DESCRIPTION OF NOTES
We will issue the Notes under an indenture, as supplemented by a supplemental indenture to be entered into at the closing of this offering
(collectively the Indenture), among us, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee (the Trustee). The terms of the Notes include those expressly set forth in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the Trust Indenture Act). The Indenture is unlimited in aggregate principal amount, although the issuance of Notes in this offering will be limited to
$600 million. We may issue an unlimited principal amount of additional notes having identical terms and conditions as the Notes (the Additional Notes), as well as debt securities of other series. We will only be permitted to issue such
Additional Notes in compliance with the covenant described under the subheading Certain Covenants Limitation on Indebtedness and Preferred Stock. Any Additional Notes will be part of the same series as the Notes that we are
currently offering and will vote on all matters with the holders of the Notes; provided that if any Additional Notes are not fungible with the Notes for federal income tax purposes, such Additional Notes will be issued with a separate CUSIP number.
Unless the context otherwise requires, for all purposes of the Indenture and this Description of Notes, references to the Notes include any Additional Notes actually issued.
This description of notes, together with the Description of Debt Securities included in the accompanying base prospectus, is
intended to be a useful overview of the material provisions of the Notes and the Indenture. Since this description of notes and such Description of Debt Securities is only a summary, you should refer to the Indenture for a complete
description of the obligations of the Company and your rights. This description of notes supersedes the Description of Debt Securities in the accompanying base prospectus to the extent it is inconsistent with such Description of
Debt Securities.
You will find the definitions of capitalized terms used in this description of notes under the heading
Certain Definitions. For purposes of this description, references to the Company, we, our and us refer only to Concho Resources Inc. and not to any of its subsidiaries. The
registered holder of a Note will be treated as the owner of it for all purposes. Only registered holders of Notes will have rights under the Indenture, and all references to holders in this description of notes are to registered holders
of Notes.
General
The Notes
.
The Notes will:
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be general unsecured, senior obligations of the Company;
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mature on January 15, 2025;
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be issued in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000;
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be represented by one or more registered Notes in global form, but in certain circumstances may be represented by Notes in definitive form as described under Book-entry, Delivery and Form;
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rank senior in right of payment to all existing (if any) and future Subordinated Obligations of the Company;
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rank equally in right of payment to all existing and future senior Indebtedness of the Company, without giving effect to collateral arrangements, including its outstanding 6.5% senior notes due 2022, 5.5% senior notes
due 2022, and 5.5% senior notes due 2023;
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be initially unconditionally guaranteed on a senior basis by each current significant Subsidiary of the Company as described under Subsidiary Guarantees;
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effectively rank junior to all existing and future secured Indebtedness of the Company, including amounts that may be borrowed under our Senior Secured Credit Agreement, to the extent of the value of the collateral
securing such Indebtedness; and
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rank structurally junior to the indebtedness and other obligations of our future non-guarantor subsidiaries, if any.
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Interest
. Interest on the Notes will:
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accrue at the rate of 4.375% per annum;
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accrue from the Issue Date or, if interest has already been paid, from the most recent interest payment date;
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be payable in cash semi-annually in arrears on January 15 and July 15, commencing on July 15, 2017;
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be payable to the holders of record on the January 1 and July 1 immediately preceding the related interest payment dates; and
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be computed on the basis of a 360-day year comprised of twelve 30-day months.
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If an interest
payment date falls on a day that is not a Business Day, the interest payment to be made on such interest payment date will be made on the next succeeding Business Day with the same force and effect as if made on such interest payment date, and no
additional interest will accrue as a result of such delayed payment. The Company will pay interest on overdue principal of the Notes at the above rate, and overdue installments of interest at such rate, to the extent lawful.
Payments on the Notes; Paying Agent and Registrar
We will pay principal of, premium, if any, and interest on the Notes at the office or agency designated by the Company in the City and State of
New York, except that we may, at our option, pay interest on the Notes by check mailed to holders of the Notes at their registered address as it appears in the registrars books. We have initially designated the corporate trust office of the
Trustee in New York, New York to act as our paying agent and its corporate trust office in Dallas, Texas to act as our registrar. We may, however, change the paying agent or registrar without prior notice to the holders of the Notes, and the Company
or any of its Restricted Subsidiaries may act as paying agent or registrar.
We will pay principal of, premium, if any, and interest on,
Notes in global form registered in the name of or held by The Depository Trust Company or its nominee in immediately available funds to The Depository Trust Company or its nominee, as the case may be, as the registered holder of such global Note.
Transfer and Exchange
A holder may
transfer or exchange Notes in accordance with the Indenture. The registrar and the Trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents in connection with a transfer of Notes. No service charge
will be imposed by the Company, the Trustee or the registrar for any registration of transfer or exchange of Notes, but the Company may require a holder to pay a sum sufficient to cover any transfer tax or other governmental taxes and fees required
by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered holder of a Note will be treated its owner for all purposes.
Optional Redemption
On and after
January 15, 2020, we may redeem all or, from time to time, a part of the Notes at the following redemption prices (expressed as a percentage of principal amount of the Notes), plus accrued and unpaid interest
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on the Notes, if any, to the applicable redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if
redeemed during the twelve-month period beginning on January 15 of the years indicated below:
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Year
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Percentage
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2020
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103.281
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%
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2021
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102.188
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%
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2022
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101.094
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%
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2023 and thereafter
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100.000
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%
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Prior to January 15, 2020, we may, at our option, on any one or more occasions redeem up to 35% of the
aggregate principal amount of the Notes (including Additional Notes) issued under the Indenture in an amount not greater than the Net Cash Proceeds of one or more Equity Offerings at a redemption price of 104.375% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided that:
(1) at least 65% of the original principal amount of the Notes issued on the Issue Date remains outstanding after each such
redemption; and
(2) the redemption occurs within 180 days after the closing of the related Equity Offering.
In addition, the Notes may be redeemed, in whole or in part, at any time prior to January 15, 2020 at the option of the Company, at a
redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest to, the applicable redemption date (subject to the right of holders of record on the relevant record date
to receive interest due on the relevant interest payment date).
Applicable Premium
means, with respect to any Note at
any time, the greater of:
(1) 1.0% of the principal amount of such Note; or
(2) the excess, if any, of:
(a) the present value at such time of (i) the redemption price of such Note at January 15, 2020 (such redemption
price being set forth in the table appearing above under the caption Optional Redemption) plus (ii) all required interest payments (excluding accrued and unpaid interest to such redemption date) due on such Note through
January 15, 2020 computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over
(b) the principal amount of such Note.
Treasury Rate
means, in respect of any redemption date, the yield to maturity at the time of computation of United
States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the redemption date (or, if
such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to January 15, 2020;
provided
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however
, that if the period from the
redemption date to January 15, 2020 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the redemption date to January 15,
2020 is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. The Company will (a) calculate the Treasury Rate as no later
than the second (and no earlier than the fourth) Business
Day preceding the applicable redemption date and (b) prior to such redemption date file with the Trustee an Officers Certificate setting forth the Applicable Premium and the Treasury Rate and showing the calculation of each in reasonable
detail.
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Selection and Notice
If the Company is redeeming less than all of the outstanding Notes, the Trustee will select the Notes for redemption in compliance with the
requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed, then on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion will deem to be fair
and appropriate (or, in the case of Notes in global form, the Trustee will select Notes for redemption based on DTCs method that most nearly approximates a pro rata selection), although no Note of $2,000 in original principal amount or less
will be redeemed in part. Notices of redemption will be mailed by first-class mail (or sent electronically, if DTC is the recipient) at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its
registered address, except that redemption notices may be sent more than 60 days prior to a redemption date if the notice is issued in connection with a legal defeasance or covenant defeasance of the Notes or a satisfaction and discharge of the
Indenture. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will
be issued in the name of the holder thereof upon cancellation of the partially redeemed Note. On and after the redemption date, interest will cease to accrue on Notes or the portion of them called for redemption unless we default in the payment
thereof. Any redemption or notice of redemption may, at our discretion, be subject to one or more conditions precedent and, in the case of a redemption with the Net Cash Proceeds of an Equity Offering, be given prior to the completion of the related
Equity Offering.
Mandatory Redemption; Offers to Purchase; Open Market Purchases
We are not required to make mandatory redemption payments or sinking fund payments with respect to the Notes. However, under certain
circumstances, we may be required to offer to purchase Notes as described under the captions Change of Control and Certain Covenants Limitation on Sales of Assets and Subsidiary Stock.
We may acquire Notes by means other than a redemption or required repurchase, whether by tender offer, open market purchases, negotiated
transactions or otherwise, in accordance with applicable securities laws, so long as such acquisition does not otherwise violate the terms of the Indenture. However, other existing or future agreements of the Company may limit the ability of the
Company or its Subsidiaries to purchase Notes prior to maturity.
Ranking
The Notes will be general unsecured obligations of the Company that rank senior in right of payment to all existing and future Indebtedness
that is expressly subordinated in right of payment to the Notes. The Notes will rank equally in right of payment with all existing and future liabilities of the Company that are not so subordinated and will be effectively subordinated to all of our
secured Indebtedness, including Indebtedness Incurred under our Senior Secured Credit Agreement, to the extent of the value of the collateral securing such Indebtedness, and liabilities of any of our future Subsidiaries that do not guarantee the
Notes. In the event of bankruptcy, liquidation, reorganization or other winding up of the Company or its Subsidiary Guarantors or upon a default in payment with respect to, or the acceleration of, any Indebtedness under the Senior Secured Credit
Agreement or other secured Indebtedness, the assets of the Company and its Subsidiary Guarantors that secure secured Indebtedness will be available to pay obligations on the Notes and the Subsidiary Guarantees only after all Indebtedness under the
Senior Secured Credit Agreement and other secured Indebtedness has been repaid in full from such assets. In addition, in the event of bankruptcy, liquidation, reorganization or other winding up of a non-guarantor Subsidiary, the assets of such
Subsidiary will be available to pay obligations on the Notes only after all obligations of such Subsidiary have been repaid in full from such assets. We advise you that there may not be sufficient assets remaining to pay amounts due on any or all
the Notes and the Subsidiary Guarantees then outstanding.
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At September 30, 2016, on an as further adjusted basis giving effect to the transactions
described in Capitalization:
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we would have had total consolidated Indebtedness of approximately $2.7 billion (including the Notes offered hereby), all of which would have ranked equally with the Notes; and
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of our total Indebtedness, we would have had no outstanding borrowings of secured Indebtedness under our Senior Secured Credit Agreement, and we would have had commitments available to be borrowed under our Senior
Secured Credit Agreement of approximately $2.5 billion of additional secured Indebtedness to which the Notes offered hereby would be effectively subordinated.
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Subsidiary Guarantees
Initially, each
current Subsidiary of the Company will be a Subsidiary Guarantor, except for one current Subsidiary that has no revenue and no material assets. Such Subsidiary is a guarantor under our existing senior notes and our Senior Secured Credit Agreement
and will be added as a Subsidiary Guarantor shortly after the closing of this offering.
The Subsidiary Guarantors will, jointly and
severally, fully and unconditionally guarantee on a senior unsecured basis our obligations under the Notes and all obligations under the Indenture. The obligations of Subsidiary Guarantors under the Subsidiary Guarantees will rank equally in right
of payment with other Indebtedness of such Subsidiary Guarantor, except to the extent such other Indebtedness is expressly subordinate to the obligations arising under the Subsidiary Guarantee. Initially, all of the Companys Subsidiaries will
be Restricted Subsidiaries. Under certain circumstances, however, the Company may designate Subsidiaries as Unrestricted Subsidiaries. None of the Unrestricted Subsidiaries will be subject to the restrictive covenants in the Indenture and none will
guarantee the Notes.
At September 30, 2016, on an as further adjusted basis giving effect to the transactions described under
Capitalization, the Subsidiary Guarantors would have had approximately $2.7 billion of outstanding long-term debt, all of it consisting of their guarantees of the Companys senior notes, and we would have additional availability of
$2.5 billion under our Senior Secured Credit Agreement.
Although the Indenture will limit the amount of Indebtedness that Restricted
Subsidiaries may Incur, such Indebtedness may be substantial and such limitation is subject to a number of significant qualifications. Moreover, the Indenture does not impose any limitation on the Incurrence by such Subsidiaries of liabilities that
are not considered Indebtedness under the Indenture. See Certain Covenants Limitation on Indebtedness and Preferred Stock.
The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary Guarantee
from constituting a fraudulent conveyance or fraudulent transfer under applicable law, although no assurance can be given that a court would give the holder the benefit of such provision. See Risk Factors Risks Related to the Notes
Federal bankruptcy and state fraudulent conveyance laws and other limitations may preclude the recovery of payments under the guarantees. If a Subsidiary Guarantee were rendered voidable, it could be subordinated by a court to all other
indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantors liability on its Subsidiary Guarantee could be reduced to
zero. If the obligations of a Subsidiary Guarantor under its Subsidiary Guarantee were avoided, holders of Notes would have to look to the assets of any remaining Subsidiary Guarantors for payment. There can be no assurance in that event that such
assets would suffice to pay the outstanding principal and interest on the Notes.
In the event a Subsidiary Guarantor is sold or disposed
of (whether by merger, consolidation, the sale of a sufficient amount of its Capital Stock so that it no longer qualifies as a Subsidiary of ours or the sale of all or substantially all of its assets (other than by lease)) and whether or
not the Subsidiary Guarantor is the surviving entity in such transaction to a Person which is not the Company or a Restricted Subsidiary of the Company, such Subsidiary Guarantor will be released from its obligations under its Subsidiary Guarantee
if the sale or other
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disposition does not violate the covenant described under Certain Covenants Limitation on Sales of Assets and Subsidiary Stock.
In addition, a Subsidiary Guarantor will be released from its obligations under the Indenture and its Subsidiary Guarantee, upon the release
or discharge of the Guarantee that resulted in the creation of such Subsidiary Guarantee pursuant to clause (b) of the covenant described under Certain Covenants Future Subsidiary Guarantors, except a release or
discharge by or as a result of payment under such Guarantee; if the Company designates such Subsidiary as an Unrestricted Subsidiary and such designation complies with the other applicable provisions of the Indenture or if such Subsidiary otherwise
no longer meets the definition of a Restricted Subsidiary; or in connection with any covenant defeasance, legal defeasance or satisfaction and discharge of the Notes as provided below under the captions Defeasance and
Satisfaction and Discharge.
Change of Control
If a Change of Control occurs, each holder will have the right to require the Company to repurchase all or any part (equal to $2,000 or an
integral multiple of $1,000 in excess of $2,000) of such holders Notes at a purchase price in cash equal to 101% of the principal amount of the Notes plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of
holders of record on the relevant record date to receive interest due on the relevant interest payment date).
Within 30 days following
any Change of Control, unless we have previously or concurrently exercised our right to redeem all of the Notes as described under Optional Redemption, we will send a notice (the Change of Control Offer) to each
holder, with a copy to the Trustee, stating:
(1) that a Change of Control has occurred and that such holder has the right
to require us to purchase such holders Notes at a purchase price in cash equal to 101% of the principal amount of such Notes plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on a
record date to receive interest on the relevant interest payment date) (the Change of Control Payment);
(2)
the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is sent) (the Change of Control Payment Date);
(3) that any Note not properly tendered will remain outstanding and continue to accrue interest;
(4) that unless we default in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;
(5) that holders electing to
have any Notes in certificated form purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled Option of Holder to Elect Purchase on the reverse of such Notes completed, to the paying
agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;
(6) that holders will be entitled to withdraw their tendered Notes and their election to require us to purchase such Notes,
provided that the paying agent receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder of the
Notes, the principal amount of Notes tendered for purchase, and a statement that such holder is withdrawing its tendered Notes and its election to have such Notes purchased;
(7) that if we are repurchasing a portion of the Note of any holder, the holder will be issued a new Note equal in principal
amount to the unpurchased portion of the Note surrendered, provided that the unpurchased portion of the Note must be equal to a minimum principal amount of $2,000 and an integral multiple of $1,000 in excess of $2,000; and
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(8) the procedures determined by us, consistent with the Indenture, that a holder
must follow in order to have its Notes repurchased.
On the Change of Control Payment Date, the Company will, to the extent lawful:
(1) accept for payment all Notes or portions of Notes (in a minimum principal amount of $2,000 and integral multiples of $1,000
in excess of $2,000) properly tendered pursuant to the Change of Control Offer and not properly withdrawn;
(2) deposit
with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes accepted for payment; and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers Certificate stating
the aggregate principal amount of Notes or portions of Notes being purchased by the Company.
The paying agent will promptly mail or
deliver to each holder of Notes accepted for payment the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new Note equal in principal amount to
any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a minimum principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000.
If the Change of Control Payment Date is on or after an interest record date and on or before the related interest payment date, any accrued
and unpaid interest, will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no further interest will be payable to holders who tender pursuant to the Change of Control Offer.
The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable.
Except as described above with respect to a Change of Control, the Indenture will not contain provisions that permit the holders to require that the Company or any of its Subsidiaries repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
We will not be required to make a Change of Control Offer upon a Change of Control if (1) a
third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by us and purchases all Notes validly tendered and
not withdrawn under such Change of Control Offer, (2) notice of redemption has been given pursuant to the Indenture as described above under Optional Redemption, unless and until there is a default in payment of the
applicable redemption price, or (3) in connection with or in contemplation of any Change of Control, we have made an offer to purchase (an Alternate Offer) any and all Notes validly tendered at a cash price equal to or higher than
the Change of Control Payment and have purchased all Notes properly tendered in accordance with the terms of such Alternate Offer.
A
Change of Control Offer may be made in advance of a Change of Control, and conditioned upon the occurrence of a Change of Control, if a definitive agreement is in place for the Change of Control at the time of making the Change of Control Offer.
We will comply, to the extent applicable, with the requirements of Rule 14e-1 of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, we will comply with the applicable
securities laws and regulations and will not be deemed to have breached our obligations under in the Indenture by virtue of our compliance with such securities laws or regulations.
Our ability to repurchase Notes pursuant to a Change of Control Offer may be limited by a number of factors. The occurrence of certain of the
events that constitute a Change of Control would constitute a default
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under the Senior Secured Credit Agreement. In addition, certain events that may constitute a change of control under the Senior Secured Credit Agreement and cause a default under that agreement
will not constitute a Change of Control under the Indenture. Future Indebtedness of the Company and its Subsidiaries may also contain prohibitions of certain events that would constitute a Change of Control or require such Indebtedness to be
repurchased upon a Change of Control. Moreover, the exercise by the holders of their right to require the Company to repurchase the Notes could cause a default under such Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Companys ability to pay cash to the holders upon a repurchase may be limited by the Companys then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required repurchases.
