If the securities being registered on this Form are being offered in connection with the formation of a
holding company and there is compliance with General Instruction G, check the following box. ☐
If this Form is
filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering. ☐
If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company,
and emerging growth company in Rule
12b-2
of the Exchange Act:
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial account standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
If
applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
THE EXCHANGE OFFER
The following summary of the registration rights agreement and letter of transmittal is not complete and is subject to, and is qualified in
its entirety by, all of the provisions of the registration rights agreement and the letter of transmittal, each of which is filed as an exhibit to the registration statement of which this prospectus is a part. The letter of transmittal is included
in this prospectus as Annex A. We urge you to read the entire registration rights agreement and the letter of transmittal carefully.
Purpose
of the Exchange Offer
In connection with the issuance of the old notes, we entered into a registration rights agreement with respect
to the notes. Pursuant to the registration rights agreement, we agreed that we will, subject to certain exceptions,
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prepare and file a registration statement (the exchange offer registration statement) with the SEC with respect to a registered exchange offer to exchange each outstanding old note for a new note having
terms substantially identical in all material respects to such old note (except that the new note will not contain terms with respect to transfer restrictions);
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after the effectiveness of the exchange offer registration statement, offer the new notes in exchange for the old notes; and
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keep the exchange offer open for a period of at least 20 business days after the date notice of the exchange offer is mailed or made available to the holders of the old notes.
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We have also agreed to include in the exchange offer registration statement a prospectus for use in any resales by any holder of old notes
that is a participating broker-dealer (as defined in the registration rights agreement) and to keep such exchange offer registration statement effective for a period ending 180 days from the expiration date of this exchange offer;
provided
that if the letters of transmittal relating to the exchange offer as provided to us indicate that no holder is a broker-dealer, we will not be obligated to maintain the effectiveness of such registration statement after the
consummation of the exchange offer.
In the event that:
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(i) the Company is not (A) required to file the exchange offer registration statement or (B) permitted to consummate the registered exchange offer because the registered exchange offer is not permitted by
applicable law or SEC policy; or
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(ii) any holder of the old notes notifies the Company prior to the 20
th
business day following consummation of the registered exchange offer that (x) such holder
is prohibited by law or SEC policy from participating in the registered exchange offer, (y) such holder may not resell the new notes acquired by it in the registered exchange offer to the public without delivering a prospectus and the
prospectus contained in the exchange offer registration statement is not appropriate or available for such resales by such holder or (z) such holder is a broker-dealer and holds old notes acquired directly from the Company or any of its
affiliates,
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then, we will, at our cost, use our commercially reasonable efforts to file with the SEC a shelf registration statement on an
appropriate form under the Securities Act to cover resales of the old notes by holders who satisfy certain conditions relating to the provision of information in connection with the shelf registration statement.
If:
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(1)
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the Company fails to file any of the registration statements required by the registration rights agreement on or before the date required by the registration rights agreement for such filing;
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(2)
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any of such registration statements is not declared effective by the SEC on or prior to the date required by the registration rights agreement for such effectiveness (the Effectiveness Target Date);
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(3)
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the Company fails to consummate the registered exchange offer within 30 business days (or longer, if required by applicable securities law) of the Effectiveness Target Date with respect to the exchange offer
registration statement; or
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(4)
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the shelf registration statement or the exchange offer registration statement is declared effective but thereafter ceases to be effective or usable in connection with resales of old notes during the periods required by
the registration rights agreement (each such event referred to in clauses (1) through (4) above, a Registration Default),
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then the Company will pay Special Interest to each holder of old notes until all Registration Defaults have been cured. The provision for Special Interest
will be the only monetary remedy available to holders under the registration rights agreement.
During the first
90-day
period immediately following the occurrence of the first Registration Default, additional interest (Special Interest) will accrue on the outstanding principal amount of old notes at a rate equal
to 0.25% per annum, which rate will increase by an additional 0.25% per annum during each subsequent
90-day
period, until all Registration Defaults have been cured, up to a maximum Special Interest rate of
1.0% per annum in respect of all Registration Defaults.
All accrued Special Interest will be paid on the next scheduled interest payment
date in the same manner as any other interest on the notes.
Following the cure of all Registration Defaults, the accrual of Special
Interest will cease.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus, for each $2,000, and $1,000 integral multiples in excess of $2,000,
principal amount of old notes properly tendered and not withdrawn before the expiration date of the exchange offer, we will issue $2,000, and $1,000 integral multiples in excess of $2,000, principal amount of new notes. Holders may tender some or
all of their old notes pursuant to the exchange offer in denominations of $2,000 and $1,000 integral multiples in excess of $2,000 thereof. The exchange offer is not conditioned upon any minimum aggregate principal amount of old notes being
tendered.
The form and terms of the new notes will be the same as the form and terms of the old notes except that:
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the new notes will have a different CUSIP number from the old notes;
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the new notes will be registered under the Securities Act and, therefore, the global securities representing the new notes will not bear legends restricting the transfer of interests in the new notes;
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the new notes will not be subject to the registration rights relating to the old notes; and
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the new notes will not be subject to any Special Interest.
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The new notes will evidence the
same indebtedness as the old notes they replace, and will be issued under, and be entitled to the benefits of, the same indenture governing the issuance of the old notes. As a result, the old notes and the new notes will be treated as a single
series of notes under the indenture.
The initial interest payment date on the notes has not yet occurred. No interest will be paid in
connection with the exchange. The new notes will accrue interest from and including the last interest payment date on which interest has been paid on the old notes or, if no interest has been paid on the old notes, from the date of original issue of
the old notes. Accordingly, the holders of old notes that are accepted for exchange will not receive accrued but unpaid interest on old notes at the time of tender. Rather, that interest will be payable on the new notes delivered in exchange for the
old notes on the first interest payment date after the expiration date.
The Company has not entered into any arrangement or understanding
with any person who will receive New Notes in the exchange offer to distribute those securities following completion of the offer. The Company is not aware of any person that will participate in the exchange offer with a view to distribute the New
Notes.
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Under existing SEC interpretations, the new notes would generally be freely transferable after
the exchange offer without further registration under the Securities Act, except that broker dealers receiving the new notes in the exchange offer in exchange for old notes that were acquired as a result of market-making or other trading activities
will be subject to a prospectus delivery requirement with respect to their resale. This view is based on interpretations by the staff of the SEC in no action letters issued to other issuers in exchange offers like this one. We have not, however,
asked the SEC to consider this particular exchange offer in the context of a no action letter. Therefore, the SEC might not treat it in the same way it has treated other exchange offers in the past. You will be relying on the no action letters that
the SEC has issued to third parties in circumstances that we believe are similar to ours. Based on these no action letters, you must meet the following conditions in order to participate in the exchange offer and receive freely transferable new
notes:
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you are not an affiliate of ours, as defined in Rule 405 of the Securities Act;
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you are not engaged in and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of new notes to be issued in the exchange offer;
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you are acquiring the new notes issued in the exchange offer in the ordinary course of your business;
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you are not a
broker-dealer
that acquired the old notes directly from us; and
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you are not acting on behalf of any person who could not truthfully and completely make the foregoing representations.
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By tendering your old notes as described in Procedures for Tendering, you will be representing to us that you satisfy all of
the above listed conditions. If you do not satisfy all of the above listed conditions:
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you cannot rely on the position of the SEC set forth in the
no-action
letters referred to above;
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you cannot tender your old notes in the exchange offer; and
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you must comply with the applicable registration and prospectus delivery requirements of the Securities Act in connection with a resale of the new notes.
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In addition, if you are a broker-dealer that acquires new notes pursuant to the exchange offer in exchange for old notes that you acquired as
a result of market-making or other trading activities, you must comply with the prospectus delivery requirements of the Securities Act in connection with a resale of the new notes. Such broker-dealers may use this prospectus to fulfill their
prospectus delivery requirements with respect to the new notes. We have agreed in the registration rights agreement to send a prospectus to any broker-dealer that requests copies in the letter of transmittal accompanying the prospectus until the
earlier of 180 days from the completion date of this exchange offer or such time as such broker-dealers no longer hold any old notes.
Unless you are required to do so because you are a broker-dealer, you may not use this prospectus for an offer to resell, resale or other
retransfer of new notes. We are not making this exchange offer to, nor will we accept tenders for exchange from, holders of old notes in any jurisdiction in which the exchange offer or the acceptance of it would not be in compliance with the
securities or blue sky laws of that jurisdiction.
Holders of old notes do not have appraisal or dissenters rights under state law
or under the indenture in connection with the exchange offer. We intend to conduct the exchange offer in accordance with the applicable requirements of Regulation 14E under the Exchange Act.
Expiration Date
The exchange offer
will expire at 11:59 p.m., Eastern Time, on [ ], 2017, unless, in our sole discretion, we extend the expiration date. If we so extend the expiration date, the term
expiration date shall mean the latest date and time to which we extend the exchange offer. We will deliver the new notes promptly after we accept the old notes.
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Extensions, Delays in Acceptance, Termination or Amendment
We reserve the right, in our sole discretion to:
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delay accepting for exchange any old notes in connection with the extension of the exchange offer;
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extend the exchange offer;
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terminate the exchange offer; or
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amend the terms of the exchange offer in any way we determine.
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We will give notice of any
delay, extension or termination to the Exchange Agent. In addition, we will give, as promptly as practicable, notice regarding any delay in acceptance, extension or termination of the offer to the registered holders of old notes by press release or
other public announcement. Any extension notice will disclose the approximate number of old notes tendered as of the notice date. If we amend the exchange offer in a manner that we determine to constitute a material change, or if we waive a material
condition, we will promptly disclose the amendment or waiver in a manner reasonably calculated to inform the holders of old notes of the amendment or waiver, and extend the offer if required by law, and in any event will extend the offer as
necessary such that at least five business days remain in the offer following notice of a material change.
We intend to make public
announcements of any delay in acceptance, extension, termination, amendment or waiver regarding the exchange offer prior to 9 a.m., Denver time, on the next business day after the previously scheduled expiration date.
Conditions to the Exchange Offer
We will
not be required to accept for exchange, or to exchange new notes for, any old notes, and we may terminate the exchange offer as provided in this prospectus at or before the expiration date, if:
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any law, statute, rule or regulation shall have been proposed, adopted or enacted, or interpreted in a manner, which, in our reasonable judgment, would impair our ability to proceed with the exchange offer;
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the new notes will not be tradable by the holder without restriction under the Securities Act and the Exchange Act and without material restrictions under the blue sky or securities laws of substantially all of the
states of the United States;
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any action or proceeding is instituted or threatened in any court or by or before the SEC or any other governmental agency with respect to the exchange offer which, in our reasonable judgment, would impair our ability
to proceed with the exchange offer;
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we have not obtained any governmental approval which we, in our reasonable judgment, consider necessary for the completion of the exchange offer as contemplated by this prospectus;
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any change, or any condition, event or development involving a prospective change, shall have occurred or be threatened in the general economic, financial, currency exchange or market conditions in the United States or
elsewhere that, in our reasonable judgment, would impair our ability to proceed with the exchange offer;
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any other change or development shall have occurred, including a prospective change or development, that, in our reasonable judgment, has or may have a material adverse effect on us, the market price of the new notes or
the old notes or the value of the exchange offer to us; or
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there shall have occurred (i) any suspension or limitation of trading in securities generally on the New York Stock Exchange or the
over-the-counter
market; (ii) a declaration of a banking moratorium by United States federal or New York state authorities; or (iii) a commencement or
escalation of a war or armed hostilities involving or relating to a country where we do business or other international or national emergency or crisis directly or indirectly involving the United States.
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We will not accept for exchange any old notes tendered, and will not issue the new notes in exchange for any old notes, if at any time a stop
order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended.
The conditions listed above are for our sole benefit and we may assert them regardless of the circumstances giving rise to any of these
conditions. We may waive these conditions in our sole discretion in whole or in part at any time and from time to time. A failure on our part to exercise any of the above rights shall not constitute a waiver of that right, and that right shall be
considered an ongoing right which we may assert at any time and from time to time.
We expressly reserve the right to amend or terminate
the exchange offer and to reject for exchange any old notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified above. By public announcement we will give oral or written notice of any
extension, amendment,
non-acceptance
or termination to the holders of the old notes in accordance with the requirements of Rule
14e-1(d)
of the Exchange Act. If we amend
an exchange offer in a manner that we consider material, we will disclose the amendment in the manner required by applicable law to the holders of the old notes under the exchange offer. In the event of a material change in an exchange offer,
including the waiver of a material condition, we will extend, if necessary, the expiration date of such exchange offer such that at least five business days remain in the exchange offer following notice of the material change.
We may assert these conditions regardless of the circumstances that may give rise to them or waive them in whole or in part at any time or at
various times in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of that right. Each of these rights will be deemed an ongoing right that we may assert at any time or at
various times.
In addition, we reserve the right in our sole discretion, to the extent permitted by applicable law, to:
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purchase or make offers for any old notes that remain outstanding subsequent to the expiration date; and
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purchase old notes in the open market, in privately negotiated transactions or otherwise.
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The
terms of any such purchases or offers may differ from the terms of the exchange offer.
Procedures for Tendering
We have forwarded to you, along with this prospectus, a letter of transmittal relating to this exchange offer. Because all of the old notes are
held in book-entry accounts maintained by the Exchange Agent at DTC, a holder need not submit a letter of transmittal. However, all holders who exchange their old notes for new notes in accordance with the procedures outlined below will be deemed to
have acknowledged receipt of, and agreed to be bound by, and to have made all of the affirmative acknowledgements required by and the representations and warranties contained in the letter of transmittal.
Procedures Applicable to Beneficial Holders
Only a registered holder of record of old notes may tender old notes in the exchange offer. If you are a beneficial owner of old notes which
are registered in the name of a broker, dealer, commercial bank, trust company
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or other nominee, and you wish to tender old notes in the exchange offer, you should contact the registered holder as soon as possible and instruct them to tender on your behalf and comply with
our instructions set forth elsewhere in this prospectus and the letter of transmittal. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your old notes, either make
appropriate arrangements to register ownership of the old notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed
prior to the expiration date.
Procedures Applicable to Old Notes Held in Book-Entry Form with DTC
The old notes were issued as global securities in fully registered form. Beneficial interests in the old notes, held by direct or indirect
participants in DTC are shown on, and transfers of these interests are effected only through, records maintained in book-entry form by DTC with respect to its participants.
If you hold your old notes in the form of book-entry interests and you wish to tender your old notes for exchange pursuant to the exchange
offer, you must transmit to the Exchange Agent on or prior to the expiration date either:
(1) a computer-generated
message transmitted by means of DTCs Automated Tender Offer Program system and received by the Exchange Agent and forming a part of a confirmation of book-entry transfer, in which you acknowledge and agree to be bound by the terms of the
letter of transmittal; or
(2) a written or facsimile copy of a properly completed and duly executed letter of
transmittal, including all other documents required by the letter of transmittal, to the Exchange Agent at the address set forth on the cover page of the letter of transmittal.
We understand that the Exchange Agent will make a request promptly after the date of this prospectus to establish accounts with respect to the
old notes at DTC for the purpose of facilitating the exchange offer. Any financial institution that is a participant in DTCs system may make book-entry delivery of old notes by causing DTC to transfer such old notes into the Exchange
Agents DTC account in accordance with DTCs electronic Automated Tender Offer Program procedures for such transfer. The exchange of new notes for tendered old notes will only be made after timely:
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confirmation of book-entry transfer of the old notes into the Exchange Agents account; and
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receipt by the Exchange Agent of an agents message and all other required documents specified in the letter of transmittal.
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The term agents message means a message, transmitted from the DTC participant to DTC and forming part of the confirmation of
a book-entry transfer from DTC to the Exchange Agent, which states that DTC has received an express acknowledgment from a participant in DTC tendering old notes and:
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the aggregate principal amount of old notes which have been tendered by the participant;
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that such participant has received an appropriate letter of transmittal and agrees to be bound by the terms of the letter of transmittal and the terms of the exchange offer; and
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that we may enforce such agreement against the participant.
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Delivery of an agents
message will also constitute an acknowledgment from the tendering DTC participant that the representations contained in the letter of transmittal and described below under Representations on Tendering Old Notes are true and correct.
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Procedures Applicable to Holders of Certificated Old Notes
No definitive certificated notes are issued and outstanding as of the date of this prospectus. Only registered holders of certificated old
notes may tender those notes in the exchange offer. If your old notes are certificated notes and you wish to tender those notes for exchange pursuant to the exchange offer, you must transmit to the Exchange Agent, on or prior to the expiration date,
a written or facsimile copy of a properly completed and duly executed letter of transmittal, including all other required documents, to the address set forth below under Exchange Agent. In addition, in order to validly tender your
certificated old notes the certificates representing your old notes must be received by the Exchange Agent prior to the expiration date.
Procedures
Applicable to All Holders
The tender by a holder that is not withdrawn before expiration of the exchange offer will constitute an
agreement between that holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal. If a holder tenders less than all of the old notes held by the holder, the tendering
holder should so indicate. The amount of old notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated.
The method of delivery of old notes, the letter of transmittal and all other required documents or transmission of an agents message to
the Exchange Agent is at the election and risk of the holder. Rather than mail these items, we recommend that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure delivery to the Exchange
Agent before expiration of the exchange offer. Holders should not send the letter of transmittal or old notes to us. Delivery of documents to DTC in accordance with its procedures will not constitute delivery to the Exchange Agent.
We will determine in our sole discretion all questions as to the validity, form, eligibility, including time of receipt, acceptance and
withdrawal of tendered outstanding notes. Our determination will be final and binding. We reserve the absolute right to reject any outstanding notes not properly tendered or any outstanding notes the acceptance of which would, in the opinion of our
counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular outstanding notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the
letter of transmittal, will be final and binding on all parties. However, we do not expect to treat any holder of outstanding notes differently from other holders to the extent they present the same facts or circumstances.
Unless waived, any defects or irregularities in connection with tenders of outstanding notes must be cured within the time that we determine.
Although we intend to notify holders of defects or irregularities with respect to tenders of outstanding notes, neither we, the Exchange Agent nor any other person will incur any liability for failure to give notification. Tenders of outstanding
notes will not be deemed made until those defects or irregularities have been cured or waived.
Outstanding notes received by the Exchange
Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent without cost to the tendering holder, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
In addition, we reserve the right in our sole discretion to (a) purchase or make
offers for any outstanding notes that remain outstanding subsequent to the expiration date, and (b) to the extent permitted by applicable law, purchase outstanding notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the exchange offer.
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Representations on Tendering Old Notes
To exchange your old notes for transferable new notes in the exchange offer, you will be required to represent to the effect that you:
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are not an affiliate of ours, as defined in Rule 405 of the Securities Act;
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are not a broker dealer that acquired the old notes directly from us;
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are not engaged in and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of new notes to be issued in the exchange offer;
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are acquiring the new notes issued in the exchange offer in the ordinary course of your business;
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if you are a broker-dealer that will acquire new notes pursuant to the exchange offer in exchange for old notes that you acquired as a result of market-making or other trading activities, you will comply with the
prospectus delivery requirements of the Securities Act in connection with a resale of the new notes as described in this summary under Restrictions on Sale by Broker Dealers below; and
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are not acting on behalf of any person who could not truthfully and completely make the foregoing representations.
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Each broker-dealer that receives new notes for its own account in exchange for Securities, where such old notes were acquired by such
broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. If you are a broker dealer and you will receive new notes for your
own account in exchange for old notes that were acquired as a result of market making activities or other trading activities, you will be required to (i) inform us per the instructions in the letter of transmittal and (ii) represent that
you will comply with the prospectus delivery requirements of the Securities Act in connection with any resale of the new notes, as set forth in the letter of transmittal. See also Plan of Distribution.
The SEC considers broker-dealers that acquired old notes directly from us, but not as a result of market-making activities or other trading
activities, to be making a distribution of the new notes if they participate in the exchange offer. Consequently, these broker-dealers must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a
resale of the new notes, and may not participate in the exchange offer.
Withdrawal Rights
Any holder will be entitled to withdraw its tender of old notes, not later than the close of business on the last day of the exchange offer, by
(a) sending to the Exchange Agent a facsimile transmission or letter setting forth the name of such holder, the principal amount of new notes delivered for exchange and a statement that such holder is withdrawing its election to have such old
notes exchanged or (b) effecting such withdrawal in compliance with the applicable procedures of the DTC.
For a withdrawal to be
effective for DTC participants, holders must comply with their respective standard operating procedures for electronic tenders and the Exchange Agent must receive an electronic notice of withdrawal from DTC.
Any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise
comply with the procedures of DTC. We will determine in our sole discretion all questions as to the validity, form and eligibility, including time of receipt, for such withdrawal notices, and our determination shall be final and binding on all
parties. Any old notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer and no new notes will be issued with respect to them unless the old notes so withdrawn are validly
re-tendered.
Any old notes which have been tendered but which are withdrawn or not accepted for exchange will be returned to the holder without cost to such holder promptly after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn old notes may be
re-tendered
by following the procedures described above under Procedures for Tendering at any time prior to
the expiration date.
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Exchange Agent
Deutsche Bank Trust Company has been appointed as Exchange Agent for the exchange offer. You should direct questions and requests for
assistance, requests for additional copies of this prospectus, the letter of transmittal or any other documents to the Exchange Agent. You should send certificates for old notes, letters of transmittal and any other required documents to the
Exchange Agent addressed as follows:
Deutsche Bank Trust Company Americas
c/o DB Services Americas, Inc.
Attn: Reorg Dept.
5022 Gate
Parkway, Suite 200
Jacksonville, FL 32256
Phone: 877-843-9767
Delivery of
a letter of transmittal to an address other than as shown above does not constitute valid delivery of such letter of transmittal.
Fees and Expenses
We will bear the expenses of soliciting tenders with respect to the exchange offer. The principal solicitation is being made by
electronic means through DTC by exchange agent; however, we may make additional solicitation by telephone or in person by our officers and regular employees and those of our affiliates.
We have not retained any dealer manager in connection with the exchange offer and will not make any payments to broker-dealers or others
soliciting acceptances of the exchange offer. We will, however, pay the Exchange Agent reasonable and customary fees for its services and reimburse it for its related reasonable out of pocket expenses.
We will pay the cash expenses to be incurred in connection with the exchange offer. They include the following:
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fees and expenses of the Exchange Agent and trustee;
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accounting and legal fees and printing costs; and
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related fees and expenses.
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Transfer Taxes
Holders who tender their old notes for exchange will not be obligated to pay any transfer taxes. If, however, a transfer tax is imposed for any
reason other than the exchange of old notes in connection with the exchange offer, then the tendering holder must pay the amount of any transfer taxes due, whether imposed on the registered holder or any other persons. If the tendering holder does
not submit satisfactory evidence of payment of these taxes or exemption from them with the letter of transmittal, the amount of these transfer taxes will be billed directly to the tendering holder.
Accounting Treatment
We will record the
new notes in our accounting records at the same carrying value as the old notes. This carrying value is the aggregate principal amount of the old notes, as reflected in our accounting records on the date of exchange. Accordingly, we will not
recognize any gain or loss for accounting purposes in connection with the exchange offer, nor will this be recorded as a redemption and issuance.
