DESCRIPTION OF THE NEW NOTES
The Company issued the old notes, and will issue the new notes, under an indenture (the "indenture"), between us and U.S. Bank National
Association, as trustee (the "trustee"). The old notes were issued in a private transaction that was not subject to the registration requirements of the Securities Act. The indenture is governed by
the Trust Indenture Act of 1939 (the "Trust Indenture Act"). 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. For purposes of this Description of the New Notes, unless the context otherwise requires, references to the "notes" includes the new notes, the old notes, and any additional notes (as described
below). This Description of the New Notes is qualified by the indenture which is filed as an exhibit to the registration statement of which this prospectus is part.
You
can find the definitions of terms used in this Description of the New Notes below under the caption "Certain Definitions." Capitalized terms used in this Description of
the New Notes, but not defined below under the caption "Certain Definitions," have the
meanings assigned to them in the indenture. In this description, the words "SRC," "we," "us," and "our" refer only to SRC Energy Inc., and not to any of its Subsidiaries or Affiliates.
All
references to "holders" in this Description of the New Notes are to registered holders of the notes. The registered holder of a note will be treated as the owner of it for all
purposes. Only registered holders will have rights under the indenture.
Brief Description of the New Notes and the Note Guarantees
The Notes
The old notes are and the new notes will be:
-
-
general unsecured obligations of the Company;
-
-
pari passu
in right of payment with all existing and future senior Indebtedness of the Company;
-
-
senior in right of payment to any future subordinated Indebtedness of the Company;
-
-
effectively junior to all secured Indebtedness to the extent of the value of the assets securing such Indebtedness;
-
-
structurally subordinate in right of payment to all indebtedness and other liabilities, including trade payables, of existing and future
subsidiaries that do not guarantee the notes; and
-
-
unconditionally guaranteed by future Guarantors on a senior unsecured basis.
The Note Guarantees
The Company currently has two subsidiaries, GCL Weld, LLC and Greeley Ranch and Farm, LLC (collectively, the "Existing
Subsidiaries"), that are not currently guarantors under the Indenture. However, in the future, each of the Company's Domestic Subsidiaries will be required to guarantee the notes if, on any date after
the date of the indenture, such Domestic Subsidiary (i) Guarantees (or otherwise becomes liable for) Indebtedness under any Credit Facility and (ii) is a Material Subsidiary. Domestic
Subsidiaries will be required to become Guarantors under the circumstances described below under "Certain CovenantsAdditional Note Guarantees". Substantially all of the
Company's operations, including the operations that are the subject of the GCII Acquisition, are conducted through SRC Energy Inc. The Company's Existing Subsidiaries represent less than 1.0%
of the Company's consolidated assets at March 31, 2018 and had no revenue for the year ended December 31, 2017 and three months ended March 31, 2018, respectively.
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Each
Note Guarantee will be:
-
-
a general unsecured obligation of the Guarantor;
-
-
pari passu
in right of payment with all existing and future senior Indebtedness of that
Guarantor;
-
-
senior in right of payment to all existing and future subordinated Indebtedness of that Guarantor;
-
-
effectively subordinated to all borrowings and other liabilities of any Guarantors under the Credit Agreement, and any other existing or future
secured Indebtedness to the extent of the value of the collateral securing such Indebtedness; and
-
-
structurally subordinated to all indebtedness and other liabilities of any of our future Subsidiaries that do not Guarantee the notes. See
"Risk FactorsRisks Associated with our Indebtedness and the NotesYour right to receive payments on the notes is effectively subordinated to the rights of our and our
restricted subsidiaries' existing and future secured creditors" and "The notes will be structurally subordinated to all indebtedness of those of our existing or future subsidiaries that
are not, or do not become, guarantors of the notes."
As
of the date of the indenture, our Existing Subsidiaries will be Restricted Subsidiaries. However, under the circumstances described below under the caption "Certain
CovenantsDesignation of Restricted and Unrestricted Subsidiaries," we will be permitted to designate certain of our Subsidiaries as "Unrestricted Subsidiaries." Unrestricted Subsidiaries
will not be subject to many of the restrictive covenants in the indenture and will not guarantee the notes. In the event of a bankruptcy, liquidation or reorganization of any Unrestricted Subsidiary,
such Unrestricted Subsidiary will pay the holders of its debt and its trade creditors before it will be able to distribute any of its assets to the Company.