Even if sufficient funds were otherwise available, our future
Indebtedness may prohibit the Companys prepayment or repurchase of Notes before their scheduled maturity. Consequently, if the Company is not able to prepay the Indebtedness under the Senior Secured Credit Agreement and any such other
Indebtedness containing similar restrictions or obtain requisite consents, the Company will be unable to fulfill its repurchase obligations if holders of Notes exercise their repurchase rights following a Change of Control, resulting in a default
under the Indenture. A default under the Indenture may result in a cross-default under the Senior Secured Credit Agreement.
If holders of
not less than 90% in aggregate principal amount of the outstanding Notes validly tender and do not withdraw such Notes in a Change of Control Offer or Alternate Offer and the Company, or any third party making a Change of Control Offer in lieu of
the Company as described above, purchases all of the Notes validly tendered and not withdrawn by such holders, the Company will have the right, upon not less than 30 nor more than 60 days prior notice, given not more than 30 days following
such purchase pursuant to the Change of Control Offer or Alternate Offer described above, to redeem all Notes that remain outstanding following such purchase at a redemption price in cash equal to the applicable Change of Control Payment plus, to
the extent not included in the Change of Control Payment, accrued and unpaid interest, if any, to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment
date).
The Change of Control provisions described above may deter certain mergers, tender offers and other takeover attempts involving
the Company. The Change of Control purchase feature is a result of negotiations between the underwriters and us. We have no current intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to
do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to incur additional Indebtedness are contained in the covenants described
under Certain Covenants Limitation on Indebtedness and Preferred Stock and Certain Covenants Limitation on Liens. Such restrictions in the Indenture can be waived only with the consent of the
holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture will not contain any covenants or provisions that may afford holders of the Notes protection in
the event of a highly leveraged transaction.
The definition of Change of Control includes a disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any Person. Although there is a limited body of case law interpreting the phrase substantially all, there is no precise established
definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of all or substantially all of the assets of a
Person. As a result, it may be unclear as to whether a Change of Control has occurred and whether a holder of Notes may require the Company to make an offer to repurchase the Notes as described above. In a published decision, the Chancery Court of
Delaware has raised the possibility that a Change of Control occurring as a result of a failure
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to have Continuing Directors comprising a majority of the Board of Directors may be unenforceable on public policy grounds.
The provisions under the Indenture relative to our obligation to make an offer to repurchase the Notes as a result of a Change of Control may
be waived or modified or terminated with the consent of the holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Notes) prior to the
occurrence of such Change of Control.
Certain Covenants
Limitation on Indebtedness and Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness) and the Company will not permit any of its Restricted Subsidiaries to issue Preferred Stock; provided, however, that the Company may Incur Indebtedness and any of the Subsidiary Guarantors may Incur Indebtedness and issue
Preferred Stock if on the date thereof:
(1) the Consolidated Coverage Ratio for the Company and its Restricted
Subsidiaries is at least 2.25 to 1.00, determined on a pro forma basis (including a pro forma application of proceeds); and
(2) no Default would occur as a consequence of, and no Event of Default would be continuing following, Incurring the
Indebtedness or its application.
The first paragraph of this covenant will not prohibit the Incurrence of the following Indebtedness:
(1) Indebtedness under one or more Credit Facilities of (a) the Company or any Subsidiary Guarantor Incurred pursuant
to this clause (1) in an aggregate amount not to exceed the greater of (i) $2.5 billion or (ii) the sum of $500.0 million and 25.0% of the Companys Adjusted Consolidated Net Tangible Assets determined as of the date of the
Incurrence of such Indebtedness after giving effect to the application of the proceeds therefrom and (b) any Foreign Subsidiary Incurred pursuant to this clause (1) in an aggregate amount not to exceed $50.0 million, in each case
outstanding at any one time;
(2) Guarantees of Indebtedness Incurred in accordance with the provisions of the Indenture;
provided that in the event such Indebtedness that is being Guaranteed is a Subordinated Obligation or a Guarantor Subordinated Obligation, then the related Guarantee shall be subordinated in right of payment to the Notes or the Subsidiary Guarantee
to at least the same extent as the Indebtedness being Guaranteed, as the case may be;
(3) Indebtedness of the Company
owing to and held by any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by the Company or any Restricted Subsidiary; provided, however, that (a)(i) if the Company is the obligor on such Indebtedness and the
obligee is not a Subsidiary Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes and (ii) if a Subsidiary Guarantor is the obligor of such Indebtedness and
the obligee is neither the Company nor a Subsidiary Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all obligations of such Subsidiary Guarantor with respect to its Subsidiary Guarantee and (b)(i)
any subsequent issuance or transfer of Capital Stock or any other event which results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (ii) any sale or other transfer of any
such Indebtedness to a Person other than the Company or a Restricted Subsidiary of the Company shall be deemed, in each case, to constitute an Incurrence of such Indebtedness by the Company or such Subsidiary, as the case may be, that was not
permitted by this clause;
(4) Indebtedness represented by (a) the Notes issued on the Issue Date and all Subsidiary
Guarantees, (b) any Indebtedness (other than the Indebtedness described in clauses (1), (2) and 4(a)) outstanding on the Issue Date and (c) any Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause
(4) or clause (5) or (8) or Incurred pursuant to the first paragraph of this covenant;
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(5) Permitted Acquisition Indebtedness;
(6) Indebtedness in respect of (a) self-insurance obligations, bid, appeal, reimbursement, performance, surety and similar
bonds and completion guarantees provided by the Company or a Restricted Subsidiary in the ordinary course of business and any Guarantees or letters of credit functioning as or supporting any of the foregoing bonds or obligations and
(b) obligations represented by letters of credit for the account of the Company or a Restricted Subsidiary in order to provide security for workers compensation claims (in the case of clauses (a) and (b) other than for an
obligation for money borrowed);
(7) Preferred Stock (other than Disqualified Stock) of any Restricted Subsidiary;
(8) Indebtedness represented by Capitalized Lease Obligations of the Company or any of its Restricted Subsidiaries (whether or
not Incurred pursuant to sale and leaseback transactions), mortgage financings or purchase money obligations, Incurred in connection with the acquisition, construction, improvement or development of real or personal, movable or immovable, property,
in each case Incurred for the purpose of financing, refinancing, renewing, defeasing or refunding all or any part of the purchase price or cost of acquisition, construction, improvement or development of property used in the business of the Company
or such Restricted Subsidiary, provided that after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred pursuant to this clause (8), together with any Refinancing Indebtedness Incurred pursuant to clause
(4) in respect of such Indebtedness, and then outstanding does not exceed $35.0 million; and provided further that the principal amount of any Indebtedness Incurred under this clause (8) did not in each case at the time of Incurrence
exceed the Fair Market Value, as determined in accordance with the definition of such term, of such acquired or constructed property or improvement or development; and
(9) in addition to the items referred to in clauses (1) through (8) above, Indebtedness of the Company and its
Restricted Subsidiaries in an aggregate outstanding principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this clause (9) and then outstanding, will not exceed the greater of $200.0
million or 2.5% of the Companys Adjusted Consolidated Net Tangible Assets, determined as of the date of Incurrence of such Indebtedness after giving effect to such Incurrence and the application of the proceeds therefrom.
For purposes of determining compliance with, and the outstanding principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant:
(1) in the event an item of that Indebtedness meets the criteria of more than one of the
types of Indebtedness described in the first and second paragraphs of this covenant, the Company, in its sole discretion, will classify such item of Indebtedness on the date of Incurrence and, subject to clause (2) below may later classify,
reclassify or redivide all or a portion of such item of Indebtedness, in any manner that complies with this covenant;
(2)
all Indebtedness outstanding on the date of the Indenture under the Senior Secured Credit Agreement shall be deemed Incurred on the Issue Date under clause (1) of the second paragraph of this covenant;
(3) Guarantees of, or obligations in respect of letters of credit supporting, Indebtedness which is otherwise included in the
determination of a particular amount of Indebtedness shall not be included;
(4) if obligations in respect of letters of
credit are Incurred pursuant to a Credit Facility and are being treated as Incurred pursuant to clause (1) of the second paragraph above and the letters of credit relate to other Indebtedness, then such other Indebtedness shall not be included;
(5) the principal amount of any Disqualified Stock of the Company or a Restricted Subsidiary, or Preferred Stock of a
Restricted Subsidiary that is not a Subsidiary Guarantor, will be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the liquidation preference
thereof;
(6) Indebtedness permitted by this covenant need not be permitted solely by reference to one provision permitting
such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness; and
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(7) the amount of Indebtedness issued at a price that is less than the principal
amount thereof will be equal to the amount of the liability in respect thereof determined in accordance with GAAP.
Accrual of interest,
accrual of dividends, the amortization of debt discount or the accretion of accreted value, the payment of interest in the form of additional Indebtedness, the payment of dividends in the form of additional shares of Preferred Stock or Disqualified
Stock and unrealized losses or charges in respect of Hedging Obligations (including those resulting from the application of FASB Accounting Standards Codification (ASC) Topic No. 815, Derivatives and Hedging), will not be deemed to
be an Incurrence of Indebtedness for purposes of this covenant.
The Company will not permit any of its Unrestricted Subsidiaries to Incur
any Indebtedness (including the issue of any Disqualified Stock), other than Non-Recourse Debt. If at any time an Unrestricted Subsidiary becomes a Restricted Subsidiary, any Indebtedness of such Subsidiary shall be deemed to be Incurred by a
Restricted Subsidiary as of such date (and, if such Indebtedness is not permitted to be Incurred as of such date under this Limitation on Indebtedness and Preferred Stock covenant, the Company shall be in Default of this covenant).
For purposes of determining compliance with any U.S. dollar-denominated restriction on the Incurrence of Indebtedness, the U.S.
dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred, in the case of term Indebtedness, or first
committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is Incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar-denominated
restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced. Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that any Person may Incur pursuant to this covenant shall
not be deemed to be exceeded solely as a result of fluctuations in the exchange rates of currencies. The principal amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency from the Indebtedness being
refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such Refinancing Indebtedness is denominated that is in effect on the date of such refinancing.
The Indenture will not treat (1) unsecured Indebtedness as subordinated or junior to secured Indebtedness merely because it is unsecured
or (2) senior Indebtedness as subordinated or junior to any other senior Indebtedness merely because it has a junior priority with respect to the same collateral.
Limitation on Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries, directly or indirectly, to:
(1) declare or pay any dividend or make any payment or distribution on or in respect of the Companys Capital Stock
(including any payment or distribution in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) except:
(a) dividends or distributions by the Company payable solely in Capital Stock of the Company (other than Disqualified Stock but
including options, warrants or other rights to purchase such Capital Stock of the Company); and
(b) dividends or
distributions payable to the Company or a Restricted Subsidiary and if such Restricted Subsidiary is not a Wholly-Owned Subsidiary, to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other
than a corporation) so long as the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution;
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(2) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of the Company or any direct or indirect parent of the Company held by Persons other than the Company or a Restricted Subsidiary (other than in exchange for Capital Stock of the Company (other than Disqualified Stock));
(3) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated Obligations or Guarantor Subordinated Obligations (other than (x) Indebtedness permitted under clause (3) of the second paragraph of the covenant Limitation on
Indebtedness and Preferred Stock or (y) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations or Guarantor Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase, redemption, defeasance or other acquisition or retirement for value); or
(4) make any Restricted Investment in any Person;
(any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Restricted Investment referred
to in clauses (1) through (4) shall be referred to herein as a Restricted Payment), if at the time the Company or such Restricted Subsidiary makes such Restricted Payment:
(a) a Default shall have occurred and be continuing (or would result therefrom);
(b) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to the covenant described under the first
paragraph under Limitation on Indebtedness and Preferred Stock after giving effect, on a pro forma basis, to such Restricted Payment; or
(c) the aggregate amount of such Restricted Payment and all other Restricted Payments declared or made subsequent to the 2009
Issue Date would exceed the sum of (the Restricted Payments Basket):
(i) 50% of Consolidated Net Income for
the period (treated as one accounting period) from July 1, 2009 to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which internal financial statements are in existence (or, in case such
Consolidated Net Income is a deficit, minus 100% of such deficit);
(ii) 100% of the aggregate Net Cash Proceeds and the
Fair Market Value of property or securities other than cash (including Capital Stock of Persons engaged primarily in the Oil and Gas Business or assets used in the Oil and Gas Business), in each case received by the Company from the issue or sale of
its Capital Stock (other than Disqualified Stock) or other capital contributions subsequent to the 2009 Issue Date (other than Net Cash Proceeds received from an issuance or sale of such Capital Stock to (x) management, employees, directors or
any direct or indirect parent of the Company, to the extent such Net Cash Proceeds have been used to make a Restricted Payment pursuant to clause (5)(a) of the next succeeding paragraph, (y) a Subsidiary of the Company or (z) an
employee stock ownership plan, option plan or similar trust (to the extent such sale to an employee stock ownership plan, option plan or similar trust is financed by loans from or Guaranteed by the Company or any Restricted Subsidiary unless such
loans have been repaid with cash on or prior to the date of determination));
(iii) the amount by which Indebtedness of
the Company or its Restricted Subsidiaries is reduced on the Companys balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the 2009 Issue Date of any Indebtedness of the Company or its
Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the Fair Market Value of any other property (other than such Capital Stock), distributed by the
Company upon such conversion or exchange), together with the net proceeds, if any, received by the Company or any of its Restricted Subsidiaries upon such conversion or exchange; and
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(iv) the amount equal to the aggregate net reduction in Restricted Investments
made by the Company or any of its Restricted Subsidiaries in any Person after the 2009 Issue Date resulting from:
(A)
repurchases, repayments or redemptions of such Restricted Investments by such Person, proceeds realized upon the sale of such Restricted Investment (other than to a Subsidiary of the Company), repayments of loans or advances or other transfers of
assets (including by way of dividend or distribution) by such Person to the Company or any Restricted Subsidiary;
(B) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of Investment) not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made
by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount in each case under this clause (iv) was included in the calculation of the amount of Restricted Payments;
provided
,
however
, that no amount
will be included under this clause (iv) to the extent it is already included in Consolidated Net Income; and
(C) the
sale by the Company or any Restricted Subsidiary (other than to the Company or a Restricted Subsidiary) of all or a portion of the Capital Stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary or a dividend from an
Unrestricted Subsidiary (whether any such distribution or dividend is made with proceeds from the issuance by such Unrestricted Subsidiary of its Capital Stock or otherwise).
As of September 30, 2016, the Restricted Payments Basket was approximately $5.8 billion.
The provisions of the preceding paragraph will not prohibit:
(1) any Restricted Payment made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock
of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar
trust is financed by loans from or Guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination) or a substantially concurrent cash capital contribution received by the
Company from its shareholders;
provided
,
however
, that (a) such Restricted Payment will be excluded from subsequent calculations of the amount of Restricted Payments and (b) the Net Cash Proceeds from such sale of Capital
Stock or capital contribution will be excluded from clause (c)(ii) of the preceding paragraph;
(2) any purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company or Guarantor Subordinated Obligations of any Subsidiary Guarantor made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Subordinated Obligations of the Company or any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Guarantor Subordinated Obligations made by exchange for or out of the
proceeds of the substantially concurrent sale of Guarantor Subordinated Obligations that, in each case, is permitted to be Incurred pursuant to the covenant described under Limitation on Indebtedness and Preferred Stock;
provided
,
however
, that such purchase, repurchase, redemption, defeasance, acquisition or retirement for value will be excluded from subsequent calculations of the amount of Restricted Payments;
(3) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Disqualified Stock of the
Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of the Company that, in each case, is permitted to be Incurred pursuant to the covenant described under Limitation on
Indebtedness and Preferred Stock;
provided
,
however
, that such purchase, repurchase, redemption, defeasance, acquisition or retirement for value will be excluded from subsequent calculations of the amount of Restricted Payments;
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(4) dividends paid or distributions made within 60 days after the date of
declaration if at such date of declaration such dividend or distribution would have complied with this covenant;
provided, however
, that such dividends and distributions will be included in subsequent calculations of the amount of Restricted
Payments; and provided further, however, that for purposes of clarification, this clause (4) shall not include cash payments in lieu of the issuance of fractional shares included in clause (9) below;
(5) so long as no Default has occurred and is continuing, (a) the repurchase or other acquisition of Capital Stock
(including options, warrants, equity appreciation rights or other rights to purchase or acquire Capital Stock) of the Company held by any existing or former employees, management or directors of the Company or any Restricted Subsidiary of the
Company or their assigns, estates or heirs, in each case pursuant to the repurchase or other acquisition provisions under employee stock option or stock purchase plans or agreements or other agreements to compensate management, employees or
directors, in each case approved by the Companys Board of Directors; provided that such repurchases or other acquisitions pursuant to this subclause (a) during any calendar year will not exceed $2.0 million in the aggregate (with unused
amounts in any calendar year being carried over to succeeding calendar years); provided further, that such amount in any calendar year may be increased by an amount not to exceed (A) the cash proceeds received by the Company from the sale of
Capital Stock of the Company to members of management, employees or directors of the Company and its Restricted Subsidiaries that occurs after the 2009 Issue Date (to the extent the cash proceeds from the sale of such Capital Stock have not
otherwise been applied to the payment of Restricted Payments by virtue of the clause (c) of the preceding paragraph), plus (B) the cash proceeds of key man life insurance policies received by the Company and its Restricted Subsidiaries
after the 2009 Issue Date, less (C) the amount of any Restricted Payments made pursuant to clauses (A) and (B) of this clause (5)(a);
provided further
,
however
, that the amount of any such repurchase or other acquisition
under this subclause (a) will be excluded in subsequent calculations of the amount of Restricted Payments and the proceeds received from any such transaction will be excluded from clause (c)(ii) of the preceding paragraph; and (b) loans or
advances to employees or directors of the Company or any Subsidiary of the Company, in each case as permitted by Section 402 of the Sarbanes-Oxley Act of 2002, the proceeds of which are used to purchase Capital Stock of the Company, or to
refinance loans or advances made pursuant to this clause (5)(b), in an aggregate principal amount not in excess of $2.0 million at any one time outstanding;
provided
,
however
, that the amount of such loans and advances will be included
in subsequent calculations of the amount of Restricted Payments;
(6) purchases, repurchases, redemptions or other
acquisitions or retirements for value of Capital Stock deemed to occur upon the exercise of stock options, warrants, rights to acquire Capital Stock or other convertible securities if such Capital Stock represents a portion of the exercise or
exchange price thereof, and any purchases, repurchases, redemptions or other acquisitions or retirements for value of Capital Stock made in lieu of withholding taxes in connection with any exercise or exchange of warrants, options or rights to
acquire Capital Stock;
provided
,
however
, that such acquisitions or retirements will be excluded from subsequent calculations of the amount of Restricted Payments;
(7) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated
Obligation (i) at a purchase price not greater than 101% of the principal amount of such Subordinated Obligation in the event of a Change of Control in accordance with provisions similar to the covenant described under Change of
Control or (ii) at a purchase price not greater than 100% of the principal amount thereof in accordance with provisions similar to the covenant described under Limitation on Sales of Assets and Subsidiary Stock;
provided that, prior to or simultaneously with such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, the Company has made the Change of Control Offer or Asset Disposition Offer, as applicable, as provided in
such covenant with respect to the Notes and has completed the repurchase or redemption of all Notes validly tendered for payment in connection with such Change of Control Offer or Asset Disposition Offer;
provided
,
however
, that such
acquisitions or retirements will be included in subsequent calculations of the amount of Restricted Payments;
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(8) payments or distributions to dissenting stockholders pursuant to applicable
law or in connection with the settlement or other satisfaction of legal claims made pursuant to or in connection with a consolidation, merger or transfer of assets;
provided
,
however
, that any payment pursuant to this clause
(8) shall be included in the calculation of the amount of Restricted Payments;
(9) cash payments in lieu of the
issuance of fractional shares;
provided
,
however
, that any payment pursuant to this clause (9) shall be excluded in the calculation of the amount of Restricted Payments;
(10) the declaration and payment of scheduled or accrued dividends to holders of any class of or series of Disqualified Stock
of the Company issued on or after the 2009 Issue Date in accordance with the covenant captioned Limitation on Indebtedness and Preferred Stock, to the extent such dividends are included in Consolidated Interest Expense; provided,
however, that any payment pursuant to this clause (10) shall be excluded in the calculation of the amount of Restricted Payments; and
(11) Restricted Payments in an amount not to exceed $30.0 million in the aggregate since the 2009 Issue Date;
provided
,
however
, that the amount of such Restricted Payments will be included in subsequent calculations of the amount of Restricted Payments.