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Consequences of Failure to Properly Tender Old Notes in the Exchange
We will issue the new notes in exchange for old notes under the exchange offer only after timely confirmation of book-entry transfer of the old
notes into the Exchange Agents account and timely receipt by the Exchange Agent of an agents message and all other required documents specified in the letter of transmittal. Therefore, holders of the old notes desiring to tender old
notes in exchange for new notes should allow sufficient time to ensure timely delivery. We are under no duty to give notification of defects or irregularities of tenders of old notes for exchange or waive any such defects or irregularities. Old
notes that are not tendered or that are tendered but not accepted by us will, following completion of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act. Thus, you may not resell the old notes,
offer them for resale or otherwise transfer them unless they are subsequently registered or resold under an exemption from the registration requirements of the Securities Act and applicable state securities laws. There will be no guaranteed delivery
procedures for the exchange offer.
Participation in the exchange offer is voluntary. In the event the exchange offer is completed, we
will generally not be required to register the remaining old notes, and therefore holders of old notes will not have any further rights to have their old notes exchanged for new notes registered under the Securities Act. Remaining old notes will
continue to be subject to the following restrictions on transfer:
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holders may resell old notes only if an exemption from registration is available or, outside the United States, to
non-U.S.
persons in accordance with the requirements of
Regulation S under the Securities Act; and
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the remaining old notes will bear a legend restricting transfer in the absence of registration or an exemption.
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To the extent that old notes are tendered and accepted in connection with the exchange offer, any trading market for remaining old notes could
be adversely affected.
Neither we nor our board of directors make any recommendation to holders of old notes as to whether to tender
or refrain from tendering all or any portion of their old notes pursuant to the exchange offer. Moreover, no one has been authorized to make any such recommendation. Holders of old notes must make their own decision whether to tender pursuant to the
exchange offer and, if so, the aggregate amount of old notes to tender, after reading this prospectus and the letter of transmittal and consulting with their advisors, if any, based on their own financial position and requirements.
29
DESCRIPTION OF THE NEW NOTES
Bill Barrett Corporation (the
Issuer
) issued the old notes, and will issue the new notes (the new notes, for purposes of
this section, the
Notes
) under an indenture dated April 28, 2017 (the
Indenture
) among itself, the Subsidiary Guarantors and Deutsche Bank Trust Company Americas, as trustee (the
Trustee
). The terms of the Notes will include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the
TIA
).
The old notes were issued in a private transaction that is not subject to the registration requirements of the Securities Act of 1933, as
amended (the
Securities Act
).
Unlike the old notes, the Notes will not be subject to the registration rights agreement (the
Registration Rights Agreement
) or the Special Interest. The old notes were
issued in denominations of at least $2,000 and integral multiples of $1,000 in excess thereof thereafter.
The following summary of
certain provisions of the Indenture does not purport to be complete and (except to the extent inconsistent with the following summary) is qualified in its entirety by reference to, the TIA and to all of the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part of the Indenture by reference to the TIA as in effect on the date of the Indenture. A copy of the Indenture may be obtained from the Issuer. The definitions of certain capitalized
terms used in the following summary are set forth below under Definitions. For purposes of this Description of the New Notes section, references to the Issuer do not include its subsidiaries.
Brief Description of the New Notes and the Subsidiary Guarantees
The Notes will be senior unsecured obligations of the Issuer ranking
pari passu
in right of payment to all existing and future
unsubordinated indebtedness of the Issuer and will rank senior in right of payment to all existing and future subordinated indebtedness of the Issuer. The Subsidiary Guarantees (as defined below) will be senior unsecured obligations of the
Subsidiary Guarantors and will rank
pari passu
in right of payment to all existing and future unsubordinated indebtedness of the Subsidiary Guarantors, and will rank senior in right of payment to all existing and future subordinated
indebtedness of the Subsidiary Guarantors. However, the Notes will be effectively subordinated to secured indebtedness of the Issuer and the Subsidiary Guarantors, including indebtedness under the Issuers Senior Credit Facility to the extent
of the value of the assets securing such indebtedness. The Issuers Senior Credit Facility is secured by its oil and natural gas properties, the equity in each of its existing Subsidiaries and certain other assets.
Initially, the Trustee will act as paying agent and registrar for the Notes. The Notes may be presented for registration of transfer and
exchange at the offices of the Registrar, which initially will be the Trustees corporate trust office. The Issuer may change any paying agent and registrar without notice to holders of the Notes (the
Holders
). The registered
Holder of any note will be treated as the owner of it for all purposes. Only registered Holders will have rights under the Indenture. The Issuer will pay principal (and premium, if any) on the Notes at the Trustees corporate office in New
York, New York. At the Issuers option, interest may be paid at the Trustees corporate trust office or by check mailed to the registered addresses of the Holders.
Subsidiary Guarantees
The Issuers
obligations under the Notes and the Indenture will be jointly and severally guaranteed (the
Subsidiary Guarantees
) by each Restricted Subsidiary (other than any Foreign Subsidiary) that incurs or guarantees any Indebtedness, which
when combined with any other Indebtedness for which such Restricted Subsidiary is an obligor or guarantor, is at least $10.0 million in aggregate principal amount.
Initially, all of the Subsidiaries of the Issuer will be Subsidiary Guarantors, but in the future the Indenture will not require all of our
Subsidiaries to guarantee the Notes. Unrestricted Subsidiaries and Foreign Subsidiaries and Subsidiaries not obligated on Indebtedness aggregating in excess of $10.0 million in aggregate principal amount will not be required to be Subsidiary
Guarantors. In addition,
Non-Guarantor
Restricted Subsidiaries will not be required to guarantee the Notes under certain circumstances as described under Certain CovenantsSubsidiary
Guarantors. As of the date of this prospectus, the Issuer has no
Non-Guarantor
Restricted Subsidiaries, no
30
Unrestricted Subsidiaries and no Foreign Subsidiaries. In the event of a bankruptcy, liquidation or reorganization of any of these
non-guarantor
Subsidiaries, these
non-guarantor
Subsidiaries will pay the holders of their debts and their trade creditors before they will be able to distribute any of their assets to us.
As of the date of the Indenture, all of our Subsidiaries were Restricted Subsidiaries. However, under the circumstances described
below under the subheading Certain CovenantsLimitation on Restricted and Unrestricted Subsidiaries, the Issuer will be permitted to designate any of its Subsidiaries as Unrestricted Subsidiaries. The effect of
designating a Subsidiary as an Unrestricted Subsidiary will be that:
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an Unrestricted Subsidiary will not be subject to many of the restrictive covenants in the Indenture;
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a Subsidiary that has previously been a Subsidiary Guarantor and that is designated an Unrestricted Subsidiary will be released from its Subsidiary Guarantee and its obligations under the Indenture; and
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the assets, income, cash flow and other financial results of an Unrestricted Subsidiary will not be consolidated with those of the Issuer for purposes of calculating compliance with the restrictive covenants contained
in the Indenture.
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The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be limited to the
maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor (including, without limitation, any borrowings or guarantees under any Credit Facility) and after giving effect to any collections
from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, result in the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor that makes a payment for distribution under its Subsidiary
Guarantee is entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based on adjusted net assets of each Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Issuer or another Restricted Subsidiary that is a
Subsidiary Guarantor without limitation, or with or to other Persons upon the terms and conditions set forth in the Indenture. See Certain CovenantsMerger, Consolidation and Sale of Assets.
A Subsidiary Guarantor shall be released from its obligations under its Subsidiary Guarantee and its obligations under the Indenture:
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(1)
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in the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital
Stock of such Subsidiary Guarantor then held by the Issuer and the Restricted Subsidiaries;
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(2)
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if such Subsidiary Guarantor is designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted Subsidiary, in each case in accordance with the provisions of the Indenture, upon effectiveness of such
designation or when it first ceases to be a Restricted Subsidiary, respectively;
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(3)
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if such Subsidiary Guarantor shall not incur or guarantee or otherwise be obligated under Indebtedness aggregating in excess of $10.0 million in aggregate principal amount (other than if such Subsidiary Guarantor
no longer guarantees or otherwise is obligated under Indebtedness aggregating in excess of $10.0 million in aggregate principal amount as a result of payment under any guarantee of any such Indebtedness by any Subsidiary Guarantor); provided
that a Subsidiary Guarantor shall not be permitted to be released from its Subsidiary Guarantee pursuant to this clause (3) if it is an obligor with respect to Indebtedness that would not, under Certain CovenantsLimitation on
Incurrence of Additional Indebtedness and Issuance of Preferred Stock, be permitted to be incurred by a Restricted Subsidiary that is not a Guarantor;
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(4)
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upon Covenant Defeasance, Legal Defeasance or satisfaction and discharge of the Indenture as provided pursuant to the defeasance or satisfaction and discharge provisions of the Indenture;
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(5)
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upon the liquidation or dissolution of such Subsidiary Guarantor provided no Default or Event of Default has occurred or is continuing;
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(6)
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at such time as, after giving effect to such release, the Indebtedness for which such Subsidiary Guarantor is an obligor or guarantor does not exceed $10.0 million in aggregate principal amount; or
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(7)
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at such time as, after giving effect to such release, such Subsidiary Guarantor would constitute a
Non-Guarantor
Restricted Subsidiary the Consolidated Net Worth of which,
together with the Consolidated Net Worth of all other
Non-Guarantor
Restricted Subsidiaries, as of such date, does not exceed $10.0 million in the aggregate.
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Principal, Maturity and Interest
The
Notes will mature on June 15, 2025. $275 million in aggregate principal amount of the old notes were issued on the Issue Date. The Indenture provides for the issuance of additional notes having identical terms and conditions to the old
notes (the
Additional Notes
). The issuance of Additional Notes will be subject to the limitations set forth under the subheading Certain CovenantsLimitation on Incurrence of Additional Indebtedness and Issuance
of Preferred Stock. The old notes, the Notes and any Additional Notes subsequently issued under the Indenture will be treated as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments,
redemptions and offers to purchase. Interest on the Notes will accrue at the rate of 8.75% per annum and will be payable semiannually in cash in arrears on each June 15 and December 15, commencing on December 15, 2017, to the Persons
who are registered Holders at the close of business on June 1 and December 1, respectively, immediately preceding the applicable interest payment date. Interest on the Notes will accrue from and including the most recent date to which
interest has been paid or, if no interest has been paid, from and including the date of issuance. Interest on overdue principal and interest, if any, will accrue at the then applicable interest rate on the Notes. Interest will be computed on the
basis of a
360-day
year comprised of 12
30-day
months.
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 solely as a result of such delayed payment.
Optional Redemption
Optional Redemption
. Except as described under Optional Redemption upon Equity Offerings or Make-Whole
Optional Redemption below, the Issuer will not be entitled to redeem the Notes at its option prior to June 15, 2020. The Notes will be redeemable, at the Issuers option, in whole at any time or in part from time to time, on and
after June 15, 2020, upon not less than 30, nor more than 60, days notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the
12-month
period commencing on June 15 of the years set forth below, plus, in each case, unpaid accrued interest, if any, thereon to the date of redemption:
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Year
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Percentage
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2020
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106.563
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%
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2021
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104.375
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%
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2022
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102.188
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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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Optional Redemption upon Equity Offerings
. At any time, or from time to time, on or prior
to June 15, 2020, the Issuer may, at its option, use all or a portion of the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the aggregate principal amount of the Notes issued under the Indenture (including any
Additional Notes) at a redemption price equal to 108.75% of the aggregate principal amount of the Notes to be redeemed, plus unpaid accrued interest, if any, thereon to the date of redemption; provided that:
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(1)
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at least 65% of the aggregate principal amount of Notes issued under the Indenture (including any Additional Notes) remains outstanding immediately after giving effect to any such redemption; and
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(2)
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the Issuer makes such redemption not more than 180 days after the consummation of any such Equity Offering.
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Notice of any redemption upon an Equity Offering may be given prior to the completion of the related Equity Offering, and any such redemption
or notice may at the Issuers discretion, be subject to one or more conditions precedent, including, without limitation, completion of the related Equity Offering.
Make-Whole Optional Redemption
. The Notes will also be redeemable, in whole or in part, at the Issuers option at any time or from
time to time, prior to June 15, 2020, at the applicable Make-Whole Price (as defined below), in accordance with the provisions of the Indenture.
Make-Whole Price
with respect to any Notes to be redeemed, means an amount equal to the greater of:
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(1)
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100% of the principal amount of such Notes; and
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(2)
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the sum of the present values of (a) the redemption price of such Notes at June 15, 2020 (as set forth above) and (b) the remaining scheduled payments of interest from the redemption date to June 15,
2020 (not including any portion of such payments of interest accrued as of the redemption date) discounted back to the redemption date on a semi-annual basis (assuming a
360-day
year consisting of 12
30-day
months) at the Treasury Rate (as defined below) plus 50 basis points;
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plus
, in the case of
both (1) and (2), accrued and unpaid interest on such Notes to the redemption date. Unless the Issuer defaults in payment of the Make-Whole Price, on and after the applicable redemption date, interest will cease to accrue on the Notes to be
redeemed.
Comparable Treasury Issue
means, with respect to Notes to be redeemed, the U.S. Treasury security selected
by an Independent Investment Banker as having a maturity most nearly equal to the period from the redemption date to June 15, 2020, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate
debt securities; provided if such period is less than one year, then the U.S. Treasury security having a maturity of one year shall be used.
Comparable Treasury Price
means, with respect to any redemption date, (1) the average of four Reference Treasury
Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such
Reference Treasury Dealer Quotations.
Independent Investment Banker
means any one of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.P. Morgan Securities LLC and their respective successors, at the Issuers option, or, if such firms or the successors, if any, to such firms, as the case may be, are unwilling or unable to select the
Comparable Treasury Issue, an independent investment banking institution of national standing appointed by the Issuer.
Reference
Treasury Dealer
means Merrill Lynch, Pierce, Fenner & Smith Incorporated and three additional primary U.S. government securities dealers in New York City (each a
Primary Treasury Dealer
) selected by the Issuer,
and its, in each case, successors (provided, however, that if any such firm or any such successor, as the case may be, shall cease to be a primary U.S. government securities dealer in New York City, the Issuer shall substitute therefor another
Primary Treasury Dealer).
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Reference Treasury Dealer Quotations
means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by
such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date.
Treasury Rate
means, with respect to any redemption date, (1) the yield, under the heading which represents the
average for the immediately preceding week, appearing in the most recently published statistical release designated H.15(159) or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System
and that establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity under the caption Treasury Constant Maturities, for the maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the stated maturity, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption
date. The Treasury Rate shall be calculated on the third business day preceding the redemption date.
The notice of redemption with
respect to the foregoing redemption need not set forth the Make-Whole Price but only the manner of calculation thereof. The Issuer will notify the Trustee of the Make-Whole Price with respect to any redemption promptly after the calculation, and the
Trustee shall not be responsible for such calculation.
Selection and Notice of Redemption
If less than all of the Notes are to be redeemed at any time, selection of such Notes, or portions thereof, for redemption will be made by the
Trustee either:
(1) in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are
listed; or
(2) if the Notes are not then listed or admitted to trading on a national securities exchange, on a pro
rata basis
, by
lot or by such other method as the Trustee shall deem fair and appropriate.
No Notes of a principal amount of $2,000 or less shall be
redeemed in part. If a partial redemption is made with the proceeds of an Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of The Depository Trust Company (
DTC
)), unless such method is otherwise prohibited. Notice of redemption shall be mailed by first-class mail 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. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed.
Notes called for redemption become due on the date fixed for redemption. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after
the applicable redemption date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Issuer has previously deposited with the paying agent for the Notes funds in satisfaction of the applicable redemption
price pursuant to the Indenture. Any redemption or notice of redemption may, at the Issuers discretion, be subject to one or more conditions precedent and, in the case of redemption with the net cash proceeds of an Equity Offering, be given
prior to the completion of the related Equity Offering.
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Mandatory Redemption; Offers to Purchase; Open Market Purchases
The Issuer is not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain
circumstances, the Issuer may be required to offer to purchase Notes as described under the captions Change of Control and Certain CovenantsLimitation on Asset Sales. The Issuer may, at any time and from
time to time, purchase Notes in the open market or otherwise.
Change of Control
The Indenture provides that upon the occurrence of a Change of Control, each Holder will have the right to require that the Issuer purchase all
or any portion of such Holders Notes pursuant to the offer described below (the
Change of Control Offer
), at a purchase price equal to 101% of the principal amount thereof, plus unpaid accrued interest, if any, thereon to
the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date).
Within 30 days following the date upon which the Change of Control occurred, the Issuer must send, by first class mail, postage prepaid, a
notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the following:
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(1)
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that a Change of Control has occurred and that such Holder has the right to require the Issuer to purchase such Holders Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date
of purchase, plus unpaid accrued interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date);
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(2)
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the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed; such purchase date, the
Change of Control Payment Date
); and
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(3)
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the instructions, as determined by the Issuer, consistent with the covenant described hereunder, that a Holder must follow in order to have its Notes purchased.
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Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled
Option of Holder to Elect Purchase on the reverse of the Note completed, to the Paying Agent for the Notes at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control
Payment Date. 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 the record date, and no additional interest will be payable to holders who tender pursuant to the Change of Control Offer.
The Issuer will not be required to make a Change of Control Offer following a Change of Control if (i) 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 the Issuer and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer or (ii) notice of redemption of all Notes has been given pursuant to the Indenture as described above under the caption Optional Redemption, unless there is a default in payment of the applicable
redemption price.
Any Change of Control Offer may be made in advance of a Change of Control, and, at the Issuers discretion,
conditioned upon the occurrence of such Change of Control, if a definitive agreement is in effect for the Change of Control at the time of making the Change of Control Offer.
If a Change of Control Offer is made, there can be no assurance that the Issuer will have available funds sufficient to pay the Change of
Control purchase price for all the Notes that might be delivered by Holders seeking to accept the Change of Control Offer. The holders of the Issuers existing senior notes have a similar right, and other debt securities that the Issuer may
issue in the future that rank equally in right of payment with the Notes, may have similar rights. If the Issuer is required to purchase outstanding Notes or such other Indebtedness pursuant to a Change of Control Offer, the Issuer expects that it
would seek third-party financing to the extent it does not have
35
available funds to meet its purchase obligations. However, the Issuer cannot assure any Holder that the Issuer would be able to obtain such financing. In addition, the Issuer may be required to
obtain a waiver or amendment under the Senior Credit Facility to permit the repurchase of the Notes. The Issuer cannot assure you that it could obtain such a waiver or amendment. Additionally, the occurrence of certain change of control events
identified in the Senior Credit Facility would constitute an event of default under the Senior Credit Facility which would permit the lenders thereunder to accelerate all indebtedness under the Senior Credit Facility. The failure of the Issuer to
make or consummate the Change of Control Offer or pay the required amount for any Notes tendered and not withdrawn when due will constitute a Default under the Indenture and will otherwise give the Trustee and the Holders the rights described under
Events of Default. See Risk FactorsRisks Relating to the NotesWe may not be able to repurchase the notes upon a change of control as required by the indenture governing the notes.
Neither the Board of Directors of the Issuer nor the Trustee may waive the covenant relating to the obligation to make a Change of Control
Offer. Restrictions in the Indenture described herein on the ability of the Issuer and its Restricted Subsidiaries to incur additional Indebtedness, to grant Liens on their property, to make Restricted Payments, to engage in mergers or similar
transactions and to make Asset Sales may also make more difficult or discourage a takeover of the Issuer, whether favored or opposed by the management of the Issuer. Consummation of any such transaction in certain circumstances may require
repurchase of the Notes, and there can be no assurance that the Issuer or the acquiring party will have sufficient financial resources to effect such repurchase. Such restrictions and the restrictions on transactions with Affiliates may, in certain
circumstances, make more difficult or discourage any leveraged buyout of the Issuer by the management of the Issuer. While such restrictions cover a wide variety of arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction. In addition, Holders may not be entitled
to require us to purchase their Notes in certain circumstances involving a significant change in the composition of the Board of Directors of the Issuer, including in connection with a proxy contest where the Board of Directors of the Issuer does
not endorse or recommend a dissident slate of directors but approves them as directors for purposes of the Change of Control definition in the Indenture.
The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of the
Issuer and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between the Issuer and the initial purchasers. The Issuer has no present intention to engage in a transaction involving a
Change of Control, although it is possible that the Issuer could decide to do so in the future.
A Change of Control Offer shall remain
open for a period of 20 Business Days or such longer period as may be required by law. The Issuer will comply with the requirements of Rule
14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the
Change of Control provisions of the Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control provisions of the
Indenture by virtue thereof.
The definition of Change of Control includes a phrase relating to the sale, lease, exchange or other
transfer of all or substantially all of the properties or assets of the Issuer. 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, the ability of a Holder to require the Issuer to repurchase its Notes as a result of a sale, lease, exchange or other transfer of less than all of the assets of the issuer to another Person or group may be
uncertain.
The provisions under the Indenture relative to the Issuers 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 (including any Additional Notes) then outstanding (including consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Notes) prior to the occurrence of such Change of Control.
36
Certain Covenants
Covenant Suspension
During any
period of time that (a) the Notes have an Investment Grade Rating and (b) no Event of Default has occurred and is continuing under the Indenture, the Issuer and its Restricted Subsidiaries will not be subject to the provisions of the
Indenture described under:
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Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock;
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Limitation on Restricted Payments;
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Limitation on Asset Sales;
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Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries;
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Clauses (2) and (3) of the first paragraph and clause (3) of the fourth paragraph of Merger, Consolidation and Sale of Assets;
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Limitation on Transactions with Affiliates; and
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Subsidiary Guarantors.
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If the Issuer and its Restricted Subsidiaries are
not subject to these covenants for any period of time as a result of the previous sentence (a
Fall-Away Period
) and, subsequently, the ratings assigned to the Notes are withdrawn or downgraded so the Notes no longer have an
Investment Grade Rating, then the Issuer and its Restricted Subsidiaries will thereafter again be subject to these covenants. The ability of the Issuer and its Restricted Subsidiaries to make Restricted Payments after the time of such withdrawal or
downgrade will be calculated as if the covenant governing Restricted Payments had been in effect during the entire period of time from the Issue Date. Notwithstanding the foregoing, the continued existence after the end of the Fall-Away Period of
facts and circumstances or obligations arising from transactions which occurred during a Fall-Away Period shall not constitute a breach of any covenant set forth in the Indenture or cause an Event of Default thereunder.
The Indenture will contain, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock
. Other than Permitted Indebtedness, the
Issuer will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible
for payment of (collectively,
incur
) any Indebtedness (including, without limitation, Acquired Indebtedness) and the Issuer will not permit any of its Restricted Subsidiaries to issue any Preferred Stock;
provided, however
,
that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness or issuance of Preferred Stock, then the Issuer and the Restricted Subsidiaries or any of them
may incur Indebtedness and any Restricted Subsidiary may issue Preferred Stock, in each case, if on the date of the incurrence of such Indebtedness or issuance of Preferred Stock, after giving pro forma effect to the incurrence thereof and the
receipt and application of the proceeds therefrom, the Issuers Consolidated EBITDAX Coverage Ratio would have been greater than 2.25 to 1.0.
