Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance
Sheet Arrangement of a Registrant.
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Indenture and 2027 Notes
The 2027
Notes were sold and issued under the Indenture, dated as of October 11, 2017, between the Issuers, the Guarantors and U.S. Bank National Association, as trustee (the Indenture). The 2027 Notes are senior unsecured obligations of the
Issuers. The 2027 Notes are fully and unconditionally guaranteed on a senior unsecured basis by the existing subsidiaries of Parsley LLC that guarantee its indebtedness under its revolving credit facility, other than Finance Corp. The 2027 Notes are
not guaranteed by the Company, Parsley LLCs sole managing member and controlling equity holder, and the Company is not subject to the terms of the Indenture.
Interest and Maturity
The 2027 Notes will mature on October 15, 2027. The 2027 Notes bear interest at the rate of 5.625% per annum, payable in cash
semi-annually in arrears on each April 15 and October 15, commencing April 15, 2018.
Optional Redemption
At any time prior to October 15, 2020, the Issuers may, from time to time, redeem up to 35% of the aggregate principal amount of the 2027
Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings at a redemption price equal to 105.625% of the principal amount of the 2027 Notes redeemed, plus accrued and unpaid interest, if any, to the date of
redemption, provided that at least 65% of the aggregate principal amount issued under the Indenture remains outstanding immediately after such redemption and the redemption occurs within 120 days of the closing date of such equity offering.
At any time prior to October 15, 2022, the Issuers may, on any one or more occasions, redeem all or a part of the 2027 Notes at a
redemption price equal to 100% of the principal amount of the 2027 Notes redeemed, plus a make-whole premium as of, and accrued and unpaid interest, if any, to, the date of redemption.
On and after October 15, 2022, the Issuers may redeem the 2027 Notes, in whole or in part, at the redemption prices set forth below, plus
accrued and unpaid interest, if any, to the date of redemption:
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YEAR
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PERCENTAGE
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2022
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102.813
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%
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2023
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101.875
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%
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2024
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100.938
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%
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2025 and thereafter
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100.000
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%
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Change of Control
If the Issuers experience certain defined changes of control, each holder of 2027 Notes may require the Issuers to repurchase all or a portion
of its 2027 Notes for cash at a price equal to 101% of the aggregate principal amount of such 2027 Notes, plus any accrued but unpaid interest to the date of repurchase.
Certain Covenants
The
Indenture contains covenants that, among other things and subject to certain exceptions and qualifications, limit the Issuers ability and the ability of their restricted subsidiaries to: (i) incur or guarantee additional indebtedness or
issue certain types of preferred stock; (ii) pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; (iii) transfer or sell assets; (iv) make investments; (v) create certain
liens; (vi) enter into agreements that restrict dividends or other payments from their subsidiaries to them; (vii) consolidate, merge or transfer all or substantially all of their assets; (viii) engage in transactions with affiliates;
and (ix) create unrestricted subsidiaries.
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Events of Default
Upon an Event of Default (as defined in the Indenture), the trustee or the holders of at least 25% of the aggregate principal amount of then
outstanding 2027 Notes may declare the 2027 Notes immediately due and payable, except that a default resulting from certain events of bankruptcy or insolvency with respect to Parsley LLC, any restricted subsidiary of Parsley LLC that is a
significant subsidiary or any group of restricted subsidiaries that, taken together, would constitute a significant subsidiary, will automatically cause all outstanding 2027 Notes to become due and payable.
The foregoing description of the Indenture is qualified in its entirety by reference to the Indenture, a copy of which is attached hereto as
Exhibit 4.1 and is incorporated herein by reference.
Fifth Amendment to Credit Agreement
On October 11, 2017, the Company, Parsley LLC, as borrower, the Guarantors, Wells Fargo Bank, National Association, as administrative
agent (the Administrative Agent), and the other lenders party thereto entered into the Fifth Amendment to Credit Agreement (the Fifth Amendment). The Fifth Amendment amends the Credit Agreement, dated as of October 28,
2016 (as previously amended and as further amended by the Fifth Amendment, the Credit Agreement), by and among the Company, Parsley LLC, the Guarantors, the Administrative Agent, JPMorgan Chase Bank, N.A., as syndication agent, BMO
Harris Bank, N.A., as documentation agent, and the other lenders party thereto.
The Fifth Amendment, among other things, modifies the
terms of the Credit Agreement to (i) increase the borrowing base under the Credit Agreement from $1.225 billion (to which it was reduced in connection with the closing of the Notes Offering) to $1.8 billion (although the aggregate
elected commitments under the Credit Agreement will remain at $1.0 billion), (ii) decrease the applicable margins for borrowings under the Credit Agreement to a range of (A) 1.5% to 2.5% for LIBOR based borrowings and (B) 0.5% to 1.5% for
alternative base rate based borrowings, with the specific applicable margins determined by reference to borrowing base utilization, (iii) provide flexibility, subject to certain conditions, to enter into reverse 1031 exchanges under
Section 1031 of the Internal Revenue Code of 1986, as amended, (iv) provide enhanced flexibility, subject to certain dollar limitations, to make investments in unrestricted subsidiaries and joint ventures and to make other investments, and
(v) provide enhanced flexibility, subject to certain conditions, to dispose of oil and gas properties not evaluated in the reserve reports delivered to the lenders pursuant to the Credit Agreement.
The Administrative Agent, the other lenders party to the Credit Agreement, and their respective affiliates have from time to time performed,
and may in the future perform, various financial advisory, commercial banking and investment banking services for the Company and its affiliates in the ordinary course of business for which they have received and would receive customary
compensation. In addition, in the ordinary course of their various business activities, such parties and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative
securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investments and securities activities may involve the Companys securities and/or instruments.
The foregoing description of the Fifth Amendment is qualified in its entirety by reference to the Fifth Amendment, a copy of which is attached
as Exhibit 10.2 and is incorporated herein by reference.