The amount of all Restricted Payments (other than cash) shall be the Fair Market Value on the date that asset(s) or securities are proposed to
be paid, transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment, except that the Fair Market Value of any non-cash dividend or distribution made within 60 days after the date of
declaration shall be determined as of such date. The Fair Market Value of any cash Restricted Payment shall be its face amount and the Fair Market Value of any non-cash Restricted Payment shall be determined in accordance with the definition of that
term. Not later than the date of making any Restricted Payment in excess of $15.0 million that will be included in subsequent calculations of the amount of Restricted Payments, the Company shall deliver to the Trustee an Officers Certificate
stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this covenant were computed.
In the event that a Restricted Payment meets the criteria of more than one of the exceptions described in (1) through (11) above or
is entitled to be made pursuant to the first paragraph above, the Company shall, in its sole discretion, classify such Restricted Payment.
As of the Issue Date, all of the Companys Subsidiaries will be Restricted Subsidiaries. We will not permit any Unrestricted Subsidiary
to become a Restricted Subsidiary except pursuant to the last sentence of the definition of Unrestricted Subsidiary. For purpose of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of Investment.
Such designation will be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to the first paragraph of this covenant or under clause (11) of the second paragraph of this covenant, or pursuant
to the definition of Permitted Investments, and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the
Indenture.
Limitation on Liens
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, Incur or suffer to exist any
Lien (the Initial Lien) other than Permitted Liens upon any of its property or assets (including Capital Stock of Restricted Subsidiaries), including any income or profits therefrom, whether owned on the date of the Indenture or acquired
after that date, which Lien is securing any Indebtedness, unless contemporaneously with the Incurrence of such Lien effective provision is made to secure the Indebtedness due under the Notes or, in respect of Liens on any Restricted
Subsidiarys property or assets, any Subsidiary Guarantee of such Restricted Subsidiary, equally and ratably with (or senior in priority to in the case of Liens
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with respect to Subordinated Obligations or Guarantor Subordinated Obligations, as the case may be) the Indebtedness secured by such Lien for so long as such Indebtedness is so secured.
Any Lien created for the benefit of the holders of the Notes pursuant to the preceding paragraph shall provide by its terms that such Lien
shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien.
Limitation on Restrictions
on Distributions from Restricted Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the
Company or any Restricted Subsidiary (it being understood that the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on Common Stock shall not be deemed a
restriction on the ability to make distributions on Capital Stock);
(2) make any loans or advances to the Company or any
Restricted Subsidiary (it being understood that the subordination of loans or advances made to the Company or any Restricted Subsidiary to other Indebtedness Incurred by the Company or any Restricted Subsidiary shall not be deemed a restriction on
the ability to make loans or advances); or
(3) sell, lease or transfer any of its property or assets to the Company or any
Restricted Subsidiary.
The preceding provisions will not prohibit:
(i) any encumbrance or restriction pursuant to or by reason of an agreement in effect at or entered into on the Issue Date,
including, without limitation, the Indenture as in effect on such date;
(ii) any encumbrance or restriction with respect
to a Person pursuant to or by reason of an agreement relating to any Capital Stock or Indebtedness Incurred by a Person on or before the date on which such Person was acquired by the Company or another Restricted Subsidiary (other than Capital Stock
or Indebtedness Incurred as consideration in, or to provide all or any portion of the funds utilized to consummate, the transaction or series of related transactions pursuant to which such Person was acquired by the Company or a Restricted
Subsidiary or in contemplation of the transaction) and outstanding on such date; provided that any such encumbrance or restriction shall not extend to any assets or property of the Company or any other Restricted Subsidiary other than the assets and
property so acquired;
(iii) encumbrances and restrictions contained in contracts entered into in the ordinary course of
business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of, or from the ability of the Company and the Restricted Subsidiaries to realize the value of, property or assets of the Company
or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary;
(iv) any encumbrance or
restriction with respect to a Unrestricted Subsidiary pursuant to or by reason of an agreement that the Unrestricted Subsidiary is a party to entered into before the date on which such Unrestricted Subsidiary became a Restricted Subsidiary; provided
that such agreement was not entered into in anticipation of the Unrestricted Subsidiary becoming a Restricted Subsidiary and any such encumbrance or restriction shall not extend to any assets or property of the Company or any other Restricted
Subsidiary other than the assets and property so acquired;
(v) with respect to any Foreign Subsidiary, any encumbrance or
restriction contained in the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was Incurred if either
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(1) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant in such Indebtedness or agreement or (2) the Company
determines that any such encumbrance or restriction will not materially affect the Companys ability to make principal or interest payments on the Notes, as determined in good faith by the Board of Directors of the Company, whose determination
shall be conclusive;
(vi) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement
effecting a refunding, replacement or refinancing of Indebtedness Incurred pursuant to an agreement referred to in clauses (i) through (v) or clause (xii) of this paragraph or this clause (vi) or contained in any amendment,
restatement, modification, renewal, supplemental, refunding, replacement or refinancing of an agreement referred to in clauses (i) through (v) or clause (xii) of this paragraph or this clause (vi); provided that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any such agreement taken as a whole are no less favorable in any material respect to the holders of the Notes than the encumbrances and restrictions contained in the agreements
governing the Indebtedness being refunded, replaced or refinanced;
(vii) in the case of clause (3) of the first
paragraph of this covenant, any encumbrance or restriction:
(a) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to a lease (including leases governing leasehold interests or farm-in agreements or farm-out agreements relating to leasehold interests in Oil and Gas Properties), license or similar
contract, or the assignment or transfer of any such lease (including leases governing leasehold interests or farm-in agreements or farm-out agreements relating to leasehold interests in Oil and Gas Properties), license (including, without
limitation, licenses of intellectual property) or other contract;
(b) contained in mortgages, pledges or other security
agreements permitted under the Indenture securing Indebtedness of the Company or a Restricted Subsidiary to the extent such encumbrances or restrictions restrict the transfer of the property subject to such mortgages, pledges or other security
agreements;
(c) contained in any agreement creating Hedging Obligations permitted from time to time under the Indenture;
(d) pursuant to customary provisions restricting dispositions of real property interests set forth in any reciprocal
easement agreements of the Company or any Restricted Subsidiary;
(e) restrictions on cash or other deposits imposed by
customers under contracts entered into in the ordinary course of business; or
(f) provisions with respect to the
disposition or distribution of assets or property in operating agreements, joint venture agreements, development agreements, area of mutual interest agreements and other agreements that are customary in the Oil and Gas Business and entered into in
the ordinary course of business;
(viii) any encumbrance or restriction contained in (a) purchase money obligations
for property acquired in the ordinary course of business and (b) Capitalized Lease Obligations permitted under the Indenture, in each case, that impose encumbrances or restrictions of the nature described in clause (3) of the first
paragraph of this covenant on the property so acquired;
(ix) any encumbrance or restriction with respect to a Restricted
Subsidiary (or any of its property or assets) imposed pursuant to an agreement entered into for the direct or indirect sale or disposition of all or a portion of the Capital Stock or assets of such Restricted Subsidiary (or the property or assets
that are subject to such restriction) pending the closing of such sale or disposition;
(x) any customary encumbrances or
restrictions imposed pursuant to any agreement of the type described in the definition of Permitted Business Investment;
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(xi) encumbrances or restrictions arising or existing by reason of applicable law
or any applicable rule, regulation or order;
(xii) encumbrances or restrictions contained in agreements governing
Indebtedness of the Company or any of its Restricted Subsidiaries permitted to be Incurred pursuant to an agreement entered into subsequent to the Issue Date in accordance with the covenant described under the caption Limitation on
Indebtedness and Preferred Stock; provided that the provisions relating to such encumbrance or restriction contained in such Indebtedness are not materially less favorable to the Company taken as a whole, as determined by the Board of
Directors of the Company in good faith, than the provisions contained in the Senior Secured Credit Agreement and in the Indenture as in effect on the Issue Date;
(xiii) the issuance of Preferred Stock by a Restricted Subsidiary or the payment of dividends thereon in accordance with the
terms thereof; provided that issuance of such Preferred Stock is permitted pursuant to the covenant described under the caption Limitation on Indebtedness and Preferred Stock and the terms of such Preferred Stock do not expressly
restrict the ability of a Restricted Subsidiary to pay dividends or make any other distributions on its Capital Stock (other than requirements to pay dividends or liquidation preferences on such Preferred Stock prior to paying any dividends or
making any other distributions on such other Capital Stock);
(xiv) supermajority voting requirements existing under
corporate charters, bylaws, stockholders agreements and similar documents and agreements;
(xv) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and
(xvi) any encumbrance or restriction contained in the Senior Secured Credit Agreement as in effect as of the Issue Date, and in
any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements
or refinancings are no more restrictive with respect to such dividend and other payment restrictions than those contained in the Senior Secured Credit Agreement as in effect on the Issue Date.
Limitation on Sales of Assets and Subsidiary Stock
The Company will not, and will not permit any of its Restricted Subsidiaries to, make any Asset Disposition unless:
(1) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Disposition
at least equal to the Fair Market Value (such Fair Market Value to be determined on the date of contractually agreeing to such Asset Disposition) of the shares or other assets subject to such Asset Disposition;
(2) at least 75% of the aggregate consideration received by the Company or such Restricted Subsidiary, as the case may be, from
such Asset Disposition and all other Asset Dispositions since the Issue Date, on a cumulative basis, is in the form of cash or Cash Equivalents or Additional Assets, or any combination thereof; and
(3) except as provided in the next paragraph, an amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied, within 365 days from the later of the date of such Asset Disposition or the receipt of such Net Available Cash, by the Company or such Restricted Subsidiary, as the case may be:
(a) to prepay, repay, redeem or purchase Pari Passu Indebtedness of the Company (including the Notes) or a Subsidiary Guarantor
or any Indebtedness (other than Disqualified Stock) of a Restricted Subsidiary that is not a Subsidiary Guarantor (in each case, excluding Indebtedness owed to the Company or an Affiliate of the Company);
provided
,
however
, that, in
connection with any prepayment, repayment, redemption or purchase of Indebtedness pursuant to this clause (a), the
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Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid,
repaid, redeemed or purchased; or
(b) to invest in Additional Assets;
provided
that pending the final application of any such Net Available Cash in accordance with clause (a) or clause (b) above,
the Company and its Restricted Subsidiaries may temporarily reduce Indebtedness or otherwise invest such Net Available Cash in any manner not prohibited by the Indenture.
Any Net Available Cash from Asset Dispositions that is not applied or invested as provided in the preceding paragraph will be deemed to
constitute Excess Proceeds. Not later than the 366th day from the later of the date of such Asset Disposition or the receipt of such Net Available Cash, if the aggregate amount of Excess Proceeds exceeds $20.0 million, the Company will
be required to make an offer (Asset Disposition Offer) to all holders of Notes and, to the extent required by the terms of other Pari Passu Indebtedness, to all holders of other Pari Passu Indebtedness outstanding with similar provisions
requiring the Company to make an offer to purchase such Pari Passu Indebtedness with the proceeds from any Asset Disposition (Pari Passu Notes) to purchase the maximum principal amount of Notes and any such Pari Passu Notes to which the
Asset Disposition Offer applies that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount (or, in the event such Pari Passu Indebtedness was issued with significant original issue
discount, 100% of the accreted value thereof) of the Notes and Pari Passu Notes plus accrued and unpaid interest, if any (or in respect of such Pari Passu Indebtedness, such lesser price, if any, as may be provided for by the terms of such
Indebtedness), to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the procedures set forth in the Indenture or the
agreements governing the Pari Passu Notes, as applicable, in each case in minimum principal amount of $2,000 and integral multiples of $1,000 in excess of $2,000. If the aggregate principal amount of Notes surrendered by holders thereof and other
Pari Passu Notes surrendered by holders or lenders, collectively, exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis on the basis of the aggregate principal amount of tendered Notes and Pari
Passu Notes. To the extent that the aggregate principal amount of Notes and Pari Passu Notes so validly tendered and not properly withdrawn pursuant to an Asset Disposition Offer is less than the Excess Proceeds, the Company or any Restricted
Subsidiary may use any remaining Excess Proceeds for general corporate purposes, subject to the other covenants contained in the Indenture. Upon completion of such Asset Disposition Offer, the amount of Excess Proceeds shall be reset at zero.
The Asset Disposition Offer will remain open for a period of 20 Business Days following its commencement, except to the extent that a longer
period is required by applicable law (the Asset Disposition Offer Period). No later than five Business Days after the termination of the Asset Disposition Offer Period (the Asset Disposition Purchase Date), the Company will
purchase the principal amount of Notes and Pari Passu Notes required to be purchased pursuant to this covenant (the Asset Disposition Offer Amount) or, if less than the Asset Disposition Offer Amount has been so validly tendered and not
properly withdrawn, all Notes and Pari Passu Notes validly tendered and not properly withdrawn in response to the Asset Disposition Offer.
If the Asset Disposition Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued
and unpaid interest, if any, will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no further interest will be payable to holders who tender Notes pursuant to the Asset Disposition Offer.
On or before the Asset Disposition Purchase Date, the Company will, to the extent lawful, accept for payment, on a pro rata basis to the
extent necessary, the Asset Disposition Offer Amount of Notes and Pari Passu Notes or portions of Notes and Pari Passu Notes so validly tendered and not properly withdrawn pursuant to the Asset Disposition Offer, or if less than the Asset
Disposition Offer Amount has been validly tendered and not properly withdrawn, all Notes and Pari Passu Notes so validly tendered and not properly withdrawn, in each case
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in minimum principal amount of $2,000 and integral multiples of $1,000 in excess of $2,000. The Company will deliver to the Trustee an Officers Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the terms of this covenant and, in addition, the Company will deliver all certificates and notes required, if any, by the agreements governing the Pari Passu Notes. The
Company or the paying agent, as the case may be, will promptly (but in any case not later than five Business Days after the termination of the Asset Disposition Offer Period) mail or deliver to each tendering holder of Notes or holder or lender of
Pari Passu Notes, as the case may be, an amount equal to the purchase price of the Notes or Pari Passu Notes so validly tendered and not properly withdrawn by such holder or lender, as the case may be, and accepted by the Company for purchase, and
the Company will promptly issue a new Note, and the Trustee, upon delivery of an authentication order from the Company, will authenticate and mail or deliver such new Note to such holder, in a principal amount equal to any unpurchased portion of the
Note surrendered; provided that each such new Note will be in a minimum principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000. In addition, the Company will take any and all other actions required by the agreements
governing the Pari Passu Notes. Any Note not so accepted will be promptly mailed or delivered by the Company to the holder thereof. The Company will publicly announce the results of the Asset Disposition Offer on the Asset Disposition Purchase Date.
The Company will comply, to the extent applicable, with the requirements of Rule 14e-1 of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to an Asset Disposition Offer. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have breached its obligations under the Indenture by virtue of its compliance with such securities laws or regulations.
For the purposes of clause (2) of the first paragraph of this covenant, the following will be deemed to be cash:
(1) the assumption by the transferee of Indebtedness (other than Subordinated Obligations or Disqualified Stock) of the Company
or Indebtedness of a Restricted Subsidiary (other than Guarantor Subordinated Obligations or Disqualified Stock of any Restricted Subsidiary that is a Subsidiary Guarantor) and the release of the Company or such Restricted Subsidiary from all
liability on such Indebtedness in connection with such Asset Disposition (in which case the Company will, without further action, be deemed to have applied such deemed cash to Indebtedness in accordance with clause (3)(a) of the first paragraph
of this covenant;
(2) with respect to any Asset Disposition of oil and gas properties by the Company or any Restricted
Subsidiary where the Company or such Restricted Subsidiary retains an interest in such properties, the costs and expenses related to the exploration, development, completion or production of such properties and activities related thereto that the
transferee (or an Affiliate thereof) has agreed to pay; and
(3) securities, notes or other obligations received by the
Company or any Restricted Subsidiary from the transferee that are converted by the Company or such Restricted Subsidiary into cash within 180 days after receipt thereof.
Notwithstanding the foregoing, the 75% limitation referred to in clause (2) of the first paragraph of this covenant shall be deemed
satisfied with respect to any Asset Disposition in which the cash or Cash Equivalents portion of the consideration received therefrom, determined in accordance with the foregoing provision on an after-tax basis, is equal to or greater than what the
after-tax proceeds would have been had such Asset Disposition complied with the aforementioned 75% limitation.
The requirement of clause
(3)(b) of the first paragraph of this covenant above shall be deemed to be satisfied if an agreement (including a lease, whether a capital lease or an operating lease) committing to make the acquisitions or expenditures referred to therein is
entered into by the Company or its Restricted Subsidiary within the specified time period and such Net Available Cash is subsequently applied in accordance with such agreement within six months following such agreement.
