two paragraphs immediately
following.
If
at any
time the Depositary for any Securities of a series represented by one or
more
Global Securities notifies the Company 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 to continue as Depositary under
Section 3.1
or
ceases to be a clearing agency registered under the Exchange Act, the Company
shall appoint a successor Depositary with respect to such Securities. If
a
successor Depositary for such Securities is not appointed by the Company
within
90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company’s election pursuant to Section 3.1
that
such Securities be represented by one or more Global Securities shall no
longer
be effective and the Company and, if applicable, the Guarantors will execute
and
the Trustee, upon receipt of a Company Order for the authentication and delivery
of Definitive Securities of such series, will authenticate and deliver,
Securities, with an endorsement of the Securities Guarantee, if applicable,
executed by the Guarantors, of such series in definitive registered form
without
coupons, 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 registered
in the
names of such Persons as the Depositary shall direct.
The
Company 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
Company and, if applicable, the Guarantors will execute and the Trustee,
upon
receipt of a Company Order for the authentication and delivery of the Definitive
Securities of such series, will authenticate and deliver, Securities, with
an
endorsement of the Securities Guarantee, if applicable, executed by the
Guarantors, of such series in definitive registered form without coupons,
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 registered
in the
names of such Persons as the Depositary shall direct.
If
specified by the Company pursuant to Section 3.1
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 and tenor in definitive registered
form
on such terms as are acceptable to the Company, the Trustee and such Depositary.
Thereupon, the Company and, if applicable, the Guarantors shall execute,
and the
Trustee, upon receipt of a Company Order for the authentication and delivery
of
Securities in definitive registered form, shall authenticate and deliver,
without service charge,
(a) to
the
Person specified by such Depositary a new Security or Securities, with an
endorsement of the Securities Guarantee, if applicable, executed by the
Guarantors, of the same series and tenor, 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
(b) to
such
Depositary a new Global Security, with an endorsement of the Securities
Guarantee, if applicable, executed by the Guarantors, 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 (a) above.
Every
Person who takes or holds any beneficial interest in a Global Security agrees
that:
(a) the
Company, the Guarantors (if applicable) and the Trustee may deal with the
Depositary as sole owner of the Global Security and as the authorized
representative of such Person;
(b) such
Person’s rights in the Global Security shall be exercised only through the
Depositary and shall be limited to those established by law and agreement
between such Person and the Depositary and/or direct and indirect participants
of the Depositary;
(c) the
Depositary and its participants make book-entry transfers of beneficial
ownership among, and receive and transmit distributions of principal and
interest on the Global Securities to, such Persons in accordance with their
own
procedures; and
(d) none
of
the Company, the Guarantors (if applicable), the Trustee, nor any agent of
any
of them will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests
of a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Section 3.6. Mutilated,
Destroyed, Lost and Stolen Securities.
If
any
mutilated Security is surrendered to the Trustee, together with, in proper
cases, such security or indemnity as may be required by the Company, the
Guarantors (if applicable) or the Trustee to save each of them and any agent
of
any of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security, with an
endorsement of the Securities Guarantee, if applicable, executed by the
Guarantors, of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If
there
shall be delivered to the Company, the Guarantors (if applicable) and the
Trustee (a) evidence to their satisfaction of the destruction, loss or
theft of any Security and (b) such security or indemnity as may be required
by
them to save each of them and any agent of either of them harmless, then,
in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company and, if applicable, the
Guarantors shall execute and upon its request the Trustee shall authenticate
and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security,
with an endorsement of the Securities Guarantee, if applicable, executed
by the
Guarantors, of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
In
case
any such mutilated, destroyed, lost or stolen Security has become or is about
to
become due and payable, the Company in its discretion may, instead of issuing
a
new Security, pay such Security.
Upon
the
issuance of any new Security under this Section, the Company 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) connected therewith.
Every
new
Security of any series issued pursuant to this Section in lieu of any destroyed,
lost or stolen Security shall constitute an original additional contractual
obligation of the Company and, if applicable, the Guarantors, regardless
of
whether the destroyed, lost or stolen Security shall be at any time enforceable
by anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Securities of that series duly
issued
hereunder.
The
provisions of this Section are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or
payment
of mutilated, destroyed, lost or stolen Securities.
Section 3.7. Payment
of Interest; Interest Rights Preserved.
Except
as
otherwise provided as contemplated by Section 3.1
with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date
shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record
Date
for such interest.
Any
interest on any Security of any series which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
“Defaulted Interest”) shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case,
as
provided in clause (a) or (b) below:
(a) The
Company may elect to make payment of any Defaulted Interest to the Persons
in
whose names the Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date
for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security of such series and
the
date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of
the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon, the Trustee shall fix a Special Record Date for the payment of
such
Defaulted Interest which shall be not more than 15 days and not less than
10
days prior to the date of the proposed payment and not less than 10 days
after
the receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date and, in the
name
and at the expense of the Company, shall cause notice of the proposed payment
of
such Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder of Securities of such series
at his
address as it appears in the Security Register, not less than 10 days prior
to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
of
such series (or their respective Predecessor Securities) are registered at
the
close of business on such Special Record Date and shall no longer be payable
pursuant to the following clause (b).
(b) The
Company may make payment of any Defaulted Interest on the Securities of any
series in any other lawful manner not inconsistent with the requirements
of any
securities exchange on which such Securities may be listed, and upon such
notice
as may be required by such exchange, if, after notice given by the Company
to
the Trustee of the proposed payment pursuant to this clause, such manner
of
payment shall be deemed practicable by the Trustee.
Subject
to the foregoing provisions of this Section, each Security delivered under
this
Indenture upon registration of transfer of or in exchange for or in lieu
of any
other Security shall carry the rights to interest accrued and unpaid, and
to
accrue, which were carried by such other Security.
Section 3.8. Persons
Deemed Owners.
Except
as
otherwise provided as contemplated by Section 3.1
with
respect to any series of Securities, prior to due presentment of a Security
for
registration of transfer, the Company, the Trustee and, if applicable, the
Guarantors and any agent thereof may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and any premium and (subject to Section 3.5
and
Section 3.7)
any
interest on such Security and for all other purposes whatsoever, regardless
of
whether such Security be overdue, and none of the Company, the Trustee nor,
if
applicable, the Guarantors nor any agent of any of them shall be affected
by
notice to the contrary.
No
holder
of any beneficial interest in any Global Security held on its behalf by a
Depositary shall have any rights under this Indenture with respect to such
Global Security, and such Depositary may be treated by the Company, the Trustee,
and, if applicable, the Guarantors and any agent of thereof as the owner
of such
Global Security for all purposes whatsoever.
Section 3.9. Cancellation.
All
Securities surrendered for payment, redemption, registration of transfer
or
exchange or for credit against any sinking fund payment shall, if surrendered
to
any Person other than the Trustee, be delivered to the Trustee and shall
be
promptly canceled by it. The Company may at any time deliver to the Trustee
for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver
to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the
Company
has not issued and sold, and all Securities so delivered shall be promptly
canceled by the Trustee. No Securities shall be authenticated in lieu of
or in
exchange for any Securities canceled as provided in this Section, except
as
expressly permitted by this Indenture. All canceled Securities held by the
Trustee shall be disposed of in accordance with its customary practices,
and the
Trustee shall thereafter deliver to the Company a certificate with respect
to
such disposition from time to time upon written request.
Section 3.10. Computation
of Interest.
Except
as
otherwise specified as contemplated by Section 3.1
for
Securities of any series, interest on the Securities of each series shall
be
computed on the basis of a year of twelve 30-day months.
Section 3.11. CUSIP
or CINS Numbers.
The
Company in issuing the Securities may use “CUSIP” or “CINS” numbers (if then
generally in use, and in addition to the other identification numbers printed
on
the Securities), and, if so, the Trustee shall use “CUSIP” or “CINS” numbers in
notices of redemption as a convenience to Holders; provided,
however,
that
any such notice may state that no representation is made as to the correctness
of such “CUSIP” or “CINS” 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 “CUSIP” or
“CINS” numbers.
ARTICLE FOUR
SATISFACTION
AND DISCHARGE
Section 4.1. Satisfaction
and Discharge of Indenture.
This
Indenture shall cease to be of further effect and will be discharged with
respect to the Securities of any series (except as to any surviving rights
of
registration of transfer or exchange of Securities and certain rights of
the
Trustee, in each case, herein expressly provided for), and the Trustee, upon
Company Request and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to such Securities, when:
(a) either
(i) all
such
Securities theretofore authenticated and delivered (other than (A) such
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 3.6,
and (B)
such Securities for whose payment money has theretofore been deposited in
trust
or segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 10.3)
have
been delivered to the Trustee for cancellation; or
(ii) all
such
Securities not theretofore delivered to the Trustee for
cancellation
(A) have
become due and payable, or
(B) will
become due and payable at their Stated Maturity within one year, or
(C) are
to be
called for redemption within one year under arrangements satisfactory to
the
Trustee for the giving of notice of redemption by the Trustee in the name,
and
at the expense, of the Company,
and
the
Company, in the case of (A), (B) or (C) above, has deposited or caused to
be
deposited with the Trustee as trust funds in trust for such purpose an amount
sufficient to pay and discharge the entire indebtedness on such Securities
not
theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be, together with instructions from the
Company
irrevocably directing the Trustee to apply such funds to the payment thereof
at
maturity or redemption, as the case may be;
(b) the
Company has paid or caused to be paid all other sums payable hereunder by
the
Company with respect to such Securities; and
(c) the
Company has delivered to the Trustee an Officer’s Certificate and an Opinion of
Counsel, which, taken together, state that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
with
respect to such Securities have been complied with.
Notwithstanding
the satisfaction and discharge of this Indenture with respect to the Securities
of any series, (x) the obligations of the Company to the Trustee under
Section 6.7,
the
obligations of the Trustee to any Authenticating Agent under Section 6.14
and the
right of the Trustee to resign under Section 6.10
shall
survive, and (y) if money shall have been deposited with the Trustee pursuant
to
clause (a) of this Section, the obligations of the Company and the Trustee
under
Section 4.2,
Section 6.6
and
Section 10.2
and the
last paragraph of Section 10.3
shall
survive.
Section 4.2. Application
of Trust Money.
Subject
to the provisions of the last paragraph of Section 10.3,
all
money deposited with the Trustee pursuant to Section 4.1
shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through
any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal
and any
premium and interest for whose payment such money has been deposited with
the
Trustee.
ARTICLE FIVE
REMEDIES
Section 5.1. Events
of Default.
“Event
of
Default”, wherever used herein with respect to Securities of any series, means
any one of the following events (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation
of
law or pursuant to any judgment, decree or order of any court or any order,
rule
or regulation of any administrative or governmental body):
(a) default
in the payment of any interest upon any Security of that series when it becomes
due and payable, and continuance of such default for a period of 30 days
(regardless of whether such payment is prohibited by the provisions of
Article Fifteen
hereof);
or
(b) default
in the payment of the principal of (or premium, if any, on) any Security
of that
series at its Maturity (regardless of whether such payment is prohibited
by the
provisions of Article Fifteen
hereof);
or
(c) default
in the performance, or breach, of any covenant set forth in Article Ten
in this
Indenture (other than a covenant a default in whose performance or whose
breach
is elsewhere in this Section specifically dealt with or which has expressly
been
included in this Indenture solely for the benefit of series of Securities
other
than that series), and continuance of such default or breach for a period
of 90
days after there has been given, by registered or certified mail, to the
Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25%
in principal amount of the Outstanding Securities of that series a written
notice specifying such default or breach and requiring it to be remedied
and
stating that such notice is a “Notice of Default” hereunder; or
(d) default
in the performance, or breach, of any covenant in this Indenture (other than
a
covenant in Article Ten
or any
other covenant a default in whose performance or whose breach is elsewhere
in
this Section specifically dealt with or which has expressly been included
in
this Indenture solely for the benefit of series of Securities other than
that
series), and continuance of such default or breach for a period of 180 days
after there has been given, by registered or certified mail, to the Company
by
the Trustee or to the Company and the Trustee by the Holders of at least
25% in
principal amount of the Outstanding Securities of that series a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a “Notice of Default” hereunder; or
(e) the
Company pursuant to or within the meaning of any Bankruptcy Law
(i) commences a voluntary case, (ii) consents to the entry of any order for
relief against it in an involuntary case, (iii) consents to the appointment
of a
Custodian of it or for all or substantially all of its property, or (iv)
makes a
general assignment for the benefit of its creditors; or
(f) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy
Law
that (i) is for relief against the Company in an involuntary case, (ii) appoints
a Custodian of the Company or for all or substantially all of its property,
or
(iii) orders the liquidation of the Company; and the order or decree remains
unstayed and in effect for 30 consecutive days; or
(g) default
in the deposit of any sinking fund payment when due; or
(h) any
other
Event of Default provided with respect to Securities of that series in
accordance with Section 3.1.
Section 5.2. Acceleration
of Maturity; Rescission and Annulment.
If
an
Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee
or the
Holders of a specified percentage in aggregate principal amount of the
Outstanding Securities of that series may declare the principal amount (or,
if
the Securities of that series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of that
series)
of all of the Securities of that series to be due and payable immediately,
by a
notice in writing to the Company (and to the Trustee if given by Holders),
and
upon any such declaration such principal amount (or specified amount) shall
become immediately due and payable. Notwithstanding the foregoing, if an
Event
of Default specified in clause (e) or (f) of Section 5.1
occurs,
the Securities of any series at the time Outstanding shall be due and payable
immediately without further action or notice.
At
any
time after such a declaration of acceleration with respect to Securities
of any
series has been made and before a judgment or decree for payment of the money
due has been obtained by the Trustee as hereinafter in this Article Five
provided, the Holders of a majority in principal amount of the Outstanding
Securities of that series, by written notice to the Company and the Trustee,
may
rescind and annul such declaration and its consequences if:
(a) the
Company or, if applicable, one or more of the Guarantors has paid or deposited
with the Trustee a sum sufficient to pay:
(i) all
overdue interest on all Securities of that series,
(ii) the
principal of (and premium, if any, on) any Securities of that series which
have
become due otherwise than by such declaration of acceleration and any interest
thereon at the rate or rates prescribed therefor in such
Securities,
(iii) to
the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate or rates prescribed therefor in such Securities, and
(iv) all
sums
paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel;
and
(b) all
Events of Default with respect to Securities of that series, other than the
non-payment of the principal of Securities of that series which have become
due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 5.13.
No
such
rescission shall affect any subsequent default or impair any right consequent
thereon.
Section 5.3. Collection
of Indebtedness and Suits for Enforcement by Trustee.
The
Company covenants that if:
(a) default
is made in the payment of any installment of interest on any Security when
such
interest becomes due and payable and such default continues for a period
of 30
days (regardless of whether such payment is prohibited by the provisions
of
Article Fifteen
hereof),
or
(b) default
is made in the payment of the principal of (or premium, if any, on) any Security
at the Maturity thereof (regardless of whether such payment is prohibited
by the
provisions of Article Fifteen
hereof),
the
Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent
that
payment of such interest shall be legally enforceable, interest on any overdue
principal and any premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances
of
the Trustee, its agents and counsel.
If
the
Company fails to pay such amounts forthwith upon such demand, the Trustee,
in
its own name and as trustee of an express trust, may institute a judicial
proceeding for the collection of the sums so due and unpaid, may prosecute
such
proceeding to judgment or final decree and may enforce the same against the
Company or, if applicable, the Guarantors or any other obligor upon such
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or, if applicable,
the
Guarantors or any other obligor upon such Securities, wherever
situated.
If
an
Event of Default with respect to Securities of any series occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce
its
rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual
to
protect and enforce any such rights, whether for the specific enforcement
of any
covenant or agreement in this Indenture or in aid of the exercise of any
power
granted herein, or to enforce any other proper remedy.
Section 5.4. Trustee
May File Proofs of Claim.
In
case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or, if applicable, any Guarantor or any
other
obligor upon the Securities, their property or their creditors, the Trustee
(irrespective of whether the principal of the Securities 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 on the Company or, if applicable,
the Guarantors for the payment of overdue principal or interest) shall be
entitled and empowered, by intervention in such proceeding or
otherwise,
(a) to
file
and prove a claim for the whole amount of principal (and premium, if any)
and
interest owing and unpaid in respect of the Securities and to file such other
papers or documents as may be necessary or advisable in order to have the
claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the
Holders allowed in such judicial proceeding, and
(b) to
collect and receive any moneys or other property payable or deliverable on
any
such claims and to distribute the same;
and
any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by
each
Holder to make such payments to the Trustee and, if the Trustee shall consent
to
the making of such payments directly to the Holders, to pay to the Trustee
any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due
the
Trustee under Section 6.7.
No
provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of
reorganization, compromise, arrangement, adjustment or composition affecting
the
Securities or, if applicable, the Securities Guarantee or the rights of any
Holder thereof or to authorize the Trustee to vote in respect of the claim
of
any Holder in any such proceeding; provided,
however,
that
the Trustee may, on behalf of the Holders, vote for the election of a trustee
in
bankruptcy or similar official and be a member of a creditors’ or other similar
committee.
Section 5.5. Trustee
May Enforce Claims Without Possession of Securities.
All
rights of action and claims under this Indenture or the Securities may be
prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto,
and any
such proceeding instituted by the Trustee shall be brought in its own name
as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit
of
the Holders of the Securities in respect of which such judgment has been
recovered.
Section 5.6. Application
of Money Collected.
Any
money
collected by the Trustee pursuant to this Article Five
shall be
applied in the following order, at the date or dates fixed by the Trustee
and,
in case of the distribution of such money on account of principal or any
premium
or interest, upon presentation of the Securities and the notation thereon
of the
payment if only partially paid and upon surrender thereof if fully
paid:
FIRST:
To
the payment of all amounts due the Trustee under Section 6.7;
SECOND:
Subject to Article Fifteen,
to the
payment of the amounts then due and unpaid for principal of and any premium
and
interest on the Securities in respect of which or for the benefit of which
such
money has been collected, ratably, without preference or priority of any
kind,
according to the amounts due and payable on such Securities for principal
and
any premium and interest, respectively; and
THIRD:
The balance, if any, to the Company.
Section 5.7. Limitation
on Suits.