Principal, Maturity and Interest
The old notes had, and the new notes will have (together with any old notes that remain outstanding) an initial aggregate principal amount of
$550.0 million. The Company may issue additional notes under the indenture from time to time;
provided
,
however
, that if the additional notes are not
fungible with the old notes or the new notes for U.S. federal income tax purposes, the additional notes
will have a separate CUSIP number. Any issuance of additional notes is subject to all of the covenants in the indenture, including the covenant described below under the caption "Certain
CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock." The old notes, the new notes issued in this exchange offer and any additional notes will be treated as a single class
for all purposes under the indenture, including without limitation, waivers, amendments, redemptions and offers to purchase. The Company will issue notes in denominations of $2,000 and integral
multiples of $1,000 in excess of $2,000. The notes will mature on December 1, 2025.
Interest
on the notes will accrue at the rate of 6.250% per annum and will be payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2018.
The Company will make each interest payment to the holders of record on the immediately preceding May 15 and November 15. If a payment date falls on a day that is not a Business Day, the
payment to be made on such payment date will be made on the next succeeding Business Day with the same force and effect as if made on such payment date, and no additional interest will accrue as a
result of such delayed payment.
Additional
interest may accrue on the notes as liquidated damages in certain circumstances described under the caption "Registration Rights; Additional Interest." All
references to "interest" in this description are deemed to include any additional interest that may be payable on the notes pursuant to the registration rights agreement.
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Interest
on the notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a holder of notes has given wire transfer instructions to the Company or the paying agent, the Company will pay all principal of, premium, if
any, on, and interest on, that holder's notes in accordance with those instructions. All other payments on the notes will be made at the office or agency of the paying agent and registrar within New
York City and the State of New York unless the Company elects to make interest payments by check mailed to the noteholders at their respective addresses set forth in the register of holders.
Paying Agent and Registrar for the Notes
The trustee is currently acting as paying agent and registrar. The Company may change the paying agent or registrar without prior notice to the
holders of the notes, and the Company or any of its Subsidiaries may act as paying agent or registrar.
Transfer
The registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents in connection
with a transfer of notes. Holders will be required to pay all taxes due on transfer. The Company will not be required to transfer any note selected for redemption. Also, the Company will not be
required to transfer any note for a period of 15 days before a selection of notes to be redeemed or between a record date and the next succeeding interest payment date.
Note Guarantees
The notes initially will not be guaranteed by the Company's Existing Subsidiaries, which represent less than 1.0% of the Company's consolidated
assets at March 31, 2018 and had no revenue for the year ended December 31, 2017 and for the three month period ended March 31, 2018,
respectively. In the future, Domestic Subsidiaries of the Company that (i) Guarantee Indebtedness under any Credit Facility and (ii) are a Material Subsidiary will be required to
Guarantee the notes under the circumstances described under "Certain CovenantsAdditional Note Guarantees." These Note Guarantees will be joint and several obligations of the
Guarantors. The obligations of each Guarantor under its Note Guarantee will be limited as necessary to prevent that Note Guarantee from constituting a fraudulent conveyance under applicable law,
although this limitation may not be effective to prevent the Note Guarantees from being voided in bankruptcy. See "Risk FactorsRisks Associated with our Indebtedness and the
NotesU.S. federal and state fraudulent transfer laws may permit a court to void, subordinate or limit the notes and all guarantees as a fraudulent transfer, and, if that occurs, you may
not receive any payments on the notes or may be required to return payments received on the notes."
A
Guarantor may not: (1) consolidate or merge with or into another Person (whether or not such Guarantor is the surviving Person), other than the Company or another Guarantor, or
(2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of such Guarantor in one or more related transactions, to another Person, other
than the Company or another Guarantor, unless:
-
(1)
-
immediately
after giving effect to such transaction or series of transactions, no Default or Event of Default exists; and
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(a) the
Person acquiring the properties or assets in any such sale, assignment, transfer, conveyance, or other disposition or the Person formed by or surviving any such consolidation or
merger (if other than the Guarantor) unconditionally assumes all the obligations of that Guarantor under its Note Guarantee, the indenture and (if then in effect) the registration rights agreement
pursuant to a supplemental indenture and a supplement to the registration rights agreement, in form reasonably satisfactory to the trustee; or
(b) the
Net Proceeds of such transaction or series of transactions are applied in a manner that does not violate the "Asset Sales" provisions of the indenture.