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The Company will not, and will not permit any Restricted Subsidiary to, engage in any Asset
Swaps, unless:
(1) at the time of entering into such Asset Swap and immediately after giving effect to such Asset Swap, no
Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and
(2) in the
event such Asset Swap involves the transfer by the Company or any Restricted Subsidiary of assets having an aggregate Fair Market Value in excess of $50.0 million, the terms of such Asset Swap have been approved by a majority of the members of the
Board of Directors of the Company.
Limitation on Affiliate Transactions
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into, make, amend or conduct any
transaction (including making a payment to, the purchase, sale, lease or exchange of any property or the rendering of any service), contract, agreement or understanding with or for the benefit of any Affiliate of the Company involving aggregate
consideration in excess of $5.0 million (an Affiliate Transaction) unless:
(1) the terms of such Affiliate
Transaction are not materially less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could reasonably be expected to be obtained in a comparable transaction at the time of such transaction in
arms-length dealings with a Person who is not such an Affiliate; and
(2) either: (a) if such Affiliate
Transaction involves an aggregate consideration in excess of $20.0 million but not greater than $50.0 million, the Company delivers to the Trustee an officers certificate certifying that such Affiliate Transaction satisfies the criteria
in clause (1) above, or (b) if such Affiliate Transaction involves an aggregate consideration in excess of $50.0 million, the Company delivers to the Trustee an officers certificate certifying that such Affiliate Transaction
satisfies the criteria in clause (1) above and that the terms of such transaction have been approved by a majority of the members of the Board of Directors of the Company having no personal stake in such transaction.
The preceding paragraph will not apply to:
(1) any Restricted Payment permitted to be made pursuant to the covenant described under Limitation on
Restricted Payments or any Permitted Investment;
(2) any issuance of Capital Stock (other than Disqualified Stock),
or other payments, awards or grants in cash, Capital Stock (other than Disqualified Stock) or otherwise pursuant to, or the funding of, employment or severance agreements and other compensation arrangements, options to purchase Capital Stock (other
than Disqualified Stock) of the Company, restricted stock plans, long-term incentive plans, stock appreciation rights plans, participation plans or similar employee benefits plans and/or insurance and indemnification arrangements provided to or for
the benefit of directors and employees approved by the Board of Directors of the Company;
(3) loans or advances to
employees, officers or directors in the ordinary course of business of the Company or any of its Restricted Subsidiaries;
(4) advances to or reimbursements of employees for moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business of the Company or any of its Restricted Subsidiaries;
(5) any transaction
between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, and Guarantees issued by the Company or a Restricted Subsidiary for the benefit of the Company or a Restricted Subsidiary, as the case may be, in accordance with
Limitation on Indebtedness and Preferred Stock;
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(6) any transaction with a joint venture or similar entity which would constitute
an Affiliate Transaction solely because the Company or a Restricted Subsidiary owns, directly or indirectly, an Equity Interest in or otherwise controls such joint venture or similar entity;
(7) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company to, or the receipt by the Company
of any capital contribution from its shareholders;
(8) indemnities of officers, directors and employees of the Company or
any of its Restricted Subsidiaries permitted by bylaw or statutory provisions and any employment agreement or other employee compensation plan or arrangement entered into in the ordinary course of business by the Company or any of its Restricted
Subsidiaries;
(9) the payment of reasonable compensation and fees paid to, and indemnity provided on behalf of, officers
or directors of the Company or any Restricted Subsidiary;
(10) the performance of obligations of the Company or any of its
Restricted Subsidiaries under the terms of any agreement to which the Company or any of its Restricted Subsidiaries is a party as of or on the Issue Date, as these agreements may be amended, modified, supplemented, extended or renewed from time to
time;
provided, however
, that any future amendment, modification, supplement, extension or renewal entered into after the Issue Date will be permitted only to the extent that its terms are not materially more disadvantageous, taken as
a whole, to the holders of the Notes than the terms of the agreements in effect on the Issue Date;
(11) transactions with
customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of the Indenture, provided that in the reasonable determination of the Board of
Directors of the Company or the senior management of the Company, such transactions are on terms not materially less favorable to the Company or the relevant Restricted Subsidiary than those that could reasonably be expected to be obtained in a
comparable transaction at such time on an arms-length basis from a Person that is not an Affiliate of the Company;
(12) payments to an Affiliate in respect of the Notes or any other Indebtedness of the Company or its Restricted Subsidiaries
on the same basis as concurrent payments are made, or offered to be made, in respect thereof to non-Affiliates;
(13)
transactions with a Person (other than an Unrestricted Subsidiary) that is an Affiliate of the Company solely because the Company owns, directly or through a Restricted Subsidiary, an Equity Interest in such Person; and
(14) transactions between the Company or any Restricted Subsidiary and any Person, a director of which is also a director of
the Company or any direct or indirect parent company of the Company, and such director is the sole cause for such Person to be deemed an Affiliate of the Company or any Restricted Subsidiary;
provided, however
, that such director shall
abstain from voting as a director of the Company or such direct or indirect parent company, as the case may be, on any matter involving such other Person.
Provision of Financial Information
The Indenture will provide that, whether or not the Company is subject to the reporting requirements of Section 13 or Section 15(d)
of the Exchange Act, to the extent not prohibited by the Exchange Act, the Company will file with the SEC, and make available to the Trustee and the holders of the Notes without cost to any holder, the annual reports and the information, documents
and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation within the time periods
specified therein with respect to an accelerated filer. In the event that the Company is not permitted to file such reports, documents and information with the SEC pursuant to the Exchange Act, the Company will nevertheless make available such
Exchange Act information to the Trustee and the holders of the Notes without cost to any holder as if the Company were subject
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to the reporting requirements of Section 13 or 15(d) of the Exchange Act within the time periods specified therein with respect to a non-accelerated filer.
If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the financial information required will include a
reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Managements Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results
of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.
The availability of the foregoing materials on the SECs website or on the Companys website shall be deemed to satisfy the
foregoing delivery obligations.
Any and all Defaults or Events of Default arising from a failure to furnish or file in a timely manner
any information or report required by this covenant shall be deemed cured (and the Company shall be deemed to be in compliance with this covenant) upon furnishing or filing such information or report as contemplated by this covenant (but without
regard to the date on which such information or report is so furnished or filed); provided that such cure shall not otherwise affect the rights of the holders under Events of Default if the principal, premium, if any, and interest
have been accelerated in accordance with the terms of the Indenture and such acceleration has not been rescinded or cancelled prior to such cure.
Merger and Consolidation
The
Company will not consolidate with or merge with or into or wind up into (whether or not the Company is the surviving corporation), or sell, lease, transfer, convey or otherwise dispose of all or substantially all its assets in one or more related
transactions to, any Person, unless:
(1) the resulting, surviving or transferee Person (the Successor Company)
will be a corporation, partnership, trust or limited liability company organized and existing under the laws of the United States of America, any State of the United States or the District of Columbia and the Successor Company (if not the Company)
will expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture;
(2) immediately after giving effect to such transaction (and treating any Indebtedness that becomes an obligation of the
Successor Company or any Subsidiary of the Successor Company as a result of such transaction as having been Incurred by the Successor Company or such Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and
be continuing;
(3) immediately after giving effect to such transaction on a pro forma basis and any related financing
transactions as if the same had occurred at the beginning of the applicable four quarter period, either (A) the Successor Company would be able to Incur at least an additional $1.00 of Indebtedness pursuant to the first paragraph of the
covenant described under Limitation on Indebtedness and Preferred Stock or (B) the Consolidated Coverage Ratio of the Company is equal to or greater than the Consolidated Coverage Ratio of the Company immediately before such
transaction;
(4) if the Company is not the Successor Company, each Subsidiary Guarantor (unless it is the other party to
such transaction, in which case clause (1) shall apply) shall have by supplemental indenture confirmed that its Subsidiary Guarantee shall apply to such Persons obligations in respect of the Indenture and the Notes shall continue to be in
effect; and
(5) the Company shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel,
each stating that such transaction and such supplemental indenture (if any) comply with the Indenture.
For purposes of this covenant, the
sale, lease, transfer, conveyance, or other disposition of all or substantially all of the assets of one or more Subsidiaries of the Company, which assets, if held by the Company
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instead of such Subsidiaries, would constitute all or substantially all of the assets of the Company on a consolidated basis, shall be deemed to be the disposition of all or substantially all of
the assets of the Company.
The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the
Company under the Indenture; and its predecessor Company, except in the case of a lease of all or substantially all its assets, will be released from all obligations under the Indenture and the Notes.
Although there is a limited body of case law interpreting the phrase substantially all, there is no precise established definition
of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve all or substantially all of the assets of a Person.
Notwithstanding the preceding clause (3), (x) any Restricted Subsidiary may consolidate with, merge or wind up into, or dispose of all or
part of its assets to, the Company, and the Company may consolidate with, merge or wind up into, or dispose of all or part of its assets to, a Subsidiary Guarantor and (y) the Company may merge with or into an Affiliate incorporated solely for
the purpose of reincorporating the Company in another jurisdiction; and provided further that, in the case of a Restricted Subsidiary that consolidates with, merges or winds up into, or disposes of all or part of its assets to, the Company, the
Company will not be required to comply with the preceding clause (5).
Future Subsidiary Guarantors
The Company will cause each Wholly-Owned Subsidiary of the Company (other than a Foreign Subsidiary) that is not already a Subsidiary Guarantor
that Guarantees any Indebtedness of the Company or a Subsidiary Guarantor, in each case to execute and deliver to the Trustee within 30 days a supplemental indenture (in the form specified in the Indenture) pursuant to which such Subsidiary will
unconditionally Guarantee, on a joint and several basis, the full and prompt payment of the principal of, premium, if any, and interest on the Notes on a senior basis; provided that any Restricted Subsidiary that constitutes an Immaterial Subsidiary
need not become a Subsidiary Guarantor until such time as it ceases to be an Immaterial Subsidiary.
Covenant Termination
From and after the occurrence of an Investment Grade Rating Event, the Company and its Restricted Subsidiaries will no longer be subject to the
provisions of the Indenture described above under the following headings:
|
|
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Limitation on Indebtedness and Preferred Stock,
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Limitation on Restricted Payments,
|
|
|
|
Limitation on Restrictions on Distributions from Restricted Subsidiaries,
|
|
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Limitation on Sales of Assets and Subsidiary Stock,
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Limitation on Affiliate Transactions and
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Clause (3) of Merger and Consolidation
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(collectively, the Eliminated
Covenants). As a result, after the date on which the Company and its Restricted Subsidiaries are no longer subject to the Eliminated Covenants, the Notes will be entitled to substantially reduced covenant protection.
After the Eliminated Covenants have been terminated, the Company may not designate any of its Subsidiaries as Unrestricted Subsidiaries
pursuant to the second sentence of the definition of Unrestricted Subsidiary.
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Events of Default
Each of the following is an Event of Default with respect to the Notes:
(1) default in any payment of interest on any Note when due, continued for 30 days;
(2) default in the payment of principal of or premium, if any, on any Note when due at its Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration of acceleration or otherwise;
(3) failure by the Company to comply
with its obligations under the covenant described under Certain Covenants Merger and Consolidation;
(4) failure by the Company to comply for 30 days (or 180 days in the case of a Reporting Failure) after notice as provided
below with any of its obligations under the covenant described under Change of Control above or under the covenants described under Certain Covenants above (in each case, other than a failure to purchase Notes
which will constitute an Event of Default under clause (2) above and other than a failure to comply with the covenant described under Certain Covenants Merger and Consolidation which is covered by clause (3));
(5) failure by the Company to comply for 60 days after notice as provided below with its other agreements contained in the
Indenture;
(6) default under any mortgage, indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries), other than Indebtedness owed to the
Company or a Restricted Subsidiary, whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, which default:
(a) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness (and any extensions of any grace period) (payment default); or
(b) results in the acceleration of such Indebtedness prior to its Stated Maturity (the cross acceleration
provision);
and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the maturity of which has been so accelerated, aggregates $125.0 million or more;
(7) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary or group of
Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary (the bankruptcy provisions);
(8) failure by the Company or any Significant Subsidiary or group of Restricted Subsidiaries that, taken together (as of the
latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary to pay final judgments aggregating in excess of $125.0 million (to the extent not covered by insurance by a
reputable and creditworthy insurer as to which the insurer has not disclaimed coverage), which judgments are not paid or discharged, and there shall be any period of 60 consecutive days following entry of such final judgment or decree during which a
stay of enforcement of such final judgment or decree, by reason of pending appeal or otherwise, shall not be in effect (the judgment default provision); or
(9) any Subsidiary Guarantee of a Significant Subsidiary or group of Restricted Subsidiaries that, taken together (as of the
latest audited consolidated financial statements for the Company and its Restricted Subsidiaries) would constitute a Significant Subsidiary, ceases to be in full force and effect (except as contemplated by the terms of the Indenture) or is declared
null and void in a judicial proceeding or any
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Subsidiary Guarantor that is a Significant Subsidiary or group of Subsidiary Guarantors that, taken together (as of the latest audited consolidated financial statements of the Company and its
Restricted Subsidiaries) would constitute a Significant Subsidiary, denies or disaffirms its obligations under the Indenture or its Subsidiary Guarantee.
However, a default under clauses (4) and (5) of this paragraph will not constitute an Event of Default until the Trustee or the
holders of at least 25% in principal amount of the outstanding Notes notify the Company in writing and, in the case of a notice given by the holders, the Trustee of the default and the Company does not cure such default within the time specified in
clauses (4) and (5) of this paragraph after receipt of such notice.
If an Event of Default (other than an Event of Default
described in clause (7) above) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee, may, and the Trustee at the
request of such holders shall, declare the principal of, premium, if any, accrued and unpaid interest, if any, on all the Notes to be due and payable. If an Event of Default described in clause (7) above occurs and is continuing, the principal
of, premium, if any, accrued and unpaid interest, if any, on all the Notes will become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holders. The holders of a majority in principal amount
of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences if, among other requirements, (1) rescission would not conflict with any judgment or decree of a court of competent jurisdiction and
(2) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived.
Notwithstanding the foregoing, if an Event of Default specified in clause (6) above shall have occurred and be continuing, such Event of
Default and any consequential acceleration (to the extent not in violation of any applicable law or in conflict with any judgment or decree of a court of competent jurisdiction) shall be automatically rescinded if (i) the Indebtedness that is
the subject of such Event of Default has been repaid or (ii) if the default relating to such Indebtedness is waived by the holders of such Indebtedness or cured and if such Indebtedness has been accelerated, then the holders thereof have
rescinded their declaration of acceleration in respect of such Indebtedness, in each case within 20 days after the declaration of acceleration with respect thereto, and (iii) any other existing Events of Default, except nonpayment of principal,
premium or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived.
Subject to
the provisions of the Indenture relating to the duties of the Trustee if an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of
any of the holders unless such holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest when due, no holder
may pursue any remedy with respect to the Indenture or the Notes unless:
(1) such holder has previously given the Trustee
notice that an Event of Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding Notes
have requested the Trustee to pursue the remedy;
(3) such holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after
the receipt of the request and the offer of security or indemnity; and
(5) the holders of a majority in principal amount
of the outstanding Notes have not waived such Event of Default or otherwise given the Trustee a direction that, in the opinion of the Trustee, is inconsistent with such request within such 60-day period.
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Subject to certain restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. If an Event of Default has occurred and is continuing,
the Trustee will be required in the exercise of its powers to use the degree of care that a prudent person would use in the conduct of his own affairs. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture
or that the Trustee determines is unduly prejudicial to the rights of any other holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.
If a Default occurs
and is continuing and is known to the Trustee, the Trustee must send to each holder notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of, premium, if any, or interest on any Note, the
Trustee may withhold such notice if and so long as a committee of trust officers of the Trustee in good faith determines that withholding notice is in the interests of the holders. In addition, the Company is required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within 30 days after the
occurrence thereof, written notice of any Defaults, their status and what action the Company is taking or proposing to take in respect thereof.
Amendments and Waivers
Subject to
certain exceptions, the Indenture and the Notes may be amended with the consent of the holders of a majority in principal amount of the Notes then outstanding (including without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes) and, subject to certain exceptions, any past default or compliance with any provisions may be waived with the consent of the holders of a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). However, without the consent of each holder of an outstanding Note affected, no amendment may, among other things:
(1) reduce the principal amount of Notes whose holders must consent to an amendment or waiver;
(2) reduce the stated rate of or extend the stated time for payment of interest on any Note;
(3) reduce the principal of or extend the Stated Maturity of any Note;
(4) reduce the premium payable upon the redemption of any Note as described above under Optional Redemption,
change the time at which any Note may be redeemed (except provisions relating to minimum required notice of optional redemption) as described above under Optional Redemption or make any change relative to our obligation to make an
offer to repurchase the Notes as a result of a Change of Control as described above under Change of Control after (but not before) the occurrence of such Change of Control;
(5) make any Note payable in money other than that stated in the Note;
(6) impair the right of any holder to receive payment of the principal of, premium, if any, and interest on such holders
Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holders Notes;
(7) make any change in the amendment provisions which require each holders consent or in the waiver provisions;
(8) modify the Subsidiary Guarantees in any manner adverse to the holders of the Notes; or
(9) make any change to or modify the ranking of the Notes that would adversely affect the holders.
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Notwithstanding the foregoing, without the consent of any holder, the Company, the Subsidiary
Guarantors and the Trustee may amend the Indenture and the Notes to:
(1) cure any ambiguity, omission, defect, mistake or
inconsistency;
(2) provide for the assumption by a successor of the obligations of the Company or any Subsidiary Guarantor
under the Indenture;
(3) provide for uncertificated Notes in addition to or in place of certificated Notes (provided that
the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code of 1986, as amended);
(4) add Guarantors with respect to the Notes, including Subsidiary Guarantors, or evidence the release of a Subsidiary
Guarantor from its Subsidiary Guarantee in accordance with the applicable provisions of the Indenture;
(5) secure the
Notes or Subsidiary Guarantees;
(6) add to the covenants of the Company or a Subsidiary Guarantor for the benefit of the
holders or surrender any right or power conferred upon the Company or a Subsidiary Guarantor;
(7) make any change that
does not adversely affect the rights of any holder; provided, however, that any change to conform the Indenture to this Description of Notes will not be deemed to adversely affect such legal rights;
(8) comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act;
or
(9) provide for the succession of a successor Trustee, provided that the successor Trustee is otherwise qualified and
eligible to act as such under the Indenture.
The consent of the holders is not necessary under the Indenture to approve the particular
form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. A consent to any amendment or waiver under the Indenture by any holder of Notes given in connection with a tender of such
holders Notes will not be rendered invalid by such tender. After an amendment under the Indenture requiring the consent of the holders becomes effective, the Company is required to send to the holders a notice briefly describing such
amendment. However, the failure to give such notice to all the holders, or any defect in the notice will not impair or affect the validity of the amendment.