No
Holder
of any Security of any series shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture (including, if applicable,
the Securities Guarantee), or for the appointment of a receiver or trustee,
or
for any other remedy hereunder, unless:
(a) such
Holder has previously given written notice to the Trustee of a continuing
Event
of Default with respect to the Securities of that series;
(b) the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(c) such
Holder or Holders have offered to the Trustee reasonable indemnity against
the
costs, expenses and liabilities to be incurred in compliance with such
request;
(d) the
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity has failed to institute any such proceeding; and
(e) no
direction inconsistent with such written request has been given to the Trustee
during such 60-day period by the Holders of a majority in principal amount
of
the Outstanding Securities of that series;
it
being
understood and intended that no one or more of such Holders shall have any
right
in any manner whatever by virtue of, or by availing of, any provision of
this
Indenture to affect, disturb or prejudice the rights of any other of such
Holders, or to obtain or to seek to obtain priority or preference over any
other
of such Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all such
Holders.
Section 5.8. Unconditional
Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding
any other provision in this Indenture, the Holder of any Security shall have
the
right, which is absolute and unconditional, to receive payment of the principal
of and any premium and (subject to Section 3.5
and
Section 3.7)
interest on such Security on the Stated Maturity or Maturities expressed
in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 5.9. Restoration
of Rights and Remedies.
If
the
Trustee or any Holder has instituted any proceeding to enforce any right
or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee
or to
such Holder, then and in every such case, subject to any determination in
such
proceeding, the Company, the Guarantors, the Trustee and the Holders shall
be
restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 5.10. Rights
and Remedies Cumulative.
Except
as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities in the last paragraph of Section 3.6,
no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and
in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of
any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11. Delay
or Omission Not Waiver.
To
fullest extent permitted by applicable law, no delay or omission of the Trustee
or of any Holder of any Securities to exercise any right or remedy accruing
upon
any Event of Default shall impair any such right or remedy or constitute
a
waiver of any such Event of Default or an acquiescence therein. Every right
and
remedy given by this Article Five
or by
law to the Trustee or to the Holders may be exercised from time to time,
and as
often as may be deemed expedient, by the Trustee or by the Holders, as the
case
may be.
Section 5.12. Control
by Holders.
The
Holders of not less than a majority in principal amount of the Outstanding
Securities of any series 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 the
Securities of such series; provided,
however,
that:
(a) such
direction shall not be in conflict with any rule of law or with this
Indenture;
(b) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction; and
(c) subject
to the provisions of Section 6.1,
the
Trustee shall have the right to decline to follow any such direction if the
Trustee in good faith shall determine that the proceeding so directed would
involve the Trustee in personal liability.
Section 5.13. Waiver
of Past Defaults.
By
written notice to the Company and the Trustee, the Holders of not less than
a
majority in principal amount of the Outstanding Securities of any series
may on
behalf of the Holders of all the Securities of such series waive any past
default hereunder with respect to such series and its consequences,
except:
(a) a
continuing default in the payment of the principal of or any premium or interest
on any Security of such series, or
(b) a
default
in respect of a covenant or provision hereof which under Article Nine
cannot
be modified or amended without the consent of the Holder of each Outstanding
Security of such series affected.
Upon
any
such waiver, such default shall cease to exist, and any Event of Default
arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture, but no such waiver shall extend to any subsequent or other default
or
impair any right consequent thereon.
Section 5.14. Undertaking
for 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,
suffered or omitted by it as Trustee, the filing by any party litigant, other
than the Trustee, in such suit of an undertaking to pay the costs of such
suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys’ fees, 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 5.14
shall
not apply to any suit instituted by the Company, to any suit instituted by
the
Trustee, to any suit instituted by any Holder, or group of Holders, holding
in
the aggregate more than 10% in principal amount of the Outstanding Securities
of
any series, or to any suit instituted by any Holder for the enforcement of
the
payment of the principal of (or premium, if any) or interest on any Security
on
or after the Stated Maturity or Maturities expressed in such Security (or,
in
the case of redemption, on or after the Redemption Date).
Section 5.15. Waiver
of Stay or Extension Laws.
Each
of
the Company and the Guarantors covenants (to the extent that it may lawfully
do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law
wherever enacted, now or at any time hereafter in force, which may affect
the
covenants or the performance of this Indenture; and each of the Company and
the
Guarantors (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee,
but
will suffer and permit the execution of every such power as though no such
law
had been enacted.
ARTICLE SIX
THE
TRUSTEE
Section 6.1. Certain
Duties and Responsibilities.
(a) Except
during the continuance of an Event of Default,
(i) the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and as are provided by the Trust
Indenture Act, and no implied covenants or obligations shall be read into
this
Indenture against the Trustee; and
(ii) in
the
absence of bad faith on its part, the Trustee may conclusively rely, as to
the
truth of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and conforming to
the
requirements of this Indenture; but in the case of any such 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 they conform to the requirements of this
Indenture.
(b) In
case
an Event of Default has occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by this Indenture, and use the
same
degree of care and skill in their exercise, as a prudent man would exercise
or
use under the circumstances in the conduct of his own affairs.
(c) 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 willful misconduct, except that
(i) this
Subsection shall not be construed to limit the effect of Subsection (a)
of this
Section;
(ii) the
Trustee shall not be liable for any error of judgment made in good faith
by a
Responsible Officer, unless it shall be proved that the Trustee was negligent
in
ascertaining the pertinent facts;
(iii) 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
of a
majority in principal amount of the Outstanding Securities of any series,
given
pursuant to Section 5.12,
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 with respect to the Securities of such
series;
and
(iv) no
provision of this Indenture shall require the Trustee to expend or risk its
own
funds or otherwise incur any financial liability in the performance of any
of
its duties hereunder, or in the exercise of any of its rights or powers,
if it
shall have reasonable grounds for believing that repayment of such funds
or
adequate indemnity against such risk or liability is not reasonably assured
to
it.
(d) Regardless
of whether therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to
the Trustee shall be subject to the provisions of this Section.
Section 6.2. Notice
of Defaults.
Within
90
days after the occurrence of any Default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders
of
Securities of such series, as their names and addresses appear in the Security
Register, notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided,
however,
that,
except in the case of a Default in the payment of the principal of or any
premium or interest on any Security of such series or in the payment of any
sinking fund installment with respect to Securities of such series, the Trustee
may withhold from Holders of Securities notice of any continuing Default
or
Event of Default if the Trustee in good faith determines that the withholding
of
such notice is in the interest of the Holders of Securities of such series;
and,
provided,
further,
that in
the case of any Default of the character specified in Section 5.1(c)
with
respect to Securities of such series, no such notice to Holders shall be
given
until at least 90 days after the occurrence thereof and that in the case
of any
Default of the character specified in Section 5.1(d)
with
respect to Securities of such series, no such notice to Holders shall be
given
until at least 180 days after the occurrence thereof.
Section 6.3. Certain
Rights of Trustee.
Subject
to the provisions of Section 6.1:
(a) the
Trustee may conclusively rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness 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 or direction of the Company or a Guarantor mentioned herein shall
be
sufficiently evidenced by a Company Request or Company Order (other than
delivery of any Security to the Trustee for authentication and delivery pursuant
to Section 3.3,
which
shall be sufficiently evidenced as provided therein) and any resolution of
the
Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever
in the administration of this Indenture the Trustee shall deem it desirable
that
a matter be proved or established prior to taking, suffering or omitting
any
action hereunder, the Trustee (unless other evidence be herein specifically
prescribed) shall be entitled to receive and may, in the absence of bad faith
on
its part, rely upon an Officer’s Certificate;
(d) the
Trustee may consult with counsel and the advice of such counsel or any Opinion
of Counsel shall be full and complete authorization and protection in respect
of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e) the
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the
Holders
pursuant to this Indenture, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or
direction;
(f) 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, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in
its
discretion, may make such further inquiry or investigation into such facts
or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney;
(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 and the Trustee
shall not be responsible for any misconduct or negligence on the part of
any
agent or attorney appointed with due care by it hereunder and shall not be
responsible for the supervision of officers and employees of such agents
or
attorneys;
(h) the
Trustee may request that the Company and, if applicable, the Guarantors deliver
an Officer’s Certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take specified actions pursuant to this
Indenture, which Officer’s Certificate may be signed by any person authorized to
sign an Officer’s Certificate, including any person specified as so authorized
in any such certificate previously delivered and not superseded;
(i) the
Trustee shall be entitled to the rights and protections afforded to the Trustee
pursuant to this Article Six
in
acting as a Paying Agent or Security Registrar hereunder; and
(j) the
Trustee shall not be deemed to have notice of any Default or Event of Default
unless a Responsible Officer of the Trustee has actual knowledge thereof
or
unless written notice of any event which is in fact such a default is received
by the Trustee at the Corporate Trust Office of the Trustee, and such notice
references the Notes and this Indenture.
Section 6.4. Not
Responsible for Recitals or Issuance of Securities.
The
recitals contained herein and in the Securities, except the Trustee’s
certificates of authentication, shall be taken as the statements of the Company
or, if applicable, the Guarantors, and the Trustee or any Authenticating
Agent
assumes no responsibility for their correctness. Neither the Trustee nor
any
Authenticating Agent makes any representations as to the validity or sufficiency
of this Indenture or of the Securities. The Trustee or any Authenticating
Agent
shall not be accountable for the use or application by the Company of Securities
or the proceeds thereof.
Section 6.5. May
Hold Securities.
The
Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar
or
any other agent of the Company or, if applicable, any Guarantor, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to Sections 310(b) and 311 of the Trust Indenture Act and
Section 6.8,
Section 6.9
and
Section 6.13,
may
otherwise deal with the Company or, if applicable, the Guarantors with the
same
rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent,
Security Registrar or such other agent.
Section 6.6. Money
Held in Trust.
Money
held by the Trustee in trust hereunder need not be segregated from other
funds
except to the extent required by law. The Trustee shall be under no liability
for interest on any money received by it hereunder except as otherwise agreed
in
writing with the Company or, if applicable, one or more of the
Guarantors.
Section 6.7. Compensation
and Reimbursement.
The
Company agrees:
(a) to
pay to
the Trustee from time to time reasonable compensation for all services rendered
by it hereunder (which compensation shall not be limited by any provision
of law
in regard to the compensation of a trustee of an express trust);
(b) except
as
otherwise expressly provided herein, to reimburse the Trustee upon its request
for all reasonable expenses, disbursements and advances incurred or made
by the
Trustee in accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents
and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to
indemnify each of the Trustee and its officers, directors, agents and employees
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence or willful misconduct on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any
of its
powers or duties hereunder.
As
security for the performance of the obligations of the Company under this
Section the Trustee shall have a lien prior to the Securities upon all property
and funds held or collected by the Trustee as such, except funds held in
trust
for the payment of principal of (and premium, if any) or interest on particular
Securities.
Without
limiting any rights available to the Trustee under applicable law, when the
Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 5.1(e)
or
Section 5.1(f),
the
expenses (including the reasonable charges and expenses of its counsel) and
the
compensation for the services of the Trustee are intended to constitute expenses
of administration under any applicable Bankruptcy Law.
The
provisions of this Section 6.7
shall
survive the satisfaction and discharge of this Indenture and the Legal
Defeasance of the Securities.
Section 6.8. Disqualification;
Conflicting Interests.
Reference
is made to Section 310(b) of the Trust Indenture Act. There shall be excluded
from the operation of Section 310(b)(1) of the Trust Indenture Act this
Indenture with respect to the Securities of more than one series.
Section 6.9. Corporate
Trustee Required; Eligibility.
There
shall at all times be a Trustee hereunder which shall be a corporation organized
and doing business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus required by
the
Trust Indenture Act, subject to supervision or examination by Federal or
State
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said 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.
The
Trustee shall not be an obligor upon the Securities or an Affiliate thereof.
If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and
with
the effect hereinafter specified in this Article Six.
Section 6.10. Resignation
and Removal; Appointment of Successor.
(a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 6.11.
(b) The
Trustee may resign at any time with respect to the Securities of one or more
series by giving written notice thereof to the Company. If the instrument
of
acceptance by a successor Trustee required by Section 6.11
shall
not have been delivered to the Trustee within 30 days after the giving of
such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(c) The
Trustee may be removed at any time with respect to the Securities of any
series
by Act of the Holders of a majority in principal amount of the Outstanding
Securities of such series, delivered to the Trustee and to the
Company.
(d) If
at any
time:
(i) the
Trustee shall fail to comply with Section 310(b) of the Trust Indenture Act
after written request therefor by the Company or by any Holder who has been
a
bona fide Holder of a Security for at least six months, or
(ii) the
Trustee shall cease to be eligible under Section 6.9
and
shall fail to resign after written request therefor by the Company or by
any
such Holder, or
(iii) the
Trustee shall become incapable of acting or shall be adjudged a bankrupt
or
insolvent or a receiver 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, (A) the Company by a Board Resolution
may
remove the Trustee with respect to all Securities, or (B) subject to
Section 5.14,
any
Holder who has been a bona fide Holder of a Security 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 with respect to
all
Securities and the appointment of a successor Trustee or Trustees.
(e) If
the
Trustee shall resign, be removed or become incapable of acting, or if a vacancy
shall occur in the office of Trustee for any cause, with respect to the
Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees with respect to the Securities
of that or those series (it being understood that any such successor Trustee
may
be appointed with respect to the Securities of one or more or all of such
series
and that at any time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with the applicable
requirements of Section 6.11.
If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series delivered to
the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 6.11,
become
the successor Trustee with respect to the Securities of such series and to
that
extent supersede the successor Trustee appointed by the Company. If no successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Company or the Holders and accepted appointment in the manner
required by Section 6.11,
any
Holder who has been a bona fide Holder of a Security 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 appointment of a successor Trustee
with respect to the Securities of such series.
(f) The
Company shall give notice of each resignation and each removal of the Trustee
with respect to the Securities of any series and each appointment of a successor
Trustee with respect to the Securities of any series to all Holders of
Securities of such series in the manner provided in Section 1.7.
Each
notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.
Section 6.11. Acceptance
of Appointment by Successor.
(a) In
case
of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee so appointed shall execute, acknowledge
and deliver to the Company, the Guarantors (if applicable) and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with
all the rights, powers, trusts and duties of the retiring Trustee; but, on
the
request of the Company or, if applicable, any Guarantor or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute
and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer
and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder.
(b) In
case
of the appointment hereunder of a successor Trustee with respect to the
Securities of one or more (but not all) series, the Company, the Guarantors
(if
applicable), the retiring Trustee and each successor Trustee with respect
to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such appointment
and which (i) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and to vest in, each successor Trustee all the
rights, powers, trusts and duties of the retiring Trustee with respect to
the
Securities of that or those series to which the appointment of such successor
Trustee relates, (ii) if the retiring Trustee is not retiring with respect
to
all Securities, shall contain such provisions as shall be deemed necessary
or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as
to
which the retiring Trustee is not retiring shall continue to be vested in
the
retiring Trustee, and (iii) 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 hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery
of
such supplemental indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested
with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company, any Guarantor
(if
applicable) or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held
by
such retiring Trustee hereunder with respect to the Securities of that or
those
series to which the appointment of such successor Trustee relates.
(c) Upon
request of any such successor Trustee, the Company and, if applicable, the
Guarantors shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers
and
trusts referred to in paragraph (a) or (b) of this Section, as the case may
be.
(d) No
successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this
Article and the Trust Indenture Act.
Section 6.12. Merger,
Conversion, Consolidation or Succession to Business.
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 all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article Six,
without
the execution or filing of any paper or any further act on the part of any
of
the parties hereto. In case any Securities shall have been authenticated,
but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same
effect
as if such successor Trustee had itself authenticated such
Securities.
Section 6.13. Preferential
Collection of Claims Against Company.
Reference
is made to Section 311 of the Trust Indenture Act. For purposes of Section
311(b) of the Trust Indenture Act,
(a) the
term
“cash transaction” means 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;
(b) the
term
“self-liquidating paper” means any draft, bill of exchange, acceptance or
obligation which is made, drawn, negotiated or incurred by the Company or,
if
applicable, any Guarantor for the purpose of financing the purchase, processing,
manufacturing, 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 Company or, if applicable,
such Guarantor arising from the making, drawing, negotiating or incurring
of the
draft, bill of exchange, acceptance or obligation.
Section 6.14. Appointment
of Authenticating Agent.
The
Trustee may appoint an Authenticating Agent or Agents with respect to one
or
more series of Securities which shall be authorized to act on behalf of the
Trustee to authenticate Securities of such series issued upon exchange,
registration of transfer or partial redemption thereof or pursuant to
Section 3.6,
and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by
the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or 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
and a certificate of authentication executed on behalf of the Trustee by
an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating
Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority,
then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus
as
set forth in its most recent report of condition so published. If at any
time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any
corporation into which an 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 such Authenticating Agent shall be a
party,
or any corporation succeeding to all or substantially all of the corporate
agency or corporate trust business of an Authenticating Agent, shall continue
to
be an Authenticating Agent, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper
or any
further act on the part of the Trustee or the Authenticating Agent.
An
Authenticating Agent may resign at any time by giving written notice thereof
to
the Trustee and to the Company and, if applicable, the Guarantors. 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 Company and,
if
applicable, the Guarantors. Upon receiving such a notice of resignation or
upon
such a termination, or in case at any time such Authenticating Agent shall
cease
to be eligible in accordance with the provisions of this Section, the Trustee
may appoint a successor Authenticating Agent which shall be acceptable to
the
Company and, if applicable, the Guarantors and shall mail written notice
of such
appointment by first-class mail, postage prepaid, to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve,
as
their names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder,
with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions
of
this Section.
Except
with respect to an Authenticating Agent appointed at the request of the Company
or, if applicable, the Guarantors, the Trustee agrees to pay to each
Authenticating Agent from time to time reasonable compensation for its services
under this Section 6.14,
and the
Trustee shall be entitled to be reimbursed by the Company or, if applicable,
the
Guarantors for such payments, subject to the provisions of Section 6.7.
If
an
appointment with respect to one or more series is made pursuant to this
Section 6.14,
the
Securities of such series may have endorsed thereon, in addition to the
Trustee’s certificate of authentication, an alternate certificate of
authentication in the following form:
This
is
one of the Securities of the series designated therein referred to in the
within-mentioned Indenture.
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[_________________________________________],
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As
Trustee
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By:
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As
Authenticating Agent
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By:
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Authorized
Officer
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ARTICLE SEVEN
HOLDERS’
LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1. Company
to Furnish Trustee Names and Addresses of Holders.