The
Note Guarantee of a Guarantor will automatically be released:
-
(1)
-
upon
any sale or other disposition of all or substantially all of the properties or assets of that Guarantor by way of merger, consolidation or otherwise, to a
Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company if the sale or other disposition does not violate the "Asset Sales"
provisions of the indenture;
-
(2)
-
in
connection with any sale or other disposition of Capital Stock of that Guarantor by way of merger, consolidation or otherwise to a Person that is not (either
before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, if the sale or other disposition does not violate the "Asset Sales" provisions of the
indenture and the Guarantor ceases to be a Restricted Subsidiary of the Company as a result of the sale or other disposition;
-
(3)
-
if
the Company designates such Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture;
-
(4)
-
upon
the liquidation or dissolution of such Guarantor in a transaction or series of transactions that does not violate the terms of the indenture; or
-
(5)
-
upon
Legal Defeasance, Covenant Defeasance or satisfaction and discharge of the indenture as provided below under the captions "Legal Defeasance and
Covenant Defeasance" and "Satisfaction and Discharge."
Optional Redemption
At any time prior to December 1, 2020, the Company may, on any one or more occasions, redeem up to 35% of the aggregate principal amount
of notes issued under the indenture, upon notice as provided in the indenture, at a redemption price equal to 106.250% of the principal
amount of the notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption (subject to the rights of holders of notes on the relevant record date to receive interest on the
relevant interest payment date), with an amount of cash not greater than the net cash proceeds of one or more Equity Offerings by the Company,
provided
that:
-
(1)
-
at
least 65% of the aggregate principal amount of notes originally issued under the indenture (excluding any additional notes and notes held by the Company and its
Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and
-
(2)
-
the
redemption occurs within 180 days of the date of the closing of such Equity Offering.
At
any time prior to December 1, 2020, the Company may on any one or more occasions redeem all or a part of the notes, upon notice as provided in the indenture, at a redemption
price equal to 100% of the principal amount of the notes redeemed, plus the Applicable Premium, and accrued and
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unpaid
interest, if any, to the date of redemption, subject to the rights of holders of notes on the relevant record date to receive interest due on the relevant interest payment date.
On
or after December 1, 2020, the Company may on any one or more occasions redeem all or a part of the notes, upon notice as provided in the indenture, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, on the notes redeemed, to the applicable date of redemption, if redeemed during the
twelve-month period beginning on December 1 of the years indicated below, subject to the rights of holders of notes on the relevant record date to receive interest on the relevant interest
payment date:
|
|
|
|
|
Year
|
|
Percentage
|
|
2020
|
|
|
104.688
|
%
|
2021
|
|
|
103.125
|
%
|
2022
|
|
|
101.563
|
%
|
2023 and thereafter
|
|
|
100.000
|
%
|
Unless
the Company defaults in the payment of the redemption price, interest will cease to accrue on the notes or portions thereof called for redemption on the applicable redemption
date.
Except
as described under the preceding paragraphs under "Optional Redemption" and as described in the final paragraph under "Repurchase at the Option of
HoldersChange of Control," the notes will not be redeemable prior to December 1, 2020. The Company will not be, however, prohibited from acquiring the notes by means other than a
redemption, whether pursuant to a tender offer, open market purchase or otherwise, so long as the acquisition does not violate the terms of the indenture.
Any
redemption described above is subject to the terms and conditions described under "Selection and Notice", including that any such redemption may, at the Company's discretion, be
subject to one or more conditions precedent.
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund payments with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each holder of notes will have the right, except as provided below, to require the Company to repurchase all or
any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of that holder's notes pursuant to a Change of Control Offer on the terms set forth in the indenture. In the Change of
Control Offer, the Company will offer to make a cash payment (a "Change of Control Payment") equal to 101% of the aggregate principal amount of notes repurchased, plus accrued and unpaid interest, if
any, on the notes repurchased to the date of purchase (the "Change of Control Purchase Date"), subject to the rights of holders of notes on the relevant record date to receive interest due on the
relevant interest payment date.
Within
30 days following any Change of Control, or at the Company's option, prior to such Change of Control but after it is publicly announced, the Company will send a notice to
each holder describing the transaction or transactions that constitute the Change of Control and offering (a "Change of Control Offer") to repurchase notes properly tendered prior to the expiration
date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is sent, or such later date as is necessary to comply with
law, pursuant to the procedures required by the indenture and described in such notice.
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Promptly
following the expiration of the Change of Control Offer, the Company will, to the extent lawful, accept for payment all notes or portions of notes properly tendered pursuant to
the Change of Control Offer.
Promptly
after such acceptance, the Company will, on the Change of Control Purchase Date, to the extent lawful:
-
(1)
-
deposit
with the paying agent an amount equal to the Change of Control Payment in respect of all notes or portions of notes properly tendered; and
-
(2)
-
deliver
or cause to be delivered to the trustee the notes accepted for payment, together with an officers' certificate stating the aggregate principal amount of
notes or portions of notes being purchased by the Company.