Defeasance
The Company at any time may
terminate all its obligations under the Notes and the Indenture (legal defeasance), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to
replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes.
The Company at
any time may terminate its obligations described under Change of Control and under covenants described under Certain Covenants (other than clauses (1), (2), (4) and (5) of Merger and
Consolidation), the operation of the cross default upon a payment default, the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries, the judgment default provision, the Subsidiary Guarantee provision
described in clause (9) under Events of Default above and the limitations contained in clause (3) under Certain Covenants Merger and Consolidation above (covenant defeasance).
If the Company exercises its legal defeasance or its covenant defeasance option, the Subsidiary Guarantees in effect at such time will
terminate.
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The Company may exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect to the Notes. If the Company exercises its covenant defeasance option, payment
of the Notes may not be accelerated because of an Event of Default specified in clause (4), (5), (6), (7) (with respect only to Significant Subsidiaries), (8) or (9) under Events of Default above or because of the
failure of the Company to comply with clause (3) under Certain Covenants Merger and Consolidation above.
In order to exercise either defeasance option, the Company must, among other things, irrevocably deposit in trust (the defeasance
trust) with the Trustee money or U.S. Government Obligations for the payment of principal, premium, if any, and interest on the Notes to redemption or Stated Maturity, as the case may be, and must comply with certain other conditions,
including delivery to the Trustee of an Opinion of Counsel (subject to customary exceptions and exclusions) to the effect that holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit
and defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. In the case of legal defeasance only, such Opinion
of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable federal income tax law.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder, when either:
(1) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes
for whose payment money has 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) have been delivered to the Trustee for cancellation, or
(2) all Notes that have not been delivered to the Trustee for cancellation have become due and payable or will become due and
payable within one year by reason of the giving of a notice of redemption or otherwise and the Company or any Subsidiary Guarantor has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust solely for
such purpose, cash in U.S. dollars, U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not
delivered to the Trustee for cancellation for principal and accrued interest to the date of Stated Maturity or redemption, and in each case certain other requirements set forth in the Indenture are satisfied.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator, stockholder, member, partner or trustee of the Company or any Subsidiary Guarantor, as such,
shall have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, the Indenture or the Subsidiary Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each
holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
Concerning the Trustee
Wells Fargo Bank,
National Association will be the Trustee under the Indenture and will be appointed by the Company as registrar and paying agent with regard to the Notes. Such bank is a lender under the Senior Secured Credit Agreement, and it also serves as trustee
under the indentures for each series of the Companys outstanding senior notes.
The Indenture will contain certain
limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of
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any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions;
provided
,
however
, that if it acquires any conflicting interest (as
defined in the Trust Indenture Act) while any Default exists it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee with such conflict or resign as Trustee.
Governing Law
The Indenture and the
Notes will be governed by, and construed in accordance with, the laws of the State of New York.
Certain Definitions
Acquired Indebtedness
means Indebtedness (i) of a Person or any of its Subsidiaries existing at the time such
Person becomes or is merged with and into a Restricted Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case whether or not Incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to have been incurred, with respect to clause (i) of the preceding sentence, on the date such Person becomes or is merged
with and into a Restricted Subsidiary and, with respect to clause (ii) of the preceding sentence, on the date of consummation of such acquisition of assets.
Additional Assets
means:
(1) any properties or assets to be used by the Company or a Restricted Subsidiary in the Oil and Gas Business;
(2) capital expenditures by the Company or a Restricted Subsidiary in the Oil and Gas Business;
(3) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or a Restricted Subsidiary; or
(4) Capital Stock constituting a Minority Interest in any Person that at such
time is a Restricted Subsidiary;
provided
,
however
, that, in the case of clauses (3) and (4), such Restricted
Subsidiary is primarily engaged in the Oil and Gas Business.
Adjusted Consolidated Net Tangible Assets
of the
Company means (without duplication), as of the date of determination, the remainder of:
(a) the sum of:
(i) discounted future net revenues from proved oil and gas reserves of the Company and its Restricted Subsidiaries calculated
in accordance with SEC guidelines before any state or federal income taxes, as estimated by the Company in a reserve report prepared as of the end of the Companys most recently completed fiscal year for which audited financial statements are
available, as increased by, as of the date of determination, the estimated discounted future net revenues from
(A)
estimated proved oil and gas reserves acquired since such year end, which reserves were not reflected in such year-end reserve report, and
(B) estimated oil and gas reserves attributable to extensions, discoveries and other additions and upward revisions of
estimates of proved oil and gas reserves since such year end due to exploration, development or exploitation, production or other activities, which would, in accordance with standard industry practice, cause such revisions (including the impact to
proved reserves and future net revenues from estimated development costs incurred and the accretion of discount since such year end), and decreased by, as of the date of determination, the estimated discounted future net revenues from
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(C) estimated proved oil and gas reserves produced or disposed of since such
year end, and
(D) estimated oil and gas reserves attributable to downward revisions of estimates of proved oil and gas
reserves since such year end due to changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions, in each case calculated on a pre-tax basis and substantially in accordance with
SEC guidelines, in the case of clauses (A) through (D) utilizing prices and costs calculated in accordance with SEC guidelines as if the end of the most recent fiscal quarter preceding the date of determination for which such information
is available to the Company were year-end; provided, however, that in the case of each of the determinations made pursuant to clauses (A) through (D), such increases and decreases shall be as estimated by the Companys petroleum engineers;
(ii) the capitalized costs that are attributable to Oil and Gas Properties of the Company and its Restricted Subsidiaries
to which no proved oil and gas reserves are attributable, based on the Companys books and records as of a date no earlier than the date of the Companys latest available annual or quarterly financial statements;
(iii) the Net Working Capital of the Company and its Restricted Subsidiaries on a date no earlier than the date of the
Companys latest annual or quarterly financial statements; and
(iv) the greater of
(A) the net book value of other tangible assets of the Company and its Restricted Subsidiaries, as of a date no earlier than
the date of the Companys latest annual or quarterly financial statements, and
(B) the appraised value, as estimated
by independent appraisers, of other tangible assets of the Company and its Restricted Subsidiaries, as of a date no earlier than the date of the Companys latest audited financial statements; provided, that, if no such appraisal has been
performed the Company shall not be required to obtain such an appraisal and only clause (iv)(A) of this definition shall apply; minus
(b) the sum of:
(i) Minority Interests;
(ii) any net gas balancing liabilities of the Company and its Restricted Subsidiaries reflected in the Companys latest
annual or quarterly balance sheet (to the extent not deducted in calculating Net Working Capital of the Company in accordance with clause (a)(iii) above of this definition);
(iii) to the extent included in (a)(i) above, the discounted future net revenues, calculated in accordance with SEC guidelines
(but utilizing prices and costs calculated in accordance with SEC guidelines as if the end of the most recent fiscal quarter preceding the date of determination for which such information is available to the Company were year-end), attributable to
reserves which are required to be delivered to third parties to fully satisfy the obligations of the Company and its Restricted Subsidiaries with respect to Volumetric Production Payments (determined, if applicable, using the schedules specified
with respect thereto); and
(iv) the discounted future net revenues, calculated in accordance with SEC guidelines,
attributable to reserves subject to Dollar-Denominated Production Payments which, based on the estimates of production and price assumptions included in determining the discounted future net revenues specified in (a)(i) above, would be necessary to
fully satisfy the payment obligations of the Company and its Subsidiaries with respect to Dollar-Denominated Production Payments (determined, if applicable, using the schedules specified with respect thereto).
If the Company changes its method of accounting from the successful efforts method of accounting to the full cost or a similar method,
Adjusted Consolidated Net Tangible Assets will continue to be calculated as if the Company were still using the successful efforts method of accounting.
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Affiliate
of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, control when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing.
Asset Disposition
means any direct or indirect sale, lease (including by means of Production Payments and
Reserve Sales and a Sale/Leaseback Transaction) (other than an operating lease entered into in the ordinary course of the Oil and Gas Business), transfer, issuance or other disposition, or a series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan, of (A) any Capital Stock of a Restricted Subsidiary (other than Preferred Stock of Restricted Subsidiaries issued in compliance with the covenant described under the heading Certain
Covenants Limitation on Indebtedness and Preferred Stock, and directors qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary), (B) all or
substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary (excluding any division or line of business the assets of which are owned by an Unrestricted Subsidiary) or (C) any other assets of the
Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary (each referred to for the purposes of this definition as a disposition), in each case by the Company or any of
its Restricted Subsidiaries, including any disposition by means of a merger, consolidation or similar transaction.
Notwithstanding
the preceding, the following items shall not be deemed to be Asset Dispositions:
(1) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;
(2) a disposition of
cash, Cash Equivalents or other financial assets in the ordinary course of business;
(3) a disposition of Hydrocarbons or
mineral products inventory in the ordinary course of business;
(4) a disposition of damaged, unserviceable, obsolete or
worn out equipment or equipment that is no longer necessary for the proper conduct of the business of the Company and its Restricted Subsidiaries and that is disposed of in each case in the ordinary course of business;
(5) transactions in accordance with the covenant described under Certain Covenants Merger and
Consolidation;
(6) an issuance of Capital Stock by a Restricted Subsidiary to the Company or to a Restricted
Subsidiary;
(7) the making of a Permitted Investment or a Restricted Payment (or a disposition that would constitute a
Restricted Payment but for the exclusions from the definition thereof) permitted by the covenant described under Certain Covenants Limitation on Restricted Payments;
(8) an Asset Swap;
(9) dispositions of assets with a Fair Market Value of less than $25.0 million;
(10) Permitted Liens;
(11) dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of
business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements;
(12) the licensing or
sublicensing of intellectual property (including, without limitation, the licensing of seismic data) or other general intangibles and licenses, leases or subleases of other property in the ordinary course of business which do not materially
interfere with the business of the Company and its Restricted Subsidiaries;
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(13) foreclosure on assets;
(14) any Production Payments and Reserve Sales; provided that any such Production Payments and Reserve Sales, other than
incentive compensation programs on terms that are reasonably customary in the Oil and Gas Business for geologists, geophysicists and other providers of technical services to the Company or a Restricted Subsidiary, shall have been created, Incurred,
issued, assumed or Guaranteed in connection with the financing of, and within 60 days after the acquisition of, the property that is subject thereto;
(15) surrender or waiver of contract rights, oil and gas leases, or the settlement, release or surrender of contract, tort or
other claims of any kind;
(16) the abandonment, farmout, lease or sublease of developed or undeveloped Oil and Gas
Properties in the ordinary course of business; and
(17) a disposition (whether or not in the ordinary course of business)
of any Oil and Gas Property or interest therein to which no proved reserves are attributable at the time of such disposition.
Asset Swap
means any substantially contemporaneous (and in any event occurring within 180 days of each other)
purchase and sale or exchange of any oil or natural gas properties or assets or interests therein between the Company or any of its Restricted Subsidiaries and another Person; provided, that any cash received must be applied in accordance with the
covenant described under Certain Covenants Limitation on Sales of Assets and Subsidiary Stock as if the Asset Swap were an Asset Disposition.
Average Life
means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the
quotient obtained by dividing (1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (2) the sum of all such payments.
Beneficial
Owner
has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular person (as that term is used in Section 13(d)(3) of the
Exchange Act), such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or
is exercisable only after the passage of time. The terms Beneficially Owns and Beneficially Owned have a corresponding meaning. For purposes of this definition, a Person shall not be deemed to Beneficially Own securities that
are the subject of a stock purchase agreement, merger agreement or similar agreement until consummation of the transactions or, as applicable, series of related transactions contemplated thereby.
Board of Directors
means, as to any Person that is a corporation, the board of directors of such Person or any duly
authorized committee thereof or as to any Person that is not a corporation, the board of managers or such other individual or group serving a similar function.
Business Day
means each day that is not a Saturday, Sunday or other day on which commercial banking institutions in
New York, New York are authorized or required by law to close.
Capital Stock
of any Person means any and
all shares, units, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible
into, or exchangeable for, such equity.
Capitalized Lease Obligations
means an obligation that is
required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation will be the capitalized amount of such obligation at the time
any determination
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thereof is to be made as determined in accordance with GAAP, and the Stated Maturity thereof will be the date of the last payment of rent or any other amount due under such lease prior to the
first date such lease may be terminated without penalty. Notwithstanding the preceding, any lease (whether entered into before or after the Issue Date) that would have been classified as an operating lease pursuant to GAAP as in effect on the Issue
Date will be deemed not to represent a Capitalized Lease Obligation.
Cash Equivalents
means:
(1) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or
instrumentality of the United States (provided that the full faith and credit of the United States is pledged in support thereof), having maturities of not more than one year from the date of acquisition;
(2) marketable general obligations issued by any state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from the date of acquisition and, at the time of acquisition, having a credit rating of A (or the equivalent thereof) or better from either S&P or Moodys;
(3) certificates of deposit, time deposits, eurodollar time deposits, overnight bank deposits or bankers acceptances
having maturities of not more than one year from the date of acquisition thereof issued by any commercial bank the short-term deposit of which is rated at the time of acquisition thereof at least A2 or the equivalent thereof by S&P,
or P-2 or the equivalent thereof by Moodys, and having combined capital and surplus in excess of $100.0 million;
(4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses
(1), (2) and (3) entered into with any bank meeting the qualifications specified in clause (3) above;
(5)
commercial paper rated at the time of acquisition thereof at least A-2 or the equivalent thereof by S&P or P-2 or the equivalent thereof by Moodys, or carrying an equivalent rating by a nationally recognized rating
agency, if both of the two named Rating Agencies cease publishing ratings of investments, and in any case maturing within one year after the date of acquisition thereof; and
(6) interests in any investment company or money market fund which invests 95% or more of its assets in instruments of the type
specified in clauses (1) through (5) above.
Change of Control
means:
(1) any person or group of related persons (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its
assets) (for the purposes of this clause (1), such person or group shall be deemed to Beneficially Own any Voting Stock of the Company held by a parent entity, if such person or group Beneficially Owns, directly or indirectly, more than 50% of the
total voting power of the Voting Stock of such parent entity), which occurrence is followed by a Rating Decline within 90 days;
(2) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), which
occurrence is followed by a Rating Decline within 90 days; or
(3) the adoption by the shareholders of the Company of a
plan or proposal for the liquidation or dissolution of the Company.
Commodity Agreements
means, in respect of
any Person, any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement in respect of Hydrocarbons used, produced, processed or sold by such Person that are customary in the Oil and Gas
Business and designed to protect such Person against fluctuation in Hydrocarbon prices.
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Common Stock
means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated and whether voting or nonvoting) of such Persons common stock whether or not outstanding on the Issue Date, and includes, without limitation, all series and
classes of such common stock.
Consolidated Coverage Ratio
means as of any date of determination, the
ratio of (x) the aggregate amount of Consolidated EBITDAX of the Company for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which financial statements are in existence to
(y) its Consolidated Interest Expense for such four fiscal quarters,
provided, however
, that:
(1) if
the Company or any Restricted Subsidiary:
(a) has Incurred any Indebtedness since the beginning of such period that
remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated EBITDAX and Consolidated Interest Expense for such period
will be calculated after giving effect on a pro forma basis to such Indebtedness and the use of proceeds thereof as if such Indebtedness had been Incurred on the first day of such period and such proceeds had been applied as of such date (except
that in making such computation, the amount of Indebtedness under any revolving Credit Facility outstanding on the date of such calculation will be deemed to be (i) the average daily balance of such Indebtedness during such four fiscal quarters
or such shorter period for which such facility was outstanding or (ii) if such revolving Credit Facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of
creation of such revolving Credit Facility to the date of such calculation, in each case, provided that such average daily balance shall take into account any repayment of Indebtedness under such revolving Credit Facility as provided in clause (b));
or
(b) has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of the period,
including with the proceeds of such new Indebtedness, that is no longer outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves a discharge of Indebtedness (in
each case other than Indebtedness Incurred under any revolving Credit Facility unless such Indebtedness has been permanently repaid and the related commitment terminated), Consolidated EBITDAX and Consolidated Interest Expense for such period will
be calculated after giving effect on a pro forma basis to such discharge of such Indebtedness as if such discharge had occurred on the first day of such period;
(2) if, since the beginning of such period, the Company or any Restricted Subsidiary has made any Asset Disposition or if the
transaction giving rise to the need to calculate the Consolidated Coverage Ratio is such an Asset Disposition, the Consolidated EBITDAX for such period will be reduced by an amount equal to the Consolidated EBITDAX (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for such period or increased by an amount equal to the Consolidated EBITDAX (if negative) directly attributable thereto for such period and Consolidated Interest Expense for
such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Restricted Subsidiaries in connection with or with the proceeds from such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale);
(3) if, since the beginning of such period, the Company or any Restricted Subsidiary (by merger or otherwise) has made an
Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary or is merged with or into the Company or a Restricted Subsidiary) or an acquisition (or will have received a contribution) of assets, including any
acquisition or contribution of assets occurring in connection
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with a transaction causing a calculation to be made under the Indenture, which constitutes all or substantially all of a company, division, operating unit, segment, business, group of related
assets or line of business, Consolidated EBITDAX and Consolidated Interest Expense for such period will be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition or
contribution had occurred on the first day of such period; and
(4) if, since the beginning of such period, any Person
(that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) made any Asset Disposition or any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such period, Consolidated EBITDAX and Consolidated Interest Expense for such period will be calculated after giving pro forma effect
thereto as if such Asset Disposition or Investment or acquisition of assets had occurred on the first day of such period.
For purposes of
this definition, whenever pro forma effect is to be given to any calculation under this definition, the pro forma calculations will be determined in good faith by a responsible financial or accounting officer of the Company; provided that such
officer may in his or her discretion include any reasonably identifiable and factually supportable pro forma changes to Consolidated EBITDAX, including any pro forma expenses and cost reductions, that have occurred or in the judgment of such officer
are reasonably expected to occur within 12 months of the date of the applicable transaction (regardless of whether such expense or cost reduction or any other operating improvements could then be reflected properly in pro forma financial statements
prepared in accordance with Regulation S-X under the Securities Act or any other regulation or policy of the SEC). If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness
will be calculated as if the average rate in effect from the beginning of such period to the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness,
but if the remaining term of such Interest Rate Agreement is less than 12 months, then such Interest Rate Agreement shall only be taken into account for that portion of the period equal to the remaining term thereof). If any Indebtedness that is
being given pro forma effect bears an interest rate at the option of the Company, the interest rate shall be calculated by applying such optional rate chosen by the Company. Interest on Indebtedness that may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Company may
designate.