For purposes of determining any particular amount of Indebtedness under this covenant, (i) guarantees of, or obligations in respect of
letters of credit relating to, Indebtedness otherwise included in the determination of such amount shall not also be included and (ii) if obligations in respect of letters of credit are incurred pursuant to a Credit Facility and are being
treated as incurred pursuant to clause (2) of the definition of Permitted Indebtedness and the letters of credit relate to other Indebtedness, then such other Indebtedness shall not be included.
Indebtedness or Preferred Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger,
consolidation, acquisition of Capital Stock or otherwise) or is merged with or into
37
the Issuer or any Restricted Subsidiary or which is secured by a Lien on an asset acquired by the Issuer or a Restricted Subsidiary (whether or not such Indebtedness is assumed by the acquiring
Person) shall be deemed incurred at the time the Person becomes a Restricted Subsidiary or at the time of the asset acquisition, as the case may be.
The Issuer will not, and will not permit any Subsidiary Guarantor to, incur any Indebtedness which by its terms (or by the terms of any
agreement governing such Indebtedness) is subordinated in right of payment to any Indebtedness of the Issuer or such Subsidiary Guarantor, as the case may be, other than the Notes and the Subsidiary Guarantees, unless such Indebtedness is also by
its terms (or by the terms of any agreement governing such Indebtedness) made expressly subordinate in right of payment to the Notes or the Subsidiary Guarantee of such Subsidiary Guarantor, as the case may be, pursuant to subordination provisions
that are at least as favorable to the Holders or such Subsidiary Guarantee as the subordination provisions of such Indebtedness (or agreement).
For purposes of the Indenture, no Indebtedness will be deemed to be subordinate or junior in right of payment to other Indebtedness solely by
virtue of not having the benefit of a Lien on assets, or guarantee of a Person, that benefits the other Indebtedness or having the benefit of such a Lien or guarantee ranking subordinate or junior to a Lien or guarantee benefiting the other
Indebtedness.
Limitation on Restricted Payments
. The Issuer will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly:
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(1)
|
declare or pay any dividend or make any distribution (other than dividends or distributions made to the Issuer or any Restricted Subsidiary and other than any dividends or distributions payable solely in Qualified
Capital Stock of the Issuer) on or in respect of shares of the Capital Stock of the Issuer or any Restricted Subsidiary to holders of such Capital Stock;
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(2)
|
purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Issuer or any Restricted Subsidiary (or make any other payment on account of, or set apart money for a sinking fund or other analogous
fund for the purchase, redemption or other acquisition or retirement for value of, any Capital Stock of the Issuer or any Restricted Subsidiary) other than through the exchange therefor solely of Qualified Capital Stock of the Issuer and other than
any acquisition or retirement for value from, or payment to, the Issuer or any Restricted Subsidiary;
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(3)
|
make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value before twelve months prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Issuer or a Subsidiary Guarantor that is subordinate or junior in right of payment to the Notes or such Subsidiary Guarantors Subsidiary Guarantee, as the case may be (other than a purchase, repurchase or
other acquisition of any such subordinated or junior Indebtedness that is so purchased, repurchased or otherwise acquired in anticipation of satisfying a sinking fund obligation, principal installment or payment at final maturity, in each case due
within 120 days of the date of such purchase, repurchase or other acquisition); or
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(4)
|
make any Investment (other than a Permitted Investment) in any other Person;
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(each of the foregoing actions
set forth in clauses (1), (2), (3) and (4) being referred to as a
Restricted Payment
;
provided, however
, that no Permitted Investment shall be deemed to be a Restricted Payment), if at the time of such Restricted
Payment or immediately after giving effect thereto:
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(i)
|
a Default or an Event of Default shall have occurred and be continuing;
|
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(ii)
|
the Issuer is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the first paragraph of the covenant Limitation on Incurrence of Additional
Indebtedness and Issuance of Preferred Stock above; or
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38
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(iii)
|
the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made after the Measurement Date (the amount expended for such purposes, if other than in cash, being the Fair Market Value of such
property as determined in good faith by the Board of Directors of the Issuer) shall exceed the sum (without duplication) of:
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(a)
|
50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Issuer earned after the Measurement Date and on or prior to the last date of the
Issuers fiscal quarter immediately preceding such Restricted Payment (the
Reference Date
) (treating such period as a single accounting period);
plus
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(b)
|
100% of the aggregate net cash proceeds, or the Fair Market Value of Property (including any Property received in any Asset Acquisition or other acquisition) other than cash, received by the Issuer from any Person
(other than a Restricted Subsidiary of the Issuer) from the issuance and sale of Qualified Capital Stock of the Issuer after the Measurement Date (excluding any net cash proceeds from an Equity Offering used to redeem the Notes);
plus
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(c)
|
100% of the aggregate net cash proceeds, or the Fair Market Value of Property (including any Property received in any Asset Acquisition or other acquisition) other than cash, of any equity contribution received by the
Issuer from a holder of the Issuers Capital Stock after the Measurement Date (excluding any net cash proceeds from an Equity Offering to the extent used to redeem the Notes);
plu
s
|
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(d)
|
an amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from dividends, interest payments, distributions, redemptions or repurchases, sales or other dispositions thereof, repayments of
loans or advances, or other transfers of cash or Properties (including transfers as a result of merger or liquidation), in each case to the Issuer or to any Restricted Subsidiary of the Issuer from Unrestricted Subsidiaries (but without duplication
of any such amount included in calculating cumulative Consolidated Net Income of the Issuer), or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (in each case valued as provided in Limitation on Restricted and
Unrestricted Subsidiaries below), not to exceed, in the case of any such redesignation, the amount of Investments previously made by the Issuer or any Restricted Subsidiary in such Unrestricted Subsidiary and which was treated as a Restricted
Payment under the Indenture;
plus
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(e)
|
the amount by which Indebtedness of the Issuer is reduced on the consolidated balance sheet of the Issuer and its Restricted Subsidiaries upon the conversion or exchange subsequent to the Measurement Date of any
Indebtedness of the Issuer or its Restricted Subsidiaries that is convertible or exchangeable for Qualified Capital Stock of the Issuer (less the amount of any cash, or the Fair Market Value of any other property, distributed by the Issuer to the
holder of such Indebtedness upon such conversion or exchange); provided, however, that the foregoing amount shall not exceed the Net Cash Proceeds, or the Fair Market Value of Property (including any Property received in any Asset Acquisition or
other acquisition) other than cash, received by the Issuer or any Restricted Subsidiary from the sale of such Indebtedness (excluding Net Cash Proceeds from sales to a Restricted Subsidiary of the Issuer);
plus
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(f)
|
an amount equal to the net reduction in Investments (other than Permitted Investments) resulting from dividends,
distributions, redemptions or repurchases, proceeds of sales or other dispositions thereof, interest payments, repayments of loans or advances, or other transfers of cash or Properties (including transfers as a result of merger or liquidation), in
each case to the Issuer or to any Restricted Subsidiary of the Issuer from any Person (other than the Issuer or a Restricted Subsidiary), or from the obligation underlying any guarantee previously entered into by the Issuer or a Restricted
Subsidiary no longer existing (and
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39
|
without such guarantee having been called upon), in each case not to exceed the amount in respect of such Investment which had been treated as a Restricted Payment (but without duplication of any
such amount included in calculating cumulative Consolidated Net Income of the Issuer).
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Notwithstanding the foregoing, the
provisions set forth in the immediately preceding paragraph shall not prohibit:
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(1)
|
the payment of any dividend or redemption payment or the making of any distribution within 60 days after the date of declaration thereof if the dividend, redemption or distribution payment, as the case may be, would
have been permitted on the date of declaration;
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(2)
|
the acquisition of any Capital Stock of the Issuer or any Restricted Subsidiary, either (i) solely in exchange for shares of Qualified Capital Stock of the Issuer or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Restricted Subsidiary of the Issuer) of Qualified Capital Stock of the Issuer;
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(3)
|
the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Indebtedness of the Issuer or any Subsidiary Guarantor that is subordinate or junior in right of payment to the Notes
or such Subsidiary Guarantors Subsidiary Guarantee, as the case may be, either (i) solely in exchange for Qualified Capital Stock of the Issuer, (ii) through the application of the net proceeds of a substantially concurrent sale for
cash (other than to a Restricted Subsidiary of the Issuer) of (a) Qualified Capital Stock of the Issuer or (b) Refinancing Indebtedness or (iii) solely in exchange for Indebtedness constituting Refinancing Indebtedness;
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(4)
|
the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Disqualified Stock of the Issuer or any Subsidiary Guarantor either (i) through the application of the net
proceeds of a substantially concurrent sale for cash (other than to a Restricted Subsidiary of the Issuer) of Refinancing Indebtedness or (ii) solely in exchange for Indebtedness constituting Refinancing Indebtedness;
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(5)
|
if no Default or Event of Default shall have occurred and be continuing, the redemption or repurchase of equity interests in the Issuer held by then present or former officers, directors or employees of the Issuer;
provided, that the aggregate cash consideration paid for all such redemptions or repurchases in any calendar year shall not exceed $2.0 million plus (A) the cash proceeds received during such calendar year by the Issuer or any of its
Restricted Subsidiaries from the sale of the Issuers Qualified Capital Stock to any such officers, directors or employees (provided that the amount of such cash proceeds utilized for any such redemption or repurchase will not increase the
amount available for Restricted Payments under clause (iii)(b) of the immediately preceding paragraph) plus (B) the cash proceeds of key man life insurance policies received during such calendar year by the Issuer and its Restricted
Subsidiaries (with unused amounts in any calendar year being carried forward to succeeding calendar years);
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(6)
|
if no Default or Event of Default shall have occurred and be continuing, repurchases of Indebtedness that is subordinated or junior in right of payment to the Notes or a Subsidiary Guarantee at a purchase price not
greater than (i) 101% of the principal amount of such subordinated or junior Indebtedness and accrued and unpaid interest thereon in the event of a Change of Control or (ii) 100% of the principal amount of such subordinated or junior Indebtedness
and accrued and unpaid interest thereon in the event of an Asset Sale, in each case plus accrued interest, in connection with any change of control offer or asset sale offer required by the terms of such Indebtedness, but only if:
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(a)
|
in the case of a Change of Control, the Issuer has first complied with and fully satisfied its obligations under the provisions described under Change of Control; or
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40
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(b)
|
in the case of an Asset Sale, the Issuer has complied with and fully satisfied its obligations in accordance with the covenant under the heading, Limitation on Asset Sales;
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(7)
|
the repurchase, redemption or other acquisition for value of Capital Stock of the Issuer or any Restricted Subsidiary representing fractional shares of such Capital Stock in connection with a merger or consolidation
involving the Issuer or Restricted Subsidiary or any other transaction permitted by the Indenture;
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(8)
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repurchases of Capital Stock deemed to occur upon the exercise or conversion of stock options, warrants or other convertible securities if such Capital Stock represents a portion of the exercise or conversion price
thereof;
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(9)
|
the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of the Issuer or any Preferred Stock of any Restricted Subsidiary of the Issuer issued on
or after the Issue Date in accordance with the Consolidated EBITDAX Coverage Ratio test described under the caption Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock;
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(10)
|
the payment of any dividend or any similar distribution by a Restricted Subsidiary to the holders (other than the Issuer or any Restricted Subsidiary) of Qualified Capital Stock of such Restricted Subsidiary; provided
that such dividend or similar distribution is paid to all holders of such Qualified Capital Stock on a pro rata basis based on their respective holdings of such Qualified Capital Stock;
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(11)
|
the defeasance, repurchase, redemption or other acquisition or retirement for value of any Capital Stock of the Issuer or any Restricted Subsidiary held by any current or former officers, directors or employees of the
Issuer or any of its Restricted Subsidiaries in connection with the exercise or vesting of any equity compensation (including, without limitation, stock options, restricted stock and phantom stock) in order to satisfy any tax withholding obligation
with respect to such exercise or vesting;
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(12)
|
any payments to dissenting stockholders not to exceed $5.0 million in the aggregate after the Issue Date (x) pursuant to applicable law or (y) in connection with the settlement or other satisfaction of
claims made pursuant to or in connection with a consolidation, merger or transfer of assets in connection with a transaction that is not prohibited by the Indenture;
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(13)
|
any redemption of share purchase rights at a redemption price not to exceed $0.01 per right;
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(14)
|
the purchase or redemption of any Acquired Subordinated Indebtedness of the Issuer or any Subsidiary Guarantor, by application of (i) cash provided from operations in the ordinary course of business or
(ii) proceeds from borrowings under the revolving portion of the Senior Credit Facility (so long as within 30 days prior to such purchase or redemption, a corresponding amount of borrowings under the revolving portion of the Senior Credit
Facility was repaid from cash provided from operations in the ordinary course of business); provided, in any such case, that the Issuer is able to incur an additional $1.00 of Indebtedness pursuant to the first paragraph of the covenant described
under the caption Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock after giving effect to such purchase or redemption; provided, further, that this clause (14) shall not permit the
application of any proceeds from any other borrowings under any Credit Facility to effect any such purchase or redemption; or
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(15)
|
any other Restricted Payments, which when combined with any other outstanding Restricted Payments made pursuant to this clause (15), does not exceed the greater of (a) $30.0 million and (b) 2.0% of Adjusted
Consolidated Net Tangible Assets determined at the time of such Restricted Payment.
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41
In determining the aggregate amount of Restricted Payments after the Measurement Date in
accordance with clause (iii) of the second preceding paragraph, amounts expended pursuant to clauses (1), (2), (3)(i), (3)(ii)(a), (7), (12) and (13) of the immediately preceding paragraph shall be included in such calculation, and amounts
expended pursuant to clauses (3)(ii)(b), (3)(iii), (4), (5), (6), (8), (9), (10), (11), (14) and (15) of the immediately preceding paragraph shall be excluded from such calculation. In determining the aggregate net cash proceeds or Fair Market
Value of Property other than cash received by the Issuer from the issuance and sale of Qualified Capital Stock in accordance with clause (3)(b) of the second preceding paragraph, amounts of cash received by the Issuer pursuant to clauses (2)(ii) or
(3)(ii)(a), or the Fair Market Value of Capital Stock of the Issuer or any Restricted Subsidiary or Indebtedness of the Issuer or any Subsidiary Guarantor acquired or retired for value pursuant to clauses (2)(i) or (3)(i), of the immediately
preceding paragraph shall be included in such calculation. For purposes of determining compliance with this covenant, in the event that a Restricted Payment meets the criteria of more than one of the exceptions described in (1) through
(15) above or is entitled to be made pursuant to the first paragraph of this covenant, the Issuer shall, in its sole discretion, classify such Restricted Payment, or later classify, reclassify or
re-divide
all or a portion of such Restricted Payment, in any manner that complies with this covenant.
A sale will be deemed to be substantially concurrent if the related purchase, repurchase, redemption, defeasance, satisfaction and
discharge, retirement or other acquisition for value or payment of principal occurs within 90 days before or after such sale.
Limitation on Asset Sales
. The Issuer will not, and will not cause or permit any of its Restricted Subsidiaries to, consummate
an Asset Sale unless:
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(1)
|
the Issuer or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of (as
determined in good faith by the Issuers Board of Directors);
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(2)
|
either (a) at least 75% of the consideration received by the Issuer or such Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition or (b) the Fair Market Value (determined at the time of receipt) of all forms of consideration other than cash and Cash Equivalents received for all Asset Sales since the Issue Date does not exceed in the aggregate 15%
of the Adjusted Consolidated Net Tangible Assets of the Issuer at the time such determination is made; and
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(3)
|
the Issuer shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof either:
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(a)
|
to repay or prepay Indebtedness outstanding under the Senior Credit Facility (or, if the Senior Credit Facility is no longer in existence, any of the Credit Facilities);
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(b)
|
to repay or prepay any Indebtedness of the Issuer that is secured by a Lien permitted to be incurred pursuant to Limitation on Liens below;
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(c)
|
to make an investment (including, without limitation, capital expenditures) in (i) properties or assets that replace the properties or assets that were the subject of such Asset Sale or (ii) properties or
assets that will be used in the Crude Oil and Natural Gas Business of the Issuer and its Restricted Subsidiaries or in businesses reasonably related thereto (collectively,
Replacement Assets
);
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(d)
|
to make a Permitted Industry Investment or to acquire or make an investment in Crude Oil and Natural Gas Related Assets;
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(e)
|
to the extent not included in (c) or (d) above, any investment in (i) Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Issuer or a Restricted Subsidiary, (ii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary, and
(iii) Capital Stock of any Subsidiary of Issuer, provided that all the Capital Stock of such Subsidiary held by the
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42
|
Issuer or any of its Restricted Subsidiaries shall entitle the Issuer or such Restricted Subsidiary to not less than a pro rata share of all dividends or other distributions made by such
Subsidiary upon any of such Capital Stock; or
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(f)
|
to make a combination of prepayment and investment permitted by the foregoing clauses (3)(a) through (3)(e).
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On the 361st day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Issuer determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(a) through (3)(f) of the immediately preceding paragraph (each a
Net Proceeds Offer Trigger Date
), such aggregate amount of Net Cash Proceeds which have been
received by the Issuer or such Restricted Subsidiary but which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(a) through (3)(f) of the immediately preceding paragraph (each a
Net Proceeds
Offer Amount
) shall be applied by the Issuer or such Restricted Subsidiary, as the case may be, to make an offer to purchase (a
Net Proceeds Offer
) on a date (the
Net Proceeds Offer Payment Date
) not
less than 30, nor more than 45, days following the applicable Net Proceeds Offer Trigger Date, from all Holders and, to the extent required by the terms of any Pari Passu Indebtedness, the holders of such Pari Passu Indebtedness, on a pro rata
basis, that principal amount of Notes (and Pari Passu Indebtedness) purchasable with the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Notes (and Pari Passu Indebtedness) to be purchased (or, in the event such
other Pari Passu Indebtedness was issued with significant original issue discount, 100% of the accreted value thereof), plus unpaid accrued interest, if any, thereon to the date of purchase; provided, however, that if at any time consideration other
than cash or Cash Equivalents received by the Issuer or any Restricted Subsidiary, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash or Cash Equivalents (other than interest received
with respect to any such
non-cash
or
non-Cash
Equivalents consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and
the Net Cash Proceeds thereof shall be applied in accordance with this covenant.
The Issuer may defer the Net Proceeds Offer until there
is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $40.0 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of
$40.0 million shall be applied as required pursuant to this covenant). Pending application of Net Cash Proceeds pursuant to this covenant, such Net Cash Proceeds may be temporarily invested in Cash Equivalents or applied to temporarily reduce
revolving credit indebtedness.
If the Net Proceeds Offer 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 additional interest will be payable to holders who tender Notes pursuant to the
Net Proceeds Offer.
Notwithstanding the first two paragraphs of this covenant, the Issuer and its Restricted Subsidiaries will be
permitted to consummate an Asset Sale without complying with such paragraphs to the extent that:
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(1)
|
the consideration for such Asset Sale constitutes Replacement Assets and/or Crude Oil and Natural Gas Related Assets and/or the assumption of obligations secured by Liens that burden some or all of the assets being sold
and/or cash or Cash Equivalents;
provided
that, in the case of any such assumption, (a) the Person assuming such obligations shall have no recourse with respect to such obligations to the Issuer or any of its Restricted Subsidiaries and
(b) no assets of the Issuer or any of its Restricted Subsidiaries (other than those assets being sold) are subject to such Liens; and
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(2)
|
such Asset Sale is for Fair Market Value;
provided
that at least 75% of the total consideration received by the Issuer or any of its Restricted Subsidiaries in connection with any such Asset Sale shall be in the
form of Replacement Assets and Crude Oil and Natural Gas Related Assets, the assumption of obligations secured by Liens described in (1) above, cash or Cash Equivalents, or any combination of the foregoing, and that any Net Cash Proceeds so
received shall be subject to the provisions of clause (3) of the first paragraph and to the provisions of the second paragraph of this covenant.
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43
For the purposes of clause (2) of both the first and immediately preceding paragraphs of
this covenant and for the purposes of clause (1) of the immediately preceding paragraph, the following are deemed to be cash or Cash Equivalents:
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(1)
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the assumption of Indebtedness or other liabilities shown on the balance sheet of the Issuer (other than obligations in respect of Disqualified Stock of the Issuer) or any Restricted Subsidiary (other than obligations
in respect of Disqualified Stock or Preferred Stock of a Subsidiary Guarantor) and the release of the Issuer or such Restricted Subsidiary from all liability on such Indebtedness or liabilities in connection with such Asset Sale (or in lieu of such
a release, the agreement of the acquiror or its parent company to indemnify and hold the Issuer or such Restricted Subsidiary harmless from and against any loss, liability or cost in respect of such assumed Indebtedness or liabilities accompanied by
the posting of a letter of credit (issued by a commercial bank that has an Investment Grade Rating) in favor of the Issuer or such Restricted Subsidiary for the full amount of the liability and for so long as the liability remains outstanding;
provided, however, that such indemnifying party (or its long-term debt securities) shall have an Investment Grade Rating (with no indication of a negative outlook or credit watch with negative implications, in any case, that contemplates such
indemnifying party (or its long term debt securities) failing to have an Investment Grade Rating) at the time the indemnity is entered into); and
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(2)
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securities received by the Issuer or any Restricted Subsidiary from the transferee that are converted by the Issuer or such Restricted Subsidiary into cash within 180 days of the Asset Sale, to the extent of cash
received in that conversion.
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The requirement of clause 3(c), 3(d) or 3(e) 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 investment referred to therein is entered into by the Issuer or any Restricted Subsidiary within the time period specified in clause
(3) and such Net Cash Proceeds are subsequently applied in accordance with such agreement within six months following such agreement.
Notice of each Net Proceeds Offer will be mailed to the record Holders as shown on the register of Holders within 30 days following the Net
Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in part in exchange for
cash. To the extent Holders properly tender Notes and holders of Pari Passu Indebtedness properly tender such Indebtedness with an aggregate principal amount exceeding the Net Proceeds Offer Amount, Notes of tendering Holders and Pari Passu
Indebtedness will be purchased on a pro rata basis (based on principal amounts of Notes and Pari Passu Indebtedness (or, in the case of Pari Passu Indebtedness issued with significant original issue discount based on the accreted value thereof)
tendered). A Net Proceeds Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law.
The
Issuers ability to repurchase Notes in a Net Proceeds Offer may be restricted by the terms of the Senior Credit Facility and may be prohibited or otherwise limited by the terms of any then existing borrowing arrangements and the Issuers
financial resources. The exercise by the Holders of their right to require the Issuer to repurchase the Notes upon a Net Proceeds Offer or a Change of Control Triggering Event could cause a default under these other agreements, even if the Change of
Control Triggering Event or Asset Sale itself does not, due to the financial effect of such repurchases on the Issuer or otherwise. In the event a Change of Control or Asset Sale occurs at a time when the Issuer is prohibited from purchasing Notes,
the Issuer could seek the consent of the applicable lenders to the purchase of Notes or could attempt to refinance the Indebtedness that contain such prohibitions. If the Issuer does not obtain a consent or repay the Indebtedness, the Issuer will
remain prohibited from purchasing Notes. In that case, the Issuers failure to purchase tendered Notes would constitute an Event of Default under the Indenture which could, in turn, constitute a default under other Indebtedness.