The
paying agent will promptly mail or wire transfer to each holder of notes properly tendered the Change of Control Payment for such notes (or, if all the notes are then in global form,
make such payment through the facilities of DTC), and the trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each holder a new note equal in principal amount to
any unpurchased portion of the notes surrendered, if any. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control
Purchase Date.
The
provisions described above that require the Company to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the
indenture are applicable, except as described in the following paragraph. Except as described above with respect to a Change of Control, the indenture will not contain provisions that permit the
holders of the notes to require that the Company repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction.
The
Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the price, 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 Company and purchases all notes properly tendered and not
withdrawn under the Change of Control Offer, (2) notice of redemption of all outstanding notes has been given pursuant to the indenture as described above under the caption
"Optional Redemption," unless and until there is a default in payment of the applicable redemption price, or (3) in connection with or in contemplation of any Change of Control,
the Company has made an offer to purchase (an "Alternate Offer") any and all notes validly tendered at a cash price equal to or higher than the Change of Control Payment and has purchased all notes
properly tendered in accordance with the terms of the Alternate Offer. Notwithstanding anything to the contrary contained in the indenture, a Change of Control Offer or Alternate Offer may be made in
advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer or
Alternate Offer is made. The closing date of any such Change of Control Offer or Alternate Offer made in advance of a Change of Control may be changed to conform to the actual closing date of the
Change of Control;
provided
that such closing date is not earlier than 30 days nor later than 60 days from the date the Change of Control
Offer or Alternate Offer notice is sent as described in this section.
The
definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the
properties or assets of the Company and its Subsidiaries taken as a whole. 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 of notes to require the Company to repurchase the notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the
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properties
or assets of the Company and its Subsidiaries taken as a whole to another Person may be uncertain.
In
the event that holders of not less than 90% in aggregate principal amount of the outstanding notes accept a Change of Control Offer or Alternate Offer and the Company (or any third
party making such Change of Control Offer or Alternate Offer in lieu of the Company as described above) purchases all of the notes held by such holders, the Company (or any third party making such
Change of Control Offer or Alternate Offer in lieu of the Company as described above) will have the right, upon not less than 30 nor more than 60 days prior notice, given not more than
30 days following the purchase pursuant to the Change of Control Offer or Alternate Offer described above, to redeem all of the notes that remain outstanding following such purchase at a
redemption price equal to the Change of Control Payment, plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest, if any, on the notes that remain outstanding,
to the date of redemption (subject to the rights of holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date).
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:
-
(1)
-
the
Company or any of its Restricted Subsidiaries, as the case may be, receives consideration at the time of the Asset Sale at least equal to the Fair Market Value
(measured as of the date of the consummation of such Asset Sale) of the assets or Equity Interests issued or sold or otherwise disposed of; and
-
(2)
-
at
least 75% of the aggregate consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For
purposes of this provision, each of the following will be deemed to be cash:
-
(a)
-
any
liabilities, as shown on the Company's most recent consolidated balance sheet, of the Company or any of its Restricted Subsidiaries (other than contingent
liabilities and liabilities that are by their terms subordinated to the notes or any Note Guarantee) that are assumed by the transferee of any such assets pursuant to a novation or indemnity agreement
that releases the Company or such Restricted Subsidiary from or indemnifies the Company or such Restricted Subsidiary against further liability;
-
(b)
-
with
respect to any Asset Sale of oil and natural gas properties by the Company or any of its Restricted Subsidiaries where the Company or such Restricted Subsidiary
retains an interest in such property, any agreement by the transferee (or an Affiliate thereof) to pay all or a portion of the costs and expenses of the Company or such Restricted Subsidiary related
to the exploration, development, completion or production of such properties and activities related thereto;
-
(c)
-
any
securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are, within 180 days of the
Asset Sale, converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion;
-
(d)
-
any
Capital Stock or assets of the kind referred to in clause (2) or (4) of the next paragraph; and
-
(e)
-
any
Designated Non-cash Consideration received by the Company or such Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value, taken together
with all other Designated Non-cash Consideration received pursuant to this clause (e) since
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the
date of the indenture, not to exceed an amount equal to 10.0% of the Company's Adjusted Consolidated Net Tangible Assets (determined at the time of receipt of such Designated Non-cash
Consideration), with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value.
Within
365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or one or more of its Restricted Subsidiaries may apply an amount equal to the amount of such
Net Proceeds at its option to any combination of the following:
-
(1)
-
to
repay, repurchase or redeem any senior Indebtedness of the Company or any Guarantor, in each case owing to a Person other than the Company or any Restricted
Subsidiary;
-
(2)
-
to
acquire all or substantially all of the assets, or any Capital Stock, of one or more other Persons primarily engaged in the Oil and Gas Business, if, after giving
effect to any such acquisition of Capital Stock, such Person becomes a Restricted Subsidiary of the Company;
-
(3)
-
to
make capital expenditures in respect of the Company's or any of its Restricted Subsidiaries' Oil and Gas Business; or
-
(4)
-
to
acquire other assets that are not classified as current assets under GAAP and that are used or useful in the Oil and Gas Business.