Consolidated EBITDAX
for any period means, without duplication, the Consolidated Net Income for such
period, plus the following, without duplication and to the extent deducted (and not added back) in calculating such Consolidated Net Income:
(1) Consolidated Interest Expense;
(2) Consolidated Income Tax Expense;
(3) consolidated depletion and depreciation expense of the Company and its Restricted Subsidiaries;
(4) consolidated amortization expense or impairment charges of the Company and its Restricted Subsidiaries recorded in
connection with the application of FASB ASC Topic No. 350, Intangibles Goodwill and Others, and FASB ASC Topic No. 360, Property, Plant and Equipment;
(5) other non-cash charges of the Company and its Restricted Subsidiaries (excluding any such non-cash charge to the extent it
represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period not included in the calculation); and
(6) consolidated exploration and abandonment expense of the Company and its Restricted Subsidiaries,
if applicable for such period; and less, to the extent included in calculating such Consolidated Net Income and in excess of any costs or expenses
attributable thereto that were deducted (and not added back) in calculating such
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Consolidated Net Income, the sum of (x) the amount of deferred revenues that are amortized during such period and are attributable to reserves that are subject to Volumetric Production
Payments, (y) amounts recorded in accordance with GAAP as repayments of principal and interest pursuant to Dollar-Denominated Production Payments and (z) other non-cash gains (excluding any non-cash gain to the extent it represents the
reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDAX in any prior period).
Notwithstanding the
preceding sentence, clauses (2) through (6) relating to amounts of a Restricted Subsidiary of the Company will be added to Consolidated Net Income to compute Consolidated EBITDAX of the Company only to the extent (and in the same
proportion) that the net income (loss) of such Restricted Subsidiary was included in calculating the Consolidated Net Income of the Company and, to the extent the amounts set forth in clauses (2) through (6) are in excess of those
necessary to offset a net loss of such Restricted Subsidiary or if such Restricted Subsidiary has net income for such period included in Consolidated Net Income, only if a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or the holders of its Capital Stock.
Consolidated Income Tax
Expense
means, with respect to any period, the provision for federal, state, local and foreign income taxes (including state franchise taxes accounted for as income taxes in accordance with GAAP) of the Company and its Restricted
Subsidiaries for such period as determined in accordance with GAAP.
Consolidated Interest Expense
means,
for any period, the total consolidated interest expense (less interest income) of the Company and its Restricted Subsidiaries, whether paid or accrued, plus, to the extent not included in such interest expense and without duplication:
(1) interest expense attributable to Capitalized Lease Obligations and the interest component of any deferred payment
obligations;
(2) amortization of debt discount and debt issuance cost (provided that any amortization of bond premium will
be credited to reduce Consolidated Interest Expense unless, pursuant to GAAP, such amortization of bond premium has otherwise reduced Consolidated Interest Expense);
(3) non-cash interest expense;
(4) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers acceptance
financing;
(5) the interest expense on Indebtedness of another Person that is Guaranteed by the Company or one of its
Restricted Subsidiaries or secured by a Lien on assets of the Company or one of its Restricted Subsidiaries, to the extent such Guarantee becomes payable or such Lien becomes subject to foreclosure;
(6) cash costs associated with Interest Rate Agreements (including amortization of fees); provided, however, that if Interest
Rate Agreements result in net cash benefits rather than costs, such benefits shall be credited to reduce Consolidated Interest Expense unless, pursuant to GAAP, such net benefits are otherwise reflected in Consolidated Net Income;
(7) the consolidated interest expense of the Company and its Restricted Subsidiaries that was capitalized during such period;
and
(8) all dividends paid or payable in cash, Cash Equivalents or Indebtedness or accrued during such period on any
series of Disqualified Stock of the Company or on Preferred Stock of its Restricted Subsidiaries payable to a party other than the Company or a Wholly-Owned Subsidiary,
minus, to the extent included above, any interest attributable to Dollar-Denominated Production Payments.
For the purpose of calculating the Consolidated Coverage Ratio in connection with the Incurrence of any Indebtedness described in the final
paragraph of the definition of Indebtedness, the calculation of Consolidated
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Interest Expense shall include all interest expense (including any amounts described in clauses (1) through (8) above) relating to any Indebtedness of the Company or any Restricted
Subsidiary described in the final paragraph of the definition of Indebtedness.
Consolidated Net
Income
means, for any period, the aggregate net income (loss) of the Company and its consolidated Subsidiaries determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends of such Person;
provided,
however
, that there will not be included (to the extent otherwise included therein) in such Consolidated Net Income:
(1) any net income (loss) of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that:
(a) subject to the limitations contained in clauses (3) and (4) below, the Companys equity in the net
income of any such Person for such period will be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (2) below); and
(b) the Companys equity in a net loss of any such Person for such period will be included in determining such
Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary during such period;
(2) any net income (but not loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that:
(a) subject to the limitations contained in clauses (3), (4) and (5) below, the Companys equity in the net
income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause); and
(b) the Companys equity in a net loss of any such Restricted Subsidiary for such period will be included in determining
such Consolidated Net Income;
(3) any gain (loss) realized upon the sale or other disposition of any property, plant or
equipment of the Company or its consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other
disposition of any Capital Stock of any Person;
(4) any extraordinary or nonrecurring gains or losses, together with any
related provision for taxes on such gains or losses and all related fees and expenses;
(5) the cumulative effect of a
change in accounting principles;
(6) any asset impairment writedowns on Oil and Gas Properties under GAAP or SEC
guidelines;
(7) any unrealized non-cash gains or losses or charges in respect of Hedging Obligations (including those
resulting from the application of FASB ASC Topic No. 815, Derivatives and Hedging);
(8) income or loss attributable
to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued);
(9) all deferred financing costs written off, and premiums paid, in connection with any early extinguishment of Indebtedness;
and
(10) any non-cash compensation charge arising from any grant of stock, stock options or other equity based awards;
provided that the proceeds resulting from any such grant will be excluded from clause (c)(ii) of the first paragraph of the covenant described under Limitation on Restricted Payments.
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Credit Facility
means, with respect to the Company or any Restricted
Subsidiary, one or more debt facilities (including, without limitation, the Senior Secured Credit Agreement), indentures or commercial paper facilities providing for revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or
in part from time to time (and whether or not with the original administrative agent and lenders or another administrative agent or agents or other lenders and whether provided under the original Senior Secured Credit Agreement or any other credit
or other agreement or indenture).
Currency Agreement
means in respect of a Person any foreign exchange
contract, currency swap agreement, futures contract, option contract or other similar agreement as to which such Person is a party or a beneficiary.
Customary Recourse Exceptions
means, with respect to any Non-Recourse Debt of an Unrestricted Subsidiary, exclusions
from the exculpation provisions with respect to such Non-Recourse Debt for the voluntary bankruptcy of such Unrestricted Subsidiary, fraud, misapplication of cash, environmental claims, waste, willful destruction and other circumstances customarily
excluded by lenders from exculpation provisions or included in separate indemnification agreements in non-recourse financings.
Default means any event which is, or after notice or passage of time or both would be, an Event of Default.
Disqualified Stock
means, with respect to any Person, any Capital Stock of such Person which by its terms (or by the
terms of any security into which it is convertible or for which it is exchangeable) at the option of the holder of the Capital Stock or upon the happening of any event:
(1) matures or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person which is not itself
Disqualified Stock) pursuant to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable for
Disqualified Stock or other Indebtedness (excluding Capital Stock which is convertible or exchangeable solely at the option of such Person or one of its Subsidiaries); or
(3) is redeemable at the option of the holder of the Capital Stock in whole or in part,
in each case on or prior to the date that is 91 days after the earlier of the date (a) of the Stated Maturity of the Notes or (b) on which there are
no Notes outstanding; provided that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date will be deemed to be
Disqualified Stock; provided further, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of
control or asset sale (each defined in a substantially identical manner to the corresponding definitions in the Indenture) shall not constitute Disqualified Stock if the terms of such Capital Stock (and all such securities into which it is
convertible or for which it is exchangeable) provide that (i) the Company may not repurchase or redeem any such Capital Stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) pursuant to such
provision prior to compliance by the Company with the provisions of the Indenture described under the captions Change of Control and Certain Covenants Limitation on Sales of Assets and Subsidiary Stock
and (ii) such repurchase or redemption will be permitted solely to the extent also permitted in accordance with the provisions of the Indenture described under the caption Certain Covenants Limitation on Restricted
Payments.
Dollar-Denominated Production Payments
means production payment obligations recorded as
liabilities in accordance with GAAP, together with all undertakings and obligations in connection therewith.
Domestic Subsidiary
means any Restricted Subsidiary that is organized under the laws of the United States of
America or any state thereof or the District of Columbia.
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Equity Interests
means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
Equity Offering
means a public or private offering for cash by the Company of Capital Stock (other than Disqualified
Stock), other than public offerings registered on Form S-8.
Exchange Act
means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
Fair Market
Value
means, with respect to any asset or property, the sale value that would be obtained in an arms-length free market transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy. Fair Market Value of an asset or property in excess of $50.0 million shall be determined by the Board of Directors of the Company acting in good faith, whose determination shall be conclusive and evidenced by a resolution
of such Board of Directors, and any lesser Fair Market Value may be determined by an officer of the Company acting in good faith.
Foreign Subsidiary
means any Restricted Subsidiary that is not organized under the laws of the United States of
America or any state thereof or the District of Columbia.
GAAP
means generally accepted accounting
principles in the United States of America as in effect from time to time. All ratios and computations based on GAAP contained in the Indenture will be computed in conformity with GAAP.
Guarantee
means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person
(whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise); or
(2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided
,
however
, that the term Guarantee will not
include endorsements for collection or deposit in the ordinary course of business or any obligation to the extent it is payable only in Capital Stock of the Guarantor that is not Disqualified Stock. The term Guarantee used as a verb has
a corresponding meaning.
Guarantor Subordinated Obligation
means, with respect to a Subsidiary
Guarantor, any Indebtedness of such Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter Incurred) which is expressly subordinate in right of payment to the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee
pursuant to a written agreement.
Hedging Obligations
of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement, Currency Agreement or Commodity Agreement.
holder
means a
Person in whose name a Note is registered on the registrars books.
Hydrocarbons
means oil, natural
gas, casing head gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all constituents, elements or compounds thereof and products refined or processed therefrom.
S-59
Immaterial Subsidiary
means, as of any date, any Restricted Subsidiary
whose total assets, as of the end of the most recent month for which financial statements are available, are less than $1,000,000 and whose total revenues for the most recent 12-month period for which financial statements are available do not exceed
$1,000,000; provided that a Restricted Subsidiary will not be considered to be an Immaterial Subsidiary if it, directly or indirectly, Guarantees or otherwise provides direct credit support for any Indebtedness of the Company.
Incur
means issue, create, assume, Guarantee, incur or otherwise become directly or indirectly liable for,
contingently or otherwise;
provided, however
, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) will be deemed to
be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary; and the terms Incurred and Incurrence have meanings correlative to the foregoing.
Indebtedness
means, with respect to any Person on any date of determination (without duplication, whether or not
contingent):
(1) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed
money;
(2) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) the principal component of all obligations of such Person in respect of letters of
credit, bankers acceptances or other similar instruments (including reimbursement obligations with respect thereto except to the extent such reimbursement obligation relates to a trade payable and except to the extent such letters of credit
are not drawn upon or, if and to the extent drawn upon, such obligation is satisfied within 30 days of payment on the letter of credit);
(4) the principal component of all obligations of such Person (other than obligations payable solely in Capital Stock that is
not Disqualified Stock) to pay the deferred and unpaid purchase price of property (except as described in clause (8) of the penultimate paragraph of this definition of Indebtedness), which purchase price is due more than six months
after the date of placing such property in service or taking delivery and title thereto to the extent such obligations would appear as a liabilities upon the consolidated balance sheet of such Person in accordance with GAAP;
(5) Capitalized Lease Obligations of such Person to the extent such Capitalized Lease Obligations would appear as liabilities
on the consolidated balance sheet of such Person in accordance with GAAP;
(6) the principal component or liquidation
preference of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary that is not a Subsidiary Guarantor, any Preferred Stock (but excluding, in each
case, any accrued dividends);
(7) the principal component of all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset at such date of determination and
(b) the amount of such Indebtedness of such other Persons;
(8) the principal component of Indebtedness of other
Persons to the extent Guaranteed by such Person; and
(9) to the extent not otherwise included in this definition, net
obligations of such Person under Commodity Agreements, Currency Agreements and Interest Rate Agreements (the amount of any such obligations to be equal at any time to the termination value of such agreement or arrangement giving rise to such
obligation that would be payable by such Person at such time);
provided
,
however
, that any indebtedness which has been defeased in
accordance with GAAP or defeased pursuant to the deposit of cash or Cash Equivalents (in an amount sufficient to satisfy all such indebtedness
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obligations at maturity or redemption, as applicable, and all payments of interest and premium, if any) in a trust or account created or pledged for the sole benefit of the holders of such
indebtedness, and subject to no other Liens, shall not constitute Indebtedness.
The amount of Indebtedness of any Person at
any date will be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date.
Notwithstanding the preceding, Indebtedness of a Person shall not include:
(1) Production Payments and Reserve Sales;
(2) any obligation of such Person in respect of a farm-in agreement or similar arrangement whereby such Person agrees to pay
all or a share of the drilling, completion or other expenses of an exploratory or development well (which agreement may be subject to a maximum payment obligation, after which expenses are shared in accordance with the working or participation
interest therein or in accordance with the agreement of the parties) or perform the drilling, completion or other operation on such well in exchange for an ownership interest in an oil or gas property;
(3) any obligations under Currency Agreements, Commodity Agreements and Interest Rate Agreements; provided that such Agreements
are entered into for bona fide hedging purposes of such Person or its Subsidiaries (as determined in good faith by the Board of Directors or senior management of the Person, whether or not accounted for as a hedge in accordance with GAAP) and, in
the case of Currency Agreements or Commodity Agreements, such Currency Agreements or Commodity Agreements are related to business transactions of the Person or its Subsidiaries entered into in the ordinary course of business and, in the case of
Interest Rate Agreements, such Interest Rate Agreements substantially correspond in terms of notional amount, duration and interest rates, as applicable, to Indebtedness of the Person or its Subsidiaries Incurred without violation of the Indenture;
(4) any obligation arising from agreements of such Person or a Subsidiary providing for indemnification, Guarantees,
adjustment of purchase price, holdbacks, contingency payment obligations or similar obligations, in each case, Incurred or assumed in connection with the acquisition or disposition of any business, assets or Capital Stock of a Subsidiary, provided
that such Indebtedness is not reflected on the face of the balance sheet of the Person or any Subsidiary;
(5) any
obligation arising from the honoring by a bank or other financial institution of a check, draft or similar instrument (including daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided that such
Indebtedness is extinguished within five Business Days of Incurrence;
(6) in-kind obligations relating to net oil or
natural gas balancing positions arising in the ordinary course of business;
(7) all contracts and other obligations,
agreements, instruments or arrangements described in clause (19), (20), (21) or (28)(a) of the definition of Permitted Liens;
(8) accrued expenses and trade payables and other accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days past the invoice or billing date or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted; and
(9) any repayment or reimbursement obligation of such Person or any of its Restricted Subsidiaries with respect to Customary
Recourse Exceptions, unless and until an event or circumstance occurs that triggers the Persons or such Restricted Subsidiarys direct repayment or reimbursement obligation (as opposed to contingent or performance obligations) to the
lender or other Person to whom such obligation is actually owed, in which case the amount of such direct payment or reimbursement obligation shall constitute Indebtedness.
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In addition, Indebtedness of any Person shall include Indebtedness described in the
first paragraph of this definition of Indebtedness that would not appear as a liability on the balance sheet of such Person if:
(1) such Indebtedness is the obligation of a partnership or joint venture that is not a Subsidiary of such Person (a
Joint Venture);
(2) such Person or a Subsidiary of such Person is a general partner of the Joint Venture or
otherwise liable for all or a portion of the Joint Ventures liabilities (a General Partner); and
(3)
there is recourse, by contract or operation of law, with respect to the payment of such Indebtedness to property or assets of such Person or a Subsidiary of such Person; and then such Indebtedness shall be included in an amount not to exceed:
(a) the lesser of (i) the net assets of the General Partner and (ii) the amount of such obligations to the extent
that there is recourse, by contract or operation of law, to the property or assets of such Person or a Subsidiary of such Person; or
(b) if less than the amount determined pursuant to clause (a) immediately above, the actual amount of such Indebtedness
that is with recourse to such Person or a Subsidiary of such Person, if the Indebtedness is evidenced by a writing and is for a determinable amount and the related interest expense shall be included in Consolidated Interest Expense to the extent
actually paid by such Person and its Subsidiaries.
Interest Rate Agreement
means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
Investment
means, with respect to any
Person, all investments by such Person in other Persons (including Affiliates) in the form of any direct or indirect advance, loan or other extensions of credit (including by way of Guarantee or similar arrangement, but excluding any debt or
extension of credit represented by a bank deposit other than a time deposit and advances or extensions of credit to customers in the ordinary course of business) or capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments (excluding any interest in a crude oil or natural gas leasehold to the
extent constituting a security under applicable law) issued by, such other Person and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided that none of the following will be
deemed to be an Investment:
(1) Hedging Obligations entered into in the ordinary course of business and in
compliance with the Indenture;
(2) endorsements of negotiable instruments and documents in the ordinary course of
business; and
(3) an acquisition of assets, Capital Stock or other securities by such Person or a Subsidiary for
consideration to the extent such consideration consists of Common Stock of such Person.
The amount of any Investment shall not be
adjusted for increases or decreases in value, write-ups, writedowns or write-offs with respect to such Investment.
For purposes of the
definition of Unrestricted Subsidiary and the covenant described under Certain Covenants Limitation on Restricted Payments,
(1) Investment will include the portion (proportionate to the Companys equity interest in a Restricted
Subsidiary to be designated as an Unrestricted Subsidiary) of the Fair Market Value of the net assets of such Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted
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Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company will be deemed to continue to have a permanent Investment in an
Unrestricted Subsidiary in an amount (if positive) equal to
(a) the Companys Investment in such
Subsidiary at the time of such redesignation less
(b) the portion (proportionate to the Companys equity interest in
such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time that such Subsidiary is so re-designated a Restricted Subsidiary;
(2) any property transferred to or from an Unrestricted Subsidiary will be valued at its Fair Market Value at the time of such
transfer; and
(3) if the Company or any Restricted Subsidiary sells or otherwise disposes of any Capital Stock of any
Restricted Subsidiary such that, after giving effect to any such sale or disposition, such entity is no longer a Subsidiary of the Company, then the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal
to the Fair Market Value of the Capital Stock of such former Subsidiary not sold or disposed of.