The provisions under the Indenture relative to the Issuers obligation to make an offer to repurchase the Notes as a result of an Asset
Sale may be waived or modified with the consent of a majority in principal amount of the Notes (including Additional Notes) then outstanding (including consents obtained in connection with a purchase of, or tender or exchange offer for, Notes) until
the Net Proceeds Offer is required to be made.
44
The Issuer will comply with the requirements of Rule
14e-1
under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net
Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the
Asset Sale
provisions of the Indenture, the Issuer shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the
Asset Sale
provisions of the Indenture by virtue thereof.
If all or any portion of any Net Proceeds Offer Amount remains after consummation of a Net Proceeds Offer, the Issuer may use such remaining
portion of such Net Proceeds Offer Amount for any purpose not otherwise prohibited by the Indenture.
Limitation on Dividend and
Other Payment Restrictions Affecting Restricted Subsidiaries
. The Issuer will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:
|
(1)
|
pay dividends or make any other distributions on or in respect of its Capital Stock (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 pay dividends or make distributions on or in respect of Capital Stock);
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|
(2)
|
make loans or advances, or to pay any Indebtedness or other obligation owed, to the Issuer or any other Restricted Subsidiary (it being understood that the subordination of loans or advances made by a Restricted
Subsidiary to the Issuer or any Restricted Subsidiary to other Indebtedness or obligations incurred or owed by the Issuer or such other Restricted Subsidiary, or of Indebtedness or any other obligation owed by any Restricted Subsidiary to the Issuer
or any Restricted Subsidiary to other Indebtedness or obligations incurred or owed by such Restricted Subsidiary shall not be deemed a restriction on the ability of a Restricted Subsidiary to make loans or advances or to pay such Indebtedness or
such other obligation);
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|
(3)
|
guarantee any Indebtedness or any other obligation of the Issuer or any Restricted Subsidiary; or
|
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(4)
|
transfer any of its property or assets to the Issuer or any other Restricted Subsidiary,
|
except for such
encumbrances or restrictions existing under or by reason of:
|
(1)
|
With respect to clauses (1)-(4) above:
|
|
(b)
|
any encumbrance or restriction pursuant to or by reason of an agreement in effect at the Issue Date;
|
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(c)
|
(i) the Indenture or any other indentures governing Pari Passu Indebtedness;
provided, however
, that the
provisions relating to such encumbrances or restriction contained in any such other indenture are no less favorable to the Holders in any material respect as determined by the Board of Directors of the Issuer in their reasonable and good faith
judgment than the provisions relating to such encumbrances or restrictions contained in the Indenture or (ii) instruments governing other Indebtedness of the Issuer 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
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45
|
Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock;
provided
that the provisions relating to such encumbrance or restriction contained in
such instruments are not materially less favorable to the Issuer and its Restricted Subsidiaries taken as a whole, as determined by the Issuer in good faith, than the provisions contained in the Senior Credit Facility and in the Indenture as in
effect on the Issue Date;
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(d)
|
the Senior Credit Facility;
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(e)
|
customary encumbrances and restrictions contained in agreements of the types described in the definition of Permitted Industry Investments;
|
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(f)
|
customary
non-assignment
provisions of any contract or any lease governing a leasehold interest of any Restricted Subsidiary;
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(g)
|
any encumbrance or restriction pursuant to or by reason of an instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to such Restricted Subsidiary, or the properties or assets of
such Restricted Subsidiary, other than the Person or the properties or assets of the Person so acquired;
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(h)
|
customary restrictions with respect to a Restricted Subsidiary of the Issuer pursuant to an agreement that has been entered into for the sale or disposition of Capital Stock or assets of such Restricted Subsidiary to be
consummated in accordance with the terms of the Indenture solely in respect of the assets or Capital Stock to be sold or disposed of;
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(i)
|
any instrument governing a Permitted Lien, to the extent and only to the extent such instrument restricts the transfer or other disposition of assets subject to such Permitted Lien;
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(j)
|
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 Issuer and the Restricted Subsidiaries to realize the value of, property or assets of the Issuer or any Restricted Subsidiary in any manner material to the Issuer or any Restricted Subsidiary;
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(k)
|
an agreement governing Refinancing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (b), (c), (d) or (g) above or this clause (k), or
contained in any amendment to an agreement referred to in clause (b), (c), (d) or (g) above or this clause (k);
provided, however
, that the provisions relating to such encumbrance or restriction contained in any such agreement governing
Refinancing Indebtedness or amended agreement are, taken as a whole, no less favorable to the Holders in any material respect as determined by the Board of Directors of the Issuer in their reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in the applicable agreement referred to in such clause (b), (c), (d) or (g) or this clause (k);
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(l)
|
Commodity Agreements, Currency Agreements or Interest Rate Agreements permitted from time to time under the Indenture;
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(m)
|
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 Limitation on Incurrence of Additional Indebtedness and Issuance of 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); and
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46
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(n)
|
restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and
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(2)
|
with respect to clause (4) above only:
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(a)
|
any encumbrance or restriction contained in security agreements, mortgages, purchase money agreements, Capitalized Lease Obligations or similar instruments securing Indebtedness of a Restricted Subsidiary to the extent
such encumbrance or restriction restricts the transfer of the property subject to such security agreements, mortgages, purchase money agreements or similar instruments;
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(b)
|
restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business;
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(c)
|
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, unitization agreements and
other agreements that are customary in the Crude Oil and Natural Gas Business and entered into in the ordinary course of business; and
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(d)
|
provisions limiting the disposition or distribution of assets or property in, or transfer of Capital Stock of, joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other
similar agreements entered into (i) in the ordinary course of business, consistent with past practice or (ii) with the approval of the Issuers Board of Directors, which limitations are applicable only to the assets, property or
Capital Stock that are the subject of such agreements.
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Limitation on Liens
. The Issuer will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind, which Liens secure Indebtedness, against or upon any property or assets of the Issuer or any of
its Restricted Subsidiaries (whether owned on the Issue Date or acquired after the Issue Date), other than Permitted Liens, unless:
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(1)
|
in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes or any Subsidiary Guarantee, the Notes or such Subsidiary Guarantee, as the case may be, are secured by
a Lien on such property, assets or proceeds that is senior in priority to such Liens at least to the same extent as the Notes are senior in priority to such Indebtedness for so long as such Indebtedness is so secured; and
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(2)
|
in all other cases, the Notes and the Subsidiary Guarantees are equally and ratably secured with the Indebtedness so secured for so long as such Indebtedness is so secured.
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Any Lien created for the benefit of the Holders pursuant to the preceding sentence 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.
Merger, Consolidation
and Sale of Assets
. The Issuer will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Issuers assets (determined on a consolidated basis for the Issuer and its Restricted Subsidiaries), unless:
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(a)
|
(i) the Issuer shall be the surviving or continuing entity or (ii) the sale or other disposition is by one or more Restricted Subsidiaries to one or more other Restricted Subsidiaries; or
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47
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(b)
|
the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition all or
substantially all of the Issuers assets (as so determined) (the
Surviving Entity
):
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(x)
|
shall be an entity organized and validly existing under the laws of the United States or any state thereof or the District of Columbia; and
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(y)
|
shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, the due and punctual payment of the principal of, premium, if any, and interest on all of the Notes and the performance of every
covenant of the Notes and the Indenture on the part of the Issuer to be performed or observed;
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(2)
|
immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(y) above (including giving effect to any Indebtedness incurred or anticipated to be incurred or repaid in connection
with or in respect of such transaction as if the same had occurred at the beginning of the applicable Four Quarter Period) and the application of any net proceeds therefrom, the Issuer or such Surviving Entity, as the case may be, either
(x) shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the covenant entitled Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock
above, or (y) would have a Consolidated EBITDAX Coverage Ratio that is equal to or greater than the Consolidated EBITDAX Coverage Ratio of the Issuer immediately prior to such transaction;
provided, however
, that this clause
(2) will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Issuer or one or more other Restricted Subsidiaries or (B) the Issuer merging
with an Affiliate of the Issuer solely for the purpose and with the sole effect of reincorporating the Issuer in another jurisdiction, converting to an entity taxable for federal income tax purposes as a corporation or a combination of the
foregoing;
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(3)
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immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(y) above (including, without limitation, giving effect to any Indebtedness incurred or anticipated to be incurred or
repaid and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing;
provided, however
, that this clause (3) will not be applicable to a Restricted
Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Issuer or one or more other Restricted Subsidiaries; and
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(4)
|
the Issuer or the Surviving Entity, as the case may be, shall have delivered to the Trustee an officers certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, complies with the applicable provisions of the Indenture, and that all conditions
precedent in the Indenture relating to such transaction have been satisfied;
provided, however
, that such counsel may rely, as to matters of fact, on a certificate or certificates of officers of the Issuer.
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For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of
all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Issuer, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Issuer.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Issuer in accordance with the foregoing, in which the Issuer is not the Surviving Entity, the Surviving Entity formed by such consolidation or into which the Issuer is merged or to which such conveyance, lease or transfer is
made shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under the Indenture and the Notes with the same effect as if such Surviving Entity had been named as such, and thereafter (except in the case of a
lease of all or substantially all of the Issuers assets) the Issuer will be relieved of all obligations and covenants under the Indenture and the Notes.
48
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose Subsidiary Guarantee is to
be released in accordance with the terms of the Subsidiary Guarantee and the Indenture in connection with any transaction complying with the provisions of the Indenture described under Limitation on Asset Sales) will not, and the
Issuer will not cause or permit any such Subsidiary Guarantor to, consolidate with or merge with or into any Person other than the Issuer or another Restricted Subsidiary that is a Subsidiary Guarantor unless:
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(1)
|
the entity formed by or surviving any such consolidation or merger (if other than the Subsidiary Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is an entity organized and
existing under the laws of the United States or any state thereof or the District of Columbia;
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(2)
|
such entity (if other than the Subsidiary Guarantor) assumes by execution of a supplemental indenture all of the obligations of the Subsidiary Guarantor under its Subsidiary Guarantee; and
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(3)
|
immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing.
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Any merger or consolidation of a Subsidiary Guarantor with and into the Issuer (with the Issuer being the surviving entity) or another
Restricted Subsidiary that is a Subsidiary Guarantor need only comply with clause (4) of the first paragraph of this covenant.
Upon
any consolidation or merger of any Subsidiary Guarantor in accordance with the second preceding paragraph (excluding any merger or consolidation of a Subsidiary Guarantor whose Subsidiary Guarantee is to be released as specified in the second
preceding paragraph and any merger or consolidation of a Subsidiary Guarantor referred to in the immediately preceding paragraph) in which such Subsidiary Guarantor is not the continuing Person, the Person formed by such consolidation or into which
such Subsidiary Guarantor is merged shall succeed to, and be substituted for, and may exercise every right and power of, such Subsidiary Guarantor under the Indenture and the Notes with the same effect as if such Person had been named as such.
Limitation on Transactions with Affiliates
. The Issuer will not, and will not cause or permit any of its Restricted Subsidiaries
to, directly or indirectly, enter into, amend or conduct any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property, the guaranteeing of any Indebtedness or the rendering
of any service) involving aggregate consideration in excess of $2.0 million with, or for the benefit of, any of their respective Affiliates (each an
Affiliate Transaction
), other than Affiliate Transactions that are on terms
that, taken as a whole, are fair and reasonable to the Issuer or the applicable Restricted Subsidiary and are no less favorable to the Issuer or the applicable Restricted Subsidiary than those that might reasonably have been obtained in a comparable
transaction at such time on an
arms-length
basis from a Person that is not an Affiliate of the Issuer or such Restricted Subsidiary.
Any Affiliate Transaction (and each series of related Affiliate Transactions which are part of a common plan) that involves aggregate payments
or other property with a Fair Market Value in excess of $25.0 million shall be approved by a majority of the disinterested members of the Board of Directors of the Issuer, such approval to be evidenced by a Board Resolution stating that such
Board of Directors has determined that such transaction complies with the foregoing provisions. If the Issuer or any Restricted Subsidiary enters into an Affiliate Transaction (or a series of related Affiliate Transactions which are part of a common
plan) that involves an aggregate Fair Market Value of more than $10.0 million, the Issuer shall, prior to the consummation thereof, deliver an officers certificate to the Trustee certifying that such transaction complies with the
foregoing provision.
The restrictions set forth in the second paragraph of this covenant shall not apply to:
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(1)
|
reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Issuer or any Restricted Subsidiary as determined in good faith by the disinterested
members of the Board of Directors of the Issuer or such Restricted Subsidiary, as the case may be;
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49
|
(2)
|
transactions exclusively between or among the Issuer and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries;
provided, however
, that such transactions are not
otherwise prohibited by the Indenture;
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(3)
|
any Investment or other Restricted Payments permitted by the Indenture;
|
|
(4)
|
any issuance of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment or severance arrangements, stock options and stock ownership, phantom stock or
other incentive compensation plans approved by the Board of Directors of the Issuer;
|
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(5)
|
(a) loans or advances to officers, directors or employees in the ordinary course of business in accordance with the past practices of the Issuer or its Restricted Subsidiaries, but in any event not to exceed
$5.0 million in the aggregate outstanding at any one time; and (b) advances to or reimbursements of officers, directors or employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary
course of business;
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(6)
|
the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Issuer to, or the receipt by the Issuer of any capital contribution from, the holders of its Capital Stock;
|
|
(7)
|
transactions and arrangements in effect, or effected in accordance with agreements or arrangements in effect, on the Issue Date, including any modifications, extensions or renewals thereof that do not adversely affect
the Issuer and its Restricted Subsidiaries, considered as a single enterprise in any material respect as compared to the kinds of transactions, arrangements or agreements in effect on the Issue Date;
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|
(8)
|
transactions with a Person that is an Affiliate of the Issuer solely because the Issuer owns, directly or through a Subsidiary, an equity interest in, or controls, such Person;
|
|
(9)
|
transactions with any joint venture or similar entity, which joint venture or similar entity is an Affiliate of the Issuer solely because an Affiliate of the Issuer is a general partner in such joint venture or similar
entity;
provided
that Affiliates (all such Affiliates taken together) of the Issuer (other than the Issuer and its Restricted Subsidiaries) do not in the aggregate beneficially own or hold, directly or indirectly, 10% or more of any class of
voting interests in such joint venture or similar entity;
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|
(10)
|
(a) guarantees by the Issuer or any of its Restricted Subsidiaries of performance of obligations of Unrestricted Subsidiaries in the ordinary course of business, except for guarantees of Indebtedness in respect of
borrowed money, and (b) pledges by the Issuer or any Restricted Subsidiary of Capital Stock in Unrestricted Subsidiaries for the benefit of lenders or other creditors of Unrestricted Subsidiaries; and
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(11)
|
any transaction in which the Issuer or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Advisor stating that such transaction is fair to the Issuer or such
Restricted Subsidiary from a financial point of view or that such transaction meets the requirements of the first paragraph of this covenant.
|
Limitation on Restricted and Unrestricted Subsidiaries
. At the time the Notes are originally issued, both of the Subsidiaries of
the Issuer (Circle B Land Company LLC and Aurora Gathering, LLC) will be Restricted Subsidiaries. As the Issuer or any of its Subsidiaries forms or acquires Subsidiaries, each newly formed or acquired Subsidiary shall be designated by the
Issuers Board of Directors as a Restricted Subsidiary or an Unrestricted Subsidiary,
provided
that (1) any Subsidiary of any already existing Unrestricted Subsidiary shall be (and shall be deemed designated as) an Unrestricted
Subsidiary (without necessity for any Board of Directors resolution), (2)
50
subject to the foregoing clause (1), any designation of an Unrestricted Subsidiary (other than during any Fall-Away Period) shall be effective only if the Investment in that Subsidiary is made in
compliance with the covenant described above under Limitation on Restricted Payments, and (3) subject to the foregoing clause (1), any failure by the Issuers Board of Directors to affirmatively make such a designation of
a Subsidiary shall be deemed a designation (in compliance with the Indenture) of such Subsidiary as a Restricted Subsidiary. After a Subsidiary of the Issuer has been designated as an Unrestricted Subsidiary, the Board of Directors of the Issuer
may, if no Default or Event of Default would arise therefrom, redesignate such Unrestricted Subsidiary to be a Restricted Subsidiary;
provided
that:
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(1)
|
any such redesignation shall be deemed to be an incurrence as of the date of such redesignation (other than during any Fall-Away Period) by the Issuer and its Restricted Subsidiaries of the Indebtedness (if any) of such
redesignated Subsidiary for purposes of the covenant under Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock above;
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(2)
|
unless such redesignated Subsidiary shall not have any Indebtedness outstanding, other than Indebtedness which would be Permitted Indebtedness, no such designation shall be permitted (other than during any Fall-Away
Period) if immediately after giving effect to such redesignation and the incurrence of any such additional Indebtedness the Issuer could not incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock above; and
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(3)
|
other than during any Fall-Away Period, such Subsidiary assumes by execution of a supplemental indenture all of the obligations of a Subsidiary Guarantor under a Subsidiary Guarantee if the aggregate Indebtedness for
which such Subsidiary is an obligor or guarantor is at least $10.0 million in aggregate principal amount.
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After a
Subsidiary of the Issuer has been designated as a Restricted Subsidiary, the Board of Directors of the Issuer also may, if no Default or Event of Default would arise therefrom, redesignate any Restricted Subsidiary to be an Unrestricted Subsidiary
if such redesignation is at that time permitted under Limitation on Restricted Payments above. Upon such permitted redesignation, such former Restricted Subsidiarys Subsidiary Guarantee will be released.
Any such designation or redesignation (other than any deemed designation referred to in clause (1) of the proviso to the first paragraph
of this covenant) of an Unrestricted Subsidiary by the Board of Directors shall be evidenced to the Trustee by the filing with the Trustee of a certified copy of the resolution of the Board of Directors giving effect to such designation or
redesignation and an Officers Certificate certifying that such designation or redesignation complied with the foregoing conditions and setting forth in reasonable detail the underlying calculations.
For purposes of the covenant described under Limitation on Restricted Payments above:
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(1)
|
an Investment shall be deemed to have been made at the time any Restricted Subsidiary is designated as an Unrestricted Subsidiary in an amount (proportionate to the Issuers equity interest in such
Subsidiary) equal to the net worth of such Restricted Subsidiary at the time that such Restricted Subsidiary is designated as an Unrestricted Subsidiary (
net worth
to be calculated based upon the Fair Market Value of the assets of
such Subsidiary as of any such date of designation as such Fair Market Value is determined in good faith by the Issuers Board of Directors); and
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(2)
|
any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer as such Fair Market Value is determined in good faith by the Issuers Board of
Directors.
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51
Notwithstanding the foregoing, the Board of Directors may not designate any Subsidiary of the
Issuer to be an Unrestricted Subsidiary (other than during any Fall-Away Period) if, after such designation or redesignation:
|
(1)
|
the Issuer or any Restricted Subsidiary:
|
|
(a)
|
provides credit support for, or a guarantee of, any Indebtedness of such Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness); or
|
|
(b)
|
is otherwise directly or indirectly liable for any Indebtedness of such Subsidiary; or
|
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(2)
|
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, any Restricted Subsidiary which (a) is not a Subsidiary of the Subsidiary to be so designated and (b) is not also then
being designated as an Unrestricted Subsidiary.
|
During any Fall-Away Period, a Restricted Subsidiary may be redesignated an
Unrestricted Subsidiary only if such Restricted Subsidiary does not own, at that time, Restricted Property, unless such Restricted Subsidiary constitutes, at the time of redesignation, less than 15% of the Issuers Adjusted Consolidated Net
Tangible Assets.
Subsidiary Guarantors
. If, after the Issue Date, any Restricted Subsidiary (including any newly formed,
newly acquired or newly redesignated Restricted Subsidiary but excluding any Foreign Subsidiary and further excluding any
Non-Guarantor
Restricted Subsidiary if the Consolidated Net Worth of such
Non-Guarantor
Restricted Subsidiary, together with the Consolidated Net Worth of all other
Non-Guarantor
Restricted Subsidiaries, as of such date, does not exceed
$10.0 million in the aggregate) incurs or guarantees any Indebtedness, which when combined with any other such Indebtedness for which such Restricted Subsidiary is an obligor or guarantor, is at least $10.0 million in aggregate principal
amount, the Issuer shall cause such Restricted Subsidiary to:
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(1)
|
execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Issuers
obligations under the Notes and the Indenture on the terms set forth in the Indenture; and
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|
(2)
|
deliver to the Trustee an opinion of counsel that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable
obligation of such Restricted Subsidiary in accordance with its terms.
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Thereafter, such Restricted Subsidiary shall be a
Subsidiary Guarantor for all purposes of the Indenture, subject to such Restricted Subsidiary ceasing to be a Subsidiary Guarantor when its Subsidiary Guarantee is released in accordance with the terms of the Indenture.
In addition, to the extent the collective Consolidated Net Worth of the
Non-Guarantor
Restricted
Subsidiaries, as of the date of the creation of, acquisition of or Investment in a
Non-Guarantor
Restricted Subsidiary, exceeds $10.0 million, the Issuer shall, within 60 days after such date, cause one
or more of such
Non-Guarantor
Restricted Subsidiaries to deliver to the Trustee such a supplemental indenture and opinion as specified in clauses (1) and (2) of the second preceding paragraph (and
thereby cause such
Non-Guarantor
Restricted Subsidiary(ies) to cease to be
Non-Guarantor
Restricted Subsidiary(ies)), such that the collective Consolidated Net Worth of
all remaining
Non-Guarantor
Restricted Subsidiaries does not exceed $10.0 million in the aggregate.
Reports to Holders
. The Indenture will provide that, whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Issuer will file with the Commission for public availability (unless the Commission will not accept such a filing, in which case the Issuer will, or will cause the Trustee to, furnish the Holders and securities
analysts and prospective investors (upon request)):
|
(1)
|
all quarterly and annual financial information that would be required to be contained in a filing with the
Commission on Forms
10-Q
and
10-K
if the Issuer were required to file such Forms, including a Managements Discussion and Analysis of Financial Condition and
Results of Operations that describes the financial condition and results of operations of the Issuer and its
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52
|
consolidated Subsidiaries showing in reasonable detail, 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, the financial condition and results of operations of the Issuer and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Issuer, if
any (except with respect to Subsidiaries designated as Unrestricted Subsidiaries that, when taken together with all other Unrestricted Subsidiaries, are minor within the meaning of Rule
3-10
of
Regulation
S-X,
substituting 5% for 3% where applicable) and, with respect to the annual information only, a report thereon by the Issuers certified independent accountants; and
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|
(2)
|
all current reports that would be required to be filed with the Commission on Form
8-K
if the Issuer were required to file such reports, in each case within the time periods
specified in the Commissions rules and regulations.
|
In the event that any direct or indirect parent company of the
Issuer becomes a guarantor of the Notes, the Issuer may satisfy its obligations under this covenant by furnishing financial information relating to such parent;
provided
that (a) such financial statements are accompanied by consolidating
financial information for such parent, the Issuer, the Subsidiary Guarantors and the Subsidiaries of the Issuer that are not Subsidiary Guarantors in the manner prescribed by the Commission and (b) such parent is not engaged in any business in
any material respect other than incidental to its ownership, directly or indirectly, of the Capital Stock of the Issuer.