The
requirement of clause (2) or (4) of the immediately preceding paragraph shall be deemed to be satisfied if a bona fide binding contract committing to make the
acquisition referred to therein is entered into by the Company or any of its Restricted Subsidiaries with a Person other than an Affiliate of the Company within the time period specified in the
preceding paragraph and such Net Proceeds are subsequently applied in accordance with such contract within 180 days following the date such agreement is entered into.
Pending
the final application of any Net Proceeds, the Company or any of its Restricted Subsidiaries may invest the Net Proceeds in any manner that is not prohibited by the indenture.
The
Net Proceeds from Asset Sales that are not applied or invested as provided in the second and third paragraphs of this section will constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $25.0 million, within ten business days thereof, the Company will make an offer (an "Asset Sale Offer") to all holders of notes and all holders of other
Indebtedness that is
pari
passu
with the notes containing provisions similar to those set forth in the indenture with respect to offers to purchase, prepay or redeem such Indebtedness with the proceeds
of sales of assets, to purchase, prepay or redeem, on a
pro rata
basis, the maximum principal amount of notes and such other
pari passu
Indebtedness (plus
all accrued interest on the notes and other Indebtedness and the amount of all fees and expenses, including premiums,
incurred in connection therewith) that may be purchased, prepaid or redeemed out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount, plus
accrued and unpaid interest, if any, to the date of purchase, prepayment or redemption, subject to the rights of holders of notes on the relevant record date to receive interest due on the relevant
interest payment date, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company or any of its Restricted Subsidiaries may use those Excess
Proceeds for any purpose not otherwise prohibited by the indenture. If the aggregate principal amount of notes and pari passu indebtedness tendered in such Asset Sale Offer exceeds the amount of
Excess Proceeds allocated to the purchase of notes, the trustee will select the notes to be purchased on a pro rata basis (except that any notes represented by a note in global form will be selected
by such method as DTC or its nominee or successor may require or, where such nominee or successor is the trustee, a method that most nearly approximates pro rata selection as the trustee deems fair
and appropriate unless otherwise required by law), based on the amounts tendered (with such adjustments as may be deemed appropriate by the Company so that only notes in
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denominations
of $2,000, or an integral multiple of $1,000 in excess thereof, will be purchased). Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.
The
Company will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934 (the "Exchange Act") and any other securities laws and regulations thereunder
to the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to a Change of Control Offer or an Asset Sale Offer. To the extent that the provisions of
any securities laws or regulations conflict with the "Change of Control" or "Asset Sales" provisions of the indenture, the Company will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the "Change of Control" or "Asset Sales" provisions of the indenture by virtue of such compliance.
The
Credit Agreement contains, and future agreements may contain, direct or indirect prohibitions of certain events, including events that would constitute a Change of Control or an
Asset Sale and including repurchases of or other prepayments in respect of the notes. The exercise by the holders of notes of their right to require the Company to repurchase the notes upon a Change
of Control or an Asset Sale could cause a default under these other agreements, even if the Change of Control or Asset Sale itself does not, due to the financial effect of such repurchases on the
Company and its Subsidiaries or otherwise. In the event a Change of Control or Asset Sale occurs at a time when the Company is effectively prohibited from purchasing notes, the Company could seek the
consent of the relevant senior lenders to the purchase of notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain a consent or repay those
borrowings, the Company will remain effectively prohibited from purchasing notes. In that case, the Company's failure to purchase
tendered notes would constitute an Event of Default under the indenture which could, in turn, constitute a default under the other indebtedness. Finally, the Company's ability to pay cash to the
holders of notes upon a repurchase may be limited by the Company's then existing financial resources. See "Risk FactorsRisks Associated with our Indebtedness and the NotesWe
may not be able to repurchase the notes upon a change of control as required by the indenture governing the notes."
Selection and Notice
If less than all of the notes are to be redeemed under any of the redemption provisions in the indenture, the trustee will select notes for
redemption on a
pro rata
basis (or, in the case of notes issued in global form as discussed under "Book-Entry, Delivery and Form," based on
a method as DTC or its nominee or successor may require or, where such nominee or successor is the trustee, a method that most nearly approximates
pro
rata
selection as the trustee deems fair and appropriate unless otherwise required by law) unless otherwise required by law or applicable stock exchange or depositary
requirements.