The
Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually,
not more than 15 days after each Regular Record Date for a series of Securities,
a list for such series of Securities, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Securities of such
series
as of such Regular Record Date, and
(b) at
such
other times as the Trustee may request in writing, within 30 days after the
receipt by the Company of any such request, a list of similar form and content
as of a date not more than 15 days prior to the time such list is furnished;
provided,
however,
that if
and so long as the Trustee shall be the Security Registrar, no such list
need be
furnished with respect to such series of Securities.
Section 7.2. Preservation
of Information; Communications to Holders.
(a) The
Trustee shall preserve, in as current a form as is reasonably practicable,
the
names and addresses of Holders contained in the most recent list furnished
to
the Trustee as provided in Section 7.1
and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as provided
in Section 7.1
upon
receipt of a new list so furnished.
(b) If
three
or more Holders (herein 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 with respect to their rights under this Indenture
or under the Securities and 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
such applicants access to the information preserved at the time by the Trustee
in accordance with Section 7.2(a),
or
(ii) inform
such applicants as to the approximate number of Holders whose names and
addresses appear in the information preserved at the time by the Trustee
in
accordance with Section 7.2(a),
and as
to the approximate cost of mailing to such Holders the form of proxy or other
communication, if any, specified in such application.
If
the
Trustee shall elect not to afford such applicants access to such information,
the Trustee shall, upon the written request of such applicants, mail to each
Holder whose name and address appear in the information preserved at the
time by
the Trustee in accordance with Section 7.2(a)
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 SEC, 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 interest of the Holders
or
would be in violation of applicable law. Such written statement shall specify
the basis of such opinion. If the SEC, 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 SEC 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 Holders 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) Every
Holder of Securities, by receiving and holding the same, agrees with the
Company, the Guarantors (if applicable) and the Trustee that none of the
Company, the Guarantors (if applicable) nor the Trustee nor any agent of
any of
them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with
Section 7.2(b),
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 Section 7.2(b).
Section 7.3. Reports
by Trustee.
Any
Trustee’s report required pursuant to Section 313(a) of the Trust Indenture Act
shall be dated as of May 15, and shall be transmitted within 60 days after
May
15 of each year (but in all events at intervals of not more than 12 months),
commencing with the year 20__, by mail to all Holders, as their names and
addresses appear in the Security Register. A copy of each such report shall,
at
the time of such transmission to Holders, be filed by the Trustee with each
stock exchange upon which any Securities are listed, with the SEC and with
the
Company. The Company will notify the Trustee when any Securities are listed
on
any stock exchange.
Section 7.4. Reports
by Company.
So
long
as clauses (1), (2) and (3) of Section 314(a) of the Trust Indenture Act
(or any
successor provisions of law) are applicable to this Indenture, the Company
shall:
(a) file
with
the Trustee, within 15 days after the Company files the same with the SEC,
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 SEC may from time
to
time by rules and regulations prescribe) which the Company may be required
to
file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange
Act; or, if the Company is not required to file information, documents or
reports pursuant to either of said Sections, then it shall file with the
Trustee
and the SEC, in accordance with rules and regulations prescribed from time
to
time by the SEC, such of the supplementary and periodic information, documents
and reports which may be required pursuant to Section 13 of the Exchange
Act in
respect of a security listed and registered on a national securities exchange
as
may be prescribed from time to time in such rules and regulations;
(b) file
with
the Trustee and the SEC, in accordance with rules and regulations prescribed
from time to time by the SEC, such additional information, documents and
reports
with respect to compliance by the Company with the conditions and covenants
of
this Indenture as may be required from time to time by such rules and
regulations; and
(c) transmit
by mail to all Holders, as their names and addresses appear in the Security
Register, within 30 days after the filing thereof with the Trustee, such
summaries of any information, documents and reports required to be filed
by the
Company pursuant to clauses (a) and (b) of this Section as may be required
by
rules and regulations prescribed from time to time by the SEC.
ARTICLE EIGHT
CONSOLIDATION,
AMALGAMATION, MERGER AND SALE
Section 8.1. Company
May Consolidate, Etc., Only on Certain Terms.
The
Company shall not consolidate or merge with or into any other Person or sell,
convey, transfer, lease or otherwise dispose of all or substantially all
of the
properties and assets of the Company and, if applicable, the Guarantors on
a
consolidated basis to any other Person unless:
(a) either:
(i) the Company is the surviving Person; or (ii) the Person formed by or
surviving any such consolidation, amalgamation or merger or resulting from
such
conversion (if other than the Company) or to which such sale, assignment,
transfer, conveyance or other disposition has been made is a corporation,
limited liability company or limited partnership organized or existing under
the
laws of the United States, any state of the United States or the District
of
Columbia;
(b) the
Person formed by or surviving any such conversion, consolidation, amalgamation
or merger (if other than the Company) or the Person to which such sale,
assignment, transfer, conveyance or other disposition has been made assumes
all
the obligations of the Company under the Securities and this Indenture pursuant
to agreements reasonably satisfactory to the Trustee;
(c) immediately
after giving effect to such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have occurred and be continuing; and
(d) the
Company has delivered to the Trustee an Officer’s Certificate and an Opinion of
Counsel, each stating that such consolidation, amalgamation, merger, conveyance,
sale, transfer or lease and such supplemental indenture, if any, comply with
this Article Eight
and that
all conditions precedent herein provided for relating to such transaction
have
been complied with.
Section 8.2. Successor
Substituted.
Upon
any
consolidation or merger of the Company with or into any other Person or any
sale, conveyance, transfer, lease or other disposition of all or substantially
all of the properties and assets of the Company and, if applicable, the
Guarantors on a consolidated basis in accordance with Section 8.1,
the
successor or resulting Person formed by or resulting upon such consolidation
or
merger (if other than the Company) or to which such sale, conveyance, transfer,
lease or other disposition is made shall succeed to, and be substituted for,
and
may exercise every right and power of, the Company under this Indenture with
the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Company and
each
of the Guarantors shall be relieved of all obligations and covenants under
this
Indenture and the Securities.
ARTICLE NINE
AMENDMENT,
SUPPLEMENT
AND WAIVER
Section 9.1. Without
Consent of Holders.
The
Company, the Guarantors and the Trustee may amend or supplement this indenture,
the Securities Guarantees or the Securities without the consent of any holder
of
a Security:
(a) to
cure
any ambiguity or to correct or supplement any provision herein that may be
inconsistent with any other provision herein; or
(b) to
evidence the succession of another Person to the Company and the assumption
by
any such successor of the covenants of the Company herein and, to the extent
applicable, to the Securities; or
(c) to
provide for uncertificated Securities in addition to or in place of certificated
Securities; provided
that the
uncertificated Securities are issued in registered form for purposes of Section
163(f) of the Code, or in the manner such that the uncertificated Securities
are
described in Section 163(f)(2)(B) of the Code; or
(d) to
add a
Securities Guarantee and cause any Person to become a Guarantor, and/or to
evidence the succession of another Person to a Guarantor and the assumption
by
any such successor of the Securities Guarantee of such Guarantor herein and,
to
the extent applicable, endorsed upon any Securities of any series;
or
(e) to
secure
the Securities of any series; or
(f) to
add to
the covenants of the Company such further covenants, restrictions, conditions
or
provisions as the Company shall consider to be appropriate for the benefit
of
the Holders of all or any series of Securities (and if such covenants,
restrictions, conditions or provisions are to be for the benefit of less
than
all series of Securities, stating that such covenants are expressly being
included solely for the benefit of such series) or to surrender any right
or
power herein conferred upon the Company 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,
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; or
(g) to
make
any change to any provision of this Indenture that does not adversely affect
the
rights or interests of any Holder of Securities; or
(h) provide
for the issuance of additional Securities in accordance with the provisions
set
forth in this Indenture on the date of this Indenture; or
(i) to
add
any additional Defaults or Events of Default in respect of all or any series
of
Securities; or
(j) to
add
to, change or eliminate any of the provisions of this Indenture to such extent
as shall be necessary to permit or facilitate the issuance of Securities
in
bearer form, registrable or not registrable as to principal, and with or
without
interest coupons; or
(k) to
change
or eliminate any of the provisions of this Indenture; provided
that any
such change or elimination shall become effective only when there is no Security
Outstanding of any series created prior to the execution of such supplemental
indenture that is entitled to the benefit of such provision; or
(l) to
establish the form or terms of Securities of any series as permitted by
Section 2.1
and
Section 3.1,
including to reopen any series of any Securities as permitted under Section 3.1;
or
(m) 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(b);
or
(n) to
conform the text of the indenture (and/or any supplemental indenture) or
any
debt securities issued thereunder to any provision of a description of such
debt
securities appearing in a prospectus or prospectus supplement or an offering
memorandum or offering circular to the extent that such provision was intended
to be a verbatim recreation of a provision of the indenture (and/or any
supplemental indenture) or any debt securities issued thereunder;
or
(o) to
modify, eliminate or add to the provisions of this Indenture to such extent
as
shall be necessary to effect the qualification of this Indenture under the
Trust
Indenture Act or under any similar federal statute subsequently enacted,
and to
add to this Indenture such other provisions as may be expressly required
under
the Trust Indenture Act.
Upon
the
request of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental indenture,
the
Trustee is hereby authorized to join with the Company and any Guarantor in
the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations that may be therein contained and to accept the
conveyance, transfer, assignment, mortgage, charge or pledge of any property
thereunder, but the Trustee shall not be obligated to enter into any such
supplemental indenture that affects the Trustee’s own rights, duties or
immunities under this Indenture or otherwise.
Section 9.2. With
Consent of Holders.
The
Company and the Trustee may amend or supplement this Indenture, the Securities
Guarantees and the Securities with the consent of the Holders of a majority
in
aggregate principal amount of the Outstanding Securities of each series of
Securities affected by such amendment or supplemental indenture, with each
such
series voting as a separate class (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for
Securities) and, subject to Section 5.8
and
Section 5.13
hereof,
any existing Default or Event of Default or compliance with any provision
of
this Indenture, the Securities Guarantees or the Securities may be waived
with
respect to each series of Securities with the consent of the Holders of a
majority in principal amount of the Outstanding Securities of such series
voting
as a separate class (including consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Securities).
Upon
the
request of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental indenture,
and
upon the filing with the Trustee of evidence satisfactory to the Trustee
of the
consent of the Holders of Securities as aforesaid, and upon receipt by the
Trustee of the documents described in Section 6.3
hereof,
the Trustee will join with the Company and the Guarantors in the execution
of
such amended or supplemental indenture unless such amended or supplemental
indenture directly affects the Trustee’s own rights, duties or immunities under
this Indenture or otherwise, in which case the Trustee may in its discretion,
but will not be obligated to, enter into such amended or supplemental
Indenture.
It
is not
necessary for the consent of the Holders of Securities under this Section 9.2
to
approve the particular form of any proposed amendment, supplement or waiver,
but
it is sufficient if such consent approves the substance of the proposed
amendment, supplement or waiver.
After
an
amendment, supplement or waiver under this Section 9.2
becomes
effective, the Company will mail to the Holders of Securities affected thereby
a
notice briefly describing the amendment, supplement or waiver. Any failure
of
the Company to mail such notice, or any defect therein, will not, however,
in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver. Subject to Section 5.8
and
Section 5.13
hereof,
the application of or compliance with, either generally or in any particular
instance, of any provision of this Indenture, the Securities or the Securities
Guarantees may be waived as to each series of Securities by the Holders of
a
majority in aggregate principal amount of the Outstanding Securities of such
series. However, without the consent of each Holder affected, an amendment,
supplement or waiver under this Section 9.2
may not
(with respect to any Securities held by a non-consenting Holder):
(a) change
the Stated Maturity of the principal of, or any installment of principal
of or
interest on, any Security, or reduce the principal amount thereof or the
rate of
interest thereon or any premium payable upon the redemption thereof, or reduce
the amount of the principal of an Original Issue Discount Security that would
be
due and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 5.2,
or
change any Place of Payment where, or the coin or currency in which, any
Security or any premium or the interest thereon is payable, or impair the
right
to institute suit for the enforcement of any such payment on or after the
Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or
(b) reduce
the percentage in principal amount of the Outstanding Securities of any series,
the consent of whose Holders is required for any such supplemental indenture,
or
the consent of whose Holders is required for any waiver (of compliance with
certain provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or
(c) modify
any of the provisions of this Section 9.2,
Section 5.8,
Section 5.13
or
Section 10.6,
except
to increase any such percentage or to provide that certain other provisions
of
this Indenture cannot be modified or waived without the consent of the Holder
of
each Outstanding Security affected thereby, provided,
however,
that
this clause (c) shall not be deemed to require the consent of any Holder
with
respect to changes in the references to “the Trustee” and concomitant changes in
this Section, or the deletion of this proviso, in accordance with the
requirements of Section 6.11(b)
and
Section 9.1(i);
or
(d) waive
a
redemption payment with respect to any Security; provided,
however,
that
any purchase or repurchase of Securities shall not be deemed a redemption
of the
Securities; or
(e) release
any Guarantor from any of its obligations under its Securities Guarantee
or this
Indenture, except in accordance with the terms of this Indenture (as
supplemented by any supplemental indenture); or
(f) make
any
change in the foregoing amendment and waiver provisions.
A
supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture that has expressly been included solely for the
benefit of one or more particular series of Securities, or that modifies
the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
Section 9.3. Execution
of Supplemental Indentures.
In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.1)
shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but 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.
Section 9.4. Effect
of Supplemental Indentures.
Upon
the
execution of any supplemental indenture under this Article Nine,
this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 9.5. Conformity
with Trust Indenture Act.
Every
supplemental indenture executed pursuant to this Article Nine
shall
conform to the requirements of the Trust Indenture Act as then in
effect.
Section 9.6. Reference
in Securities to Supplemental Indentures.
Securities
of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Nine
may, and
shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If
the
Company shall so determine, new Securities of any series so modified as to
conform, in the opinion of the Trustee and the Company, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities of such
series.
ARTICLE TEN
COVENANTS
Section 10.1. Payment
of Principal, Premium and Interest.
The
Company covenants and agrees for the benefit of each series of Securities
that
it will duly and punctually pay the principal of and any premium and interest
on
the Securities of that series in accordance with the terms of the Securities
and
this Indenture.
Section 10.2. Maintenance
of Office or Agency.
The
Company will maintain in the United States, an office or agency (which may
be an
office of the Trustee or Registrar or agent of the Trustee or Registrar)
where
Securities of that series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration of transfer
or
exchange and where notices and demands to or upon the Company in respect
of the
Securities of that series and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change
in the
location, of such office or agency. If at any time the Company shall fail
to
maintain any such required office or agency or shall fail to furnish the
Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee.
The
Company may also from time to time designate one or more other offices or
agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind
such
designations. The Company will give prompt written notice to the Trustee
of any
such designation or rescission and of any change in the location of any such
other office or agency.
Except
as
otherwise specified with respect to a series of Securities as contemplated
by
Section 3.1,
the
Company hereby initially designates the office of the Trustee located at
[__________________________________________],
as the
Company’s office or agency for each such purpose for each series of
Securities.
Section 10.3. Money
for Securities Payments to Be Held in Trust.
If
the
Company shall at any time act as its own Paying Agent, with respect to any
series of Securities, it will, on or before each due date of the principal
of
and any premium or interest on any of the Securities of that series, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal and any premium and interest so becoming
due
until such sums shall be paid to such Persons or otherwise disposed of as
herein
provided and will promptly notify the Trustee of its action or failure so
to
act.
Whenever
the Company shall have one or more Paying Agents for any series of Securities,
it will, prior to each due date of the principal of and any premium or interest
on any Securities of that series, deposit with a Paying Agent a sum sufficient
to pay the principal and any premium or interest so becoming due, such sum
to be
held in trust for the benefit of the Persons entitled to such principal,
premium
or interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act. For purposes
of
this Section 10.3,
should
a due date for principal of and any premium or interest on, or sinking fund
payment with respect to any series of Securities not be on a Business Day,
such
payment shall be due on the next Business Day without any interest for the
period from the due date until such Business Day.
The
Company will cause each Paying Agent for any series of Securities other than
the
Trustee to execute and deliver to the Trustee an instrument in which such
Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will:
(a) hold
all
sums held by it for the payment of the principal of and any premium or interest
on Securities of that series in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of
as herein provided;
(b) give
the
Trustee notice of any Default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment of principal and
any
premium or interest on the Securities of that series; and
(c) at
any
time during the continuance of any such Default, upon the written request
of the
Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying
Agent.
The
Company and, if applicable, the Guarantors may at any time, for the purpose
of
obtaining the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay, to the
Trustee
all sums held in trust by the Company or such Paying Agent, such sums to
be held
by the Trustee upon the same trusts as those upon which such sums were held
by
the Company or such Paying Agent; and, upon such payment by any Paying Agent
to
the Trustee, such Paying Agent shall be released from all further liability
with
respect to such money.
Subject
to any applicable escheat or abandoned property laws, any money deposited
with
the Trustee or any Paying Agent, or then held by the Company, in trust for
the
payment of the principal of and any premium or interest on any Security of
any
series and remaining unclaimed for one year after such principal and any
premium
or interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability
of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided,
however,
that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once,
in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The
City of
New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
Section 10.4. Existence.
Subject
to Article Eight,
the
Company and, if any Securities of a series to which Article Fourteen
has been
made applicable are Outstanding, each Guarantor will do or cause to be done
all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided,
however,
that
the Company and, if applicable, each Guarantor shall not be required to preserve
any such right or franchise if the Board of Directors shall determine that
the
preservation thereof is no longer desirable in the conduct of the business
of
the Company or such Guarantor, as the case may be.
Section 10.5. Statement
by Officers as to Default.
Annually,
within 150 days after the close of each fiscal year beginning with the first
fiscal year during which one or more series of Securities are Outstanding,
the
Company and, if any Securities of a series to which Article Fourteen
has been
made applicable are Outstanding, each Guarantor will deliver to the Trustee
a
brief certificate (which need not include the statements set forth in
Section 1.3)
from
the principal executive officer, principal financial officer or principal
accounting officer of the Company and, if applicable, such Guarantor as to
his
or her knowledge of the Company’s or such Guarantor’s, as the case may be,
compliance (without regard to any period of grace or requirement of notice
provided herein) with all conditions and covenants under the Indenture and,
if
the Company or such Guarantor, as the case may be, shall be in Default,
specifying all such Defaults and the nature and status thereof of which such
officer has knowledge.
