EXHIBIT T3E(5)
(Face of Note)
SOUTHWEST ROYALTIES, INC.
FORM OF
SENIOR SECURED NOTE
DUE 2004
No. __________ $__________
CUSIP No. __________
Southwest Royalties, Inc., a Delaware corporation (hereinafter the
"Issuer," which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_________, or registered assigns, the principal sum of $_________, on June 30,
2004.
Interest Payment Dates: April 15 and October 15 of each year,
commencing April 15, 2002.
Record Dates: April 1 and October 1.
Reference is made to the further provisions of this Note set forth
below or on the reverse side of this Note which will, for all purposes, have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this Instrument to be duly
executed under its corporate seal.
Dated: ___________________ SOUTHWEST ROYALTIES, INC.,
a Delaware corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
Attest Secretary: _________________________
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
as Trustee
Dated:__________________ By: ____________________________
Authorized Signatory
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(Back of Note)
SOUTHWEST ROYALTIES, INC.
SENIOR SECURED NOTE
DUE 2004
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
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SOUTHWEST ROYALTIES, INC.
Senior Secured Note due June 30, 2004
1. Interest.
--------
Southwest Royalties, Inc., a Delaware corporation (the "Issuer"), promises
to pay interest on the principal amount of the Senior Secured Notes (the
"Notes") due June 30, 2004 (the "Maturity Date") at a rate of 10 1/2% per annum
beginning on February 1, 2002 (as if the Notes were issued on that date) through
December 31, 2002, at a rate of 11 1/2% per annum from January 1, 2003 through
December 31, 2003, and at a rate of 12 1/2% per annum from January 1, 2004 until
the Maturity Date.
The Issuer will pay interest semi-annually on April 15 and October 15 of
each year (each, an "Interest Payment Date"), commencing April 15, 2002.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from February 1, 2002.
If the Issuer shall default in the payment of any installment of interest,
or the principal of or premium, if any, on the Notes, when the same becomes due
and payable, at maturity, upon redemption, by acceleration or otherwise
(including the failure to make a payment to purchase the Notes tendered pursuant
to a Change of Control Offer or an Excess Cash Offer), then interest on the
Notes and all amounts then due thereunder shall accrue interest at the rate 18%
per annum (the "Default Rate") until the Notes are paid in full or the Default
in payment is cured. The Issuer shall pay interest on all such overdue amounts
(including installments of interest, to the extent lawful) on demand without
regard to any applicable grace periods. Interest will be computed on the basis
of a 360-day year comprised of twelve 30 day months, and, in the case of a
partial month, the actual number of days elapsed.
2. Method of Payment.
-----------------
The Issuer shall pay interest on the Notes (except defaulted interest) to
the Persons who are the registered Holders at the close of business on the
Record Date immediately preceding the Interest Payment Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. Except as
provided below, the Issuer shall pay principal and interest in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Issuer may pay principal and interest by wire transfer of Federal
funds, or interest by its check payable in such U.S. Legal Tender. The Issuer
may deliver any such interest payment to the Paying Agent or the Issuer may mail
any such interest payment to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
--------------------------
Initially, Wilmington Trust Company (the "Trustee") will act as Paying
Agent and Registrar. The Issuer may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. The Issuer or any of its
Subsidiaries may, subject to certain exceptions, act as Paying Agent, Registrar
or co-Registrar.
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4. Indenture.
---------
The Issuer issued the Notes under an Indenture, dated as of ____________,
2002 (the "Indenture"), among the Issuer, the Guarantors named therein and the
Trustee. Capitalized terms used herein but not otherwise defined herein have the
meanings set forth in the Indenture unless otherwise defined herein. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the TIA, as in effect on the date of the Indenture.
The Notes are subject to all such terms, and Holders of Notes are referred to
the Indenture and the TIA for a statement of them. The Notes are senior secured
obligations of the Issuer limited in aggregate principal amount to $60,000,000.
5. Redemption.
----------
(a) The Issuer may redeem, at its election, the Notes in cash at the
Redemption Price equal to 100% of the principal amount of the Notes so redeemed,
including accrued and unpaid interest, if any, to the Redemption Date.
(b) Unless otherwise prohibited by law, in the event the Issuer has
available funds to repurchase all of the Senior Notes at par from the Permitted
Credit Facility and a Subordinated Credit Facility and the weighted average
interest cost of the borrowed funds under the Permitted Credit Facility and the
Subordinated Credit Facility is 12% or less, then the Issuer shall redeem, and
the Holders shall tender, without premium or penalty, all of the Notes for a
redemption price equal to 100% of the principal amount of the Notes so redeemed,
plus accrued but unpaid interest, if any, thereon to the Redemption Date;
provided, however, that the Board of Directors may, by unanimous vote, direct
the Issuer not to effect such repurchase; and provided further, that the Issuer
shall not effect a repurchase if such repurchase would cause the Issuer to
become insolvent.