The Issuer will
be deemed to have furnished to the Holders and to securities analysts and prospective investors the reports or information referred to in clauses (1) and (2) of the first paragraph of this covenant or the information referred to in the
second paragraph of this covenant if the Issuer has posted such reports or information on the Issuer Website with access to current and prospective investors. For purposes of this covenant, the term Issuer Website means the collection of
web pages that may be accessed on the World Wide Web using the URL address http://www.billbarrettcorp.com or such other address as the Issuer may from time to time designate in writing to the Trustee. Information on such website shall not be deemed
incorporated by reference into this prospectus.
This covenant will not impose any duty on the Issuer under the Sarbanes-Oxley Act of 2002
and the related Commission rules that would not otherwise be applicable.
No Personal Liability of Directors, Officers and Employees
No director, officer, employee, incorporator, partner, member or stockholder of the Issuer or any Subsidiary Guarantor, as such, shall have any
liability for any of the Issuers or any Subsidiary Guarantors obligations under the Notes or the Indenture or any Subsidiary Guaranty or any claim based on, in respect of, by reason of, these 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. The waiver may not be effective to waive liabilities under the federal securities laws and it is the view of
the Commission that such a waiver is against public policy.
Events of Default
The following events will be defined in the Indenture as
Events of Default
:
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(1)
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the failure to pay interest on any Notes when the same becomes due and payable and the failure continues for a period of 30 days;
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(2)
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the failure by the Issuer to (a) pay the principal on any Notes, when such principal becomes due and
payable, at maturity, upon redemption or otherwise, or (b) consummate a purchase of Notes when required pursuant to the covenants described above under (i) Change of Control and (ii) Certain
CovenantsLimitation on Asset Sales, which failure, solely in the case of clause (b)(i), continues for a period of 30 days or, solely in the case of clause (b)(ii), continues for a
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period of 30 days after the Issuer receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding
principal amount of the Notes (including any Additional Notes);
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(3)
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the failure to comply with any other covenant contained in the Indenture and described above under the caption Certain Covenants, which failure continues for a period of 30 days after the Issuer
receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes (including any Additional Notes) (except in the case of a
failure to comply with any of the terms or provisions of (i) the first paragraph of Certain CovenantsMerger, Consolidation and Sale of Assets which will constitute an Event of Default with such notice requirement but
without such passage of time requirement or (ii) Certain CovenantsReports to Holders, which will constitute an Event of Default only after a period of 90 days after such notice);
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(4)
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the failure of the Issuer or any Subsidiary Guarantor to comply with its other agreements contained in the Indenture for 60 days after the Issuer receives written notice from the Trustee or the Holders of 25% in
principal amount of the outstanding Notes (including any Additional Notes) specifying the failure (and demanding that such failure be remedied);
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(5)
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a default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Issuer or of any Restricted Subsidiary (or the payment of which
is guaranteed by the Issuer or any Restricted Subsidiary), whether such Indebtedness exists on the Issue Date or is created thereafter, which default (i) is caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness after any applicable grace period provided in such Indebtedness on the date of such default (a
payment default
) or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a payment default or the maturity of which has been so accelerated, aggregates at least
$50.0 million;
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(6)
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one or more judgments for the payment of money in an aggregate amount in excess of $50.0 million (unless covered by insurance by a reputable insurer as to which the insurer has not disclaimed coverage) shall have
been rendered against the Issuer or any of its Restricted Subsidiaries and such judgment(s) remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and
non-appealable;
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(7)
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certain events of bankruptcy affecting the Issuer or any of its Significant Subsidiaries; or
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(8)
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any of the Subsidiary Guarantees cease to be in full force and effect or any of the Subsidiary Guarantees are declared to be null and void or invalid and unenforceable or any of the Subsidiary Guarantors denies or
disaffirms its liability under its Subsidiary Guarantees (other than by reason of release of a Subsidiary Guarantor in accordance with the terms of the Indenture).
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The Indenture will provide that, if an Event of Default (other than an Event of Default specified in clause (7) above relating to the
Issuer) shall occur and be continuing, the Holders of at least 25% in principal amount of outstanding Notes (including any Additional Notes) may, or the Trustee may, in the event that the Trustee is deemed to have notice of such Event of Default,
declare the principal of, premium, if any, and accrued and unpaid interest on all the Notes to be due and payable by notice in writing to the Issuer and the Trustee specifying the Event of Default and that it is a notice of acceleration,
and the same shall become immediately due and payable. If an Event of Default specified in clause (7) above relating to the Issuer occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on
all of the outstanding Notes shall
ipso facto
become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The effect of such provision may be limited by applicable law.
Notwithstanding the foregoing, if an Event of Default specified in clause (5) above shall have occurred and be continuing, such Event of Default and any acceleration resulting therefrom shall be automatically rescinded if (i) the
Indebtedness that is the subject of such Event of Default has been repaid, or (ii) the default relating to such Indebtedness has been waived or cured and, if such Indebtedness has been accelerated, the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness.
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The Indenture will provide that, at any time after a declaration of acceleration with respect to
the Notes as described in the preceding paragraph, the Holders of a majority in principal amount of the Notes (including any Additional Notes) may rescind and cancel such declaration and its consequences:
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(1)
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if the rescission would not conflict with any judgment or decree;
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(2)
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if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of such acceleration;
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(3)
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to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid;
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(4)
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if the Issuer has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances; and
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(5)
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in the event of the cure or waiver of an Event of Default of the type described in clause (7) of the description of Events of Default above, the Trustee shall have received an officers certificate that such
Event of Default has been cured or waived;
provided, however
, that such counsel may rely, as to matters of fact, on a certificate or certificates of officers of the Issuer.
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No such rescission shall affect any subsequent Default or impair any right consequent thereto.
The Indenture will provide that, at any time prior to the declaration of acceleration of the Notes, the Holders of a majority in principal
amount of the Notes (including any Additional Notes) may waive (including by any waivers obtained in connection with a purchase of, or tender or exchange offer for, Notes) any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest on any Notes.
The Indenture will provide that Holders may
not enforce the Indenture or the Notes except as provided in the Indenture and under the TIA. During the existence of an Event of Default, the Trustee is required to exercise such rights and powers vested in it under the Indenture and use the same
degree of care and skill in its exercise thereof as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Subject to the provisions of the Indenture relating to the duties of the Trustee, whether or not an
Event of Default shall occur and be continuing, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee
reasonable indemnity. Subject to all provisions of the Indenture and applicable law, the Holders of a majority in aggregate principal amount of the then outstanding Notes (including any Additional Notes) have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the
Trustee reasonably determines is unduly prejudicial to the rights of any other Holder or that would in the opinion of its counsel involve the Trustee in personal liability.
The Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture. Upon becoming aware of any
Default or Event of Default, the Issuer is required within ten Business Days to deliver to the Trustee a statement specifying such Default or Event of Default, unless such Default or Event of Default has been cured before the end of the
ten-Business
Day period.
Legal Defeasance and Covenant Defeasance
The Issuer may, at its option and at any time, elect to have its obligations and the corresponding obligations of the Subsidiary Guarantors
discharged with respect to the outstanding Notes (
Legal Defeasance
).
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Such Legal Defeasance means that the Issuer shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, and satisfied all of its obligations with
respect to the Notes, except for:
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(1)
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the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due;
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(2)
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the Issuers obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments;
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(3)
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the rights, powers, trust, duties and immunities of the Trustee and the Issuers obligations in connection therewith; and
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(4)
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the Legal Defeasance provisions of the Indenture.
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In addition, the Issuer may, at its option
and at any time, elect to terminate its obligations under Change of Control and under all of the covenants that are described in the Certain Covenants (other than the covenant described in the first paragraph
under Merger, Consolidation and Sale of Assets, except to the extent described below) and the operation of clause (2)(b), clauses (3) through (6) and clause (8) under Events of Default and the
limitations described in clause (2) of the first paragraph under the covenant Merger, Consolidation and Sale of Assets and thereafter any omission to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes (
Covenant Defeasance
). In the event of Legal Defeasance, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. In the event Covenant Defeasance occurs,
certain events (other than nonpayment, bankruptcy, receivership, reorganization and insolvency events) described under Events of Default will no longer constitute an Event of Default with respect to the Notes. If the Issuer
exercises either its Legal Defeasance or Covenant Defeasance option, each Subsidiary Guarantor will be released and relieved of any obligations under its Subsidiary Guarantee.
In order to exercise either Legal Defeasance or Covenant Defeasance:
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(1)
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the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in United States dollars,
non-callable
United States government obligations, or
a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Notes on
the stated date for payment thereof or on the applicable redemption date, as the case may be;
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(2)
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in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that:
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(a)
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the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling; or
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(b)
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since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
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(3)
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in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had
not occurred;
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(4)
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no Default or Event of Default, of which the Trustee is deemed to have notice, shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of
Indebtedness or other borrowing of funds, or the grant of Liens securing such Indebtedness or other borrowing, all or a portion of which are to be applied to such deposit);
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(5)
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such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Indenture (other than a Default or Event of Default resulting from the incurrence of
Indebtedness or other borrowing of funds, or the grant of Liens securing such Indebtedness or other borrowing, all or a portion of which are to be applied to such deposit) or any other Indebtedness incurred under clause (2) of the definition of
Permitted Indebtedness;
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(6)
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the Issuer shall have delivered to the Trustee an officers certificate stating that the deposit was not made by the Issuer with the intent of preferring the Holders over any other creditors of the Issuer or with
the intent of defeating, hindering, delaying or defrauding any other creditors of the Issuer or others;
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(7)
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the Issuer shall have delivered to the Trustee an officers certificate stating that all conditions precedent relating to such Legal Defeasance or Covenant Defeasance, as applicable, have been complied with; and
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(8)
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the Issuer shall have delivered to the Trustee an opinion of counsel (which opinion of counsel may be subject to customary assumptions, qualifications and exclusions), stating that all conditions precedent relating to
such Legal Defeasance or Covenant Defeasance, as applicable, have been complied with; provided, however, that such counsel may rely, as to matters of fact, on a certificate or certificates of officers of the Issuer.
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Satisfaction and Discharge
The Indenture
will be discharged and will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when:
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(a)
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all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which 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 Issuer and thereafter repaid to the Issuer or discharged from such trust) have been delivered to the Trustee for cancellation; or
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(b)
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all Notes not theretofore delivered to the Trustee for cancellation have become due and payable or will become due and payable within one year by reason of the mailing of a notice of redemption or otherwise and the
Issuer has irrevocably deposited or caused to be deposited with the Trustee funds (constituting cash in U.S. dollars,
non-callable
Cash Equivalents within the meaning of clauses (1) or (2) of the
definition thereof or a combination of cash in U.S. dollars and such
non-callable
Cash Equivalents) in an amount sufficient (without consideration of any reinvestment of interest) to pay and discharge the
entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Issuer directing the
Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be;
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(2)
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the Issuer has paid all other sums payable under the Indenture by the Issuer; and
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(3)
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the Issuer has delivered to the Trustee an officers certificate and an opinion of counsel stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have
been complied with; provided, however, that such counsel may rely, as to matters of fact, on a certificate or certificates of officers of the Issuer.
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Modification of the Indenture
From time to time, the Issuer, the Subsidiary Guarantors and the Trustee, without the consent of the Holders, may amend the Indenture for
certain specified purposes, including curing ambiguities, defects or inconsistencies, to comply with any requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA, to make any change that would
provide any additional benefit or rights to the Holders or that does not adversely affect the rights of any Holder, to conform the Indenture to the Description of the New Notes herein or to, in certain circumstances, comply with the Indenture. In
formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an opinion of counsel; provided, however, that in delivering such opinion of counsel,
such counsel may rely, as to matters of fact, on a certificate or certificates of officers of the Issuer.
Other modifications and
amendments of the Indenture may be made with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including any Additional Notes) issued under the Indenture (including consents obtained in connection with a
purchase of, or tender or exchange offer for, Notes), except that, without the consent of each Holder affected thereby, no amendment may (with respect to Notes held by any
non-consenting
Holder):
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(1)
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reduce the amount of Notes whose Holders must consent to an amendment;
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(2)
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reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest and Special Interest, on any Notes;
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(3)
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reduce the principal of or change or have the effect of changing the fixed maturity of any Notes;
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(4)
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reduce the amount payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under Optional Redemption above;
provided, however
, that solely for
the avoidance of doubt and without any other implication, redemption shall not be deemed to include any purchase or repurchase of Notes;
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(5)
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make any Notes payable in money other than that stated in the Notes;
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(6)
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make any change in provisions of the Indenture protecting the right of each Holder to receive payment of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment,
or permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default;
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(7)
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amend, change or modify in any material respect the obligation of the Issuer (A) to make and consummate a Change of Control Offer in the event a Change of Control Triggering Event has occurred or (B) to make
and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or modify any of the provisions or definitions applicable to any such Change of Control Triggering Event or Asset Sale that has occurred or been
consummated;
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(8)
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modify or change any provision of the Indenture or the related definitions affecting the ranking in right of payment of the Notes or any Subsidiary Guarantee as senior unsecured indebtedness of the Issuer or the
relevant Subsidiary Guarantors, as the case may be, in a manner which adversely affects the Holders;
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(9)
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to provide for the issuance of Additional Notes under the Indenture in accordance with the limitations set forth in the Indenture; or
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58
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(10)
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release any Subsidiary Guarantor from any of its obligations under its Subsidiary Guarantee or the Indenture otherwise than in accordance with the terms of the Indenture.
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The Holders of a majority of the principal amount of the Notes (including any Additional Notes) then outstanding (including waivers obtained
in connection with a purchase of, or tender or exchange offer for, Notes) may waive compliance with certain restrictive covenants and provisions of the Indenture, except in the case of the matters specified in the first paragraph under this caption
Modification of the Indenture.
The consent of the Holders is not necessary under the Indenture to approve the particular form
of any proposed amendment, supplement or waiver. It is sufficient if such consent approves the substance of the proposed amendment, supplement or waiver. After an amendment, supplement or waiver under the Indenture becomes effective, the Issuer is
required to mail to the Holders a notice briefly describing the amendment, supplement or waiver. However, the failure to give such notice, or any defect in the notice, will not impair or affect the validity of the amendment, supplement or waiver.
Governing Law
The Indenture and the
Notes will be governed by, and construed in accordance with, the laws of the State of New York.
The Trustee
The Indenture will provide that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the Indenture, and use the same degree of care and skill in its exercise thereof as a prudent man
would exercise or use under the circumstances in the conduct of his own affairs.
A successor Trustee may be appointed in accordance with
the terms of the Indenture.
The Indenture and the provisions of the TIA contain certain limitations on the rights of the Trustee, should
it become a creditor of the Issuer or a Subsidiary Guarantor, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the TIA, the Trustee will be
permitted to engage in other transactions;
provided, however
, that if the Trustee acquires any conflicting interest as described in the TIA, it must eliminate such conflict or resign.
Book-Entry, Delivery and Form
We will
issue the new notes in the form of global notes, or the Global Exchange Notes. The Global Exchange Notes will be deposited with, or on behalf of, The Depository Trust Company, or DTC, and registered in the name of the DTC or its nominee. Except as
set forth below, the Global Exchange Notes may be transferred, in whole and not in part, and only to DTC or another nominee of DTC. You may hold your beneficial interests in the Global Exchange Notes directly through DTC if you have an account with
DTC or indirectly through organizations that have accounts with DTC.
DTC has advised us that it is:
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a limited purpose trust company organized under the laws of the State of New York;
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a banking organization within the meaning of the New York State Banking Law;
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a member of the Federal Reserve System;
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a clearing corporation within the meaning of the Uniform Commercial Code; and
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a clearing agency registered under Section 17A of the Exchange Act.
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59
DTC was created to hold securities for its participants and to facilitate the clearance and
settlement of securities transactions between its participants through electronic book-entry changes to the accounts of its participants. DTCs participants include securities brokers and dealers, including the initial purchasers; banks and
trust companies; clearing corporations and other organizations. Indirect access to DTCs system is also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a custodial
relationship with a DTC participant, either directly or indirectly. Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC.
So long as DTCs nominee is the registered owner of the Global Exchange Notes, that nominee will be considered the sole owner or holder
of the Exchange Notes represented by the Global Exchange Notes for all purposes under the Indentures. Except as provided below under
Certificated Notes
, owners of beneficial interests in a Global Exchange Note:
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will not be entitled to have Exchange Notes represented by the Global Exchange Note registered in their names;
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will not receive or be entitled to receive physical, certificated Exchange Notes; and
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will not be considered the owners or holders of the Exchange Notes under the Indentures for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee under the
Indentures.
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As a result, each investor who owns a beneficial interest in a Global Exchange Note must rely on the procedures
of DTC to exercise any rights of a holder of Exchange Notes under the Indentures (and, if the investor is not a participant or an indirect participant in DTC, on the procedures of the DTC participant through which the investor owns its interest).
Payments of principal, premium (if any) and interest with respect to the Exchange Notes represented by a Global Exchange Note will be made by the trustee to DTCs nominee as the registered holder of the Global Exchange Note. We understand that
under existing industry practice, in the event an owner of a beneficial interest in a Global Exchange Note desires to take any action that the DTC, as the holder of the Global Exchange Note, is entitled to take, the DTC would authorize the
participants to take such action, and the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them.
We will make payments of principal of, premium, if any, and interest on Exchange Notes represented by the Global Exchange Notes registered in
the name of and held by the DTC or its nominee to the DTC or its nominee, as the case may be, as the registered owner and holder of the Global Exchange Notes. We expect that the DTC or its nominee, upon receipt of any payment of principal of,
premium, if any, or interest on the Global Exchange Notes will credit participants accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Exchange Notes as shown on the
records of the DTC or its nominee. We also expect that payments by participants or indirect participants to owners of beneficial interests in the Global Exchange Notes held through such participants or indirect participants will be governed by
standing instructions and customary practices and will be the responsibility of such participants or indirect participants. We will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the Global Exchange Notes for any Exchange Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between the DTC
and its participants or indirect participants or the relationship between such participants or indirect participants and the owners of beneficial interests in the Global Exchange Notes owning through such participants. Transfers between participants
in DTC will be effected under DTCs procedures and will be settled in
same-day
funds.
Although the DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Exchange Notes among
participants of the DTC, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Trustee nor the Company will have any responsibility or liability for the
performance by the DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations or otherwise.
60
Registration Rights; Special Interest
The following description is a summary of the material provisions of the Registration Rights Agreement. It does not restate that agreement in
its entirety. We urge you to read the Registration Rights Agreement in its entirety because it, and not this description, defines your registration rights as holders of the old notes.
In the event that:
(i) the Company is not (A) required to file the exchange offer registration statement or (B) permitted to
consummate the registered exchange offer because the registered exchange offer is not permitted by applicable law or SEC policy; or
(ii) any holder of the old notes notifies the Company prior to the 20th business day following consummation of the
registered exchange offer that (x) such holder is prohibited by law or SEC policy from participating in the registered exchange offer, (y) such holder may not resell the new notes acquired by it in the registered exchange offer to the
public without delivering a prospectus and the prospectus contained in the exchange offer registration statement is not appropriate or available for such resales by such holder or (z) such holder is a broker-dealer and holds old notes acquired
directly from the Company or any of its affiliates,
then, we will, at our cost, use our commercially reasonable efforts to file with the SEC a shelf
registration statement on an appropriate form under the Securities Act to cover resales of the old notes by holders who satisfy certain conditions relating to the provision of information in connection with the shelf registration statement.
If:
(1) the Company fails to file any of the registration statements required by the registration rights agreement on or
before the date required by the registration rights agreement for such filing;
(2) any of such registration
statements is not declared effective by the SEC on or prior to the date required by the registration rights agreement for such effectiveness (the Effectiveness Target Date);
(3) the Company fails to consummate the registered exchange offer within 30 business days (or longer, if required by
applicable securities law) of the Effectiveness Target Date with respect to the exchange offer registration statement; or
(4) the shelf registration statement or the exchange offer registration statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of old notes during the periods required by the registration rights agreement (each such event referred to in clauses (1) through (4) above, a Registration Default),
then the Company will pay Special Interest to each holder of old notes until all Registration Defaults have been cured. The provision for
Special Interest will be the only monetary remedy available to holders under the registration rights agreement.
During the first
90-day
period immediately following the occurrence of the first Registration Default, additional interest (Special Interest) will accrue on the outstanding principal amount of old notes at a rate equal
to 0.25% per annum, which rate will increase by an additional 0.25% per annum during each subsequent
90-day
period, until all Registration Defaults have been cured, up to a maximum Special Interest rate of
1.0% per annum in respect of all Registration Defaults.
61
All accrued Special Interest will be paid on the next scheduled interest payment date in the same
manner as any other interest on the notes. Following the cure of all Registration Defaults, the accrual of Special Interest will cease.
The Registration Rights Agreement may be amended or supplemented (and rights of holders of old notes thereunder may be waived) only pursuant
to the written consent of the holders of a majority in principal amount of the old notes.
Definitions
Set forth below is a summary of certain of the defined terms to be used in the Indenture. Reference is made to the form of Indenture for the
full definition of all such terms, as well as any other terms used herein for which no definition is provided.
Acquired
Indebtedness
means Indebtedness or Preferred Stock of a Person or any of its Subsidiaries (1) existing at the time such Person becomes a Restricted Subsidiary or at the time it merges or consolidates with the Issuer or any of its
Restricted Subsidiaries or (2) which becomes Indebtedness or Preferred Stock of the Issuer or a Restricted Subsidiary in connection with the acquisition of assets from such Person, in each case not incurred in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary or such acquisition, merger or consolidation.
Acquired Subordinated Indebtedness
means Indebtedness of the Issuer or any Subsidiary Guarantor that (i) is
subordinated or junior in right of payment to the Notes or such Subsidiary Guarantors Subsidiary Guarantee, as the case may be, (ii) constitutes Acquired Indebtedness and (iii) was not incurred in connection with, or in contemplation
of, another Person merging with or into, or becoming a Restricted Subsidiary of, the Issuer or any of its Subsidiaries.