Section 10.6. Additional
Amounts.
If
the
Securities of a series provide for the payment of additional amounts (as
provided in Section 3.1(o)),
at
least 10 days prior to the first Interest Payment Date with respect to that
series of Securities and at least 10 days prior to each date of payment of
principal of, premium, if any, or interest on the Securities of that series
if
there has been a change with respect to the matters set forth in the
below-mentioned Officer’s Certificate, the Company shall furnish to the Trustee
and the principal Paying Agent, if other than the Trustee, an Officer’s
Certificate instructing the Trustee and such Paying Agent whether such payment
of principal of, premium, if any, or interest on the Securities of that series
shall be made to holders of the Securities of that series without withholding
or
deduction for or on account of any tax, assessment or other governmental
charge
described in the Securities of that series. If any such withholding or deduction
shall be required, then such Officer’s Certificate shall specify by country the
amount, if any, required to be withheld or deducted on such payments to such
holders and shall certify the fact that additional amounts will be payable
and
the amounts so payable to each holder, and the Company shall pay to the Trustee
or such Paying Agent the additional amounts required to be paid by this Section.
The Company covenants to indemnify the Trustee and any Paying Agent for,
and to
hold them harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by any of them in reliance on any Officer’s
Certificate furnished pursuant to this Section 10.6.
Whenever
in this Indenture there is mentioned, in any context, the payment of the
principal of or any premium, interest or any other amounts on, or in respect
of,
any Securities of any series, such mention shall be deemed to include mention
of
the payment of additional amounts provided by the terms of such series
established hereby or pursuant hereto to the extent that, in such context,
additional amounts are, were or would be payable in respect thereof pursuant
to
such terms, and express mention of the payment of additional amounts (if
applicable) in any provision hereof shall not be construed as excluding the
payment of additional amounts in those provisions hereof where such express
mention is not made.
ARTICLE ELEVEN
REDEMPTION
OF SECURITIES
Section 11.1. Applicability
of Article.
Securities
of any series which are redeemable before their Stated Maturity shall be
redeemable in accordance with their terms and (except as otherwise specified
as
contemplated by Section 3.1
for
Securities of any series) in accordance with this Article Eleven.
Section 11.2. Election
to Redeem; Notice to Trustee.
The
election of the Company to redeem any Securities shall be evidenced by a
Board
Resolution. In case of any redemption at the election of the Company of less
than all the Securities of any series, the Company shall, at least 15 days
prior
to the last date for the giving of notice of such redemption (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities of such series
to be
redeemed and, if applicable, of the tenor of the Securities to be redeemed.
In
the case of any redemption of Securities (a) prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture or (b) pursuant to an election of the Company
that
is subject to a condition specified in the terms of the Securities of the
series
to be redeemed, the Company shall furnish the Trustee with an Officer’s
Certificate evidencing compliance with such restriction or
condition.
Section 11.3. Selection
by Trustee of Securities to Be Redeemed.
If
less
than all the Securities of any series are to be redeemed (unless all of the
Securities of such series and of a specified tenor are to be redeemed), the
particular Securities to be redeemed shall be selected not more than 45 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities
of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series.
The
Trustee shall promptly notify the Company in writing of the Securities selected
for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed. If the Securities
of
any series to be redeemed consist of Securities having different dates on
which
the principal is payable or different rates of interest, or different methods
by
which interest may be determined or have any other different tenor or terms,
then the Company may, by written notice to the Trustee, direct that the
Securities of such series to be redeemed shall be selected from among the
groups
of such Securities having specified tenor or terms and the Trustee shall
thereafter select the particular Securities to be redeemed in the manner
set
forth in the preceding paragraph from among the group of such Securities
so
specified.
For
all
purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the
case of
any Securities redeemed or to be redeemed only in part, to the portion of
the
principal amount of such Securities which has been or is to be
redeemed.
Section 11.4. Notice
of Redemption.
Notice
of
redemption shall be given by first-class mail, postage prepaid, mailed not
less
than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of
Securities to be redeemed, at his address appearing in the Security
Register.
All
notices of redemption shall state:
(a) the
Redemption Date,
(b) the
Redemption Price, or if not then ascertainable, the manner of calculation
thereof,
(c) if
less
than all the Outstanding Securities of any series are to be redeemed, the
identification (and, in the case of partial redemption, the principal amounts)
of the particular Securities to be redeemed,
(d) that
on
the Redemption Date the Redemption Price will become due and payable upon
each
such Security to be redeemed and, if applicable, that interest thereon will
cease to accrue on and after said date,
(e) the
place
or places where such Securities are to be surrendered for payment of the
Redemption Price, and
(f) that
the
redemption is for a sinking fund, if such is the case.
Notice
of
redemption of Securities to be redeemed at the election of the Company shall
be
given by the Company or, at the Company’s request, by the Trustee in the name
and at the expense of the Company.
Section 11.5. Deposit
of Redemption Price.
Prior
to
any Redemption Date, the Company shall deposit with the Trustee or with a
Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and
hold
in trust as provided in Section 10.3)
an
amount of money sufficient to pay the Redemption Price of, and (except if
the
Redemption Date shall be an Interest Payment Date) accrued interest on, all
the
Securities which are to be redeemed on that date.
Section 11.6. Securities
Payable on Redemption Date.
Notice
of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security
for
redemption in accordance with said notice, such Security shall be paid by
the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided,
however,
that
unless otherwise specified with respect to Securities of any series as
contemplated in Section 3.1,
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant record dates according to their terms and the provisions of
Section 3.7.
If
any
Security called for redemption shall not be so paid upon surrender thereof
for
redemption, the principal (and premium, if any) shall, until paid, bear interest
from the Redemption Date at the rate prescribed therefor in the
Security.
Section 11.7. Securities
Redeemed in Part.
Any
Security which is to be redeemed only in part shall be surrendered at a Place
of
Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory
to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and tenor, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal
of
the Security so surrendered.
ARTICLE TWELVE
SINKING
FUNDS
Section 12.1. Applicability
of Article.
The
provisions of this Article Twelve
shall be
applicable to any sinking fund for the retirement of Securities of a series
except as otherwise specified as contemplated by Section 3.1
for
Securities of such series.
The
minimum amount of any sinking fund payment provided for by the terms of
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 Securities of any series is herein referred to as an “optional sinking
fund payment.” If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 12.2.
Each
sinking fund payment shall be applied to the redemption of Securities of
any
series as provided for by the terms of Securities of such series.
Section 12.2. Satisfaction
of Sinking Fund Payments with Securities.
The
Company (a) may deliver Outstanding Securities of a series (other than any
previously called for redemption) and (b) may apply as a credit Securities
of a
series which have been redeemed either at the election of the Company pursuant
to the terms of such Securities or through the application of permitted optional
sinking fund payments pursuant to the terms of such Securities, in each case
in
satisfaction of all or any part of any sinking fund payment with respect
to the
Securities of such series required to be made pursuant to the terms of such
Securities as provided for by the terms of such series; provided
that
such Securities have not been previously so credited. Such Securities shall
be
received and credited for such purpose by the Trustee at the Redemption Price
specified in such Securities for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced
accordingly.
Section 12.3. Redemption
of Securities for Sinking Fund.
Not
less
than 45 days prior to each sinking fund payment date for any series of
Securities (unless a shorter period shall be satisfactory to the Trustee),
the
Company will deliver to the Trustee an Officer’s Certificate specifying the
amount of the next ensuing sinking fund payment for that series pursuant
to the
terms of that series, the portion thereof, if any, which is to be satisfied
by
payment of cash and the portion thereof, if any, which is to be satisfied
by
delivering and crediting Securities of that series pursuant to Section 12.2
and
stating the basis for such credit and that such Securities have not been
previously so credited, and will also deliver to the Trustee any Securities
to
be so delivered. Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 11.3
and
cause notice of the redemption thereof to be given in the name of and at
the
expense of the Company in the manner provided in Section 11.4.
Such
notice having been duly given, the redemption of such Securities shall be
made
upon the terms and in the manner stated in Section 11.6
and
Section 11.7.
ARTICLE THIRTEEN
DEFEASANCE
Section 13.1. Option
to Effect Legal Defeasance or Covenant Defeasance.
The
Company may, at the option of its Board of Directors evidenced by a resolution
set forth in an Officers’ Certificate, and at any time, elect to have either
Section 13.2
or
Section 13.3
hereof
be applied to all outstanding Securities upon compliance with the conditions
set
forth below in this Article Thirteen.
Section 13.2. Legal
Defeasance
and
Discharge.
Upon
the
Company’s exercise under Section 13.1
hereof
of the option applicable to this Section 13.2,
the
Company and each of the Guarantors will, subject to the satisfaction of the
conditions set forth in Section 13.4
hereof,
be deemed to have been discharged from their obligations with respect to
all
outstanding Securities (including the Securities Guarantees) on the date
the
conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For
this purpose, Legal Defeasance means that the Company and the Guarantors
will be
deemed to have paid and discharged the entire Debt represented by the
outstanding Securities (including the Securities Guarantees), which will
thereafter be deemed to be “outstanding” only for the purposes of Section 13.5
hereof
and the other sections of this Indenture referred to in clauses (a) and (b)
below, and to have satisfied all their other obligations under such Securities,
the Securities Guarantees and this Indenture (and the Trustee, on demand
of and
at the expense of the Company, shall execute proper instruments acknowledging
the same), except for the following provisions which will survive until
otherwise terminated or discharged hereunder:
(a) the
rights of Holders of Outstanding Securities to receive payments in respect
of
the principal of, or interest or premium, if any, on such Securities when
such
payments are due from the trust referred to in Section 13.4
hereof;
(b) the
Company’s obligations with respect to such Securities under Section 3.4,
Section 3.5,
Section 3.6,
Section 10.2
and
Section 10.3
hereof;
(c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and
the
Company’s and the Guarantors’ obligations in connection therewith;
and
(d) this
Article Thirteen.
Subject
to compliance with this Article Thirteen,
the
Company may exercise its option under this Section 13.2
notwithstanding the prior exercise of its option under Section 13.3
hereof.
Section 13.3. Covenant
Defeasance.
Upon
the
Company’s exercise under Section 13.1
hereof
of the option applicable to this Section 13.3,
the
Company and each of the Guarantors will, subject to the satisfaction of the
conditions set forth in Section 13.4
hereof,
be released from each of their obligations under the covenants contained
in
Section 7.4,
Section 8.1
and
Section 10.4
hereof
as well as any Additional Defeasible Provisions (such release and termination
hereinafter referred to as “Covenant
Defeasance”),
and
the Securities will thereafter be deemed not “outstanding” for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but will
continue to be deemed “outstanding” for all other purposes hereunder (it being
understood that such Securities will not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect
to the
outstanding Securities and Securities Guarantees, the Company and the Guarantors
may omit to comply with and will have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly
or
indirectly, by reason of any reference elsewhere herein to any such covenant
or
by reason of any reference in any such covenant to any other provision herein
or
in any other document and such omission to comply will not constitute a Default
or an Event of Default under Section 5.1
hereof,
but, except as specified above, the remainder of this Indenture and such
Securities and Securities Guarantees will be unaffected thereby. In addition,
upon the Company’s exercise under Section 13.1
hereof
of the option applicable to this Section 13.3
hereof,
subject to the satisfaction of the conditions set forth in Section 13.4
hereof,
Section 5.1(c)
and
Section 5.1(d)
hereof
and will not constitute Events of Default.
Section 13.4. Conditions
to Legal or Covenant Defeasance.
In
order
to exercise either Legal Defeasance or Covenant Defeasance under either
Section 13.2
or
Section 13.3
hereof:
(a) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of
the Holders of the Securities, cash in U.S. dollars, non-callable U.S.
Government Obligations, or a combination of cash in U.S. dollars and
non-callable U.S. Government Obligations, in such amounts as will be sufficient,
in the opinion of a nationally recognized investment bank, appraisal firm,
or
firm of independent public accountants to pay the principal of, or interest
and
premium, if any, on the Outstanding Securities on the stated date for payment
thereof or on the applicable redemption date, as the case may be, and the
Company must specify whether the Securities are being defeased to such stated
date for payment or to a particular redemption date;
(b) in
the
case of an election under Section 13.2
hereof,
the Company must deliver to the Trustee an Opinion of Counsel confirming
that:
(i) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling; or
(ii) since
the
Issue Date, there has been a change in the applicable federal income tax
law,
in
either
case to the effect that, and based thereon such Opinion of Counsel will confirm
that, the Holders of the Outstanding Securities will not recognize income,
gain
or loss for federal income tax purposes as a result of such Legal Defeasance
and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance
had
not occurred;
(c) in
the
case of an election under Section 13.3
hereof,
the Company must deliver to the Trustee an Opinion of Counsel confirming
that
the Holders of the Outstanding Securities will not recognize income, gain
or
loss for federal income tax purposes as a result of such Covenant Defeasance
and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) no
Default or Event of Default has occurred and is continuing on the date of
such
deposit (other than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit);
(e) the
deposit will not result in a breach or violation of, or constitute a default
under, any other instrument to which the Company or any Guarantor is a party
or
by which the Company or any Guarantor is bound;
(f) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under, any material agreement or instrument (other
than this Indenture) to which the Company or any of its Subsidiaries is a
party
or by which the Company or any of its Subsidiaries is bound;
(g) the
Company must deliver to the Trustee an Officers’ Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders
of
Securities over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company or
others;
(h) the
Company must deliver to the Trustee an Officers’ Certificate, stating that all
conditions precedent set forth in clauses (a) through (g) of this Section 13.4
have
been complied with; and
(i) the
Company must deliver to the Trustee an Opinion of Counsel (which Opinion
of
Counsel may be subject to customary assumptions, qualifications and exclusions),
stating that all conditions precedent set forth in clauses (b), (c) and (e)
of
this Section 13.4
have
been complied with; provided
that the
Opinion of Counsel with respect to clause (e) of this Section 13.4
may be
to the knowledge of such counsel.
Section 13.5. Deposited
Money and U.S. Government Obligations to be Held in
Trust,
Other
Miscellaneous Provisions.
Subject
to Section 13.6
hereof,
all money and non-callable U.S. Government Obligation (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 13.5,
the
“Trustee”)
pursuant to Section 13.4
hereof
in respect of the Outstanding Securities will be held in trust and applied
by
the Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine,
to
the Holders of such Securities of all sums due and to become due thereon
in
respect of principal, premium, if any, and interest, but such money need
not be
segregated from other funds except to the extent required by law.
The
Company will pay and indemnify the Trustee against any tax, fee or other
charge
imposed on or assessed against the cash or non-callable U.S. Government
Obligations deposited pursuant to Section 13.4
hereof
or the principal and interest received in respect thereof other than any
such
tax, fee or other charge which by law is for the account of the Holders of
the
Outstanding Securities.
Notwithstanding
anything in this Article Thirteen
to the
contrary, the Trustee will deliver or pay to the Company from time to time
upon
the request of the Company any money or non-callable U.S. Government Obligations
held by it as provided in Section 13.4
hereof
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 13.4(a)
hereof),
are in excess of the amount thereof that would then be required to be deposited
to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 13.6. Repayment.
Any
money
deposited with the Trustee or any Paying Agent, or then held by the Company,
in
trust for the payment of the principal of, premium, if any, or interest on
any
Security and remaining unclaimed for two years after such principal, premium,
if
any, or interest has become due and payable shall be paid to the Company
on its
request or (if then held by the Company) will be discharged from such trust;
and
the Holder of such Security will thereafter be permitted to look only to
the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company
as
trustee thereof, will thereupon cease; provided,
however,
that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once,
in the
New York Times and The Wall Street Journal (national edition), notice that
such
money remains unclaimed and that, after a date specified therein, which will
not
be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the
Company.
Section 13.7. Reinstatement.
If
the
Trustee or Paying Agent is unable to apply any United States dollars or
non-callable U.S. Government Obligations in accordance with Section 13.2
or
Section 13.3
hereof,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company’s and the Guarantors’ obligations under this
Indenture and the Securities and the Securities Guarantees will be revived
and
reinstated as though no deposit had occurred pursuant to Section 13.2
or
Section 13.3
hereof
until such time as the Trustee or Paying Agent is permitted to apply all
such
money in accordance with Section 13.2
or
Section 13.3
hereof,
as the case may be; provided,
however,
that,
if the Company makes any payment of principal of, premium, if any, or interest
on any Note following the reinstatement of its obligations, the Company will
be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE FOURTEEN
GUARANTEE
OF SECURITIES
Section 14.1. Securities
Guarantee.
(a) Subject
to the other provisions of this Article Fourteen,
each of
the Guarantors hereby jointly and severally, guarantees to each Holder of
a
Security of each series to which this Article Fourteen
has been
made applicable as provided in Section 3.1(t)
(the
Securities of such series being referred to herein as the “Guaranteed
Securities”) (which Security has been authenticated and delivered by the
Trustee), and to the Trustee and its successors and assigns, irrespective
of the
validity and enforceability of this Indenture, the Guaranteed Securities,
the
obligations of the Company hereunder or thereunder, that:
(i) the
principal of, premium, if any, and interest on the Guaranteed Securities
will be
promptly paid in full when due, whether at maturity, by acceleration, redemption
or otherwise, and interest on the overdue principal of and interest on the
Guaranteed Securities, if any, if lawful, and all other obligations of the
Company to the Holders of Guaranteed Securities, or the Trustee hereunder
or
thereunder will be promptly paid in full or performed, all in accordance
with
the terms hereof and thereof; and
(ii) in
case
of any extension of time of payment or renewal of any Guaranteed Securities
or
any of such other obligations, that same will be promptly paid in full when
due
or performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise.
Failing
payment when due of any amount so guaranteed or any performance so guaranteed
for whatever reason, the Guarantors will be jointly and severally obligated
to
pay the same immediately. Each Guarantor agrees that this is a guarantee
of
payment and not a guarantee of collection.