(c) Any redemption shall comply with Article Three of the Indenture.
6. Notice of Redemption.
--------------------
Notice of redemption will be mailed by first class mail at least 30 days
but not more than 60 days before the Redemption Date to each Holder of Notes to
be redeemed at his registered address, with a copy to the Trustee or any Paying
Agent. Notes in denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any Redemption Date,
if monies for the redemption of the Notes called for redemption shall have been
deposited with the Paying Agent on such Redemption Date, the Notes called for
redemption will cease to bear interest and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price and any accrued and
unpaid interest to the Redemption Date.
7. Subordination.
-------------
The Notes are generally subordinated in right to payment to the prior
payment in full in cash of the Senior Indebtedness or other payment satisfactory
to the Senior Lenders to the extent provided in the Indenture and the Collateral
Trust Agreement. The Notes are pari passu in right of payment to the Junior
Notes and superior with respect to certain Collateral to the Junior Notes
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and subject to an existing Lien for the benefit of holders of the Junior Notes
with respect to certain other Collateral. Each Holder, by accepting a Note,
agrees to the subordination with respect to the Senior Indebtedness and
authorizes and directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee as its attorney-in-fact for such purposes.
"Senior Indebtedness" means the Obligations of the Issuer under the
Permitted Credit Facility.
8. Denominations: Transfer: Exchange.
---------------------------------
The Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder may register the transfer of,
or exchange Notes in accordance with, the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Notes
selected for redemption.
9. Persons Deemed Owners.
---------------------
The registered Holder of a Note may be treated as the owner of it for all
purposes.
10. Unclaimed Money.
---------------
If money for the payment of principal or interest remains unclaimed for one
year, the Trustee and the Paying Agent(s) will pay the money back to the Issuer
at its written request. After such payment, all liability of the Trustee and
such Paying Agent(s) with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Issuer at any time deposits into an irrevocable trust with the
Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the
principal of and interest on the Notes to redemption or maturity and complies
with the other provisions of the Indenture relating thereto, the Issuer will be
discharged from certain provisions of the Indenture and the Notes (including the
financial covenants, but excluding its obligation to pay the principal of and
interest on the Notes).
12. Amendment: Supplement: Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and any existing
Default or Event of Default or compliance with any provision may be waived with
the consent of the Holders of a majority in aggregate principal amount of the
Notes then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, or make any other change
with respect to matters or questions arising under the Indenture.
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13. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the Issuer and
its Subsidiaries to, among other things, incur additional Indebtedness or issue
Disqualified Capital Stock, make payments in respect of its Capital Stock, enter
into transactions with Affiliates, permit additional Liens on their respective
assets, sell assets, change the nature of its business, merge or consolidate
with any other Person and sell, lease, transfer or otherwise dispose of
substantially all of its properties or assets. The limitations are subject to a
number of important qualifications and exceptions. The Issuer must report to the
Trustee on compliance with such limitations on an annual basis.
14. Successors.
----------
When a successor assumes all the obligations of its predecessor under the
Notes and the Indenture, the predecessor will be released from those
obligations.
15. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee and the
Holders shall have such rights and remedies as are set in the Indenture and the
Security Documents.
16. No Recourse Against Others.
--------------------------
No stockholder, director, officer or employee, as such, of any obligor
under the Notes or the Indenture or any successor corporation shall have any
liability for any obligation of any obligor under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
17. Authentication.
--------------
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
18. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a Note or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
19. CUSIP Numbers.
-------------
Pursuant to recommendation promulgated by the Committee on Uniform Security
Identification Procedures, the Issuer will cause CUSIP numbers to be printed on
the Notes as a convenience to the Holder of the Notes. No representation is made
as to the accuracy of such
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numbers as printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
20. Guarantees.
----------
Payment of the principal of, premium, if any, and interest on the Notes
will be unconditionally guaranteed by Southwest Royalties Holdings, Inc., MRO
Holdings, Inc. and Blue Heel and certain future Subsidiaries of the Issuer
pursuant to and in accordance with the terms of Article Twelve of the Indenture.
21. Security and Collateral.
-----------------------
The Obligations of the Issuer under the Notes are secured by a lien on
substantially all of the Issuer's material assets and as otherwise set forth in
the Indenture and the Security Documents.
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ASSIGNMENT
I or we assign this note to:
_______________________________
_______________________________
_______________________________
_______________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee:
_______________________________
and irrevocably appoint ______________________ agent to transfer this Note on
the books of the Issuer. The agent may substitute another to act for him.
Dated: ___________________
Signature: ________________________
(Sign exactly as name appears on the other side of this Note)
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