Adjusted
Consolidated Net Tangible Assets
or
ACNTA
of a Person means (without duplication), as of the date of determination:
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(a)
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discounted future net revenues from proved oil and gas reserves of the Issuer and its Restricted Subsidiaries, calculated in accordance with Commission guidelines (before any state or federal or other income tax), as
estimated by a nationally recognized firm of independent petroleum engineers or the Issuer in a reserve report prepared by the Issuers petroleum engineers as of a date no earlier than the date of the Issuers latest annual consolidated
financial statements, as increased by, as of the date of determination, the estimated discounted future net revenues from:
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(i)
|
estimated proved oil and gas reserves acquired by the Issuer and its Restricted Subsidiaries since the date of such
year-end
reserve report; and
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(ii)
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estimated oil and gas reserves attributable to extensions, discoveries and other additions and upward revisions of estimates of proved oil and gas reserves since the date of such
year-end
reserve report due to exploration, development or exploitation, production and other activities, which reserves were not reflected in such reserve report which would, in accordance with standard
industry practice, result in such determinations,
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62
in each of cases (i) and (ii) calculated in accordance with Commission guidelines
(utilizing the prices utilized in such
year-end
reserve report), and decreased by, as of the date of determination, the estimated discounted future net revenues from:
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(iii)
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estimated proved oil and gas reserves produced or disposed of since the date of such
year-end
reserve report; and
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(iv)
|
estimated oil and gas reserves attributable to downward revisions of estimates of proved oil and gas reserves since the date of such
year-end
reserve report due to changes in
geological conditions, exploration, development or exploitation, production or other activities conducted since the date of such reserve report or other factors which would, in accordance with standard industry practice, cause such revisions,
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in each of cases (iii) and (iv) calculated in accordance with Commission guidelines (utilizing the prices
utilized in such
year-end
reserve report) and, in the case of each of clauses (i), (ii), (iii) and (iv), as estimated by the Issuers petroleum engineers or any independent petroleum engineers engaged by
the Issuer for that purpose; plus
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(b)
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the capitalized costs that are attributable to oil and gas properties of the Issuer and its Subsidiaries to which no proved oil and gas reserves are attributable, based on the Issuers books and records as of a
date no earlier than the date of the Issuers most recent annual or quarterly financial statements;
plus
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(c)
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the Net Working Capital on a date no earlier than the date of the Issuers most recent consolidated annual or quarterly financial statements;
plus
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(d)
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with respect to each other tangible asset of the Issuer or its consolidated Restricted Subsidiaries specifically including, but not to the exclusion of any other qualifying tangible assets, the Issuers or its
consolidated Restricted Subsidiaries gas gathering and processing facilities, land, equipment, leasehold improvements, investments carried on the equity method, restricted cash and the carrying value of marketable securities, the greater of
(i) the net book value of such other tangible asset on a date no earlier than the date of the Issuers most recent consolidated annual or quarterly financial statements and (ii) the appraised value, as estimated by independent
appraisers, of such other tangible assets of the Issuer and its Restricted Subsidiaries (provided that the Issuer may rely on subclause (i) of this clause (d) if no appraisal is available or has been obtained), as of a date no earlier than
the date of the Issuers latest audited financial statements;
minus
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(2)
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minority interests and, to the extent not otherwise taken into account in determining Adjusted Consolidated Net Tangible Assets, any net natural gas balancing liabilities of the Issuer and its consolidated Restricted
Subsidiaries reflected in the Issuers latest audited financial statements.
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In addition to, but without duplication
of, the foregoing, for purposes of this definition, Adjusted Consolidated Net Tangible Assets shall be calculated after giving effect, on a
pro forma
basis, to (A) any Investment not prohibited by the Indenture, to and
including the date of the transaction giving rise to the need to calculate Adjusted Consolidated Net Tangible Assets (the
Assets Transaction Date
), in any other Person that, as a result of such Investment, becomes a Restricted
Subsidiary of the Issuer, (B) the acquisition, to and including the Assets Transaction Date (by merger, consolidation or purchase of stock or assets), of any business or assets, including, without limitation, Permitted Industry Investments, and
(C) any sales or other dispositions of assets permitted by the Indenture (other than sales of Hydrocarbons or other mineral products in the ordinary course of business) occurring on or prior to the Assets Transaction Date. If the Issuer changes
its method of accounting from the successful efforts method to the full costs method or a similar method of accounting, ACNTA will continue to be calculated as if the Issuer were still using the successful efforts method of accounting.
63
Affiliate
means, with respect to any specified Person, any other Person who
directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term control means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative of the
foregoing.
Affiliate Transaction
has the meaning set forth under Certain CovenantsLimitation on
Transactions with Affiliates.
Asset Acquisition
means (1) an Investment by the Issuer or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a Restricted Subsidiary, or shall be merged with or into the Issuer or any Restricted Subsidiary, or (2) the acquisition by the Issuer or any Restricted Subsidiary of the
assets of any Person (other than a Restricted Subsidiary) which constitute all or substantially all of the assets of such Person or comprise any division, operating unit, segment, business, group of related assets or line of business of such Person.
Asset Sale
means any direct or indirect sale, issuance, conveyance, transfer, exchange, lease (other than operating
leases entered into in the ordinary course of business), assignment or other transfer for value by the Issuer or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Issuer or a Restricted
Subsidiary of:
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(1)
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any Capital Stock of any Restricted Subsidiary; or
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|
(2)
|
any other property or assets (including any interests therein) (other than cash or Cash Equivalents) of the Issuer or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar
transaction;
provided, however
, that Asset Sales shall not include:
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(a)
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the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Issuer in a transaction which is (i) made in compliance with the provisions of Certain
CovenantsMerger, Consolidation and Sale of Assets or (ii) subject to the provisions of Change of Control;
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(b)
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any Investment in an Unrestricted Subsidiary which is made in compliance with the provisions of Certain CovenantsLimitation on Restricted Payments above;
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(c)
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disposals, abandonments or replacements of damaged, unserviceable,
worn-out
or other obsolete equipment or other assets or assets that are no longer useful in the conduct of the
Crude Oil and Natural Gas Business of the Issuer and its Restrict Subsidiaries;
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(d)
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the sale, lease, conveyance, disposition or other transfer (each, a
Transfer
) by the Issuer or any Restricted Subsidiary of assets or property, or the issuance or sale of Capital Stock by a Restricted
Subsidiary, to the Issuer or one or more Restricted Subsidiaries;
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(e)
|
any disposition or other Transfer of Hydrocarbons or other mineral products in the ordinary course of business or the Transfer of equipment, inventory, products, services, accounts receivable or other assets in the
ordinary course of business;
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(f)
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any Transfer of an interest in an oil, gas or mineral property, pursuant to a
farm-out,
farm-in,
joint operating, overriding royalty
interest, area of mutual interest or unitization agreement, or other similar or customary arrangement or agreement that the Issuer or any Restricted Subsidiary determines in good faith to be necessary or appropriate for the economic development of
such Property other than Production Payments and Reserve Sales;
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64
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(g)
|
surrender or waiver of contract rights, oil and gas leases or property related thereto, abandonment of any oil or gas property or interests therein or the settlement, release or surrender of contract, tort or other
claims of any kind;
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(h)
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any disposition of defaulted receivables that have been
written-off
as uncollectible that arose in the ordinary course of business for collection;
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(j)
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the Transfer by the Issuer or any Restricted Subsidiary of assets or property in any single transaction or series of related transactions that involve assets or properties having a Fair Market Value (valued at the Fair
Market Value of such assets or property at the time of such Transfer) not to exceed $20.0 million;
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(k)
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a Restricted Payment that does not violate the covenant described above under the caption Certain CovenantsLimitation on Restricted Payments or a Permitted Investment (including, without
limitation, unwinding any Commodity Agreements, Interest Rate Agreements or Currency Agreements);
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(l)
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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 Crude Oil and
Natural Gas Business for geologists, geophysicists and other providers of technical services to the Issuer or a Restricted Subsidiary, shall have been created, incurred, issued, assumed or Guaranteed in connection with the acquisition or financing
of, and within 60 days after the acquisition of, the property that is subject thereto;
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(m)
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the disposition (whether or not in the ordinary course of the Crude Oil and Natural Gas Business) of oil or gas properties or direct or indirect interests in real property;
provided
that at the time of such sale
or transfer such properties do not have associated with them any proved reserves;
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(n)
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the
farm-out,
lease or sublease of developed or undeveloped crude oil or natural gas properties owned or held by the Issuer or such Restricted Subsidiary in exchange for crude oil
and natural gas properties owned or held by another Person;
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(o)
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the creation or perfection of a Lien (but not, except to the extent contemplated in clause (p) below, the sale or other disposition of the properties or assets subject to such Lien);
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(p)
|
the creation or perfection of a Permitted Lien and the exercise by any Person in whose favor a Permitted Lien is granted of any of its rights in respect of that Permitted Lien;
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(q)
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the licensing or sublicensing of intellectual property, including, without limitation, licenses for seismic data, in the ordinary course of business and which do not materially interfere with the business of the Issuer
and its Restricted Subsidiaries; and
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(r)
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the disposition of oil and natural gas properties in connection with tax credit transactions complying with Section 29 of the Internal Revenue Code or any successor or analogous provisions of the Internal Revenue
Code.
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Asset Swap
means any trade or exchange by the Issuer or any Restricted Subsidiary of oil and gas
properties or other properties or assets for oil and gas properties or other properties or assets owned or held by another Person;
provided
that the Fair Market Value of the properties or assets traded or exchanged by the Issuer or such
Restricted Subsidiary (together with any cash) is reasonably equivalent to the Fair Market Value of the properties or assets (together with any cash) to be received by the Issuer or such Restricted Subsidiary;
provided,
further
, that
any Net Cash Proceeds received must be applied in accordance with Certain CovenantsLimitation on Asset Sales.
65
Board of Directors
means, as to any Person, the board of directors (or similar
governing body) of such Person or any duly authorized committee thereof including, in the case of a limited partnership, the board of directors of the managing general partner thereof.
Board Resolution
means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant
Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.
Borrowing Base
means the Borrowing Base as defined in and as determined from time to time pursuant to the
Senior Credit Facility; provided that the Borrowing Base under such Credit Facility is determined on a basis substantially consistent with customary terms for oil and gas secured reserve based loan transactions and has a lender group that includes
one or more commercial financial institutions which engage in oil and gas reserve based lending in the ordinary course of their respective businesses.
Business Day
means any day other than a Saturday, Sunday or any other day on which commercial banking institutions in the
City of New York are required or authorized by law or other governmental action to be closed.
Capital Stock
means:
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(1)
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with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common
Stock and Preferred Stock of such Person and including any warrants, options or rights to acquire any of the foregoing and instruments convertible into any of the foregoing;
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(2)
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with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person; and
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(3)
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any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person,
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but excluding from all of the foregoing clauses (1), (2) and (3) any debt securities convertible into Capital Stock, whether or not such debt securities
include any right of participation with Capital Stock.
Capitalized Lease Obligation
means, as to any Person, an
obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP (other than any obligation that is required to be classified and accounted for as an operating lease for
financial reporting purposes in accordance with GAAP as in effect on the Issue Date), and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the stated
maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. For purposes of the covenant
described under Certain CovenantsLimitation on Liens, a Capitalized Lease Obligation will be deemed to be secured by a Lien on the property being leased.
Cash Equivalents
means:
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(1)
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marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing
within one year from the date of acquisition thereof;
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66
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(2)
|
marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the three highest ratings obtainable from either S&P or Moodys;
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(3)
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commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having one of the two highest ratings obtainable from Moodys or S&P;
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(4)
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certificates of deposit or bankers acceptances maturing within one year from the date of acquisition thereof or demand deposit accounts and Eurodollar time deposits and overnight bank deposits issued by any bank
organized under the laws of the United States of America or any state thereof or the District of Columbia or any United States branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than
$100 million;
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(5)
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repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (1) or (2) above entered into with any bank meeting the qualifications specified in clause
(4) above;
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(6)
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deposits in money market funds investing in instruments of the type specified in clauses (1) through (5) above; and
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(7)
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money market mutual or similar funds having assets in excess of $100 million.
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Change of Control
means the occurrence of one or more of the following events: (a) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Issuer to any Person or Group (each, a
Transferee
) as such terms are used in Section 13(d) and 14(d) of the
Exchange Act (whether or not otherwise in compliance with the provisions of the Indenture), but excluding any such sale, lease, exchange or other transfer as part of a transaction in compliance with Certain CovenantsMerger,
Consolidation and Sale of Assets if the owners of the Capital Stock of the Issuer immediately prior to such transaction own at least a majority of the Capital Stock of such Transferee immediately after such transaction by economic or voting
interest; (b) the approval by the Issuer of any plan or proposal for the liquidation or dissolution of the Issuer (whether or not otherwise in compliance with the provisions of the Indenture); (c) any Person or Group shall become the beneficial
owner (as defined in Rule
13d-3
of the Exchange Act, except that a Person or Group shall be deemed to be a beneficial owner of all securities such Person or Group shall have the right to acquire or vote within
one year), directly or indirectly, of Capital Stock representing more than 50% of the aggregate total ordinary voting power represented by the issued and outstanding Capital Stock of the Issuer; or (d) the replacement of a majority of the Board
of Directors of the Issuer over a
two-year
period from the directors who constituted the Board of Directors of the Issuer at the beginning of such period with directors who shall not have been approved by a
vote of at least a majority of the Board of Directors of the Issuer then still in office who either were members of such Board of Directors at the Issue Date or whose election as a member of such Board of Directors was previously so approved.
Change of Control Offer
has the meaning set forth under Change of Control.
Change of Control Payment Date
has the meaning set forth under Change of Control.
Commission
means the Securities and Exchange Commission.
Commodity Agreements
means, with respect to any Person, any futures contract, forward contract, commodity swap agreement,
commodity option agreement, hedging agreements and other agreements or arrangements or any combination thereof entered into by such Person in respect of Hydrocarbons purchased, used, produced, processed or sold by such Person or its Subsidiaries
that are customary in the Crude Oil and Natural Gas Business and that are designed to manage the risks of Hydrocarbon price fluctuations.
Common Stock
of any Person means any and all shares, interests or other participations in, and other equivalents (however
designated and whether voting or
non-voting)
of such Persons common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes
of such common stock.
67
Company Properties
means all Properties, and equity, partnership or other
ownership interests therein, that are related or incidental to, or used or useful in connection with, the conduct or operation of any business activities of the Issuer or the Subsidiaries, which business activities are not prohibited by the terms of
the Indenture.
Consolidated EBITDAX
means, for any period, the sum (without duplication) of:
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(1)
|
Consolidated Net Income; and
|
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(2)
|
to the extent Consolidated Net Income has been reduced thereby:
|
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(a)
|
all income taxes of the Issuer and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period;
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(b)
|
Consolidated Interest Expense;
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(c)
|
the amount of any Preferred Stock dividends paid by the Issuer and its Restricted Subsidiaries; and
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(d)
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Consolidated
Non-cash
Charges or consolidated exploration expense,
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less
any
non-cash
items increasing Consolidated Net Income for such period, all as determined on a consolidated
basis for the Issuer and its Restricted Subsidiaries in accordance with GAAP.
Consolidated EBITDAX Coverage Ratio
means, with respect
to the Issuer, the ratio of (i) Consolidated EBITDAX of the Issuer during the four full fiscal quarters for which financial information in respect thereof is available (the
Four Quarter Period
) ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated EBITDAX Coverage Ratio (the
Transaction Date
) to (ii) Consolidated Fixed Charges of the Issuer for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, Consolidated EBITDAX and Consolidated Fixed Charges shall be calculated after giving effect (without duplication) on a
pro forma
basis for the period of
such calculation to:
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(1)
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the incurrence or repayment of any Indebtedness or issuance of Preferred Stock of the Issuer or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness or issuance of other Preferred Stock (and the application of the proceeds thereof), other than the incurrence or repayment of indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or
repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period; and
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(2)
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any Asset Sales (and the application of the proceeds thereof) or Asset Acquisitions by the Issuer or any Restricted Subsidiary (or by any Person acquired by the Issuer or any Restricted Subsidiary) (including, without
limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Issuer or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition)
incurring Acquired Indebtedness, and also including, without limitation, any Consolidated EBITDAX attributable to the assets which are the subject of the Asset Acquisition or Asset Sale (and the application of the proceeds thereof) during the Four
Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale (and the application of the proceeds thereof) or Asset
Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period.
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68
For purposes of this definition, (a) any Person that is a Restricted Subsidiary on the
Transaction Date will be deemed to have been a Restricted Subsidiary at all times during the Four Quarter Period; and (b) any Person that is not a Restricted Subsidiary on the Transaction Date will be deemed not to have been a Restricted
Subsidiary at any time during the Four Quarter Period. If the Issuer or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding paragraph shall give effect to the incurrence of such
guaranteed Indebtedness as if the Issuer or the Restricted Subsidiary, as the case may be, had directly incurred or otherwise assumed such guaranteed Indebtedness.
For purposes of this definition, whenever
pro forma
effect is to be given to an acquisition or disposition of assets or any other event
in connection with any calculation, the
pro forma
calculations shall be determined in good faith by a responsible financial or accounting Officer of the Issuer (including
pro forma
expense and cost reductions and any
pro forma
expense and cost reductions that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial officer of the Issuer (regardless of whether those cost savings or operating improvements could then be reflected
in pro forma financial statements in accordance with Regulation
S-X
promulgated under the Securities Act or any regulation or policy of the Commission related thereto)).
Furthermore, in calculating Consolidated Fixed Charges for purposes of determining the denominator (but not the numerator) of this
Consolidated EBITDAX Coverage Ratio:
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(1)
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interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate
per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction Date;
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(2)
|
if interest on any Indebtedness actually incurred on the Transaction Date 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
rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and
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(3)
|
notwithstanding clauses (1) and (2) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Rate Agreements, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of such agreements.
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Consolidated Fixed
Charges
means, with respect to the Issuer for any period, the sum, without duplication, of:
|
(1)
|
Consolidated Interest Expense (including any premium or penalty paid in connection with redeeming or retiring Indebtedness of the Issuer and its Restricted Subsidiaries prior to the stated maturity thereof pursuant to
the agreements governing such Indebtedness),
plus
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(2)
|
the amount of all dividend payments on any series of Preferred Stock of the Issuer or any Restricted Subsidiary (other than dividends paid in Qualified Capital Stock and other than to the Issuer or any Restricted
Subsidiary) paid, accrued or scheduled to be paid or accrued during such period.
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Consolidated Interest
Expense
means, with respect to the Issuer for any period, the sum of, without duplication:
|
(1)
|
the aggregate of the interest expense of the Issuer and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation, (a) any amortization of
original issue discount and debt issuance cost, (b) the net costs, losses or gains under Interest Rate Agreements, (c) all capitalized interest, and (d) the interest portion of any deferred payment obligation,
plus
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69
|
(2)
|
the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Issuer and its Restricted Subsidiaries during such period, as determined on a consolidated basis in
accordance with GAAP,
minus
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(3)
|
to the extent included above,
write-off
of deferred financing costs and interest attributable to Dollar-Denominated Production Payments.
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Consolidated Net Income
means, with respect to the Issuer for any period, the aggregate net income (or loss) of the Issuer
and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP;
provided, however
, that there shall be excluded therefrom:
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(1)
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any net
after-tax
gains (or losses) from Asset Sales or abandonments or reserves relating thereto;
|
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(2)
|
any net
after-tax
extraordinary or nonrecurring gains (or losses) and any net
after-tax
gain or loss realized upon the sale or other
disposition of any Capital Stock of any Person;
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(3)
|
the net income (but not loss) of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by charter, contract,
operation of law or otherwise;
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(4)
|
the net income of any Person in which the Issuer has an interest, other than a Restricted Subsidiary, except to the extent of cash dividends or distributions actually paid to the Issuer or to a Restricted Subsidiary by
such Person (and
provided
that the Issuers equity in a net loss of any such Person for such period shall not be included in determining such Consolidated Net Income, except to the extent of the aggregate cash actually contributed to
such Person by the Issuer or a Restricted Subsidiary during such period);
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(5)
|
(a) any net
after-tax
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) and (b) any income or loss attributable to any Person acquired in any
pooling-of-interests
transaction for any period
prior to the date of such acquisition;
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(6)
|
in the case of a successor to the Issuer by consolidation or merger or as a transferee of the Issuers assets, any net income (or loss) of the successor corporation prior to such consolidation, merger or transfer
of assets;
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(7)
|
any
non-cash
charges related to a ceiling test write-down under GAAP;
|
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(8)
|
any unrealized
non-cash
gains or losses or charges in respect of Interest Rate Agreements, Currency Agreements or Commodity Agreements (including those resulting from the
application of SFAS 133);
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(9)
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any
non-cash
compensation charge arising from any grant of stock, stock options or other equity-based awards, in accordance with GAAP;
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(10)
|
any consolidated
non-cash
gains or losses arising from changes in GAAP standards or principles after the Issue Date or the cumulative effect thereof;
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(11)
|
all net income or loss of Unrestricted Subsidiaries;
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(12)
|
any asset (including goodwill) impairment or writedown on or related to Crude Oil and Natural Gas Properties or other
non-current
assets under applicable GAAP or Commission
guidelines; and
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70
|
(13)
|
any
non-cash
or nonrecurring charges associated with any premium or penalty paid,
write-off
of deferred financing costs or other financial
recapitalization charges in connection with redeeming or retiring any Indebtedness prior to maturity.
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Consolidated
Net Worth
means, with respect to any specified Person as of any date, the sum of:
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(1)
|
the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date;
plus
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(2)
|
the respective amounts reported on such Persons balance sheet as of such date with respect to any series of Preferred Stock (other than Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such Preferred Stock.
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Consolidated
Non-cash
Charges
means, with respect to the Issuer,
for any period, the aggregate depreciation, depletion, amortization, impairment and other
non-cash
charges or expenses of the Issuer and its Restricted Subsidiaries reducing Consolidated Net Income of the
Issuer for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charge which requires an accrual of or a reserve for cash charges for any future period).
consolidation
means, with respect to any Person, the consolidation of the accounts of the Restricted Subsidiaries of such
Person with those of such Person, all in accordance with GAAP; provided, however, that consolidation will not include consolidation of the accounts of any Unrestricted Subsidiary of such Person with the accounts of such Person. The term
consolidated
has a correlative meaning to the foregoing.
Covenant Defeasance
has the meaning set
forth under Legal Defeasance and Covenant Defeasance.
Credit Facility
means, with respect to the
Issuer or any Restricted Subsidiary, one or more debt facilities (or other financing arrangement (including, without limitation, the Senior Credit Facility, commercial paper facilities, letters of credit facilities, bankers acceptances or
indentures), in each case with banks or other institutional lenders that engage in making bank loans or similar extensions of credit in the ordinary course, providing for revolving credit loans, term loans, letters of credit, bankers
acceptances or other borrowings, in each case, as amended, restated, modified, renewed, extended, refunded, replaced (whether upon or after termination or otherwise) or refinanced (in each case, without limitation as to amount), in whole or in part,
from time to time; provided that any Credit Facility includes assignment provisions substantially similar to the assignment provisions contained in the Senior Credit Facility as in effect on the date of the Indenture.
Crude Oil and Natural Gas Business
means:
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(1)
|
the acquisition, exploration, exploitation, development, operation, production, hedging, swapping and disposition of interests in oil, natural gas and other Hydrocarbon properties and assets;
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(2)
|
the gathering, marketing, treating, processing, storage, refining, hedging, swapping, selling and transporting of any production from such interests, properties or assets (or interests, properties or assets of others)
and products produced in association therewith; and
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(3)
|
activities arising from, relating to or necessary, appropriate, ancillary, complementary or incidental to the foregoing.
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Crude Oil and Natural Gas Properties
means all Properties, including equity or other ownership interests therein, owned by
any Person which contain or have been assigned proved oil and gas reserves, as defined in Rule
4-10
of Regulation
S-X
of the Securities Act.