(b) To
the
extent permissible under applicable law, the
obligations of the Guarantors under this Securities Guarantee are
unconditional, irrespective of the validity, regularity or enforceability
of the
Guaranteed Securities or this Indenture, the absence of any action to enforce
the same, any waiver or consent by any Holder of the Guaranteed Securities
with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense
of a
guarantor. To the extent permitted by applicable law, each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a
court
in the event of insolvency or bankruptcy of the Company, any right to require
a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Securities Guarantee will not be discharged except
by
complete performance of the obligations contained in the Guaranteed Securities
and this Indenture.
(c) If
any
Holder or the Trustee is required by any court or otherwise to return to
the
Company, the Guarantors or any custodian, trustee, liquidator or other similar
official acting in relation to either the Company or the Guarantors, any
amount
paid by either to the Trustee or such Holder, this Securities Guarantee,
to the
extent theretofore discharged, will be reinstated in full force and
effect.
(d) Each
Guarantor agrees that it will not be entitled to any right of subrogation
in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Guarantor further
agrees that, to the extent permitted by applicable law, as between the
Guarantors, on the one hand, and the Holders of Guaranteed Securities and
the
Trustee, on the other hand, (1) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Five
hereof
for the purposes of this Securities Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of
the
obligations guaranteed hereby, and (2) in the event of any declaration of
acceleration of such obligations as provided in Article Five
hereof,
such obligations (regardless of whether due and payable) will forthwith become
due and payable by the Guarantors for the purpose of this Securities Guarantee.
The Guarantors will have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights
of
the Holders under the Securities Guarantee.
Section 14.2. Limitation
on Guarantor Liability.
Each
Guarantor, and by its acceptance of Guaranteed Securities, each Holder thereof,
hereby confirms that it is the intention of all such parties that the Securities
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Securities Guarantee. To effectuate the foregoing
intention, the Trustee, to the extent permitted under applicable law, the
Holders and each Guarantor hereby irrevocably agree that the obligations
of such
Guarantor will be limited to the maximum amount that will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of
such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by
or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article Fourteen,
result
in the obligations of such Guarantor under its Securities Guarantee not
constituting a fraudulent transfer or conveyance.
Section 14.3. Execution
and Delivery of Securities Guarantee Notation.
To
evidence its Securities Guarantee set forth in Section 14.1
hereof,
each Guarantor hereby agrees that a notation of such Securities Guarantee
substantially in the form set forth in Section 2.3
or
established pursuant to a Board Resolution or in a supplemental indenture,
in
accordance with the provisions of Section 2.1,
will be
endorsed by an officer of such Guarantor on each Guaranteed Security
authenticated and delivered by the Trustee and that this Indenture will be
executed on behalf of such Guarantor by one of its officers.
Each
Guarantor hereby agrees that its Securities Guarantee set forth in Section 14.1
hereof
will remain in full force and effect notwithstanding any failure to endorse
on
each Guaranteed Security a notation of such Securities Guarantee.
If
an
officer whose signature is on this Indenture or on the Securities Guarantee
no
longer holds that office at the time the Trustee authenticates the Guaranteed
Security on which a Securities Guarantee is endorsed, the Securities Guarantee
will be valid nevertheless.
The
delivery of any Guaranteed Security by the Trustee, after the authentication
thereof hereunder, will constitute due delivery of the Securities Guarantee
of
such Guaranteed Security set forth in this Indenture on behalf of the
Guarantors.
ARTICLE FIFTEEN
SUBORDINATION
OF SECURITIES
Section 15.1. Securities
Subordinated to Senior Debt.
The
Company and the Trustee each covenants and agrees, and each Holder, by its
acceptance of a Security, likewise covenants and agrees that all Securities
shall be issued subject to the provisions of this Article Fifteen;
and
each Person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that the payment of the
principal of, interest and premium, if any, on each and all of the Securities
shall, to the extent and in the manner set forth in this Article Fifteen,
be
subordinated in right of payment to the prior payment in full, in cash or
cash
equivalents, of all existing and future Senior Debt.
Section 15.2. No
Payment on Securities in Certain Circumstances.
(a) No
direct
or indirect payment by or on behalf of the Company of the principal of, interest
and premium, if any, on each and all of the Securities (other than with the
money, securities or proceeds held under any defeasance trust established
in
accordance with this Indenture), whether pursuant to the terms of the Securities
or upon acceleration or otherwise shall be made if, at the time of such payment,
there exists a default in the payment of all or any portion of the obligations
on any Senior Debt and such default shall not have been cured or waived or
the
benefits of this sentence waived by or on behalf of the holders of such Senior
Debt.
(b) During
the continuance of any other event of default with respect to any Designated
Senior Debt pursuant to which the maturity thereof may be accelerated, upon
receipt by the Trustee of written notice from the trustee or other
representative for the holders of such Designated Senior Debt (or the holders
of
at least a majority in principal amount of such Designated Senior Debt then
outstanding), no payment of the principal of, interest or premium, if any,
on
each and all of the Securities (other than with the money, securities or
proceeds held under any defeasance trust established in accordance with this
Indenture) may be made by or on behalf of the Company upon or in respect
of the
Securities for a period (a “Payment Blockage Period”) commencing on the date of
receipt of such notice and ending 179 days thereafter (unless, in each case,
such Payment Blockage Period has been terminated by written notice to the
Trustee from such trustee of, or other representatives for, such holders
or by
payment in full in cash or cash equivalents of such Designated Senior Debt
or
such event of default has been cured or waived). Not more than one Payment
Blockage Period may be commenced with respect to the Securities during any
period of 360 consecutive days. Notwithstanding anything in this Indenture
to
the contrary, there must be 180 consecutive days in any 360-day period in
which
no Payment Blockage Period is in effect. No event of default that existed
or was
continuing (it being acknowledged that any subsequent action that would give
rise to an event of default pursuant to any provision under which an event
of
default previously existed or was continuing shall constitute a new event
of
default for this purpose) on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Debt initiating such
Payment Blockage Period shall be, or shall be made, the basis for the
commencement of a second Payment Blockage Period by the trustee or other
representative for the holders of such Designated Senior Debt, whether or
not
within a period of 360 consecutive days, unless such event of default shall
have
been cured or waived for a period of not less than 90 consecutive
days.
(c) In
the
event that, notwithstanding the foregoing, any payment shall be received
by the
Trustee or any Holder when such payment is prohibited by clause (a) or (b)
above, the Trustee shall promptly notify the holders of Senior Debt of such
prohibited payment and such payment shall be held in trust for the benefit
of,
and shall be paid over or delivered to, the holders of Senior Debt or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, but only to the extent that, upon notice
from
the Trustee to the holders of Senior Debt that such prohibited payment has
been
made, the holders of the Senior Debt (or their representative or representatives
of a trustee) within 30 days of receipt of such notice from the Trustee notify
the Trustee of the amounts then due and owing on the Senior Debt, if any,
and
only the amounts specified in such notice to the Trustee shall be paid to
the
holders of Senior Debt and any excess above such amounts due and owing on
Senior
Debt shall be paid to the Company.
Section 15.3. Payment
over Proceeds upon Dissolution, Etc.
(a) Upon
any
payment or distribution of assets or securities of the Company of any kind
or
character, whether in cash, property or securities (other than with the money,
securities or proceeds held under any defeasance trust established in accordance
with this Indenture), in connection with any dissolution or winding up or
total
or partial liquidation or reorganization of the Company, whether voluntary
or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings
or
other marshalling of assets for the benefit of creditors, all amounts due
or to
become due upon all Senior Debt shall first be paid in full, in cash or cash
equivalents, before the Holders or the Trustee on their behalf shall be entitled
to receive any payment by (or on behalf of) the Company on account of the
Securities, or any payment to acquire any of the Securities for cash, property
or securities, or any distribution with respect to the Securities of any
cash,
property or securities. Before any payment may be made by, or on behalf of,
the
Company on any Security (other than with the money, securities or proceeds
held
under any defeasance trust established in accordance with this Indenture),
in
connection with any such dissolution, winding up, liquidation or reorganization,
any payment or distribution of assets or securities for the Company of any
kind
or character, whether in cash, property or securities, to which the Holders
or
the Trustee on their behalf would be entitled, but for the provisions of
this
Article Fifteen,
shall
be made by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person making such payment or distribution
or by
the Holders or the Trustee if received by them or it, directly to the holders
of
Senior Debt (pro rata to such holders on the basis of the respective amounts
of
Senior Debt held by such holders) or their representatives or to any trustee
or
trustees under any indenture pursuant to which any such Senior Debt may have
been issued, as their respective interests appear, to the extent necessary
to
pay all such Senior Debt in full, in cash or cash equivalents, after giving
effect to any concurrent payment, distribution or provision therefor to or
for
the holders of such Senior Debt.
(b) To
the
extent any payment of Senior Debt (whether by or on behalf of the Company,
as
proceeds of security or enforcement of any right of setoff or otherwise)
is
declared to be fraudulent or preferential, set aside or required to be paid
to
any receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar
Person under any bankruptcy, insolvency, receivership, fraudulent conveyance
or
similar law, then if such payment is recovered by, or paid over to, such
receiver, trustee in bankruptcy, liquidating trustee or other similar Person,
the Senior Debt or part thereof originally intended to be satisfied shall
be
deemed to be reinstated and outstanding as if such payment had not occurred.
To
the extent the obligation to repay any Senior Debt is declared to be fraudulent,
invalid, or otherwise set aside under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then the obligation so declared
fraudulent, invalid or otherwise set aside (and all other amounts that would
come due with respect thereto had such obligation not been so affected) shall
be
deemed to be reinstated and outstanding as Senior Debt for all purposes hereof
as if such declaration, invalidity or setting aside had not
occurred.
(c) In
the
event that, notwithstanding the provision in clause (a) above prohibiting
such payment or distribution, any payment or distribution of assets or
securities of the Company of any kind or character, whether in cash, property
or
securities, shall be received by the Trustee or any Holder at a time when
such
payment or distribution is prohibited by clause (a) above and before all
obligations in respect of Senior Debt are paid in full, in cash or cash
equivalents, such payment or distribution shall be received and held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Debt (pro rata to such holders on the basis of the respective amounts
of
Senior Debt held by such holders) or their representatives or to any trustee
or
trustees under any indenture pursuant to which any such Senior Debt may have
been issued, as their respective interests appear, for application to the
payment of all such Senior Debt remaining unpaid, in cash or cash equivalents,
after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of such Senior Debt.
(d) For
purposes of this Section 15.3,
the
words “cash, property or securities” shall not be deemed to include, so long as
the effect of this clause is not to cause the Securities to be treated in
any
case or proceeding or similar event described in this Section 15.3
as part
of the same class of claims as the Senior Debt or any class of claims
pari
passu
with, or
senior to, the Senior Debt for any payment or distribution, securities of
the
Company or any other Person provided for by a plan of reorganization or
readjustment that are subordinated, at least to the extent that the Securities
are subordinated, to the payment of all Senior Debt then outstanding;
provided
that
(i) if a new Person results from such reorganization or readjustment, such
Person assumes the Senior Debt and (ii) the rights of the holders of the
Senior Debt are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or
the
merger of the Company with or into, another Person or the liquidation or
dissolution of the Company following the sale, conveyance, transfer, lease
or
other disposition of all or substantially all of its property and assets
to
another Person upon the terms and conditions provided in Section 8.1
of this
Indenture shall not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of this Section 15.3
if such
other Person shall, as a part of such consolidation, merger, sale, conveyance,
transfer, lease or other disposition, comply (to the extent required) with
the
conditions stated in Section 8.1
of this
Indenture.
Section 15.4. Subrogation.
(a) Upon
the
payment in full of all Senior Debt in cash or cash equivalents, the Holders
shall be subrogated to the rights of the holders of Senior Debt to receive
payments or distributions of cash, property or securities of the Company
made on
such Senior Debt until the principal of, premium, if any, and interest on
the
Securities shall be paid in full; and, for the purposes of such subrogation,
no
payments or distributions to the holders of the Senior Debt of any cash,
property or securities to which the Holders or the Trustee on their behalf
would
be entitled except for the provisions of this Article Fifteen,
and no
payment pursuant to the provisions of this Article Fifteen
to the
holders of Senior Debt by the Holders or the Trustee on their behalf shall,
as
between the Company, its creditors other than holders of Senior Debt, and
the
Holders, be deemed to be a payment by the Company to or on account of the
Senior
Debt. It is understood that the provisions of this Article Fifteen
are
intended solely for the purpose of defining the relative rights of the Holders,
on the one hand, and the holders of the Senior Debt, on the other
hand.
(b) If
any
payment or distribution to which the Holders would otherwise have been entitled
but for the provisions of this Article Fifteen
shall
have been applied, pursuant to the provisions of this Article Fifteen,
to the
payment of all amounts payable under Senior Debt, then, and in such case,
the
Holders shall be entitled to receive from the holders of such Senior Debt
any
payments or distributions received by such holders of Senior Debt in excess
of
the amount required to make payment in full, in cash or cash equivalents,
of
such Senior Debt of such holders.
Section 15.5. Obligations
of Company Unconditional.
(a) Nothing
contained in this Article Fifteen
or
elsewhere in this Indenture or in the Securities is intended to or shall
impair,
as among the Company and the Holders, the obligation of the Company, which
is
absolute and unconditional, to pay to the Holders the principal of, premium,
if
any, and interest on the Securities as and when the same shall become due
and
payable in accordance with their terms, or is intended to or shall affect
the
relative rights of the Holders and creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein or therein prevent
the
Holders or the Trustee on their behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to
the
rights, if any, under this Article Fifteen
of the
holders of the Senior Debt.
(b) Without
limiting the generality of the foregoing, nothing contained in this Article Fifteen
will
restrict the right of the Trustee or the Holders to take any action to declare
the Securities to be due and payable prior to their Stated Maturity pursuant
to
Section 5.1
of this
Indenture or to pursue any rights or remedies hereunder; provided,
however,
that
all Senior Debt then due and payable or thereafter declared to be due and
payable shall first be paid in full, in cash or cash equivalents, before
the
Holders or the Trustee are entitled to receive any direct or indirect payment
from the Company with respect to any Security.
Section 15.6. Notice
to Trustee.
(a) The
Company shall give prompt written notice to the Trustee of any fact known
to the
Company that would prohibit the making of any payment to or by the Trustee
in
respect of the Securities pursuant to the provisions of this Article Fifteen.
The
Trustee shall not be charged with the knowledge of the existence of any default
or event of default with respect to any Senior Debt or of any other facts
that
would prohibit the making of any payment to or by the Trustee unless and
until
the Trustee shall have received notice in writing at its Corporate Trust
Office
to that effect signed by an Officer of the Company, or by a holder of Senior
Debt or trustee or agent thereof; and prior to the receipt of any such written
notice, the Trustee shall, subject to Article Six,
be
entitled to assume that no such facts exist; provided
that,
if
the Trustee shall not have received the notice provided for in this Section 15.6
at least
two Business Days prior to the date upon which, by the terms of this Indenture,
any monies shall become payable for any purpose (including, without limitation,
the payment of the principal of, premium, if any, or interest on any Security),
then, notwithstanding anything herein to the contrary, the Trustee shall
have
full power and authority to receive any monies from the Company and to 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 on or after such prior
date except for an acceleration of the Securities prior to such application.
Nothing contained in this Section 15.6
shall
limit the right of the holders of Senior Debt to recover payments as
contemplated by this Article Fifteen.
The
foregoing shall not apply if the Paying Agent is the Company. The Trustee
shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Senior Debt (or a trustee
on behalf of, or other representative of, such holder) to establish that
such
notice has been given by a holder of such Senior Debt or a trustee or
representative on behalf of any such holder.
(b) In
the
event that the Trustee determines in good faith that any evidence is required
with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article Fifteen,
the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt held by such
Person,
the extent to which such Person is entitled to participate in such payment
or
distribution and any other facts pertinent to the rights of such Person under
this Article Fifteen
and, if
such evidence is not furnished to the Trustee, the Trustee may defer any
payment
to such Person pending judicial determination as to the right of such Person
to
receive such payment.
Section 15.7. Reliance
on Judicial Order or Certificate of Liquidating Agent.
Upon
any
payment or distribution of assets or securities referred to in this Article Fifteen,
the
Trustee and the Holders shall be entitled to rely upon any order or decree
made
by any court of competent jurisdiction in which bankruptcy, dissolution,
winding
up, liquidation or reorganization proceedings are pending, or upon a certificate
of the receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar 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 Debt and other
Debt
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article Fifteen.
Section 15.8. Trustee’s
Relation to Senior Debt.
(a) The
Trustee and any Paying Agent shall be entitled to all the rights set forth
in
this Article Fifteen
with
respect to any Senior Debt that may at any time be held by it in its individual
or any other capacity to the same extent as any other holder of Senior Debt
and
nothing in this Indenture shall deprive the Trustee or any Paying Agent of
any
of its rights as such holder.
(b) With
respect to the holders of Senior Debt, the Trustee undertakes to perform
or to
observe only such of its covenants and obligations as are specifically set
forth
in this Article Fifteen,
and no
implied covenants or obligations with respect to the holders of Senior Debt
shall be read into this Indenture against the Trustee. The Trustee shall
not be
deemed to owe any fiduciary duty to the holders of Senior Debt (except as
provided in Section 15.2
and
Section 15.3
of this
Indenture) and shall not be liable to any such holders if the Trustee shall
in
good faith mistakenly pay over or distribute to Holders of Securities or
to the
Company or to any other person cash, property or securities to which any
holders
of Senior Debt shall be entitled by virtue of this Article Fifteen
or
otherwise.
Section 15.9. Subordination
Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior
Debt.
No
right
of any present or future holders of any Senior Debt to enforce subordination
as
provided in this Article Fifteen
will at
any time in any way be prejudiced or impaired by any act or failure to act
on
the part of the Company or by any act or failure to act, in good faith, by
any
such holder, or by any noncompliance by the Company with the terms of this
Indenture, regardless of any knowledge thereof that any such holder may have
or
otherwise be charged with. The provisions of this Article Fifteen
are
intended to be for the benefit of, and shall be enforceable directly by,
the
holders of Senior Debt.
Section 15.10. Holders
Authorize Trustee to Effectuate Subordination of Securities.
Each
Holder by his acceptance of any Securities authorizes and expressly directs
the
Trustee on his behalf to take such action as may be necessary or appropriate
to
effectuate the subordination provided in this Article Fifteen,
and
appoints the Trustee his attorney-in-fact for such purposes, including, in
the
event of any dissolution, winding up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization
or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the property and assets of the
Company, the filing of a claim for the unpaid balance of its Securities in
the
form required in those proceedings. If the Trustee does not file a proper
claim
or proof in indebtedness in the form required in such proceeding at least
30
days before the expiration of the time to file such claim or claims, each
holder
of Senior Debt is hereby authorized to file an appropriate claim for and
on
behalf of the Holders.