No
notes of $2,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail (or sent electronically if DTC is the recipient) at least 30 but not more
than 60 days before the redemption date to each holder of notes to be redeemed at its registered address, except that redemption notices may be sent more than 60 days prior to a
redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture.
Any
such redemption may, at the Company's discretion, be subject to one or more conditions precedent, including any related Equity Offering. If such redemption is subject to the
satisfaction of one or more conditions precedent, the related notice shall describe each such condition, and if applicable, shall state that, in the Company's discretion, the date of redemption may be
delayed until such time as any or all such conditions shall be satisfied or waived (
provided
that in no event shall such date of redemption be delayed
to a date later than 60 days after the date on which such notice was sent), or such redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall
not have been satisfied or waived by the date of redemption, or by the date of redemption as so delayed.
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If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount of that note that is
to be redeemed. A new note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the holder of notes upon cancellation of the original note. Subject to
the provisions of the preceding paragraph, notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest will cease to accrue on notes or portions
of notes called for redemption, unless the Company defaults in making the redemption payment.
Certain Covenants
Changes in Covenants if Notes Rated Investment Grade
If:
(1) the
notes are rated Baa3 or better by Moody's or BBB or better by S&P (or, if either such entity ceases to rate the notes for reasons outside of the
control of the Company, the equivalent investment grade credit rating from any other "nationally recognized statistical rating organization" within the meaning of Section 3(a) (62) of
the Exchange Act selected by the Company as a replacement agency); and
(2) no
Default or Event of Default shall have occurred and be continuing,
then,
beginning on that date and subject to the provisions of the following paragraph, the covenants specifically listed under the following captions in this prospectus will be suspended:
(1) "Repurchase
at the Option of HoldersAsset Sales";
(2) "Restricted
Payments";
(3) "Incurrence
of Indebtedness and Issuance of Preferred Stock";
(4) "Dividend
and Other Payment Restrictions Affecting Restricted Subsidiaries";
(5) "Designation
of Restricted and Unrestricted Subsidiaries";
(6) "Transactions
with Affiliates"
(7) "Business
Activities"; and
(8) clause (4)
of the covenant described below under the caption "Merger, Consolidation or Sale of Assets."
During
any period that the foregoing covenants have been suspended (the "Suspension Period"), the Company's Board of Directors may not designate any of its Subsidiaries as Unrestricted
Subsidiaries pursuant to the covenant described below under the caption "Designation of Restricted and Unrestricted Subsidiaries" or the second paragraph of the definition of
"Unrestricted Subsidiaries."
Notwithstanding
the foregoing, if the ratings assigned to the notes by both such ratings agencies should subsequently decline to below Baa3 and BBB from Moody's or S&P,
respectively, the foregoing covenants will be reinstituted as of and from the date both such ratings were below investment grade. Calculations under the reinstated "Restricted Payments" covenant will
be made as if the "Restricted Payments" covenant had been in effect since the date of the indenture except that no default will be deemed to have occurred solely by reason of a Restricted Payment made
while that covenant was suspended. Furthermore, all Indebtedness incurred, or Disqualified Stock or Preferred Stock issued, during the Suspension Period will be deemed to have been incurred or issued
pursuant to clause (2) of the definition of "Permitted Debt" appearing in the covenant described under "Incurrence of Indebtedness and Issuance of Preferred Stock."
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In
addition, for purposes of the covenant described under "Transactions with Affiliates," all agreements and arrangements entered into by the Company or any Restricted
Subsidiary with an Affiliate of the Company during the Suspension Period will be deemed to have been entered into prior to the date of the indenture and permitted by clause (7) of such
covenant, and for purposes of the covenant described under "Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries," all contracts entered into during the Suspension
Period that contain any of the restrictions contemplated by such covenant will be deemed to have been existing on the date of the indenture.
There
can be no assurance that the notes will ever achieve an investment grade rating or that any such rating will be maintained.