71
Crude Oil and Natural Gas Related Assets
means any Investment or capital
expenditure (but not including additions to working capital or repayments of any revolving credit or working capital borrowings) by the Issuer or any Subsidiary of the Issuer which is related to the business of the Issuer and its Subsidiaries as it
is conducted on the date of the Asset Sale giving rise to the Net Cash Proceeds to be reinvested.
Currency Agreement
means, with respect to any Person, any foreign exchange contract, currency swap agreement, currency futures contract, currency option contract or other similar agreement or arrangement to which such Person is a party or beneficiary.
Default
means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both
would be, an Event of Default.
Disqualified Stock
means that portion of any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person that is not itself
Disqualified Stock) or is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock, pursuant to a sinking fund obligation or otherwise, or is mandatorily redeemable at the sole option of the holder thereof
(other than redeemable only for Capital Stock of such Person that is not itself Disqualified Stock) or is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock, in whole or in part, in either case, on or
prior to the final stated maturity of the Notes;
provided, however
, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem
such Capital Stock upon the occurrence of an asset sale or change of control occurring prior to the final stated maturity of the Notes shall not constitute Disqualified Stock if:
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(1)
|
the asset sale or change of control provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Notes and described
under Certain CovenantsLimitation on Asset Sales and Change of Control; and
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(2)
|
any such requirement only becomes operative after compliance with such terms applicable to the Notes, including the purchase of any Notes tendered pursuant thereto (or concurrently therewith, provided that all of the
Notes validly tendered for purchase and not withdrawn pursuant to the requirements described under Change of Control or Certain Covenants Limitation on Asset Sales are so purchased).
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The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price will be calculated in accordance
with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined pursuant to the Indenture;
provided, however
, that if
such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be the book value of such Disqualified Stock as reflected in the most recent
financial statements of such Person.
Dollar-Denominated Production Payment
means production payment obligations
recorded as liabilities in accordance with GAAP, together with all undertakings and obligations in connection therewith.
Equity
Offering
means an offering of Qualified Capital Stock of the Issuer, including any Public Equity Offerings and any
non-public,
unregistered offering or private placement of such Qualified Capital
Stock, or any contribution to capital of the Issuer in respect of Qualified Capital Stock of the Issuer.
Exchange Act
means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.
Fair Market Value
means, with respect to any asset or property, the price which would be paid in an
arms-length,
free market transaction, for cash, between an informed and willing seller and an informed and willing buyer,
neither of whom is under undue pressure or compulsion to complete the transaction. Unless otherwise provided in the Indenture, (i) Fair Market Value of an asset or property in excess of $20 million shall be determined in good faith by the
Board of Directors of the Issuer, and shall be evidenced by a Board Resolution, and (ii) any
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lesser Fair Market Value shall be determined by the principal financial officer or principal accounting officer of the Issuer acting in good faith, which determination, in the case of clause
(i) or (ii) will be conclusive for all purposes under the Indenture.
Fall-Away Period
has the meaning set
forth under Certain covenantsCovenant suspension.
Foreign Subsidiary
means a Restricted Subsidiary
not organized or existing under the laws of the United States of America or any state or territory thereof and any direct or indirect subsidiary of such Restricted Subsidiary, and in each such case, as of its most recently available balance sheet
date, at least 50% of the tangible assets of which were not located in the United States of America or any state or territory thereof.
GAAP
means generally accepted accounting principles in the United States of America as in effect from time to time,
including those set forth in:
|
(1)
|
the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants;
|
|
(2)
|
statements and pronouncements of the Financial Accounting Standards Board;
|
|
(3)
|
such other statements by such other entity as approved by a significant segment of the accounting profession; and
|
|
(4)
|
the rules and regulations of the Commission governing the inclusion of financial statements (including
pro forma
financial statements) in periodic reports required to be filed pursuant to Section 13 of the
Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the Commission.
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guarantee
means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness
of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
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(1)
|
to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to
take-or-pay
or to maintain financial statement conditions or otherwise); or
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(2)
|
entered into for the purpose 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);
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provided, however
, that the term guarantee shall not include endorsements for collection or deposit in the ordinary course of business or
any obligation to the extent it is payable only in Qualified Capital Stock. The term
guarantee
used as a verb has a corresponding meaning.
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 all products,
by-products
and all other substances (whether or not hydrocarbon in nature) produced in connection
therewith or refined, separated, settled or derived therefrom or the processing thereof, and all other minerals and substances related to the foregoing, including, but not limited to, liquified petroleum gas, natural gas, kerosene, sulphur, lignite,
coal, uranium, thorium, iron, geothermal steam, water, carbon dioxide, helium, and any and all other minerals, ores, or substances of value, and the products and proceeds therefrom, including, without limitation, all gas resulting from the
in-situ
combustion of coal or lignite.
incur
has the meaning set forth under
Certain CovenantsLimitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock. Notwithstanding the foregoing, solely for purposes of determining compliance with Certain
CovenantsLimitation on Incurrence of Additional Indebtedness and Issuance of
73
Preferred Stock, the following will not be deemed to be incurrences of Indebtedness or issuances of Preferred Stock:
|
(1)
|
amortization of debt discount or the accretion of principal with respect to a
non-interest
bearing or other discount security;
|
|
(2)
|
the payment of regularly scheduled interest in the form of additional Indebtedness of the same instrument or the payment of regularly scheduled dividends on Capital Stock in the form of additional Capital Stock of the
same class and with the same terms;
|
|
(3)
|
the obligation to pay a premium in respect of Indebtedness or Preferred Stock arising in connection with the issuance of a notice of redemption or making of a mandatory offer to purchase such Indebtedness or Preferred
Stock; and
|
|
(4)
|
unrealized losses or charges in respect of hedging obligations (including those resulting from the application of SFAS 133).
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Indebtedness
means with respect to any Person, without duplication:
|
(1)
|
the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable;
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(2)
|
all Capitalized Lease Obligations of such Person;
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(3)
|
all obligations of such Person representing the deferred purchase price of property, all conditional sale obligations of such Person and all obligations under any title retention agreement (but excluding Trade Accounts
Payable), to the extent such obligations would appear as a liability upon the balance sheet of such Person in accordance with GAAP;
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(4)
|
all obligations for the reimbursement of any obligor on any outstanding letter of credit, bankers acceptance or similar credit transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such
drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit);
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(5)
|
guarantees and other contingent obligations in respect of Indebtedness referred to in this definition;
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(6)
|
all obligations of any other Person of the type referred to in clauses (1) through (5) above which are secured by any Lien on any property or asset of such Person, the amount of such obligation being deemed to be
the lesser of the Fair Market Value of such property or asset and the amount of the obligation so secured;
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(7)
|
all net payment obligations under Commodity Agreements, Currency Agreements and Interest Rate Agreements;
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(8)
|
all Disqualified Stock issued by such Person with the amount or principal amount of
Indebtedness represented by such Disqualified Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed redemption price or repurchase price; and
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74
|
(9)
|
any guarantee by such Person of production or payment with respect to (A) a Production Payment or (B) Production Payments and Reserve Sales;
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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 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, and the other applicable terms of the instrument governing such indebtedness, shall not constitute Indebtedness.
For purposes hereof, the maximum fixed repurchase price of any Disqualified Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon,
or measured by, the Fair Market Value of such Disqualified Stock, such Fair Market Value shall be determined reasonably and in good faith by the Board of Directors of the Issuer. Notwithstanding the foregoing, (i) accrued expenses and Trade
Accounts Payable arising in the ordinary course of business shall not constitute Indebtedness and (ii) except as expressly provided in clause (9) above, Production Payments and Reserve Sales shall not constitute
Indebtedness.
Any obligation of a 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 maximum payment obligations, 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
shall not constitute Indebtedness.
Notwithstanding the foregoing, in connection with the acquisition or disposition of any business,
assets or Capital Stock of a Restricted Subsidiary or the Issuer, Indebtedness will exclude any obligations arising from agreements of the Issuer or any of its Restricted Subsidiaries providing for indemnification, guarantees (other than
guarantees of Indebtedness), adjustment of purchase price, holdbacks, contingent payment obligations based on a final financial statement or performance of acquired or disposed of assets or similar obligations, in each case, incurred or assumed in
connection with such acquisition or disposition.
The amount or principal amount of Indebtedness at any time of
determination as used herein shall, except as set forth below, be determined in accordance with GAAP:
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(1)
|
the amount or principal amount of any Indebtedness issued at a price that is less than the principal amount at maturity thereof shall be the accreted value thereof;
|
|
(2)
|
the amount or principal amount of any Capitalized Lease Obligation shall be the amount determined in accordance with the definition thereof;
|
|
(3)
|
the amount or principal amount of any Preferred Stock shall be the greater of its voluntary or involuntary liquidation preference and its maximum fixed redemption price or repurchase price;
|
|
(4)
|
the amount or principal amount of any Interest Rate Agreements included in the definition of Permitted Indebtedness shall be zero;
|
|
(5)
|
the amount or principal amount of all other unconditional obligations shall be the amount of the liability thereof determined in accordance with GAAP; and
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|
(6)
|
the amount or principal amount of all other contingent obligations shall be the maximum liability at such date of such Person.
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Independent Advisor
means a reputable accounting, appraisal or nationally recognized investment banking, engineering or
consulting firm (a) which does not, and whose directors, officers and employees or
75
Affiliates do not, have a direct or indirect material financial interest in the Issuer and (b) which, in the judgment of the Board of Directors of the Issuer, is otherwise disinterested,
independent and qualified to perform the task for which it is to be engaged.
Interest Rate Agreements
means, with
respect to any Person, (i) any agreements of such Person with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and (ii) any interest rate protection agreements,
interest rate future agreements, interest rate option agreements, agreements providing for interest rate swaps, caps, floors or collars and similar agreements or arrangements to which such Person is a party or beneficiary.
Investment
means, with respect to any Person, any direct or indirect:
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(1)
|
loan, advance or other extension of credit (including, without limitation, a guarantee) or capital contribution (by means of any transfer of cash or other property valued at the Fair Market Value thereof as of the date
of transfer) to others or any payment for property or services for the account or use of others;
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|
(2)
|
purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities (excluding any interest in a crude oil or natural gas leasehold to the extent constituting a security under
applicable law) or evidences of Indebtedness issued by any other Person (whether by merger, consolidation, amalgamation or otherwise and whether or not purchased directly from the issuer of such securities or evidences of Indebtedness);
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(3)
|
guarantee or assumption of the Indebtedness of any other Person (other than the guarantee or assumption of Indebtedness of such Person or a Restricted Subsidiary of such Person which guarantee or assumption is made in
compliance with the provisions of Certain CovenantsLimitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock above); and
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(4)
|
other items that would be classified as investments on a balance sheet of such Person prepared in accordance with GAAP.
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Notwithstanding the foregoing, Investment shall exclude direct or indirect advances or payments to customers or suppliers in the
ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on a balance sheet, endorsements for collection or deposits arising in the ordinary course of business, any loan or
extension of credit represented by a bank deposit other than a time deposit, any interest in an oil or gas leasehold to the extent constituting a security under applicable law and extensions of trade credit by the Issuer and its Restricted
Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Issuer or such Restricted Subsidiary, as the case may be. The amount of any Investment shall be its Fair Market Value at the time the investment is made
and shall not be adjusted for increases or decreases in value, or
write-ups,
write-downs or write-offs with respect to such Investment. If the Issuer 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, it ceases to be a Subsidiary of the Issuer, the Issuer 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 Restricted Subsidiary not sold or disposed of.
Investment Grade Rating
means a Moodys rating of Baa3 or higher and an S&P rating of
BBB-
or higher or, if either such Rating Agency ceases to rate the Notes for reasons outside of the Issuers control, the equivalent investment grade credit rating from any other Rating Agency.
Issue Date
means the date of original issuance of the Notes (excluding, for such purpose any Additional Notes).
Legal Defeasance
has the meaning set forth under Legal Defeasance and Covenant Defeasance.
76
Lien
means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest).
Measurement Date
means March 31, 2017.
Moodys
means Moodys Investors Service, Inc.
Net Cash Proceeds
means, with respect to any Asset Sale, the aggregate proceeds in the form of cash or Cash Equivalents
including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents received by the Issuer or any of its Restricted Subsidiaries from such Asset Sale net of (a) reasonable
out-of-pocket
expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting, reservoir engineering and investment banking fees and sales
commissions and title expenses), (b) taxes (including secondary tax expenses) paid or payable or taxes required to be accrued as a liability under GAAP after taking into account any reduction in consolidated tax liability due to available tax
credits or deductions and any tax sharing arrangements, (c) repayment of Indebtedness or Preferred Stock that is required to be repaid in connection with such Asset Sale or that is secured by any assets subject to such Asset Sale, in accordance
with the terms of any Lien upon such assets, (d) appropriate amounts to be provided by the Issuer or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any post closing adjustments or liabilities
associated with such Asset Sale and retained by the Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, and (e) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of
such Asset Sale.
Net Proceeds Offer
has the meaning set forth under Certain CovenantsLimitation on
Asset Sales.
Net Proceeds Offer Amount
has the meaning set forth under Certain
CovenantsLimitation on Asset Sales.
Net Proceeds Offer Payment Date
has the meaning set forth under
Certain CovenantsLimitation on Asset Sales.
Net Proceeds Offer Trigger Date
has the meaning
set forth under Certain CovenantsLimitation on Asset Sales.
Net Working Capital
means all
current assets (other than current assets from Commodity Agreements) of the Issuer and its consolidated Subsidiaries, minus all current liabilities of the Issuer and its consolidated Subsidiaries, except current liabilities included in Indebtedness
and any current liabilities from Commodity Agreements, in each case as set forth in financial statements of the Issuer prepared in accordance with GAAP (excluding any adjustments made pursuant to FAS 133);
provided
that current assets and
current liabilities shall exclude Consolidated
Non-cash
Charges.
Non-Guarantor
Restricted Subsidiary
means any Restricted Subsidiary that is not a Subsidiary Guarantor and is not a Wholly-Owned Restricted Subsidiary and has been designated by the Issuer as a
Non-Guarantor
Restricted Subsidiary, as evidenced by a Board Resolution.
Pari Passu
Indebtedness
means any Indebtedness of the Issuer or any Subsidiary Guarantor that ranks
pari passu
in right of payment with the Notes or such Subsidiary Guarantees, as applicable.
Permitted Acquisition Indebtedness
means Indebtedness or Preferred Stock of the Issuer or any of its Restricted
Subsidiaries to the extent such Indebtedness or Preferred Stock was Indebtedness of:
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(1)
|
a Subsidiary prior to the date on which such Subsidiary became a Restricted Subsidiary; or
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77
|
(2)
|
a person that was merged or consolidated into the Issuer or a Restricted Subsidiary;
|
provided
that on
the date such Subsidiary became a Restricted Subsidiary or the date such Person was merged or consolidated into the Issuer or a Restricted Subsidiary, as applicable, after giving pro forma effect thereto,
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(a)
|
the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated EBITDAX Coverage Ratio test described under Certain CovenantsLimitation on Incurrence of
Additional Indebtedness and Issuance of Preferred Stock,
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(b)
|
the Consolidated EBITDAX Coverage Ratio for the Issuer would be equal to or greater than the Consolidated EBITDAX Coverage Ratio for the Issuer immediately prior to such transaction, or
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|
(c)
|
the Consolidated Net Worth of the Issuer would be equal to or greater than the Consolidated Net Worth of the Issuer immediately prior to such transaction.
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Permitted Indebtedness
means, without duplication, each of the following:
|
(1)
|
(A) the Notes issued on the Issue Date or (B) the Exchange Notes issued pursuant to the Exchange Offer or (C) any Subsidiary Guarantees of any Notes or Exchange Notes referred to in clauses (A) or (B);
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(2)
|
Indebtedness of the Issuer or any Restricted Subsidiary incurred pursuant to the Credit Facilities; provided, however, that immediately after giving effect to the incurrence of Indebtedness under the Credit Facilities,
the aggregate principal amount of all Indebtedness incurred under this clause (2) and then outstanding does not exceed the greater of (i) $1.0 billion and (ii) an amount equal to the sum of (A) $400.0 million plus (B) 30% of
Adjusted Consolidated Net Tangible Assets determined as of the date of the incurrence of such Indebtedness;
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(3)
|
Indebtedness of a Restricted Subsidiary to, or Preferred Stock of a Restricted Subsidiary held by, the Issuer or to a Restricted Subsidiary for so long as such Indebtedness or Preferred Stock is held by the Issuer or a
Restricted Subsidiary, in each case subject to no Lien held by a Person other than the Issuer or a Restricted Subsidiary;
provided, however
, that if as of any date any Person other than the Issuer or a Restricted Subsidiary owns or holds any
such Indebtedness or Preferred Stock or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of the Indebtedness or issuance of the Preferred Stock so held by a Person other than the Issuer or a Restricted
Subsidiary not constituting Permitted Indebtedness under this clause (3) by the issuer of such Indebtedness or Preferred Stock;
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(4)
|
Indebtedness (including the $315.3 million aggregate principal amount of the Issuers 7
5
/
8
% Senior Notes due 2019, $400.0 million aggregate principal amount of the Issuers 7% Senior Notes due 2022 and the $0.6 million aggregate principal amount of the Issuers 5.0%
Convertible Senior Notes due 2028) or Preferred Stock outstanding on the Issue Date (other than Indebtedness described in clause (1), (2) or (3));
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(5)
|
the guarantee by the Issuer or any Restricted Subsidiary of any Indebtedness that is (x) referred to in clause (2) or (4) or (y) permitted by the Indenture to be incurred by the Issuer or any Restricted
Subsidiary;
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(6)
|
Interest Rate Agreements of the Issuer or a Restricted Subsidiary covering Indebtedness of the Issuer or any of its Restricted Subsidiaries;
provided, however
, that such Interest Rate Agreements are entered into
to manage the exposure of the Issuer and its Restricted Subsidiaries to fluctuations in interest rates with respect to Indebtedness incurred in accordance with the Indenture to the extent the notional principal amount of such Interest Rate
Agreements does not exceed the principal amount of the Indebtedness to which such Interest Rate Agreements relate;
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78
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(7)
|
Indebtedness of the Issuer to a Restricted Subsidiary for so long as such Indebtedness is held by a Restricted Subsidiary, in each case subject to no Lien;
provided, however
, that (i) any Indebtedness of the
Issuer to any Restricted Subsidiary that is not a Subsidiary Guarantor is unsecured and (ii) if as of any date any Person other than a Restricted Subsidiary owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of the Indebtedness so held by a Person other than the Issuer not constituting Permitted Indebtedness under this clause (7) by the Issuer;
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(8)
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Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business;
provided, however
, that such Indebtedness is extinguished within five Business Days of incurrence;
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(9)
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Indebtedness of the Issuer or any of its Restricted Subsidiaries represented by (a) payment obligations in connection with self-insurance, or bid, performance, appeal or surety bonds or similar bonds or for
completion or performance guarantees or obligations or for similar requirements in the ordinary course of business and any guarantees or letters of credit functioning as or supporting any of the foregoing bonds or (b) obligations represented by
letters of credit for the account of the Issuer or such Restricted Subsidiary, as the case may be, in order to provide security for workers compensation claims;
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(10)
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Refinancing Indebtedness issued to Refinance Indebtedness incurred in accordance with Certain CovenantsLimitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock above
(other than pursuant to clauses (3), (6), (7), (8), (9), (11), (12), (13), (14), (17) or (19) of this definition);
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(11)
|
Capitalized Lease Obligations and Purchase Money Indebtedness of the Issuer or any of its Restricted Subsidiaries incurred after the Issue Date at any one time outstanding not to exceed the greater of (a) 2.0% of
Adjusted Consolidated Net Tangible Assets determined at the date of incurrence after giving
pro forma
effect to such incurrence and the application of proceeds thereof; and (b) $50.0 million;
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(12)
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obligations arising in connection with Commodity Agreements of the Issuer or a Restricted Subsidiary;
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(13)
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Indebtedness under Currency Agreements;
provided, however
, that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Issuer and its
Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder;
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(14)
|
Indebtedness relating to Hydrocarbon balancing positions arising in the ordinary course of business;
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(15)
|
Indebtedness of any of the Issuer and the Restricted Subsidiaries to the extent the net proceeds thereof are promptly (a) used to redeem all of the Notes or (b) deposited to effect Covenant Defeasance or Legal
Defeasance or satisfy and discharge the Indenture as described under Legal Defeasance and Covenant Defeasance or Satisfaction and Discharge;
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(16)
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Permitted Acquisition Indebtedness;
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(17)
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Indebtedness of the Issuer or any Restricted Subsidiary arising from guarantees of Indebtedness of joint ventures at any time outstanding not to exceed the greater of (a) $20.0 million and (b) 1.0% of Adjusted
Consolidated Net Tangible Assets determined as of the date of incurrence of such Indebtedness after giving
pro forma
effect to such incurrence and the application of proceeds thereof;
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(18)
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Indebtedness consisting of the financing of insurance premiums in customary amounts consistent with the operations and business of the Issuer and the Restricted Subsidiaries; and
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(19)
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additional Indebtedness of the Issuer or any of its Restricted Subsidiaries in an aggregate principal amount at any time outstanding not to exceed the greater of (a) 2.5% of Adjusted Consolidated Net Tangible Assets
determined at the date of incurrence of such Indebtedness after giving
pro forma
effect to such incurrence and the application of proceeds thereof; and (b) $75.0 million. In the event that an item of Indebtedness or Preferred Stock or
proposed Indebtedness or Preferred Stock (including, without limitation, Acquired Indebtedness) meets the criteria of more than one of the categories of Permitted Indebtedness described in clause (1) through (19) above, or is entitled to be
incurred under the above covenant entitled Certain CovenantsLimitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock even if not Permitted Indebtedness, the Issuer will be permitted to classify or
later reclassify (in whole or in part in its sole discretion) such item of Indebtedness or Preferred Stock in any manner (including by dividing and classifying such item of Indebtedness or Preferred Stock in more than one type of Indebtedness or
Preferred Stock permitted under such covenant) that complies with that covenant. Indebtedness or Preferred Stock permitted by such covenant need not be permitted solely by reference to one provision permitting such Indebtedness or Preferred Stock
but may be permitted in part by one such provision and in part by one or more other provisions permitting such Indebtedness or Preferred Stock. The dollar equivalent principal amount of any Indebtedness denominated in a foreign currency and incurred
pursuant to any dollar-denominated restriction on the incurrence of Indebtedness shall be calculated based on the relevant currency exchange rate in effect on the date that 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 (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness being Refinanced and plus the
amount of reasonable fees and expenses incurred by the Issuer and its Restricted Subsidiaries in connection with such Refinancing). Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Issuer and the
Restricted Subsidiaries may incur under such 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.