Section 15.11. Not
to
Prevent Events of Default.
The
failure to make a payment on account of principal of, premium, if any, or
interest on the Securities by reason of any provision of this Article Fifteen
will not
be construed as preventing the occurrence of an Event of Default.
Section 15.12. Trustee’s
Compensation Not Prejudiced.
Nothing
in this Article Fifteen
will
apply to amounts due to the Trustee pursuant to other sections of this
Indenture, including Section 6.7.
Section 15.13. No
Waiver of Subordination Provisions.
Without
in any way limiting the generality of Section 15.9,
the
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders, without incurring
responsibility to the Holders and without impairing or releasing the
subordination provided in this Article Fifteen
or the
obligations hereunder of the Holders to the holders of Senior Debt, do any
one
or more of the following: (a) change the manner, place or terms of payment
or
extend the time of payment of, or renew or alter, Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding
or
secured; (b) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (c) release any Person
liable in any manner for the collection of Senior Debt; and (d) exercise
or
refrain from exercising any rights against the Company and any other
Person.
Section 15.14. Payments
May Be Paid Prior to Dissolution.
Nothing
contained in this Article Fifteen
or
elsewhere in this Indenture shall prevent (i) the Company, except under the
conditions described in Section 15.2
or
Section 15.3,
from
making payments of principal of, premium, if any, and interest on the
Securities, or from depositing with the Trustee any money for such payments,
or
(ii) the application by the Trustee of any money deposited with it for the
purpose of making such payments of principal of, premium, if any, and interest
on the Securities to the holders entitled thereto unless, at least two Business
Days prior to the date upon which such payment becomes due and payable, the
Trustee shall have received the written notice provided for in Section 15.2(b)
of this
Indenture (or there shall have been an acceleration of the Securities prior
to
such application) or in Section 15.15 of this Indenture. The Company shall
give
prompt written notice to the Trustee of any dissolution, winding up, liquidation
or reorganization of the Company.
Section 15.15. Trust
Moneys Not Subordinated.
Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article Four
by the
Trustee for the payment of principal of, premium, if any, and interest on
the
Securities shall not be subordinated to the prior payment of any Senior Debt
(provided that, at the time deposited, such deposit did not violate any then
outstanding Senior Debt), and none of the Holders shall be obligated to pay
over
any such amount to any holder of Senior Debt.
ARTICLE SIXTEEN
SUBORDINATION
OF SECURITIES GUARANTEES
Section 16.1. Securities
Guarantees Subordinated to Guarantor Senior Debt.
Each
Guarantor and the Trustee each covenants and agrees, and each Holder, by
its
acceptance of a Securities Guarantee, likewise covenants and agrees that
all
Securities Guarantees shall be issued subject to the provisions of this
Article Sixteen;
and
each Person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that the payment of the
principal of and premium, if any, and interest on each and all of the Securities
shall, to the extent and in the manner set forth in this Article Sixteen,
be
subordinated in right of payment to the prior payment in full, in cash or
cash
equivalents, of all existing and future Guarantor Senior Debt of such Guarantor.
Section 16.2. No
Payment on Securities Guarantees in Certain Circumstances.
(a) No
direct
or indirect payment by or on behalf of any principal of and premium, if any,
and
interest on each and all of the Securities (other than with the money,
securities or proceeds held under any defeasance trust established in accordance
with this Indenture), whether pursuant to the terms of the Securities Guarantees
or upon acceleration or otherwise shall be made if, at the time of such payment,
there exists a default in the payment of all or any portion of the obligations
on any Guarantor Senior Debt of such Guarantor and such default shall not
have
been cured or waived or the benefits of this sentence waived by or on behalf
of
the holders of such Guarantor Senior Debt.
(b) During
the continuance of any other event of default with respect to any Designated
Guarantor Senior Debt pursuant to which the maturity thereof may be accelerated,
upon receipt by the Trustee of written notice from the trustee or other
representative for the holders of such Designated Guarantor Senior Debt (or
the
holders of at least a majority in principal amount of such Designated Guarantor
Senior Debt then outstanding), no payment of Senior Subordinated Obligations
(other than with the money, securities or proceeds held under any defeasance
trust established in accordance with this Indenture) may be made by or on
behalf
of any Guarantor upon or in respect of the Securities Guarantees for a period
(a
“Securities Guarantee Payment Blockage Period”) commencing on the date of
receipt of such notice and ending 179 days thereafter (unless, in each case,
such Securities Guarantee Payment Blockage Period has been terminated by
written
notice to the Trustee from such trustee of, or other representatives for,
such
holders or by payment in full in cash or cash equivalents of such Designated
Guarantor Senior Debt or such event of default has been cured or waived).
Not
more than one Securities Guarantee Payment Blockage Period may be commenced
with
respect to the Securities Guarantees during any period of 360 consecutive
days.
Notwithstanding anything in this Indenture to the contrary, there must be
180
consecutive days in any 360-day period in which no Securities Guarantee Payment
Blockage Period is in effect. No event of default that existed or was continuing
(it being acknowledged that any subsequent action that would give rise to
an
event of default pursuant to any provision under which an event of default
previously existed or was continuing shall constitute a new event of default
for
this purpose) on the date of the commencement of any Securities Guarantee
Payment Blockage Period with respect to the Designated Guarantor Senior Debt
initiating such Securities Guarantee Payment Blockage Period shall be, or
shall
be made, the basis for the commencement of a second Securities Guarantee
Payment
Blockage Period by the trustee or other representative for the holders of
such
Designated Guarantor Senior Debt, whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days.
(c) In
the
event that, notwithstanding the foregoing, any payment shall be received
by the
Trustee or any Holder when such payment is prohibited by clause (a) or (b)
above, the Trustee shall promptly notify the holders of Guarantor Senior
Debt of
such prohibited payment and such payment shall be held in trust for the benefit
of, and shall be paid over or delivered to, the holders of Guarantor Senior
Debt
or their respective representatives, or to the trustee or trustees under
any
indenture pursuant to which any of such Guarantor Senior Debt may have been
issued, as their respective interests may appear, but only to the extent
that,
upon notice from the Trustee to the holders of Guarantor Senior Debt that
such
prohibited payment has been made, the holders of the Guarantor Senior Debt
(or
their representative or representatives of a trustee) within 30 days of receipt
of such notice from the Trustee notify the Trustee of the amounts then due
and
owing on the Guarantor Senior Debt, if any, and only the amounts specified in
such notice to the Trustee shall be paid to the holders of Guarantor Senior
Debt
and any excess above such amounts due and owing on Guarantor Senior Debt
shall
be paid to such Guarantor.
Section 16.3. Payment
over Proceeds upon Dissolution, Etc.
(a) Upon
any
payment or distribution of assets or securities of a Guarantor of any kind
or
character, whether in cash, property or securities (other than with the money,
securities or proceeds held under any defeasance trust established in accordance
with this Indenture), in connection with any dissolution or winding up or
total
or partial liquidation or reorganization of such Guarantor, whether voluntary
or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings
or
other marshalling of assets for the benefit of creditors, all amounts due
or to
become due upon all Guarantor Senior Debt shall first be paid in full, in
cash
or cash equivalents, before the Holders or the Trustee on their behalf shall
be
entitled to receive any payment by (or on behalf of) such Guarantor on account
of Senior Subordinated Obligations, or any payment to acquire any of the
Securities Guarantees for cash, property or securities, or any distribution
with
respect to the Securities Guarantees of any cash, property or securities.
Before
any payment may be made by, or on behalf of, any Guarantor on any Senior
Subordinated Obligations (other than with the money, securities or proceeds
held
under any defeasance trust established in accordance with this Indenture),
in
connection with any such dissolution, winding up, liquidation or reorganization,
any payment or distribution of assets or securities for such Guarantor of
any
kind or character, whether in cash, property or securities, to which the
Holders
or the Trustee on their behalf would be entitled, but for the provisions
of this
Article Sixteen,
shall
be made by such Guarantor or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person making such payment or distribution
or by
the Holders or the Trustee if received by them or it, directly to the holders
of
Guarantor Senior Debt (pro rata to such holders on the basis of the respective
amounts of Guarantor Senior Debt held by such holders) or their representatives
or to any trustee or trustees under any indenture pursuant to which any such
Guarantor Senior Debt may have been issued, as their respective interests
appear, to the extent necessary to pay all such Guarantor Senior Debt in
full,
in cash or cash equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Guarantor
Senior Debt.
(b) To
the
extent any payment of Guarantor Senior Debt (whether by or on behalf of any
Guarantor, as proceeds of security or enforcement of any right of setoff
or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent
or
other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then if such payment is recovered by, or paid
over
to, such receiver, trustee in bankruptcy, liquidating trustee or other similar
Person, the Guarantor Senior Debt or part thereof originally intended to
be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay any Guarantor Senior
Debt is declared to be fraudulent, invalid, or otherwise set aside under
any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then
the obligation so declared fraudulent, invalid or otherwise set aside (and
all
other amounts that would come due with respect thereto had such obligation
not
been so affected) shall be deemed to be reinstated and outstanding as Guarantor
Senior Debt for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
(c) In
the
event that, notwithstanding clause (a) above prohibiting such payment or
distribution, any payment or distribution of assets or securities of any
Guarantor of any kind or character, whether in cash, property or securities,
shall be received by the Trustee or any Holder at a time when such payment
or
distribution is prohibited by clause (a) above and before all obligations
in
respect of Guarantor Senior Debt are paid in full, in cash or cash equivalents,
such payment or distribution shall be received and held in trust for the
benefit
of, and shall be paid over or delivered to, the holders of Guarantor Senior
Debt
(pro rata to such holders on the basis of the respective amounts of Guarantor
Senior Debt held by such holders) or their representatives or to any trustee
or
trustees under any indenture pursuant to which any such Guarantor Senior
Debt
may have been issued, as their respective interests appear, for application
to
the payment of all such Guarantor Senior Debt remaining unpaid in full, in
cash
or cash equivalents, after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of such Guarantor Senior
Debt.
(d) For
purposes of this Section 16.3,
the
words “cash, property or securities” shall not be deemed to include, so long as
the effect of this clause is not to cause the Securities Guarantees to be
treated in any case or proceeding or similar event described in this
Section 16.3
as part
of the same class of claims as the Guarantor Senior Debt or any class of
claims
pari
passu
with, or
senior to, the Guarantor Senior Debt for any payment or distribution, securities
of any Guarantor or any other Person provided for by a plan of reorganization
or
readjustment that are subordinated, at least to the extent that the Securities
Guarantees are subordinated, to the payment of all Guarantor Senior Debt
then
outstanding; provided
that (1)
if a new Person results from such reorganization or readjustment, such Person
assumes the Guarantor Senior Debt and (2) the rights of the holders of the
Guarantor Senior Debt are not, without the consent of such holders, altered
by
such reorganization or readjustment. The consolidation of a Guarantor with,
or
the merger of a Guarantor with or into, another Person or the liquidation
or
dissolution of a Guarantor following the sale, conveyance, transfer, lease
or
other disposition of all or substantially all of its property and assets
to
another Person without violation of the terms and conditions provided in
this
Indenture shall not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of this Section 16.3.
Section 16.4. Subrogation.
(a) Upon
the
payment in full of all Guarantor Senior Debt in cash or cash equivalents,
the
Holders shall be subrogated to the rights of the holders of Guarantor Senior
Debt to receive payments or distributions of cash, property or securities
of the
Guarantors made on such Guarantor Senior Debt until all obligations arising
under the Securities Guarantees shall be paid in full; and, for the purposes
of
such subrogation, no payments or distributions to the holders of the Guarantor
Senior Debt of any cash, property or securities to which the Holders or the
Trustee on their behalf would be entitled except for the provisions of this
Article Sixteen,
and no
payment pursuant to the provisions of this Article Sixteen
to the
holders of Guarantor Senior Debt by the Holders or the Trustee on their behalf
shall, as between each Guarantor, its creditors other than holders of Guarantor
Senior Debt, and the Holders, be deemed to be a payment by such Guarantor
to or
on account of the Guarantor Senior Debt. It is understood that the provisions
of
this Article Sixteen
are
intended solely for the purpose of defining the relative rights of the Holders,
on the one hand, and the holders of the Guarantor Senior Debt, on the other
hand.
(b) If
any
payment or distribution to which the Holders would otherwise have been entitled
but for the provisions of this Article Sixteen
shall
have been applied, pursuant to the provisions of this Article Sixteen,
to the
payment of all amounts payable under Guarantor Senior Debt, then, and in
such
case, the Holders shall be entitled to receive from the holders of such
Guarantor Senior Debt any payments or distributions received by such holders
of
Guarantor Senior Debt in excess of the amount required to make payment in
full,
in cash or cash equivalents, of such Guarantor Senior Debt of such
holders.
Section 16.5. Obligations
of Guarantor Unconditional.
(a) Nothing
contained in this Article Sixteen
or
elsewhere in this Indenture or in the Securities is intended to or shall
impair,
as among the Guarantors and the Holders, the obligation of such Guarantors,
which is absolute and unconditional, to pay to the Holders all obligations
arising under the Securities Guarantees as and when the same shall become
due
and payable in accordance with their terms, or is intended to or shall affect
the relative rights of the Holders and creditors of the Guarantors other
than
the holders of the Guarantor Senior Debt, nor shall anything herein or therein
prevent the Holders or the Trustee on their behalf from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
subject
to the rights, if any, under this Article Sixteen
of the
holders of the Guarantor Senior Debt.
(b) Without
limiting the generality of the foregoing, nothing contained in this Article Sixteen
will
restrict the right of the Trustee or the Holders to take any action to declare
the Securities to be due and payable prior to their Stated Maturity pursuant
to
Section 5.1
of this
Indenture or to pursue any rights or remedies hereunder; provided, however,
that
all Guarantor Senior Debt then due and payable or thereafter declared to
be due
and payable shall first be paid in full, in cash or cash equivalents, before
the
Holders or the Trustee are entitled to receive any direct or indirect payment
from any Guarantor on the Securities.
Section 16.6. Notice
to Trustee.
(a) Each
Guarantor shall give prompt written notice to the Trustee of any fact known
to
such Guarantor that would prohibit the making of any payment to or by the
Trustee in respect of the Securities Guarantees pursuant to the provisions
of
this Article Sixteen.
The
Trustee shall not be charged with the knowledge of the existence of any default
or event of default with respect to any Guarantor Senior Debt of any Guarantor
or of any other facts that would prohibit the making of any payment to or
by the
Trustee unless and until the Trustee shall have received notice in writing
at
its Corporate Trust Office to that effect signed by an Officer of such
Guarantor, or by a holder of such Guarantor Senior Debt or trustee or agent
thereof; and prior to the receipt of any such written notice, the Trustee
shall,
subject to Article Six,
be
entitled to assume that no such facts exist; provided
that, if
the Trustee shall not have received the notice provided for in this Section 16.6
at least
two Business Days prior to the date upon which, by the terms of this Indenture,
any monies shall become payable for any purpose (including, without limitation,
the payment of all obligations arising under any Securities Guarantee), then,
notwithstanding anything herein to the contrary, the Trustee shall have full
power and authority to receive any monies from such Guarantor and to 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 on or after such prior
date except for an acceleration of the Securities prior to such application.
Nothing contained in this Section 16.6
shall
limit the right of the holders of Guarantor Senior Debt to recover payments
as
contemplated by this Article Sixteen.
The
foregoing shall not apply if the Paying Agent is the Company. The Trustee
shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Guarantor Senior Debt
(or a
trustee on behalf of, or other representative of, such holder) to establish
that
such notice has been given by a holder of such Guarantor Senior Debt or a
trustee or representative on behalf of any such holder.
(b) In
the
event that the Trustee determines in good faith that any evidence is required
with respect to the right of any Person as a holder of Guarantor Senior Debt
to
participate in any payment or distribution pursuant to this Article Sixteen,
the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Guarantor Senior Debt held
by
such Person, the extent to which such Person is entitled to participate in
such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Sixteen
and, if
such evidence is not furnished to the Trustee, the Trustee may defer any
payment
to such Person pending judicial determination as to the right of such Person
to
receive such payment.
Section 16.7. Reliance
on Judicial Order or Certificate of Liquidating Agent.
Upon
any
payment or distribution of assets or securities referred to in this Article Sixteen,
the
Trustee and the Holders shall be entitled to rely upon any order or decree
made
by any court of competent jurisdiction in which bankruptcy, dissolution,
winding
up, liquidation or reorganization proceedings are pending, or upon a certificate
of the receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar 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 Guarantor Senior Debt
and
other Debt of a Guarantor, the amount thereof or payable thereon, the amount
or
amounts paid or distributed thereon and all other facts pertinent thereto
or to
this Article Sixteen.
Section 16.8. Trustee's
Relation to Guarantor Senior Debt.
(a) The
Trustee and any Paying Agent shall be entitled to all the rights set forth
in
this Article Sixteen
with
respect to any Guarantor Senior Debt that may at any time be held by it in
its
individual or any other capacity to the same extent as any other holder of
Guarantor Senior Debt and nothing in this Indenture shall deprive the Trustee
or
any Paying Agent of any of its rights as such holder.
(b) With
respect to the holders of Guarantor Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Sixteen,
and no
implied covenants or obligations with respect to the holders of Guarantor
Senior
Debt shall be read into this Indenture against the Trustee. The Trustee shall
not be deemed to owe any fiduciary duty to the holders of Guarantor Senior
Debt
(except as provided in Section 16.2(c)
and
Section 16.3(c)
of
this Indenture) and shall not be liable to any such holders if the Trustee
shall
in good faith mistakenly pay over or distribute to Holders of Securities
Guarantees or to a Guarantor or to any other person cash, property or securities
to which any holders of Guarantor Senior Debt shall be entitled by virtue
of
this Article Sixteen
or
otherwise.
Section 16.9. Subordination
Rights Not Impaired by Acts or Omissions of a Guarantor or Holders of Guarantor
Senior Debt.