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:
(1) declare
or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including any
payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company and other than dividends or
distributions payable to the Company or a Restricted Subsidiary of the Company);
(2) repurchase,
redeem or otherwise acquire or retire for value (including in connection with any merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company;
(3) make
any payment on or with respect to, or repurchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Company or any Guarantor that is
contractually subordinated to the notes or to any Note Guarantee (excluding (A) any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries and
(B) the purchase or other acquisition of subordinated Indebtedness acquired in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due
within one year of the date of such purchase or other acquisition), except a payment of interest or principal at the Stated Maturity thereof; or
(4) make
any Restricted Investment
(all
such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"),
unless,
at the time of and after giving effect to such Restricted Payment:
(a) no
Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;
(b) the
Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the
most recently ended four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described below under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock"; and
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(c) such
Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries since the date of the
indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (6), (7), (8), (9), (10) and (11) of the next succeeding paragraph), is less than the sum,
without duplication, of:
(i) 50%
of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the Company's fiscal quarter in which the notes
are originally issued to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such deficit);
plus
(ii) 100%
of the aggregate net cash proceeds and the Fair Market Value of property or securities other than cash (including marketable securities, other than marketable
securities of the Company or a Subsidiary of the Company, and including Capital Stock of Persons, other than the Company or a Subsidiary of the Company, engaged primarily in the Oil and Gas Business
or assets used or useful in the Oil and Gas Business), in each case received by the Company since the date of the indenture as a contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than (i) Disqualified Stock and (ii) net cash proceeds received from an issuance or sale of such Equity Interests to a Subsidiary of the Company or
an employee stock ownership plan, option plan or similar trust to the extent such sale to an employee stock ownership plan, option plan or similar trust is financed by loans from or Guaranteed by the
Company or any Restricted Subsidiary (unless such loans have been repaid with cash on or prior to the date of determination)) or from the issue or sale of convertible or exchangeable Disqualified
Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of the Company);
plus
(iii) to
the extent not already included in Consolidated Net Income for such period, if any Restricted Investment that was made by the Company or any of its Restricted
Subsidiaries after the date of the indenture is (A) sold for cash (other than to the Company or any Subsidiary of the Company), (B) reduced as a result of (I) repayment of loans
or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary, (II) other repurchases, repayments or redemptions of such Restricted Investments, or
(III) the release of any Guarantee (except to the extent any amounts are paid
under such Guarantee) that constituted a Restricted Investment, or (C) otherwise cancelled, liquidated or repaid for cash, the cash return of capital with respect to such Restricted Investment
resulting from such sale, liquidation or repayment (less any out-of-pocket costs incurred in connection with any such sale);
plus
(iv) the
amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by
a Subsidiary of the Company) subsequent to the date of the indenture of any such Indebtedness for Equity Interests (other than Disqualified Stock) of the Company (less the amount of any cash, or the
Fair Market Value of any other property (other than such Equity Interests), distributed by the Company upon such conversion or exchange and excluding the net cash proceeds from the conversion or
exchange financed, directly or indirectly, using funds borrowed from the Company or any Subsidiary), together with the net proceeds, if any, received by the Company or any of its Restricted
Subsidiaries upon such conversion or exchange;
plus
(v) to
the extent that any Unrestricted Subsidiary of the Company designated as such after the date of the indenture is redesignated as a Restricted Subsidiary pursuant to
the
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terms
of the indenture or is merged or consolidated with or into, or transfers or otherwise disposes of all of substantially all of its properties or assets to or is liquidated into, the Company or a
Restricted Subsidiary after the date of the indenture, the lesser of, as of the date of such redesignation, merger, consolidation, transfer, disposition or liquidation, (A) the Fair Market
Value of the Company's Investment in such Subsidiary (or of the properties or assets disposed of, as applicable) as of the date of such redesignation, merger, consolidation, transfer, disposition or
liquidation and (B) such Fair Market Value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary after the date of the indenture;
plus
(vi) any
dividends or distributions received in cash by the Company or a Restricted Subsidiary after the date of the indenture from an Unrestricted Subsidiary of the
Company, to the extent that such dividends or distributions were not otherwise included in the Consolidated Net Income of the Company for such period.