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Permitted Industry Investments
means any Investment made in the ordinary course of the
business of the Issuer or any Restricted Subsidiary or that is of a nature that is or shall have become of a kind or character that is customarily made in the Crude Oil and Natural Gas Business, including, without limitation, investments or
expenditures for exploiting, exploring for, acquiring, developing, producing, processing, refining, gathering, marketing or transporting Hydrocarbons through agreements, transactions, properties, interests or arrangements which permit one to share
or transfer risks or costs, comply with regulatory requirements regarding local ownership or otherwise or satisfy other objectives customarily achieved through the conduct of the Crude Oil and Natural Gas Business jointly with third parties,
including, without limitation:
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(1)
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capital expenditures, including, without limitation, acquisitions of Company Properties and interests therein;
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(2)
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entry into, and Investments in the form of or pursuant to, operating agreements, joint ventures, working
interests, royalty interests, mineral leases, unitization agreements, processing agreements,
farm-in
agreements,
farm-out
agreements, pooling arrangements, contracts for
the sale, transportation, storage or exchange of hydrocarbons and minerals production sharing agreements,
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production sales and marketing agreements, development agreements, area of mutual interest agreements, unitization agreements, pooling arrangements, joint bidding agreements, service contracts,
joint venture agreements, partnership agreements (whether general or limited), limited liability company agreements, subscription agreements, stock purchase agreements, stockholder agreements, oil or gas leases, overriding royalty agreements, net
profits agreements, production payment agreements, royalty trust agreements, incentive compensation programs on terms that are reasonably customary in the Crude Oil and Natural Gas Business for geologists, geophysicists and other providers of
technical services to the Issuer or any Restricted Subsidiary, operating agreements, division orders, participation agreements, master limited partnership agreements, contracts for the sale, purchase, exchange, transportation, gathering, processing,
marketing or storage of Hydrocarbons, communitizations, declarations, orders and agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or
geophysical permits or agreements, development agreements or other similar or customary agreements, transactions, properties, interests or arrangements, and Investments and expenditures (including, without limitation, capital expenditures) in
connection therewith or pursuant thereto, Asset Swaps, and exchanges of Company Properties for other Company Properties that, together with any cash and Cash Equivalents in connection therewith, are of at least equivalent value as determined in good
faith by the Board of Directors of the Issuer;
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(3)
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ownership interests in oil, gas or other Hydrocarbon or mineral properties and interests therein, liquid natural gas facilities, drilling operations, processing facilities, refineries, gathering systems, pipelines,
storage facilities, related systems or facilities, ancillary real property interests and interests therein; and
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(4)
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Investments of operating funds on behalf of
co-owners
of Crude Oil and Natural Gas Properties of the Issuer or the Subsidiaries pursuant to joint operating agreements.
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Permitted Investments
means:
|
(1)
|
Investments by the Issuer or any Restricted Subsidiary in any Person that is or will become immediately after such Investment a Restricted Subsidiary or that will merge or consolidate into the Issuer or a Restricted
Subsidiary;
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(2)
|
Investments in the Issuer by any Restricted Subsidiary;
provided, however
, that any Indebtedness evidencing any such Investment held by a Restricted Subsidiary that is not a Subsidiary Guarantor is unsecured;
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|
(3)
|
Investments in cash and Cash Equivalents;
|
|
(4)
|
Investments made by the Issuer or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Certain Covenants Limitation on Asset Sales
above;
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(5)
|
Permitted Industry Investments, including prepayments, advances and deposits paid with respect thereto;
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(6)
|
Investments to the extent that Qualified Capital Stock of the Issuer is the consideration paid or provided by the Issuer;
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(7)
|
receivables owing to the Issuer or any Restricted Subsidiary if 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 Issuer or any such Restricted Subsidiary deems reasonable under the circumstances;
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(8)
|
payroll, travel 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;
|
|
(9)
|
loans or advances to officers, directors or employees made in the ordinary course of business consistent with past practices of the Issuer or such Restricted Subsidiary and otherwise in compliance with the covenant
Certain CovenantsLimitation on Transactions with Affiliates;
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|
(10)
|
stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Issuer or any Restricted Subsidiary or in satisfaction of judgments or in settlement of
litigation, arbitration or other disputes with Persons who are not Affiliates;
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(11)
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Investments in any Person where such Investment was acquired by the Issuer or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Issuer 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 Issuer 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;
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(12)
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Investments in 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 Issuer or any Restricted Subsidiary;
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(13)
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Investments in any Person to the extent such Investments consist of Commodity Agreements, Interest Rate Agreements or Currency Agreements otherwise permitted under the covenant described under Certain
CovenantsLimitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock;
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(14)
|
Investments that are in existence on the Issue Date, and any extension, modification or renewal of any such Investments, but only to the extent not involving additional advances, contributions or other Investments of
cash or other assets or other increases of such Investments (other than as a result of the accrual or accretion of interest or original issue discount or the issuance of
pay-in-kind
securities, in each case, pursuant to the terms of such Investments as in effect on the Issue Date);
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(15)
|
guarantees of performance or other obligations (other than Indebtedness) arising in the ordinary course in the Crude Oil and Natural Gas Business, including obligations under oil and natural gas exploration,
development, joint operating, and related agreements and licenses or concessions related to the Crude Oil and Natural Gas Business;
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(16)
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Investments of a Restricted Subsidiary acquired after the Issue Date or of any entity merged into or consolidated with the Issuer or a Restricted Subsidiary in accordance with the covenants described under
Certain CovenantsMerger, Consolidation and Sale of Assets to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date
of such acquisition, merger or consolidation;
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(17)
|
repurchases of or other Investments in the Notes or the Exchange Notes;
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(18)
|
Investments in any units of any oil and gas royalty trust;
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(19)
|
guarantees of Indebtedness permitted under the covenant described under Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock;
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(20)
|
guarantees by the Issuer or any of its Restricted Subsidiaries of operating leases (other than Capitalized Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into in the
ordinary course of business;
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(21)
|
advances and prepayments for asset purchases in the ordinary course of business in the Crude Oil and Natural Gas Business of the Issuer or any of its Restricted Subsidiaries; and
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(22)
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additional Investments made after the Issue Date having, when taken together with all other Investments made pursuant to this clause (22) that are outstanding at the time of such additional Investment, an aggregate
Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value) not to exceed the greater of (a) $50.0 million and (b) 2.0% of Adjusted Consolidated Net Tangible Assets determined
at the time of such additional Investment.
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With respect to any Investment, the Issuer may, in its sole discretion, allocate
all or any portion of such Investment to one or more of the above clauses so that the entire Investment is a Permitted Investment.
Permitted Liens
means each of the following types of Liens:
|
(1)
|
Liens existing as of the Issue Date (and any extensions, replacements or renewals thereof covering property or assets secured by such Liens on the Issue Date);
|
|
(2)
|
Liens securing Indebtedness outstanding under the Credit Facilities;
|
|
(3)
|
Liens securing the Notes and the Subsidiary Guarantees and other obligations arising under the Indenture;
|
|
(4)
|
Liens of the Issuer or a Subsidiary Guarantor on assets of any Restricted Subsidiary;
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|
(5)
|
Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under the Indenture and which has been incurred in accordance with the provisions of the
Indenture;
provided, however
, that such Liens do not extend to or cover any property or assets of the Issuer or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced;
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(6)
|
Liens for taxes, assessments or governmental charges or claims either not delinquent or contested in good faith by appropriate proceedings and as to which the Issuer or a Restricted Subsidiary, as the case may be, shall
have set aside on its books such reserves as may be required pursuant to GAAP;
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(7)
|
statutory and contractual Liens of landlords to secure rent arising in the ordinary course of business and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith or other Liens arising solely by virtue of any statutory or common law provision relating to bankers Liens, rights of
set-off
or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution;
provided, however
, that (A) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by the Issuer in excess of those set forth by regulations promulgated by the Federal Reserve Board and (B) such deposit account is not intended by the Issuer or any Restricted
Subsidiary to provide collateral to the depository institution;
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(8)
|
Liens incurred or deposits made in the ordinary course of business (i) in connection with workers
compensation, unemployment insurance, social security or old age pension laws or other similar law, rule or regulation, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in
connection therewith, (ii) to secure the performance of
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83
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tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money
bonds and other similar obligations (including letters of credit in connection therewith but exclusive of obligations for the payment of borrowed money),
(iii) 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 (iv) deposits of cash or United States government bonds to secure surety, stay, appeal, indemnity performance or other similar
bonds to which such Person is a party or deposits as security for contested taxes or indemnity performance or other similar bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of
rent, in each case incurred in the ordinary course of business;
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|
(9)
|
judgment and attachment Liens not giving rise to an Event of Default;
|
|
(10)
|
easements,
rights-of-way,
licenses, zoning restrictions, restrictive covenants, minor imperfections in title and other similar charges or
encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Issuer or any of its Restricted Subsidiaries;
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|
(11)
|
any interest or title of a lessor under any Capitalized Lease Obligation;
provided
that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease
Obligation;
|
|
(12)
|
Liens securing Purchase Money Indebtedness of the Issuer or any Restricted Subsidiary;
provided, however
, that (i) the Purchase Money Indebtedness shall not be secured by any property or assets of the Issuer
or any Restricted Subsidiary other than the property and assets so acquired or constructed (except for proceeds, improvements, rents and similar items relating to the property or assets so acquired or constructed) and (ii) the Lien securing
such Indebtedness shall be created within 120 days of such acquisition or construction;
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|
(13)
|
Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof and Liens in favor
of issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;
provided, however
, that such letters of credit or surety bonds do not constitute
Indebtedness;
|
|
(14)
|
Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Issuer or any of its Restricted Subsidiaries, including rights of offset and
set-off;
|
|
(15)
|
Liens securing Interest Rate Agreements which Interest Rate Agreements relate to Indebtedness that is otherwise permitted under the Indenture and Liens securing Commodity Agreements or Currency Agreements;
|
|
(16)
|
Liens securing Acquired Indebtedness incurred in accordance with Certain CovenantsLimitation on
Incurrence of Additional Indebtedness and Issuance of Preferred Stock above;
provided, however
, that (i) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the
Issuer or a Restricted Subsidiary and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Issuer or a Restricted Subsidiary and (ii) such Liens do not extend to or cover any property
or assets of the Issuer or of any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Issuer or a Restricted Subsidiary
(except for proceeds, improvements, rents
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84
|
and similar items relating to the property or assets so secured) and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Issuer or a Restricted Subsidiary;
|
|
(17)
|
Liens on, or related to, properties and assets of the Issuer and its Subsidiaries to secure all or a part of the costs incurred in the ordinary course of business of exploration, drilling, development, production,
processing, gas gathering, transportation, marketing, refining or storage, abandonment or operation thereof;
|
|
(18)
|
Liens securing Indebtedness incurred to finance, or Capitalized Lease Obligations with respect to, the construction, purchase or lease of, or repairs, improvements or additions to, property, plant or equipment of such
Person;
provided, however
, that the Lien may not extend to any other property owned by such Person or any of its Restricted Subsidiaries at the time the Lien is incurred (other than assets and property affixed or appurtenant thereto), and the
Indebtedness (other than any interest thereon) secured by the Lien may not be incurred more than 180 days after the later of the acquisition, completion of construction, repair, improvement, addition or commencement of full operation of the property
subject to the Lien;
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|
(19)
|
Liens on pipeline or pipeline facilities, Hydrocarbons or properties and assets of the Issuer and its Subsidiaries which arise out of operation of law;
|
|
(20)
|
royalties, overriding royalties, revenue interests, net revenue interests, net profit interests, reversionary interests, production payments, production sales contracts, preferential rights of purchase, operating
agreements, working interests and other similar interests, participation agreements, properties, arrangements and agreements, all as ordinarily exist with respect to Properties and assets of the Issuer and its Subsidiaries or otherwise as are
customary in the oil and gas business;
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|
(21)
|
with respect to any Properties and assets of the Issuer and its Subsidiaries, Liens arising under, or in connection with, or related to,
farm-out
agreements,
farm-in
agreements, joint operating agreements, area of mutual interest agreements, partnership agreements, oil, gas, other hydrocarbons and minerals leases, licenses or sublicenses, assignments, purchase and sale
agreements, division orders, contracts for the sale, purchase, transportation, processing or exchange of crude oil, natural gas or other Hydrocarbons, unitization and pooling declarations, joint interest billing arrangements and agreements,
development agreements, any other agreements, transactions, properties, interests or arrangements referred to in clause (2) of the definition of Permitted Industry Investments, and/or other similar or customary arrangements,
agreements or interests that the Issuer or any Subsidiary determines in good faith to be necessary or appropriate for the economic development of such Property or asset or which are customary in the Crude Oil and Natural Gas Business;
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|
(22)
|
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);
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(23)
|
survey exceptions, encumbrances, 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 or other restrictions as to the use of real property, minor defects in title or Liens incidental to the conduct of the business of such Person or to the ownership of its properties
which were not incurred or created to secure the payment of borrowed money which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;
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(24)
|
Liens on property at the time such Person or any of its Subsidiaries acquires the property, including any acquisition by means of a merger or consolidation with or into such Person or a Subsidiary of such Person;
provided, however
, that the Liens may not extend to any other property owned by such Person or any of its Restricted Subsidiaries (other than assets and property affixed or appurtenant thereto);
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|
(25)
|
Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of the Issuer or any Restricted Subsidiary on deposit with or in possession of
such bank;
|
|
(26)
|
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;
|
|
(27)
|
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 Legal Defeasance and Covenant Defeasance and Satisfaction and Discharge;
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|
(28)
|
Liens to secure Production Payments or Production Payments and Reserve Sales;
provided, however
, that the Liens may not extend to any assets other than those that are the subject of such Production Payments or
Production Payments and Reserve Sales, as applicable;
|
|
(29)
|
Liens to secure any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien referred to in clauses (1), (11), (12), (16), (17), (18), (24) or (30);
provided,
however
, that:
|
|
(a)
|
such new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements
and accessions to, such property or proceeds or distributions thereof); and
|
|
(b)
|
the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (x) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under
clauses (1), (11), (12), (16), (17), (18), (24) or (30) at the time the original Lien became a Permitted Lien and (y) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension,
renewal or replacement;
|
|
(30)
|
Liens on property of an Unrestricted Subsidiary at the time that it is designated as a Restricted Subsidiary pursuant to the definition of Unrestricted Subsidiary;
provided
that such Liens were not
incurred in connection with, or contemplation of, such designation;
|
|
(31)
|
to the extent not included in any other clause of this definition, leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Issuer and its Restricted
Subsidiaries, taken as a whole;
|
|
(32)
|
Liens arising from Uniform Commercial Code financial statement filings regarding operating leases entered into by the Issuer and its Restricted Subsidiaries in the ordinary course of business;
|
|
(33)
|
to the extent not included in any other clause of this definition, Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary or any joint venture owned by the Issuer or any Restricted Subsidiary to the
extent securing Indebtedness that is
non-recourse
to the Issuer or to any Restricted Subsidiary;
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86
|
(34)
|
Liens incurred in the ordinary course of business with respect to outstanding obligations in the aggregate not exceeding the greater of (x) $50.0 million or (y) 5% of Adjusted Consolidated Net Tangible Assets
determined at the date of incurrence after giving
pro forma
effect to such incurrence and the application of the proceeds thereof; and
|
|
(35)
|
solely during any Fall-Away Period, any Liens on any properties or assets not constituting a Restricted Property.
|
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 an individual, partnership, corporation, unincorporated organization, limited liability company, trust,
estate, or joint venture, or a governmental agency or political subdivision thereof.
Preferred Stock
of any Person
means any Capital Stock of any class or classes (however designated) of such Person that has preferential rights to any other Capital Stock of any class of such Person with respect to dividends or redemptions or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person.
Production Payments
means, collectively,
Dollar-Denominated Production Payments and Volumetric Production Payments.
Production Payments and Reserve Sales
means
the grant or transfer to any Person of a Dollar-Denominated Production Payment, Volumetric Production Payment, royalty, overriding royalty, revenue interest, net revenue interest, reversionary interest, net profits interest, master limited or other
partnership interest or other interest in oil and natural gas properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production attributable to such properties, including, without limitation,
any such grants or transfers pursuant to incentive compensation programs on terms that are reasonably customary in the Crude Oil and Natural Gas Business for geologists, geophysicists or other providers of technical services to the Issuer or a
Restricted Subsidiary.
Property
means, with respect to any Person, any interests of such Person in any kind of
property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Capital Stock, partnership interests and other equity or ownership interests in any other Person.
Public Equity Offering
means an underwritten public Equity Offering by the Issuer.
Purchase Money Indebtedness
means Indebtedness the net proceeds of which are used to finance the cost (including the cost
of construction) of property or assets acquired in the normal course of business by the Person incurring such Indebtedness.
Qualified Capital Stock
means any Capital Stock that is not Disqualified Stock.
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, selected by the Issuer which shall be substituted for S&P or Moodys, or both, as the case may be.
Reference Date
has the meaning set forth under Certain CovenantsLimitation on Restricted Payments.
Refinance
means, in respect of any security or Indebtedness or Preferred Stock, to refinance, extend, renew, refund,
repay, prepay, redeem, effect a change by amendment or modification, defease or retire, or to issue a security or Indebtedness or Preferred Stock in exchange or replacement for (or the net proceeds of which are used to Refinance), such security or
Indebtedness or Preferred Stock in whole or in part.
Refinanced
and
Refinancing
shall have correlative meanings.
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Refinancing Indebtedness
means any Indebtedness or Preferred Stock issued in
or resulting from a Refinancing by the Issuer or any Restricted Subsidiary of the Issuer of Indebtedness or Preferred Stock, in each case that:
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(1)
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does not have an aggregate principal amount that is greater than the aggregate principal amount of the Indebtedness or Preferred Stock being Refinanced as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such Indebtedness or Preferred Stock, as applicable, being Refinanced and plus the amount of reasonable fees and expenses incurred by the Issuer and its Restricted Subsidiaries
in connection with such Refinancing); or
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(2)
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does not have (x) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness or Preferred Stock, as applicable, being Refinanced or (y) a final maturity
date or redemption date, as applicable, earlier than the final maturity date or redemption date, as applicable, of the Indebtedness or Preferred Stock, as applicable, being Refinanced;
provided, however
, that (a) if such Indebtedness
being Refinanced is Indebtedness of the Issuer or one or more Subsidiary Guarantors, then such Refinancing Indebtedness shall be Indebtedness solely of the Issuer and/or such Subsidiary Guarantors which were obligors or guarantors of such
Indebtedness being Refinanced; (b) if such Indebtedness being Refinanced is subordinate or junior in right of payment to the Notes or a Subsidiary Guarantee, then such Refinancing Indebtedness shall be subordinate or junior in right of payment
to the Notes or such Subsidiary Guarantee, as the case may be, at least to the same extent and in the same manner as the Indebtedness being Refinanced or shall be Preferred Stock of the obligor on the Indebtedness being refinanced; (c) if any
Preferred Stock being Refinanced was Disqualified Stock of the Issuer, the Refinancing Indebtedness shall be Disqualified Stock of the Issuer and (d) if any Preferred Stock being refinanced was Preferred Stock of a Restricted Subsidiary, the
Refinancing Indebtedness shall be Preferred Stock of such Restricted Subsidiary.
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Replacement Assets
has
the meaning set forth under Certain CovenantsLimitation on Asset Sales.
Restricted Payment
has
the meaning set forth under Certain CovenantsLimitation on Restricted Payments.
Restricted
Property
means, with respect to any Fall-Away Period, any Crude Oil and Natural Gas Property having a Fair Market Value in excess of $10.0 million and any facilities directly related to the production of Hydrocarbons from a Restricted
Property and includes Capital Stock of a corporation or other Person which owns such property or facilities, but does not include (i) any property or facilities used in connection with or necessarily incidental to the purchase, sale, storage,
transportation or distribution of Hydrocarbons, (ii) any property which, in the opinion of the Issuers Board of Directors, is not materially important to the total business conducted by the Issuer or its Subsidiaries as an entirety or
(iii) any portion of a particular property which, in the opinion of the Issuers Board of Directors, is not materially important to the use or operation of such property.
Restricted Subsidiary
means any Subsidiary of the Issuer that has not been designated by the Board of Directors of the
Issuer (or deemed designated) as an Unrestricted Subsidiary pursuant to and in compliance with Certain CovenantsLimitation on Restricted and Unrestricted Subsidiaries above. Any such designation may be revoked by a Board
Resolution of the Issuer delivered to the Trustee, subject to the provisions of such covenant.
S&P
means
Standard & Poors Ratings Services.
Sale and Leaseback Transaction
means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing for the leasing to the Issuer or a Restricted Subsidiary of any Property, whether owned by the Issuer or any Restricted Subsidiary at the Issue Date or later acquired
which has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property.
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Securities Act
means the Securities Act of 1933, as amended.
Senior Credit Facility
means the debt facility provided for under the Third Amended and Restated Credit Agreement dated as
of March 16, 2010 among Bill Barrett Corporation, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A. and Deutsche Bank Securities Inc., as syndication agents, Bank of Montreal and Wells Fargo Bank, N.A., as
documentation agents and the lenders party thereto, or any successor or replacement agreements and whether by the same or any other agent, lender or group of lenders, documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreements extending the maturity of, Refinancing, replacing, increasing or otherwise restructuring all or any portion of the Indebtedness under
such agreements.
Significant Subsidiary
means a Restricted Subsidiary of a Person that is also a significant
subsidiary as defined in Rule 1.02(w) of Regulation
S-X
under the Securities Act.
Subsidiary
, with respect to any Person, means any (i) corporation, association or other business entity of which the
outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors, managers or trustees of such entity under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person
or any other Person of which at least a majority of the voting interests under ordinary circumstances is at the time, directly or indirectly, owned by such Person or (ii) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
Subsidiary Guarantee
shall have the meaning assigned to such term under Subsidiary Guarantees.
Subsidiary Guarantor
means each of the Issuers Restricted Subsidiaries on the Issue Date, and each other Person that
is required to become a Guarantor by the terms of the Indenture after the Issue Date;
provided, however
, that any Person constituting a Subsidiary Guarantor as described above shall cease to constitute a Subsidiary Guarantor when its
Subsidiary Guarantee is released in accordance with the terms of the Indenture.
Surviving Entity
has the meaning set
forth under Certain CovenantsMerger, Consolidation and Sale of Assets.
Trade Accounts Payable
means (a) accounts payable or other obligations of the Issuer or any Restricted Subsidiary created or assumed by the Issuer or such Restricted Subsidiary in the ordinary course of business in connection with the obtaining of goods or services
and (b) obligations arising under contracts for the exploration, development, drilling, completion, production and plugging and abandonment of wells or for the construction, repair or maintenance of related infrastructure or facilities.
Unrestricted Subsidiary
means any Subsidiary of the Issuer designated (or deemed designated) as such pursuant to and in
compliance with Certain CovenantsLimitation on Restricted and Unrestricted Subsidiaries above. Any such designation may be revoked by a Board Resolution of the Issuer delivered to the Trustee, subject to the provisions of
such covenant.
Volumetric Production Payments
means production payment obligations recorded as deferred revenue in
accordance with GAAP, together with all undertakings and obligations in connection therewith.
Weighted Average Life to
Maturity
means, when applied to any Indebtedness or Preferred Stock at any date, the number of years obtained by dividing (1) the then outstanding aggregate principal amount of such Indebtedness or Preferred Stock into (2) the
sum of the total of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal or (with respect to Preferred Stock) redemption or similar payment,
including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth)
which will elapse between such date and the making of such payment.
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Wholly-Owned Restricted Subsidiary
means a Restricted Subsidiary all the
Capital Stock of which (other than directors qualifying shares) is owned by the Issuer or another Wholly-Owned Restricted Subsidiary.
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