No
right
of any present or future holders of any Guarantor Senior Debt to enforce
subordination as provided in this Article Sixteen
will at
any time in any way be prejudiced or impaired by any act or failure to act
on
the part of a Guarantor or by any act or failure to act, in good faith, by
any
such holder, or by any noncompliance by such Guarantor with the terms of
this
Indenture, regardless of any knowledge thereof that any such holder may have
or
otherwise be charged with. The provisions of this Article Sixteen
are
intended to be for the benefit of, and shall be enforceable directly by,
the
holders of Guarantor Senior Debt.
Section 16.10. Holders
Authorize Trustee to Effectuate Subordination of Securities
Guarantees.
Each
Holder by his acceptance of any Securities Guarantees authorizes and expressly
directs the Trustee on his behalf to take such action as may be necessary
or
appropriate to effectuate the subordination provided in this Article Sixteen,
and
appoints the Trustee his attorney-in-fact for such purposes, including, in
the
event of any dissolution, winding up, liquidation or reorganization of a
Guarantor (whether in bankruptcy, insolvency, receivership, reorganization
or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the property and assets of such
Guarantor, the filing of a claim for the unpaid balance of its Securities
Guarantees in the form required in those proceedings. If the Trustee does
not
file a proper claim or proof in indebtedness in the form required in such
proceeding at least 30 days before the expiration of the time to file such
claim
or claims, each holder of Guarantor Senior Debt is hereby authorized to file
an
appropriate claim for and on behalf of the Holders.
Section 16.11. Not
to
Prevent Events of Default.
The
failure to fulfill any obligation arising under the Securities Guarantees
by
reason of any provision of this Article Sixteen
will not
be construed as preventing the occurrence of an Event of Default.
Section 16.12. Trustee's
Compensation Not Prejudiced.
Nothing
in this Article Sixteen
will
apply to amounts due to the Trustee pursuant to other sections of this
Indenture, including Section 6.7.
Section 16.13. No
Waiver of Subordination Provisions.
Without
in any way limiting the generality of Section 16.9,
the
holders of Guarantor Senior Debt may, at any time and from time to time,
without
the consent of or notice to the Trustee or the Holders, without incurring
responsibility to the Holders and without impairing or releasing the
subordination provided in this Article Sixteen
or the
obligations hereunder of the Holders to the holders of Guarantor Senior Debt,
do
any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Guarantor Senior
Debt or any instrument evidencing the same or any agreement under which
Guarantor Senior Debt is outstanding or secured; (b) sell, exchange, release
or
otherwise deal with any property pledged, mortgaged or otherwise securing
Senior
Debt; (c) release any Person liable in any manner for the collection of
Guarantor Senior Debt; and (d) exercise or refrain from exercising any rights
against the Company and any other Person.
Section 16.14. Payments
May Be Paid Prior to Dissolution.
Nothing
contained in this Article Sixteen
or
elsewhere in this Indenture shall prevent (i) a Guarantor, except under the
conditions described in Section 16.2
or
Section 16.3,
from
fulfilling any obligation arising under the Securities Guarantees, or from
depositing with the Trustee any money for such payments, or (ii) the application
by the Trustee of any money deposited with it for the purpose of fulfilling
any
obligation arising under the Securities Guarantees to the holders entitled
thereto unless, at least two Business Days prior to the date upon which such
payment becomes due and payable, the Trustee shall have received the written
notice provided for in Section 16.2(b)
of
this Indenture (or there shall have been an acceleration of the Securities
Guarantees prior to such application) or in Section 16.6
of this
Indenture. The Company shall give prompt written notice to the Trustee of
any
dissolution, winding up, liquidation or reorganization of such
Guarantor.
*
*
*
This
instrument may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
IN
WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, as of the day and year first above written.
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CONSTELLATION
ENERGY PARTNERS LLC
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By:
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Name:
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Title:
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[________________________________]
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By:
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Name:
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Title:
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EXHIBIT
5.1
January 30,
2008
Constellation
Energy Partners LLC
111
Market Place
Baltimore,
Maryland 21202
Ladies
and Gentlemen:
We
have
acted as special counsel to Constellation Energy Partners LLC, a Delaware
limited liability company (the “Company”),
CEP
Mid-Continent LLC, a Delaware limited liability company and wholly owned
subsidiary of the Company (“CEP
Mid-Con”),
Northeast Shelf Energy, L.L.C., an Oklahoma limited liability company and
wholly
owned subsidiary of the Company ( “Northeast
Shelf”),
Mid-Continent Oilfield Supply, L.L.C., an Oklahoma limited liability company
and
wholly owned subsidiary of the Company (“MCOS”),
Robinson’s Bend Marketing II, LLC, a Delaware limited liability company and
wholly owned subsidiary of the Company (“RB
Marketing”),
Robinson’s Bend Operating II, LLC, a Delaware limited liability company and
wholly owned subsidiary of the Company (“RB
Operating”),
and
Robinson’s Bend Production II, LLC, a Delaware limited liability company and
wholly owned subsidiary of the Company (“RB
Production”
and
together with CEP Mid-Con, Northeast Shelf, MCOS, RB Marketing and RB Operating,
the “Guarantors”
and
collectively with the Company, the “Registrants”),
in
connection with the preparation of a registration statement on Form S-3 (the
“Registration
Statement”),
filed
with the Securities and Exchange Commission (the “SEC”)
pursuant to the Securities Act of 1933, as amended (the “Securities
Act”),
on
January 30, 2008. The Registration Statement relates to the offering from
time to time, as set forth in the Registration Statement, the form of
prospectuses contained therein (collectively, the “Prospectus”)
and
one or more supplements to the Prospectus (each, a “Prospectus
Supplement”),
of
(i) common units representing Class B limited liability company interests
in the Company by the Company (the “Primary Common
Units”),
(ii)
debt securities, which may either be senior or subordinated in right of payment,
and may be issued in one or more series (the “Debt
Securities”),
by
the Company, (iii) guarantees with respect to the Debt Securities (the
“Guarantees”)
by
some or all of the Guarantors and (iv) up to 5,918,894 common units representing
Class B limited liability company interests in the Company (the "Secondary
Common Units") by the selling unitholder named in the prospectus. The
Primary Common Units, the Debt Securities and the Guarantees are referred
to
herein collectively as the “Securities.”
The
Registration Statement provides that the aggregate initial public offering
price
of the Securities will not exceed $1,000,000,000. The Securities and the
Secondary Common Units will be offered in amounts, at prices and on terms
to be
determined at the time of sale and to be set forth in the Prospectus
Supplements. The Primary Common Units and the Secondary Common Units
are referred to herein collectively as the "Common Units". All
capitalized terms used but not defined herein have the respective meanings
assigned to such terms in the Registration Statement or in the Indentures
(as
defined below), as the case may be.
Constellation
Energy Partners LLC
January 30,
2008
Page
2
The
Debt
Securities will be issued pursuant to either (i) an indenture governing senior
debt securities, in the form filed as Exhibit 4.1
to
the Registration Statement, between the Company and the trustee (the
“Senior
Indenture”),
or
(ii) an indenture governing subordinated debt securities, in the form filed
as
Exhibit 4.2 to the Registration Statement, between the Company and the trustee
(the “Subordinated
Indenture”
and
together with the Senior Indenture, the “Indentures”).
The
Guarantees, if any, with respect to any series of Debt Securities issued under
either of the Indentures, will be issued under such indenture, as amended and
supplemented by a supplemental indenture thereto, among the Company, each
guarantor providing a Guarantee of the Debt Securities of such series and the
trustee under such indenture.
In
arriving at the opinions expressed below, we have examined the
following:
(i) the
Certificate of Formation and Second Amended and Restated Operating Agreement
(the “LLC
Agreement”)
of the
Company, in each case as amended to date;
(ii) the
Certificate of Formation and Operating Agreement of CEP Mid-Con, in each case
as
amended to date;
(iii) the
Articles of Organization and Amended and Restated Operating Agreement of
Northeast Shelf, in each case as amended to date;
(iv) the
Articles of Organization and Amended and Restated Operating Agreement of MCOS,
in each case as amended to date;
(v) the
Certificate of Formation and Amended and Restated Operating Agreement of RB
Marketing, in each case as amended to date;
(vi)
the
Certificate of Formation and Amended and Restated Operating Agreement of RB
Operating, in each case as amended to date;
(vi) the
Certificate of Formation and Amended and Restated Operating Agreement of RB
Production, in each case as amended to date;
(vii) a
specimen of the certificate representing the Common Units;
(viii)
the
Registration Statement;
(ix) the
Prospectus;
(x) the
forms
of the Indentures filed as Exhibits 4.1 and 4.2 to the Registration Statement;
and
(xi) the
originals or copies certified or otherwise identified to our satisfaction of
such other instruments and other certificates of public officials, officers
and
representatives of the Registrants and such other persons, and we have made
such
investigations of law, as we have deemed appropriate as a basis for the opinions
expressed below.
Constellation
Energy Partners LLC
January 30,
2008
Page
3
In
rendering the opinions expressed below, we have assumed and have not verified
(i) the genuineness of the signatures on all documents that we have examined,
(ii) the legal capacity of all natural persons, (iii) the authenticity of all
the documents supplied to us as originals, and (iv) the conformity to the
authentic originals of all documents supplied to us as certified or photostatic
or faxed copies. In conducting our examination of documents executed by parties
other than the Registrants, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate
or
other, and the due execution and delivery by such parties of such documents
and
that, to the extent such documents purport to constitute agreements, such
documents constitute valid and binding obligations of such parties.
In
rendering the opinions expressed below with respect to the Securities and the
Secondary Common Units, we have assumed that:
(i) the
Certificate of Formation and LLC Agreement of the Company, the Certificate
of
Formation and Operating Agreement of CEP Mid-Con, the Articles of Organization
and Amended and Restated Operating Agreement of Northeast Shelf, the Articles
of
Organization and Amended and Restated Operating Agreement of MCOS, the
Certificate of Formation and Amended and Restated Operating Agreement of RB
Marketing, the Certificate of Formation and Amended and Restated Operating
Agreement of RB Operating and the Certificate of Formation and Amended and
Restated Operating Agreement of RB Production, each as amended to date, will
not
have been amended in any manner that would affect any legal conclusion set
forth
herein;
(ii)
the
consideration paid for any Primary Common Units will comply with Article V
of
the LLC Agreement;
(iii) that
the
certificates for the Common Units conform to the specimens thereof examined
by
us and have been duly countersigned by a transfer agent and duly registered
by a
registrar of the Common Units;
(iv) any
supplemental indenture to either of the Indentures and any resolution of the
board of managers and/or any officers’ certificate executed and delivered
pursuant to such Indenture, in any such case, pursuant to which any Debt
Securities and Guarantees are issued, will comply with such Indenture as
theretofore supplemented, and the form and terms of such Debt Securities and
Guarantees will comply with such Indenture as then supplemented (including
by
any such supplemental indenture) and any such resolution of the board of
managers and/or officers’ certificate; and
Constellation
Energy Partners LLC
January 30,
2008
Page
4
(v) the
form
and terms of such Securities, when established, the issuance, sale and delivery
thereof by the applicable Registrant, and the incurrence and performance of
the
applicable Registrant’s obligations thereunder or in respect thereof (including,
without limitation, its obligations under each of the Indentures with respect
to
Debt Securities and Guarantees issued thereunder) in accordance with the terms
thereof, will comply with, and will not violate, the Certificate of Formation
and LLC Agreement of the Company, the Certificate of Formation and Operating
Agreement of CEP-Mid-Con, the Articles of Organization and Amended and Restated
Operating Agreement of Northeast Shelf, the Articles of Organization and Amended
and Restated Operating Agreement of MCOS, the Certificate of Formation and
Amended and Restated Operating Agreement of RB Marketing, the Certificate of
Formation and Amended and Restated Operating Agreement of RB Operating and
the
Certificate of Formation and Amended and Restated Operating Agreement of RB
Production, each as amended to date, or any applicable law, rule, regulation,
order, judgment, decree, award, or agreement binding upon any of the
Registrants, or to which the issuance, sale and delivery of such Securities,
or
the incurrence and performance of such obligations, may be subject, or violate
any applicable public policy, or be subject to any defense in law or equity,
and
(without limiting the generality of the foregoing) Section 5-501.6.b of the
New
York General Obligations Law will apply in the case of all such Debt Securities
and Guarantees. In addition, except in the case of Guarantees, we have assumed
the receipt by each person to whom or for whose benefit a Security is to be
issued (collectively, the “Beneficial
Holders”)
of a
certificate for such Security or the receipt by The Depository Trust Company,
acting as agent, on behalf of all Beneficial Holders of the class or series
of
Securities of which such Security is one, of a global security then evidencing
such Securities. In addition, we have assumed the issuance and sale of and
payment for the Securities so acquired, in accordance with the applicable
purchase, underwriting or similar agreement approved by the board of managers
of
the Company and the boards of directors of CEP Mid-Con, Northeast Shelf, MCOS,
RB Marketing, RB Operating, RB Production, as applicable, and the Registration
Statement (including the Prospectus and the applicable Prospectus
Supplement).
Based
upon the foregoing and subject to the limitations, qualifications, exceptions
and assumptions set forth herein, we are of the opinion that:
1. With
respect to the Primary Common Units, when (a) the Company has taken all
necessary action to approve the issuance of such Primary Common Units, the
terms
of the offering thereof and related matters and (b) such Primary Common Units
have been issued and delivered in accordance with the terms of the applicable
definitive purchase, underwriting or similar agreement approved by the board
of
managers of the Company, upon payment (or delivery) of the consideration
therefor provided for therein, such Primary Common Units will be validly issued,
fully paid (to the extent required under the LLC Agreement) and
nonassessable,
except
as
such nonassessability may be affected by (i) the matters described in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2006 under
the caption “Risk Factors—Risks Related to Our Structure—Unitholders may have
liability to repay distributions.” and (ii) Sections 18-607 and 18-804 of the
Delaware Limited Liability Company Act.
2.
With
respect to the Secondary Common Units, such Secondary Common Units have been
validly issued and fully paid (to the extent required under the LLC Agreement)
and are nonassessable,
except
as
such nonassessability may be affected by (i) the matters described in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2006 under
the caption “Risk Factors—Risks Related to Our Structure—Unitholders may have
liability to repay distributions.” and (ii) Sections 18-607 and 18-804 of the
Delaware Limited Liability Company Act.
Constellation
Energy Partners LLC
January 30,
2008
Page
5
3. With
respect to any series of Debt Securities to be issued under either of the
Indentures, when (a) such Indenture, has been duly authorized and validly
executed and delivered by the Company and by the trustee under such Indenture,
(b) the applicable supplement, if any, to such Indenture, has been duly
authorized and validly executed and delivered by the Company, and any
guarantors, as applicable, and by the trustee under such Indenture, or the
applicable resolution of the board of managers has been duly authorized and
validly executed and delivered by the Company, or the applicable officers’
certificate has been validly executed and delivered by a duly authorized officer
of the Company, in each case, in accordance with the terms of such Indenture,
(c) such Indenture, as then and theretofore supplemented, has been duly
qualified under the Trust Indenture Act of 1939, as amended (the “Trust
Indenture Act”),
(d)
the Company has taken all necessary action to approve the issuance and terms
of
such series of Debt Securities, the terms of the offering thereof and related
matters and (e) the Debt Securities of such series have been duly executed,
authenticated, issued and delivered in accordance with the terms of such
Indenture and the applicable definitive purchase, underwriting or similar
agreement approved by the board of managers of the Company, as applicable,
upon
payment (or delivery) of the consideration therefor provided for therein, the
Debt Securities of such series will constitute valid and legally binding
obligations of the Company.
4. With
respect to the Guarantees of any series of Debt Securities to be issued by
the
Guarantors under either of the Indentures, when (a) the Company and the
applicable Guarantors have taken all necessary limited liability company action
to authorize and approve the issuance and terms of the Guarantees and the series
of Debt Securities to which they pertain, the terms of the offering of such
Debt
Securities and such Guarantees and related matters, (b) a supplemental indenture
to such Indenture, pursuant to which the applicable Guarantors agree to be
bound
by the guarantee provisions of such Indenture as applied to the Debt Securities
of such series, has been duly authorized and validly executed and delivered
by
the Company, the applicable Guarantors and the trustee under such indenture,
(c)
such Indenture, as then and theretofore supplemented, pursuant to which the
Guarantees will be issued, has been duly qualified under the Trust Indenture
Act, and (d) the Debt Securities of such series have been duly executed,
authenticated, issued and delivered in accordance with the terms of such
Indenture and the applicable definitive purchase, underwriting or similar
agreement approved by the board of managers of the Company (on behalf of the
applicable Guarantors), upon payment (or delivery) of the consideration for
such
Debt Securities provided for therein, such Guarantees will constitute valid
and
legally binding obligations of the applicable Guarantors.
Our
opinions in paragraphs 3 and 4 above are subject to applicable
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfer or conveyance), reorganization, moratorium and other similar
laws affecting creditors’ rights generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law), including, without limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (b) concepts
of
materiality, reasonableness, good faith and fair dealing, and we express no
opinion herein with respect to provisions relating to severability or
separability.
With
respect to our opinions expressed above as they relate to Debt Securities and
the Guarantees or other obligations of the Registrants, as applicable,
denominated in a currency other than U.S. dollars, we note that (i) a New York
statute provides that a judgment rendered by a court of the State of New York
in
respect of an obligation denominated in any such other currency would be
rendered in such other currency and would be converted into U.S. dollars at
the
rate of exchange prevailing on the date of entry of the judgment, and (ii)
a
judgment rendered by a Federal court sitting in the State of New York in respect
of an obligation denominated in any such other currency may be expressed in
U.S.
dollars, but we express no opinion as to the rate of exchange such Federal
court
would apply.
Constellation
Energy Partners LLC
January 30,
2008
Page
5
We
express no opinion other than as to the federal laws of the United States of
America, the laws of the State of New York and the Delaware Limited Liability
Company Act. In rendering the foregoing opinions, we have relied on the opinion
of the law firm of Hall Estill for matters involving Oklahoma law with respect
to certain of the Subsidiary Guarantors, a copy of which is filed as Exhibit
5.2
to the Registration Statement. We hereby consent to the filing of this opinion
as an exhibit to the Registration Statement and to the reference to this firm
under the heading “Legal Matters” in the Prospectus. In giving this consent we
do not admit that we are “experts” under the Securities Act, or the rules and
regulations of the SEC issued thereunder, with respect to any part of the
Registration Statement, including this exhibit. This opinion is expressed as
of
the date hereof, and we disclaim any undertaking to advise you of any subsequent
changes of the facts stated or assumed herein or any subsequent changes in
applicable law, and we have assumed that at no future time would any such
subsequent change of fact or law affect adversely our ability to render at
such
time an opinion (a) containing the same legal conclusions set forth herein
and
(b) subject only to such (or fewer) assumptions, limitations and qualifications
as are contained herein.