Investment Grade
Rating
means a rating equal to or higher than:
(1) Baa3 (or the equivalent) with a stable or better
outlook by Moodys; or
(2) BBB- (or the equivalent) with a stable or better outlook by S&P,
or, if either such entity ceases to make a rating on the Notes publicly available for reasons outside of the Companys control, the equivalent investment
grade credit rating from any other Rating Agency.
Investment Grade Rating Event
means the first day on which
the Notes have an Investment Grade Rating from at least one Rating Agency, and no Default has occurred and is then continuing under the Indenture.
Issue Date
means the first date on which the Notes are issued under the Indenture.
Lien
means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge,
security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in
no event shall an operating lease be deemed to constitute a Lien.
Minority Interest
means the percentage
interest represented by any class of Capital Stock of a Restricted Subsidiary that are not owned by the Company or a Restricted Subsidiary.
Moodys
means Moodys Investors Service, Inc., or any successor to the rating agency business thereof.
Net Available Cash
from an Asset Disposition means cash payments received (including any cash payments
received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and net proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding
any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset
Disposition or received in any other non-cash
form, including consideration deemed to be cash pursuant to clause (2) of the seventh paragraph of the covenant described under Certain Covenants Limitation on Sales of Assets and Subsidiary Stock) therefrom, in each
case net of:
(1) all legal, accounting, investment banking, title and recording tax expenses, commissions and other
fees and expenses Incurred, and all federal, state, provincial, foreign and local taxes required to be paid or
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accrued as a liability under GAAP (after taking into account any available tax credits or deductions and any tax sharing agreements), as a consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with
the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures or
to holders of royalty or similar interests as a result of such Asset Disposition;
(4) the deduction of appropriate amounts
to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition; and
(5) all relocation expenses incurred as a result thereof and all related severance and associated costs, expenses and
charges of personnel related to assets and related operations disposed of;
provided, however
, that if any consideration for an Asset Disposition
(that would otherwise constitute Net Available Cash) is required to be held in escrow pending determination of whether or not a purchase price adjustment will be made, such consideration (or any portion thereof) shall become Net Available Cash only
at such time as it is released to the Company or any of its Restricted Subsidiaries from escrow.
Net Cash
Proceeds
, with respect to any issuance or sale of Capital Stock or any contribution to equity capital, means the cash proceeds of such issuance, sale or contribution net of attorneys fees, accountants fees, underwriters
or placement agents fees, listing fees, discounts or commissions and brokerage, consultant and other fees and charges actually Incurred in connection with such issuance, sale or contribution and net of taxes paid or payable as a result of such
issuance or sale (after taking into account any available tax credit or deductions and any tax sharing arrangements).
Net Working Capital
means (a) the sum of (i) all current assets of the Company and its Restricted
Subsidiaries, except current assets from commodity price risk management activities arising in the ordinary course of the Oil and Gas Business, plus (ii) the amount of revolving credit borrowings available to be Incurred under the Senior
Secured Credit Agreement, less (b) all current liabilities of the Company and its Restricted Subsidiaries, except current liabilities (i) associated with asset retirement obligations relating to Oil and Gas Properties, (ii) included
in Indebtedness and (iii) any current liabilities from commodity price risk management activities arising in the ordinary course of the Oil and Gas Business, in each case as set forth in the consolidated financial statements of the Company
prepared in accordance with GAAP.
Non-Recourse Debt
means Indebtedness of a Person:
(1) as to which neither the Company nor any Restricted Subsidiary (a) provides any Guarantee or credit support of any kind
(including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor or otherwise), except for Customary Recourse Exceptions;
(2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against
an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default under such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and
(3) the explicit terms of which provide there is no recourse
against any of the assets of the Company or its Restricted Subsidiaries, except for Customary Recourse Exceptions.
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Officer
means the Chairman of the Board, the Chief Executive Officer,
the President, the Chief Financial Officer, any Vice President, the Treasurer or the Secretary of the Company. Officer of any Subsidiary Guarantor has a correlative meaning.
Officers Certificate
means a certificate signed by two Officers of the Company.
Oil and Gas Business
means:
(1) the business of acquiring, exploring, exploiting, developing, producing, operating and disposing of interests in oil,
natural gas, liquefied natural gas and other Hydrocarbon and mineral properties or products produced in association with any of the foregoing;
(2) the business of gathering, marketing, distributing, treating, processing, storing, refining, selling and transporting of
any production from such interests or properties and products produced in association therewith and the marketing of oil, natural gas, other Hydrocarbons and minerals obtained from unrelated Persons;
(3) any other related energy business, including power generation and electrical transmission business, directly or indirectly,
from oil, natural gas and other Hydrocarbons and minerals produced substantially from properties in which the Company or its Restricted Subsidiaries, directly or indirectly, participate;
(4) any business relating to oil field sales and service; and
(5) any business or activity relating to, arising from, or necessary, appropriate or incidental to the activities described in
the foregoing clauses (1) through (4) of this definition.
Oil and Gas Properties
means all
properties, including equity or other ownership interests therein, owned by a Person which contain or are believed to contain oil and gas reserves.
Opinion of Counsel
means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be
an employee of or counsel to the Company or the Trustee.
Pari Passu Indebtedness
means any Indebtedness
of the Company or any Subsidiary Guarantor that ranks equally in right of payment to the Notes or the Subsidiary Guarantees, as the case may be.
Permitted Acquisition Indebtedness
means Indebtedness (including Disqualified Stock) of the Company or any of the
Restricted Subsidiaries to the extent such Indebtedness was Indebtedness:
(1) of an acquired Person prior to the
date on which such Person became a Restricted Subsidiary as a result of having been acquired and not incurred in contemplation of such acquisition; or
(2) of a Person that was merged, consolidated or amalgamated with or into the Company or a Restricted Subsidiary that was not
incurred in contemplation of such merger, consolidation or amalgamation,
provided
that on the date such Person became a Restricted Subsidiary or
the date such Person was merged, consolidated and amalgamated with or into the Company or a Restricted Subsidiary, as applicable, after giving pro forma effect thereto,
(a) the Restricted Subsidiary or the Company, as applicable, would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Coverage Ratio test described under Certain Covenants Limitation on Indebtedness and Preferred Stock, or
(b) the Consolidated Coverage Ratio for the Company would be greater than the Consolidated Coverage Ratio for the Company
immediately prior to such transaction.
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Permitted Business Investment
means any Investment made in the ordinary
course of, and of a nature that is or shall have become customary in, the Oil and Gas Business including investments or expenditures for actively exploiting, exploring for, acquiring, developing, producing, processing, gathering, marketing or
transporting oil, natural gas or other Hydrocarbons and minerals through agreements, transactions, interests or arrangements which permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other
objectives customarily achieved through the conduct of the Oil and Gas Business jointly with third parties including:
(1) ownership interests in oil, natural gas, other Hydrocarbons and minerals properties, liquefied natural gas facilities,
processing facilities, gathering systems, pipelines, storage facilities or related systems or ancillary real property interests;
(2) Investments in the form of or pursuant to operating agreements, working interests, royalty interests, mineral leases,
processing agreements, farm-in agreements, farm-out agreements, contracts for the sale, transportation or exchange of oil, natural gas, other Hydrocarbons and minerals, production sharing agreements, participation agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling agreements, joint bidding agreements, service contracts, joint venture agreements, partnership agreements (whether general or limited), subscription agreements, stock purchase
agreements, stockholder agreements and other similar agreements (including for limited liability companies) with third parties; and
(3) direct or indirect ownership interests in drilling rigs and related equipment, including, without limitation,
transportation equipment.
Permitted Investment
means an Investment by the Company or any Restricted Subsidiary
in:
(1) the Company (including by way of an Investment in the Notes) or a Restricted Subsidiary;
(2) another Person whose primary business is the Oil and Gas Business if as a result of such Investment such other Person
becomes a Restricted Subsidiary or is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary and, in each case, any Investment held by such Person; provided that
such Investment was not acquired by such Person in contemplation of such acquisition, merger, consolidation or transfer;
(3) cash and Cash Equivalents;
(4) receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
(5) payroll, commission, travel, relocation and similar advances to cover matters that are expected at the time of such
advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;
(6) loans or advances to employees (other than executive officers) made in the ordinary course of business consistent with past
practices of the Company or such Restricted Subsidiary;
(7) Capital Stock, obligations or securities received in
settlement of debts (x) created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments or (y) pursuant to any plan of reorganization or similar arrangement in a bankruptcy
or insolvency proceeding;
(8) any Person as a result of the receipt of non-cash consideration from an Asset Disposition
that was made pursuant to and in compliance with the covenant described under Certain Covenants Limitation on Sales of Assets and Subsidiary Stock;
(9) Investments in existence on the Issue Date;
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(10) Commodity Agreements, Currency Agreements, Interest Rate Agreements and
related Hedging Obligations, which transactions or obligations are Incurred in compliance with the covenant described under Certain Covenants Limitation on Indebtedness and Preferred Stock;
(11) Guarantees issued in accordance with the covenant described under Certain
Covenants Limitation on Indebtedness and Preferred Stock;
(12) Permitted Business Investments;
(13) any Person where such Investment was acquired by the Company or any of its Restricted Subsidiaries (a) in exchange
for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts
receivable or (b) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(14) any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and
lease, utility and workers compensation, performance and other similar deposits made in the ordinary course of business by the Company or any Restricted Subsidiary;
(15) Guarantees of performance or other obligations (other than Indebtedness) arising in the ordinary course in the Oil and Gas
Business, including obligations under oil and natural gas exploration, development, joint operating, and related agreements and licenses, concessions or operating leases related to the Oil and Gas Business;
(16) Investments in the Notes; and
(17) Investments by the Company or any of its Restricted Subsidiaries, together with all other Investments pursuant to this
clause (17), in an aggregate amount outstanding at the time of such Investment not to exceed the greater of $90.0 million and 1.0% of the Companys Adjusted Consolidated Net Tangible Assets (with the Fair Market Value of such Investment being
measured at the time such Investment is made and without giving effect to subsequent changes in value); provided, however, that if any Investment pursuant to this clause (17) is made in any Person that is not a Restricted Subsidiary at the date
of the making of such Investment and such Person becomes a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this
clause (17) for so long as such Person continues to be a Restricted Subsidiary.
Permitted Liens
means,
with respect to any Person:
(1) Liens securing Indebtedness under a Credit Facility permitted to be Incurred under
the Indenture;
(2) pledges or deposits by such Person under workers compensation laws, unemployment insurance laws,
social security or old age pension laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits (which may be
secured by a Lien) to secure public or statutory obligations of such Person including letters of credit and bank guarantees required or requested by the United States, any State thereof or any foreign government or any subdivision, department,
agency, organization or instrumentality of any of the foregoing in connection with any contract or statute (including lessee or operator obligations under statutes, governmental regulations, contracts or instruments related to the ownership,
exploration and production of oil, natural gas, other hydrocarbons and minerals on State, Federal or foreign lands or waters), or deposits of cash or United States government bonds to secure indemnity performance, surety or appeal bonds or other
similar bonds to which such Person is a party, or deposits as security for contested taxes or import or customs duties or for the payment of rent, in each case Incurred in the ordinary course of business;
(3) statutory and contractual Liens of landlords and Liens imposed by law, including carriers, warehousemens,
mechanics, materialmens and repairmens Liens, in each case for sums not yet due or
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being contested in good faith by appropriate proceedings if a reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made in respect thereof;
(4) Liens for taxes, assessments or other governmental charges or claims not yet subject to penalties for non-payment or which
are being contested in good faith by appropriate proceedings; provided that appropriate reserves, if any, required pursuant to GAAP have been made in respect thereof;
(5) Liens in favor of issuers of surety or performance bonds or bankers acceptances issued pursuant to the request of and
for the account of such Person in the ordinary course of its business;
(6) survey exceptions, encumbrances, ground leases,
easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning, building codes or other restrictions (including, without limitation, minor
defects or irregularities in title and similar encumbrances) as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which do not in the aggregate materially adversely
affect the value of the assets of such Person and its Restricted Subsidiaries, taken as a whole, or materially impair their use in the operation of the business of such Person;
(7) Liens securing Hedging Obligations;
(8) leases, licenses, subleases and sublicenses of assets (including, without limitation, real property and intellectual
property rights) which do not materially interfere with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries;
(9) prejudgment Liens and judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and
any appropriate legal proceedings which may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;
(10) Liens for the purpose of securing the payment of all or a part of the purchase price of, or Capitalized Lease Obligations,
purchase money obligations or other payments Incurred to finance the acquisition, lease, improvement or construction of or repairs or additions to, assets or property acquired or constructed in the ordinary course of business; provided that:
(a) the aggregate principal amount of Indebtedness secured by such Liens is otherwise permitted to be Incurred under the
Indenture and does not exceed the cost of the assets or property so acquired or constructed; and
(b) such Liens are
created within 180 days of the later of the acquisition, lease, completion of improvements, construction, repairs or additions or commencement of full operation of the assets or property subject to such Lien and do not encumber any other assets or
property of the Company or any Restricted Subsidiary other than such assets or property and assets affixed or appurtenant thereto;
(11) Liens arising solely by virtue of any statutory or common law provisions relating to bankers Liens, rights of
set-off or similar rights and remedies as to deposit accounts or other funds maintained with a depositary institution; provided that:
(a) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the
Company in excess of those set forth by regulations promulgated by the Federal Reserve Board; and
(b) such deposit account
is not intended by the Company or any Restricted Subsidiary to provide collateral to the depository institution;
(12)
Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company and its Restricted Subsidiaries in the ordinary course of business;
(13) Liens existing on the Issue Date, other than Liens securing the Senior Secured Credit Agreement;
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(14) Liens on property or shares of Capital Stock of a Person at the time such
Person becomes a Subsidiary; provided, however, that such Liens are not created or Incurred in connection with, or in contemplation of, such other Person becoming a Subsidiary; provided further, however, that any such Lien may not extend to any
other property owned by the Company or any Restricted Subsidiary (other than assets or property affixed or appurtenant thereto);
(15) Liens on property at the time the Company or any of its Subsidiaries acquired the property, including any acquisition by
means of a merger or consolidation with or into the Company or any of its Subsidiaries; provided, however, that such Liens are not created or Incurred in connection with, or in contemplation of, such acquisition; provided further, however, that such
Liens may not extend to any other property owned by the Company or any Restricted Subsidiary (other than assets or property affixed or appurtenant thereto);
(16) Liens securing the Notes, Subsidiary Guarantees and other obligations under the Indenture;
(17) Liens securing Refinancing Indebtedness Incurred to refinance Indebtedness that was previously so secured, provided that
any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose,
could secure) the Indebtedness being refinanced or is in respect of property or assets that is the security for a Permitted Lien hereunder;
(18) any interest or title of a lessor under any Capitalized Lease Obligation or operating lease;
(19) Liens in respect of Production Payments and Reserve Sales, which Liens shall be limited to the property that is the
subject of such Production Payments and Reserve Sales;
(20) Liens arising under farm-out agreements, farm-in agreements,
division orders, contracts for the sale, purchase, exchange, transportation, gathering or processing of Hydrocarbons, unitizations and pooling designations, declarations, orders and agreements, development agreements, joint venture agreements,
partnership agreements, operating agreements, royalties, working interests, net profits interests, joint interest billing arrangements, participation agreements, production sales contracts, area of mutual interest agreements, gas balancing or
deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, and other agreements which are customary in the Oil and Gas Business; provided,
however, in all instances that such Liens are limited to the assets that are the subject of the relevant agreement, program, order or contract;
(21) Liens on pipelines or pipeline facilities that arise by operation of law;
(22) Liens securing Indebtedness in an aggregate principal amount outstanding at any one time, added together with all other
Indebtedness secured by Liens Incurred pursuant to this clause (22), not to exceed the greater of $90.0 million and 1.0% of the Companys Adjusted Consolidated Net Tangible Assets, as determined on the date of Incurrence of such Indebtedness
after giving pro forma effect to such Incurrence and the application of the proceeds therefrom;
(23) Liens in favor of the
Company or any Subsidiary Guarantor;
(24) deposits made in the ordinary course of business to secure liability to
insurance carriers;
(25) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods in the ordinary course of business;
(26) Liens deemed to exist
in connection with Investments in repurchase agreements permitted under the covenant described under Certain Covenants Limitation on Restricted Payments; provided that such Liens do not extend to any assets other than those
that are the subject of such repurchase agreement;
(27) Liens encumbering reasonable customary initial deposits and margin
deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
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(28) any (a) interest or title of a lessor or sublessor under any lease,
liens reserved in oil, gas or other Hydrocarbons, minerals, leases for bonus, royalty or rental payments and for compliance with the terms of such leases; (b) restriction or encumbrance that the interest or title of such lessor or sublessor may
be subject to (including, without limitation, ground leases or other prior leases of the demised premises, mortgages, mechanics liens, tax liens, and easements); or (c) subordination of the interest of the lessee or sublessee under such
lease to any restrictions or encumbrance referred to in the preceding clause (b);
(29) Liens upon specific items of
inventory or other goods and proceeds of any Person securing such Persons obligations in respect of bankers acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or
other goods;
(30) Liens arising under the Indenture in favor of the Trustee for its own benefit and similar Liens in favor
of other trustees, agents and representatives arising under instruments governing Indebtedness permitted to be incurred under the Indenture,
provided, however
, that such Liens are solely for the benefit of the trustees, agents or
representatives in their capacities as such and not for the benefit of the holders of such Indebtedness;
(31) Liens
arising from the deposit of funds or securities in trust for the purpose of decreasing or defeasing Indebtedness so long as such deposit of funds or securities and such decreasing or defeasing of Indebtedness are permitted under the covenant
described under Certain Covenants Limitation on Restricted Payments; and
(32) Liens in favor of
collecting or payer banks having a right of setoff, revocation, or charge back with respect to money or instruments of the Company or any Subsidiary of the Company on deposit with or in possession of such bank.
In each case set forth above, notwithstanding any stated limitation on the assets that may be subject to such Lien, a Permitted Lien on a
specified asset or group or type of assets may include Liens on all improvements, additions and accessions thereto and all products and proceeds thereof (including dividends, distributions and increases in respect thereof).
Person
means any individual, corporation, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, limited liability company, government or any agency or political subdivision thereof or any other entity.
Preferred Stock
, as applied to the Capital Stock of any corporation or other Person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class
of such Person.
Production Payments and Reserve Sales
means the grant or transfer by the Company or a
Restricted Subsidiary to any Person of a royalty, overriding royalty, net profits interest, production payment (whether volumetric or dollar denominated), partnership or other interest in Oil and Gas Properties, reserves or the right to receive all
or a portion of the production or the proceeds from the sale of production attributable to such properties where the holder of such interest has recourse solely to such production or proceeds of production, subject to the obligation of the grantor
or transferor to operate and maintain, or cause the subject interests to be operated and maintained, in a reasonably prudent manner or other customary standard or subject to the obligation of the grantor or transferor to indemnify for environmental,
title or other matters customary in the Oil and Gas Business, including any such grants or transfers pursuant to incentive compensation programs on terms that are reasonably customary in the Oil and Gas Business for geologists, geophysicists or
other providers of technical services to the Company or a Restricted Subsidiary.