Very
truly yours,
/s/
Andrews Kurth LLP
[LETTERHEAD
OF HALL, ESTILL, HARDWICK, GABLE, GOLDEN & NELSON,
P.C.]
January
30, 2008
Constellation
Energy Partners LLC
111
Market Place
Baltimore,
Maryland 21202
Ladies
and Gentlemen:
We
have
acted as special Oklahoma counsel to Northeast Shelf Energy, L.L.C., an Oklahoma
limited liability company (“Northeast
Shelf”),
and
Mid-Continent Oilfield Supply, L.L.C., an Oklahoma limited liability company
(“MCOS”,
and
together with Northeast Shelf, the “Oklahoma
Guarantors”),
in
connection with the preparation of a registration statement on Form S-3 (the
“Registration
Statement”),
filed
with the Securities and Exchange Commission (the “SEC”)
pursuant to the Securities Act of 1933, as amended (the “Securities
Act”),
on
January 30, 2008. The Registration Statement relates to the offering from
time
to time, as set forth in the Registration Statement, the form of prospectuses
contained therein (collectively, the “Prospectus”)
and
one or more supplements to the Prospectus (each, a “Prospectus
Supplement”),
of
(i) common units representing limited liability company interests in
Constellation Energy Partners LLC, a Delaware limited liability company (the
“Company”),
by
the Company (the “Primary Common
Units”),
(ii)
debt securities, which may either be senior or subordinated in right of payment,
and may be issued in one or more series (the “Debt
Securities”),
by
the Company, (iii) guarantees with respect to the Debt Securities (the
“Guarantees”)
by
some or all of the guarantors listed in the Registration Statement, including
the Oklahoma Guarantors and (iv) up to 5,918,894 common units representing
Class
B limited liability company interests in the Company (the "Secondary Common
Units") by the selling unitholder named in the Prospectus. The Primary
Common Units, the Debt Securities and the Guarantees are referred to herein
collectively as the “Securities.”
The
Registration Statement provides that the aggregate initial public offering
price
of the Securities will not exceed $1,000,000,000. The Securities and the
Secondary Common Units will be offered in amounts, at prices and on terms
to be
determined at the time of sale and to be set forth in the Prospectus
Supplements. All capitalized terms used but not defined herein have the
respective meanings assigned to such terms in the Registration Statement
or in
the Indentures (as defined below), as the case may be.
The
Debt
Securities will be issued pursuant to either (i) an indenture governing senior
debt securities, in the form filed as Exhibit 4.1
to
the Registration Statement, between the Company and the trustee (the
“Senior
Indenture”),
or
(ii) an indenture governing subordinated debt securities, in the form filed
as
Exhibit 4.2 to the Registration Statement, between the Company and the trustee
(the “Subordinated
Indenture”,
and
together with the Senior Indenture, the “Indentures”).
The
Guarantees, if any, with respect to any series of Debt Securities issued under
either of the Indentures, will be issued under such Indenture, as amended and
supplemented by a supplemental indenture thereto, among the Company, each
guarantor providing a Guarantee of the Debt Securities of such series, and
the
trustee under such Indenture.
Constellation
Energy Partners LLC
January
30, 2008
Page
2
A. Examined
Documents
In
connection with this opinion letter, we have examined copies of the
following:
1. the
Articles of Organization and Amended and Restated Operating Agreement of
Northeast Shelf, in each case as amended to date; and
2. the
Articles of Organization and Amended and Restated Operating Agreement of MCOS,
in each case as amended to date;
3. the
Registration Statement;
4. the
Prospectus;
5. the
forms
of the Indentures filed as Exhibits 4.1 and 4.2 to the Registration Statement;
and
6. the
originals or copies certified or otherwise identified to our satisfaction of
such other instruments and other certificates of public officials, officers
and
representatives of the Oklahoma Guarantors and such other persons, and we have
made such investigations of law, as we have deemed appropriate as a basis for
the opinions expressed below.
B. Scope
of Examination, General Bases and Assumptions for Legal
Opinions
1. In
rendering the opinions expressed below, we have assumed and have not verified
(a) the genuineness of the signatures on all documents that we have examined,
(b) the legal capacity of all natural persons, (c) the authenticity of all
the
documents supplied to us as originals, and (d) the conformity to the authentic
originals of all documents supplied to us as certified or photostatic or faxed
copies.
2. In
conducting our examination of documents executed and to be executed by parties
other than the Oklahoma Guarantors, we have assumed that such parties had and
will have the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization by all
requisite action, corporate or other, and the due execution and delivery by
such
parties of such documents and that, to the extent such documents purport to
constitute contractual obligations, such documents constitute valid and binding
obligations of such parties.
3. In
accordance with the general policies of this law firm in rendering legal
opinions, we have assumed for the purposes of the opinions expressed below
that
no fraud exists with respect to any of the matters relevant to such opinions,
and nothing has come to our attention that has caused us to believe that there
exists any fraud which would render invalid the opinions expressed
below.
Constellation
Energy Partners LLC
January
30, 2008
Page
3
4. Except
to
the extent necessary to render the opinions herein, we have not made any
independent review or investigation of the organization, existence, assets,
business or affairs of the Oklahoma Guarantors.
5. In
rendering the opinions expressed below with respect to the Securities, we have
assumed that:
(a) the
Articles of Organization and Amended and Restated Operating Agreement of
Northeast Shelf and the Articles of Organization and Amended and Restated
Operating Agreement of MCOS, each as amended to date, will not have been amended
in any manner that would affect any legal conclusion set forth herein;
and
(b) any
supplemental indenture to either of the Indentures and any resolution of the
managers with the approval of the members of each of the Oklahoma Guarantors
and/or any officers’ certificate executed and delivered by each of the Oklahoma
Guarantors pursuant to such Indenture, in any such case, pursuant to which
any
Debt Securities and Guarantees are issued, will comply with such Indenture
as
theretofore supplemented, and the form and terms of such Debt Securities and
Guarantees will comply with such Indenture as then supplemented (including
by
any such supplemental indenture) and any such resolution of the managers with
the approval of the members and/or officers’ certificate of each of the Oklahoma
Guarantors.
6. In
rendering the opinions expressed below with respect to the Securities, we have
assumed that each of the Oklahoma Guarantors is validly existing and in good
standing and there will be no material change in such status with respect to
the
Oklahoma Guarantors.
C. Legal
Opinions
Based
upon the foregoing and subject to the assumptions set forth above and the
qualifications and exceptions and assumptions set forth hereafter, we are of
the
opinion that:
1. With
respect to the Guarantees of any series of Debt Securities to be issued by
the
Oklahoma Guarantors under either of the Indentures, when (a) the Company and
the
Oklahoma Guarantors have taken all necessary limited liability company action
to
authorize and approve the issuance and terms of the Guarantees and the series
of
Debt Securities to which they pertain, the terms of the offering of such Debt
Securities and such Guarantees and related matters, (b) a supplemental indenture
to such Indenture, pursuant to which the Oklahoma Guarantors agree to be bound
by the guarantee provisions of such Indenture as applied to the Debt Securities
of such series, has been duly authorized and validly executed and delivered
by
the Company, the Oklahoma Guarantors and the trustee under such Indenture,
(c)
such Indenture, as then and theretofore supplemented, pursuant to which the
Guarantees will be issued, has been duly qualified under the Trust Indenture
Act, (d) the Debt Securities of such series have been duly executed,
authenticated, issued and delivered in accordance with the terms of such
Indenture and the applicable definitive purchase, underwriting or similar
agreement approved by the board of managers of the Company and the managers,
with the approval of the members, of each of the Oklahoma Guarantors, and (e)
upon payment (or delivery) of the consideration for such Debt Securities
provided for therein, such Guarantees will constitute valid and legally binding
obligations of the Oklahoma Guarantors.
Constellation
Energy Partners LLC
January
30, 2008
Page
4
D. Qualifications
and Exceptions for Legal Opinions
1. Our
opinion in paragraph 1 above is subject to applicable bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfer or
conveyance), reorganization, moratorium and other similar laws affecting
creditors’ rights generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law), including,
without limitation, (a) the possible unavailability of specific performance,
injunctive relief or any other equitable remedy, and (b) concepts of
materiality, reasonableness, good faith and fair dealing, and we express no
opinion herein with respect to provisions relating to severability or
separability.
2. Our
opinion in paragraph 1 above is limited insofar as enforceability may be
affected by applicable statutes of limitation.
3. We
express no opinion as to matters of usury including lack of enforceability
as a
consequence thereof, including any usury savings clause; provided, if the laws
of the State of Oklahoma were to apply to the legality of principal, interest
and other amounts to be paid pursuant to the terms of the Indentures or
Guarantees, the payment of such amounts would not be usurious under the laws
of
the State of Oklahoma if the loan finance charge does not and will not exceed
an
annual percentage rate of 45%, calculated according to the actuarial method
(as
used herein, “loan
finance charge”
includes charges payable directly or indirectly by an obligor and imposed
directly or indirectly in accordance with the debt instruments as an incident
to
the extension of credit, however denominated, including, without limitation,
all
commitment fees, organization fees, and prepayment fees).
4. We
do not
express any opinion herein concerning any laws other than the laws of the State
of Oklahoma, and when expressly so stated, the laws of the United States of
America. For these purposes, the laws of the State of Oklahoma shall not be
deemed to include laws of the United States of America applicable within the
State of Oklahoma (except where expressly so stated).
5. This
opinion is rendered as of the date hereof and based solely upon compilations
of
the applicable laws as were available to the public on the date hereof. We
assume no obligations to update or supplement this opinion to reflect any facts
or circumstances that may hereafter come to our attention or any changes in
law
that may hereafter occur.
6. Our
opinions also shall not be deemed to cover, and shall be subject to the effect
of, applicable federal securities and state securities laws, including, without
limitation, the (a) Securities Act, (b) Securities Exchange Act of 1934, as
amended, (c) Public Utilities Holding Company Act of 1935, as amended, (d)
Investment Company Act of 1940, as amended, and (e) Oklahoma “Blue Sky” laws, as
amended.
Constellation
Energy Partners LLC
January
30, 2008
Page
2
Andrews
Kurth LLP is entitled to rely on our opinion in connection with its opinion
to
you dated the date hereof.
We
hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the heading “Legal Matters” in
the Prospectus. In giving this consent we do not admit that we are “experts”
under the Securities Act, or the rules and regulations of the SEC issued
thereunder, with respect to any part of the Registration Statement, including
this opinion as an exhibit.
|
Very truly yours, |
|
/s/
Hall, Estill, Hardwick, Gable, Golden & Nelson,
P.C. |
January
30, 2008
Constellation
Energy Partners LLC
111
Market Place
Baltimore,
Maryland 21202
|
|
|
Re: |
Constellation
Energy Partners LLC, Registration Statement on Form
S-3
|
Ladies
and Gentlemen:
We
have
acted as special counsel to Constellation Energy Partners LLC, a Delaware
limited liability company (the “Company”),
in
connection with the preparation of a registration statement on Form S-3
(the
“Registration
Statement”),
filed
with the Securities and Exchange Commission (the “SEC”)
pursuant to the Securities Act of 1933, as amended (the “Securities
Act”),
on
January 30, 2008. The Registration Statement relates, in part, to the offering
from time to time, as set forth in the forms of prospectus contained in
the
Registration Statement (collectively, the “Prospectus”),
of
(i) common units representing Class B limited liability company interests
in the
Company by the Company (the “Primary
Common Units”)
and
(ii) up to 5,918,894 common units representing Class B limited liability
company
interests in the Company (the “Secondary
Common Units”)
by the
selling unitholder named in the Prospectus. The Primary Common Units and
the
Secondary Common Units are referred to herein collectively as the “Common
Units.”
The
Common Units will be offered in amounts, at prices and on terms to be determined
at the time of sale and to be set forth in Prospectus Supplements (collectively,
the “Offerings”).
In
connection therewith, we have participated in the preparation of the discussions
set forth under the caption “Material Tax Consequences” (the “Discussions”)
in the
Prospectus.
The
Discussions, subject to the qualifications and assumptions stated in the
Discussions and the limitations and qualifications set forth herein, constitute
our opinion as to the material United States federal income tax consequences
for
purchasers of Common Units pursuant to the Offerings.
Constellation
Energy Partners LLC
January
30, 2008
Page
2
This
opinion letter is limited to the matters set forth herein, and no opinions
are
intended to be implied or may be inferred beyond those expressly stated herein.
Our opinion is rendered as of the date hereof and we assume no obligation
to
update or supplement this opinion or any matter related to this opinion to
reflect any change of fact, circumstances, or law after the date hereof.
In
addition, our opinion is based on the assumption that the matter will be
properly presented to the applicable court.
Furthermore,
our opinion is not binding on the Internal Revenue Service or a court. In
addition, we must note that our opinion represents merely our best legal
judgment on the matters presented and that others may disagree with our
conclusion. There can be no assurance that the Internal Revenue Service will
not
take a contrary position or that a court would agree with our opinion if
litigated.
We
hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to our firm and this opinion contained in
the
Discussions. In giving this consent, we do not admit that we are “experts” under
the Securities Act, or under the rules and regulations of the Securities
and
Exchange Commission relating thereto, with respect to any part of the
Registration Statement.
|
Very
truly yours,
/s/
Andrews Kurth LLP
|
Unassociated Document
EXHIBIT
12.1
RATIO
OF EARNINGS TO FIXED CHARGES
The
following table sets forth the ratios of earnings to fixed charges for us and
our predecessors for each of the periods indicated. All dollar amounts are
reported in thousands.
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Constellation
Energy
Partners
LLC
|
|
|
|
Everlast
Energy LLC
|
|
|
|
Torch
Energy
|
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
For
the
period
from
February
7, 2005
(inception)
to
December
31,
|
|
|
|
For
the
period
from
January
1, 2005
(inception)
to
June
12,
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2006
|
|
2005
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
2002
|
|
Net
Income (loss)(1)
|
|
$
|
11,330
|
|
$
|
10,316
|
|
$
|
15,989
|
|
$
|
11,941
|
|
|
|
$
|
(10,636
|
)
|
$
|
2,099
|
|
$
|
4,987
|
|
|
|
$
|
414
|
|
Fixed
Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and Amortization of Debt Issuance Costs
|
|
|
4,209
|
|
|
2
|
|
|
221
|
|
|
3
|
|
|
|
|
2,437
|
|
|
3,028
|
|
|
1,961
|
|
|
|
|
—
|
|
Total
Fixed Charges
|
|
|
4,209
|
|
|
2
|
|
|
221
|
|
|
3
|
|
|
|
|
2,437
|
|
|
3,028
|
|
|
1,961
|
|
|
|
|
—
|
|
Earnings
(loss)(2)
|
|
$
|
15,539
|
|
$
|
10,318
|
|
$
|
16,210
|
|
$
|
11,944
|
|
|
|
$
|
(8,199
|
)
|
$
|
5,127
|
|
$
|
6,948
|
|
|
|
$
|
414
|
|
Ratio
of earnings (loss) to fixed charges
|
|
|
3.69
|
|
|
5,159.00
|
|
|
73.35
|
|
|
3,981.33
|
|
|
|
|
(3.36
|
)
|
|
1.69
|
|
|
3.54
|
|
|
|
|
—
|
|
(1) Net
income is the equivalent of income from continuing operations, as CEP has no
discontinued operations.
(2) Earnings
are deemed to consist of income from continuing operations and fixed
charges.
Unassociated Document
EXHIBIT
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
hereby
consent to the incorporation by reference in this Registration Statement on
Form
S-3 of our report dated March 12, 2007 relating to the financial statements
of
Constellation Energy Partners LLC and of our report dated June 12, 2006 relating
to the financial statements of Everlast Energy LLC, both of which appear in
Constellation Energy Partners LLC’s Annual Report on Form 10-K for the year
ended December 31, 2006. We also consent to the incorporation by reference
in
this Registration Statement on Form S-3 of our report dated July 3, 2007
relating to the statements of direct revenues and direct operating expenses
of
the natural gas and oil properties acquired from EnergyQuest Resources, LP,
of
our report dated July 3, 2007 relating to the financial statements of Kansas
Processing EQR, LLC, both of which appear in the Current Report on Form 8-K/A
dated July 3, 2007 and of our report dated October 11, 2007 relating to the
statements of revenues and direct operating expenses of certain oil and gas
properties acquired from Newfield Exploration Mid-Continent Inc., which appears
in the Current Report on Form 8-K/A dated October 12, 2007. We also consent
to
the reference to us under the heading “Experts” in such Registration
Statement.
/s/
PricewaterhouseCoopers LLP
Houston,
Texas
January
28, 2008
Unassociated Document
EXHIBIT
23.2
CONSENT
OF INDEPENDENT AUDITORS
We
consent to the incorporation by reference in this Registration Statement of
Constellation Energy Partners LLC on Form S-3 of our report dated September
13,
2007 (which report expresses an unqualified opinion and includes an explanatory
paragraph relating to supplemental information), relating to the financial
statements of AMVEST Osage, Inc. as of July 31, 2006 and 2005 and for each
of
the three years in the period ended July 31, 2006 appearing in the Current
Report on Form 8-K/A filed on September 14, 2007 by Constellation Energy
Partners LLC and to the reference to us under the heading “Experts” in the
Prospectuses, which are part of this Registration Statement.
/s/
Deloitte & Touche LLP
Richmond,
Virginia
January
28, 2008
EXHIBIT
23.3
CONSENT
OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
As
independent petroleum engineers, we hereby consent to the reference to our
Firm’s name in the Registration Statement on Form S-3 and related Prospectus of
Constellation Energy Partners LLC for the registration of units representing
limited liability company interests and debt securities.
|
|
|
|
NETHERLAND,
SEWELL
& ASSOCIATES, INC |
|
|
|
|
By: |
/s/
Danny D. Simmons |
|
Danny
D. Simmons
Executive
Vice President
|
Houston,
Texas
January
18, 2008