Rating Agency
means
each of S&P and Moodys, or if S&P or Moodys or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be,
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selected by the Company (as certified by a resolution of the Board of Directors) which shall be substituted for S&P or Moodys, or both, as the case may be.
Rating Decline
means the occurrence of a decrease of one or more gradations (including gradations within rating
categories as well as between rating categories) in the rating of the Notes by either Rating Agency.
Refinancing
Indebtedness
means Indebtedness that is Incurred to refund, refinance, replace, exchange, renew, repay, extend, prepay, redeem or retire (including pursuant to any defeasance or discharge mechanism) (collectively, refinance and
refinances and refinanced shall have correlative meanings) any Indebtedness (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary, but excluding Indebtedness of a Subsidiary that is not a Restricted Subsidiary that refinances Indebtedness of the Company or a Restricted Subsidiary), including Indebtedness that refinances
Refinancing Indebtedness,
provided, however
, that:
(1)(a) if the Stated Maturity of the Indebtedness being
refinanced is the same as or earlier than the Stated Maturity of the Notes, the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced or (b) if the Stated Maturity of the
Indebtedness being refinanced is later than the Stated Maturity of the Notes, the Refinancing Indebtedness has a Stated Maturity at least 91 days later than the Stated Maturity of the Notes;
(2) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced;
(3) such Refinancing Indebtedness is Incurred in an
aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being refinanced (plus, without duplication, any additional Indebtedness Incurred to pay interest, premiums or defeasance costs required by the instruments governing such existing Indebtedness and fees and expenses
Incurred in connection therewith); and
(4) if the Indebtedness being refinanced is subordinated in right of payment to the
Notes or the Subsidiary Guarantee, such Refinancing Indebtedness is subordinated in right of payment to the Notes or the Subsidiary Guarantee on terms at least as favorable to the holders as those contained in the documentation governing the
Indebtedness being refinanced.
Reporting Failure
means the failure of the Company to file with the SEC and make
available or otherwise deliver to the Trustee and each holder of Notes, within the time periods specified in the covenant described under Certain Covenants Provision of Financial Information (after giving effect to any
grace period specified under Rule 12b-25 under the Exchange Act), the periodic reports, information, documents or other reports which the Company may be required to file with the SEC pursuant to such provision.
Restricted Investment
means any Investment other than a Permitted Investment.
Restricted Subsidiary
means any Subsidiary of the Company other than an Unrestricted Subsidiary.
S&P
means S&P Global Ratings or any successor to the rating agency business thereof.
Sale/Leaseback Transaction
means an arrangement relating to property now owned or hereafter acquired whereby the
Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person.
SEC
means the United States Securities and Exchange Commission.
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Senior Secured Credit Agreement
means the Second Amended and Restated
Credit Agreement dated as of May 9, 2014 among the Company, as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders parties thereto from time to time, including any guarantees, collateral documents, instruments and
agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or
other institutional lenders or investors that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases
the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under the covenant described under Certain Covenants Limitation on Indebtedness and Preferred Stock
above).
Significant Subsidiary
means any Restricted Subsidiary that would be a Significant
Subsidiary of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC, as in effect on the Issue Date.
Stated Maturity
means, with respect to any security, the date specified in such security as the fixed date on which
the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision, but shall not include any contingent obligations to repay, redeem or repurchase any such principal prior to the date originally
scheduled for the payment thereof.
Subordinated Obligation
means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is expressly subordinate in right of payment to the Notes pursuant to a written agreement.
Subsidiary
of any Person means (a) any corporation, association or other business entity (other than a
partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total ordinary voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof (or Persons performing similar functions) or (b) any partnership, joint venture, limited liability company or similar entity of which more than 50% of the capital accounts, distribution rights, total
equity and voting interests or general or limited partnership interests, as applicable, that is, in the case of clauses (a) and (b), at the time owned or controlled, directly or indirectly, by (1) such Person, (2) such Person and one
or more Subsidiaries of such Person or (3) one or more Subsidiaries of such Person. Unless otherwise specified in the Indenture or the context indicates otherwise, each reference to a Subsidiary (other than in this definition) will refer to a
Subsidiary of the Company.
Subsidiary Guarantee
means, individually, any Guarantee of payment of the
Notes by a Subsidiary Guarantor pursuant to the terms of the Indenture and any supplemental indenture thereto, and, collectively, all such Guarantees.
Subsidiary Guarantors
means any Subsidiary of the Company that is a guarantor of the Notes, including any Person
that is required after the Issue Date to guarantee the Notes pursuant to the Future Subsidiary Guarantors covenant, in each case until a successor replaces such Person pursuant to the applicable provisions of the Indenture and,
thereafter, means such successor.
2009 Issue Date
means September 18, 2009, the initial date of
issuance of the Companys 8.625% senior notes due 2017.
Unrestricted Subsidiary
means:
(1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board
of Directors of the Company in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
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The Board of Directors of the Company may designate any Subsidiary of the Company (including any
newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary through merger or consolidation or Investment therein) to be an Unrestricted Subsidiary only if:
(1) such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of or have any Investment in, or
own or hold any Lien on any property of, any other Subsidiary of the Company which is not a Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary;
(2) all the Indebtedness of such Subsidiary and its Subsidiaries shall, at the date of designation, and will at all times
thereafter, consist of Non-Recourse Debt;
(3) on the date of such designation, such designation and the Investment of the
Company or a Restricted Subsidiary in such Subsidiary complies with the provision of the Indenture described under the caption Certain Covenants Limitation on Restricted Payments;
(4) such Subsidiary is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation to subscribe for additional Capital Stock of such Person;
(5) such Subsidiary, either alone or in
the aggregate with all other Unrestricted Subsidiaries, does not operate, directly or indirectly, all or substantially all of the business of the Company and its Subsidiaries; and
(6) on the date such Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is not a party to any agreement,
contract, arrangement or understanding with the Company or any Restricted Subsidiary with terms substantially less favorable to the Company or such Restricted Subsidiary than those that might have been obtained from Persons who are not Affiliates of
the Company, except as permitted by the covenant described under Certain Covenants Transactions with Affiliates.
Any
such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a resolution of the Board of Directors of the Company giving effect to such designation and an Officers Certificate
certifying that such designation complies with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be Incurred as of such date. The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and the Company could Incur at least $1.00 of additional Indebtedness under the
first paragraph of the covenant described under Certain Covenants Limitation on Indebtedness and Preferred Stock on a pro forma basis taking into account such designation.
U.S. Government Obligations
means securities that are (a) direct obligations of the United States of America
for the timely 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 of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation of the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depositary receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligations or a specific payment of principal of or interest on any such U.S. Government Obligations held by such custodian for the
account of the holder of such depositary receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligations or the specific payment of principal of or interest on the U.S. Government Obligations evidenced by such depositary receipt.
Volumetric Production Payments
means production payment obligations recorded as deferred revenue in accordance with
GAAP, together with all undertakings and obligations in connection therewith.
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Voting Stock
of an entity means all classes of Capital Stock of such
entity then outstanding and normally entitled to vote in the election of members of such entitys Board of Directors.
Wholly-Owned Subsidiary
means a Restricted Subsidiary, all of the Capital Stock of which (other than directors
qualifying shares) is owned by the Company or another Wholly-Owned Subsidiary.
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BOOK-ENTRY, DELIVERY AND FORM
We have obtained the information in this section concerning The Depository Trust Company (DTC), Clearstream Banking, S.A.,
Luxembourg (Clearstream, Luxembourg) and Euroclear Bank SA/NV, as operator of the Euroclear System (Euroclear), and their book-entry systems and procedures from sources that we believe to be reliable. We take no
responsibility for an accurate portrayal of this information. In addition, the description of the clearing systems in this section reflects our understanding of the rules and procedures of DTC, Clearstream, Luxembourg and Euroclear as they are
currently in effect. Those systems could change their rules and procedures at any time.
The notes will initially be represented by one or
more fully registered global notes. Each such global note will be deposited with, or on behalf of, DTC or any successor thereto and registered in the name of Cede & Co. (DTCs nominee). You may hold your interests in the global notes
in the United States through DTC, or in Europe through Clearstream, Luxembourg or Euroclear, either as a participant in such systems or indirectly through organizations which are participants in such systems. Clearstream, Luxembourg and Euroclear
will hold interests in the global notes on behalf of their respective participating organizations or customers through customers securities accounts in Clearstream, Luxembourgs or Euroclears names on the books of their respective
depositaries, which in turn will hold those positions in customers securities accounts in the depositaries names on the books of DTC. Citibank, N.A. will act as depositary for Clearstream, Luxembourg and JPMorgan Chase Bank, N.A. will
act as depositary for Euroclear.
So long as DTC or its nominee is the registered owner of the global securities representing the notes,
DTC or such nominee will be considered the sole owner and holder of the notes for all purposes of the notes and the indenture. Except as provided below, owners of beneficial interests in the notes will not be entitled to have the notes registered in
their names, will not receive or be entitled to receive physical delivery of the notes in definitive form and will not be considered the owners or holders of the notes under the indenture, including for purposes of receiving any reports delivered by
us or the trustee pursuant to the indenture. Accordingly, each person owning a beneficial interest in a note must rely on the procedures of DTC or its nominee and, if such person is not a participant, on the procedures of the participant through
which such person owns its interest, in order to exercise any rights of a holder of notes.
Unless and until we issue the notes in fully
certificated, registered form under the limited circumstances described below under the heading Certificated Notes:
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you will not be entitled to receive a certificate representing your interest in the notes;
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all references in this prospectus supplement to actions by holders will refer to actions taken by DTC upon instructions from its direct participants; and
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all references in this prospectus supplement to payments and notices to holders will refer to payments and notices to DTC or Cede & Co., as the registered holder of the notes, for distribution to you in
accordance with DTC procedures.
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The Depository Trust Company
DTC will act as securities depositary for the notes. The notes will be issued as fully registered notes registered in the name of
Cede & Co. DTC is:
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a limited-purpose trust company organized under the New York Banking Law;
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a banking organization under the New York Banking Law;
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a member of the Federal Reserve System;
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a clearing corporation under the New York Uniform Commercial Code; and
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a clearing agency registered under the provisions of Section 17A of the Exchange Act.
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DTC holds securities that its direct participants deposit with DTC. DTC facilitates the
settlement among direct participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in direct participants accounts, thereby eliminating the need for
physical movement of securities certificates.
Direct participants of DTC include securities brokers and dealers (including the
underwriters), banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its direct participants. Indirect participants of DTC, such as securities brokers and dealers, banks and trust companies, can
also access the DTC system if they maintain a custodial relationship with a direct participant.
Purchases of notes under DTCs
system must be made by or through direct participants, which will receive a credit for the notes on DTCs records. The ownership interest of each beneficial owner is in turn to be recorded on the records of direct participants and indirect
participants. Beneficial owners will not receive written confirmation from DTC of their purchase, but beneficial owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their
holdings, from the direct participants or indirect participants through which such beneficial owners entered into the transaction. Transfers of ownership interests in the notes are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners will not receive certificates representing their ownership interests in notes, except as provided below in Certificated Notes.
To facilitate subsequent transfers, all notes deposited with DTC are registered in the name of DTCs nominee, Cede & Co. The
deposit of notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the notes. DTCs records reflect only the identity of the
direct participants to whose accounts such notes are credited, which may or may not be the beneficial owners. The participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct participants, by direct participants to indirect participants and by direct
participants and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Book-entry Format
Under the book-entry
format, the paying agent will pay interest or principal payments to Cede & Co., as nominee of DTC. DTC will forward the payment to the direct participants, who will then forward the payment to the indirect participants (including
Clearstream, Luxembourg or Euroclear) or to you as the beneficial owner. You may experience some delay in receiving your payments under this system. None of us, any Subsidiary Guarantor, the trustee under the indenture or any paying agent has any
direct responsibility or liability for the payment of principal or interest on the notes to owners of beneficial interests in the notes.
DTC is required to make book-entry transfers on behalf of its direct participants and is required to receive and transmit payments of
principal, premium, if any, and interest on the notes. Any direct participant or indirect participant with which you have an account is similarly required to make book-entry transfers and to receive and transmit payments with respect to the notes on
your behalf. We, the Subsidiary Guarantors and the trustee under the indenture have no responsibility for any aspect of the actions of DTC, Clearstream, Luxembourg or Euroclear or any of their direct or indirect participants. In addition, we, the
Subsidiary Guarantors and the trustee under the indenture have no responsibility or liability for any aspect of the records kept by DTC, Clearstream, Luxembourg, Euroclear or any of their direct or indirect participants relating to or payments made
on account of beneficial ownership interests in the notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. We also do not supervise these systems in any way.
The trustee will not recognize you as a holder under the indenture, and you can only exercise the rights of a holder indirectly through DTC
and its direct participants. DTC has advised us that it will only take action
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regarding a note if one or more of the direct participants to whom the note is credited direct DTC to take such action and only in respect of the portion of the aggregate principal amount of the
notes as to which that participant or participants has or have given that direction. DTC can only act on behalf of its direct participants. Your ability to pledge notes to non-direct participants, and to take other actions, may be limited because
you will not possess a physical certificate that represents your notes.
Neither DTC nor Cede & Co. (nor any other DTC nominee)
will consent or vote with respect to the notes unless authorized by a direct participant in accordance with DTCs procedures. Under its usual procedures, DTC will mail an omnibus proxy to its direct participant as soon as possible after the
record date. The omnibus proxy assigns Cede & Co.s consenting or voting rights to those direct participants to whose accounts the notes are credited on the record date (identified in a listing attached to the omnibus proxy).
Clearstream, Luxembourg or Euroclear will credit payments to the cash accounts of Clearstream, Luxembourg customers or Euroclear participants
in accordance with the relevant systems rules and procedures, to the extent received by its depositary. These payments will be subject to tax reporting in accordance with relevant United States tax laws and regulations. Clearstream, Luxembourg
or Euroclear, as the case may be, will take any other action permitted to be taken by a holder under the indenture on behalf of a Clearstream, Luxembourg customer or Euroclear participant only in accordance with its relevant rules and procedures and
subject to its depositarys ability to effect those actions on its behalf through DTC.
DTC, Clearstream, Luxembourg and Euroclear
have agreed to the foregoing procedures in order to facilitate transfers of the notes among participants of DTC, Clearstream, Luxembourg and Euroclear. However, they are under no obligation to perform or continue to perform those procedures, and
they may discontinue those procedures at any time.
Transfers Within and Among Book-entry Systems
Transfers between DTCs direct participants will occur in accordance with DTC rules. Transfers between Clearstream, Luxembourg customers
and Euroclear participants will occur in accordance with their respective applicable rules and operating procedures.
DTC will effect
cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream, Luxembourg customers or Euroclear participants, on the other hand, in accordance with DTC rules on
behalf of the relevant European international clearing system by its depositary. However, cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, instruct its depositary to effect final
settlement on its behalf by delivering or receiving securities in DTC and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream, Luxembourg customers and Euroclear participants
may not deliver instructions directly to the depositaries.
Because of time-zone differences, credits of securities received in
Clearstream, Luxembourg or Euroclear resulting from a transaction with a DTC direct participant will be made during the subsequent securities settlement processing, dated the business day following the DTC settlement date. Those credits or any
transactions in those securities settled during that processing will be reported to the relevant Clearstream, Luxembourg customer or Euroclear participant on that business day. Cash received in Clearstream, Luxembourg or Euroclear as a result of
sales of securities by or through a Clearstream, Luxembourg customer or a Euroclear participant to a DTC direct participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream, Luxembourg or
Euroclear cash amount only as of the business day following settlement in DTC.
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Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of debt securities among their respective participants, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time.
Certificated Notes
Unless and until they
are exchanged, in whole or in part, for notes in definitive form in accordance with the terms of the notes, the notes may not be transferred except (1) as a whole by DTC to a nominee of DTC or (2) by a nominee of DTC to DTC or another
nominee of DTC or (3) by DTC or any such nominee to a successor of DTC or a nominee of such successor.
We will issue notes to you or
your nominees, in fully certificated registered form, rather than to DTC or its nominees, only if:
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we advise the trustee in writing that DTC is no longer willing or able to discharge its responsibilities properly or that DTC is no longer a registered clearing agency under the Exchange Act, and we have not appointed a
qualified successor within 90 days;
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an event of default has occurred and is continuing under the indenture and DTC has notified us and the trustee of its desire to exchange the global notes for certificated notes; or
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subject to DTCs rules, we, at our option, elect to terminate the book-entry system through DTC.
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If any of the three above events occurs, DTC is required to notify all direct participants that notes in fully certificated registered form
are available through DTC. DTC will then surrender the global note representing the notes along with instructions for re-registration. We will re-issue the notes in fully certificated registered form and will recognize the registered holders of the
certificated notes as holders under the indenture.
Unless and until we issue the notes in fully certificated, registered form,
(1) you will not be entitled to receive a certificate representing your interest in the notes; (2) all references in this prospectus supplement to actions by holders will refer to actions taken by the depositary upon instructions from its
direct participants; and (3) all references in this prospectus supplement to payments and notices to holders will refer to payments and notices to the depositary or its nominee, as the registered holder of the notes, for distribution to you in
accordance with its policies and procedures.
Same Day Settlement and Payment
We will make payments in respect of the notes represented by the global notes (including principal, premium, if any, and interest) by wire
transfer of immediately available funds to the accounts specified by DTC or its nominee. We will make all payments of principal, interest and premium, if any, with respect to certificated notes by wire transfer of immediately available funds to the
accounts specified by the holders of the certificated notes or, if no such account is specified, by mailing a check to each such holders registered address. The notes represented by the global notes are expected to be eligible to trade in
DTCs Same-Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. We expect that secondary trading in any certificated
notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Clearstream,
Luxembourg customer or Euroclear participant purchasing an interest in a global note from another customer or participant will be credited, and any such crediting will be reported to the relevant Clearstream, Luxembourg customer or Euroclear
participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. DTC has advised us that cash received in Clearstream, Luxembourg or Euroclear
as a result of sales of interests in a global note by or through a
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Clearstream, Luxembourg customer or Euroclear participant to another customer or participant will be received with value on the settlement date of DTC but will be available in the relevant
Clearstream, Luxembourg or Euroclear cash account only as of the business day for Euroclear or Clearstream, Luxembourg following DTCs settlement date.
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