The
preceding provisions will not prohibit:
(1) the
payment of any dividend or distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or
distribution or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend, distribution or redemption payment would have complied with the provisions
of the indenture;
(2) the
making of any Restricted Payment in exchange for, or out of or with the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of, Equity Interests of the Company (other than Disqualified Stock) or from the substantially concurrent contribution of common equity capital to the Company;
provided
that the amount of any
such net cash proceeds that are utilized for any such Restricted Payment will not be considered to be net proceeds of
Equity Interests for purposes of clause (c)(ii) of the preceding paragraph and will not be considered to be net cash proceeds from an Equity Offering for purposes of the "Optional Redemption"
provisions of the indenture;
(3) the
payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a
pro
rata
basis;
(4) the
repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of the Company or any Guarantor that is contractually subordinated to
the notes or to any Note Guarantee (including the payment of any required premium and any fees and expenses incurred in connection with such repurchase, redemption, defeasance or other acquisition or
retirement) with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness;
(5) repurchases
of Indebtedness of the Company or any Guarantor that is contractually subordinated in right of payment to the notes or a Note Guarantee at a purchase price
not greater than (i) 101% of the principal amount of such subordinated Indebtedness in the event of a Change of Control or (ii) 100% of the principal amount of such subordinated
Indebtedness in the event of an Asset Sale, in each case, plus accrued and unpaid interest thereon, to the extent required by the terms of such Indebtedness, but only if:
(a) in
the case of a Change of Control, the Company has first complied with and fully satisfied its obligations under the provisions described under "Repurchase
at the Option of HoldersChange of Control"; or
(b) in
the case of an Asset Sale, the Company has complied with and fully satisfied its obligations in accordance with the covenant under the heading
"Repurchase at the Option of HoldersAsset Sales";
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(6) so
long as no Default or Event of Default has occurred and is continuing, the repurchase, redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any Restricted Subsidiary of the Company held by any current or former officer, director or employee of the Company or any of its Restricted Subsidiaries pursuant to any equity
subscription agreement, stock option agreement, shareholders' agreement or similar agreement;
provided
that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests may not exceed $5.0 million in any twelve- month period (with unused amounts in any twelve-month period being carried over to
succeeding twelve- month periods);
(7) the
repurchase of Equity Interests deemed to occur upon the exercise of stock or other equity options to the extent such Equity Interests represent a portion of the
exercise price of those stock or other equity options and any repurchase or other acquisition of Equity Interests made in lieu of or to satisfy the Company's tax withholding obligations in connection
with any exercise, exchange or vesting of equity compensation (including stock options, warrants, incentives, restricted stock, restricted stock units, phantom stock, performance shares, performance
share units or other rights to acquire Equity Interests);
(8) so
long as no Default or Event of Default has occurred and is continuing or would be caused thereby, the declaration and payment of regularly scheduled or accrued
dividends or distributions to holders of any class or series of Disqualified Stock of the Company or any Preferred Stock of any Restricted Subsidiary of the Company issued on or after the date of the
indenture in accordance with the Fixed Charge Coverage Ratio test described below under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock";
(9) payments
of cash, dividends, distributions, advances or other Restricted Payments by the Company or any of its Restricted Subsidiaries to allow the payment of cash in
lieu of the issuance of fractional shares upon the exercise of options or warrants, the conversion or exchange of Capital Stock of any such Person or any other transaction permitted by the indenture;
(10) other
Restricted Payments in an aggregate amount not to exceed the greater of (i) $35.0 million and (ii) 3.0% of Adjusted Consolidated Net Tangible
Assets (determined as of the time of such Restricted Payment) since the date of the indenture;
(11) payments
or distributions to dissenting stockholders pursuant to applicable law in connection with a merger, consolidation or transfer of all or substantially all of
the assets of the Company that complies
with the provisions described under the caption "Merger, Consolidation or Sale of Assets"; and
(12) repurchases
or redemptions of shares of common Equity Interests of the Company from any holder of less than 100 shares of such common Equity Interests;
provided
that the aggregate amount paid for all such
repurchases or redemptions shall not exceed $1.0 million in any fiscal year.
The
amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment (or, in the case of a dividend or distribution, on the date of
declaration) of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The Fair Market
Value of any assets or securities that are required to be valued by this covenant will be determined in accordance with the definition of "Fair Market Value".
For
purposes of determining compliance with the covenant described above, in the event that a Restricted Payment meets the criteria of more than one of the exceptions described in
clauses (1) through (12) of the second preceding paragraph, the Company 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 complied with such covenant.
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Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, issue, assume, Guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company will not issue any Disqualified Stock and
will not permit any of its Restricted Subsidiaries to issue any Preferred Stock;
provided
,
however
, that
the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and the Guarantors may incur Indebtedness (including Acquired Debt) or issue Preferred Stock, if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or such Preferred Stock is issued, as the case may be, would have been at least 2.25 to 1.0, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred or the Disqualified Stock or the Preferred Stock had been issued, as the case may be, at the beginning of such four-quarter period.
The
first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness or issuances of Disqualified Stock or Preferred Stock, as applicable
(collectively, "Permitted Debt"):
(1) the
incurrence by the Company and any Guarantor of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time
outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and the Guarantors thereunder) not to
exceed the greatest of (i) $450.0 million, (ii) $100.0 million plus 30.0% of the Company's Adjusted Consolidated Net Tangible Assets determined as of the date of such
incurrence and (iii) the Borrowing Base at the time of incurrence;
(2) the
incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness;
(3) the
incurrence by the Company and the Guarantors of Indebtedness represented by the notes and the related Note Guarantees;
(4) the
incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money
obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment used
in the business of the Company or any of its Restricted Subsidiaries, in an aggregate principal amount outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund,
refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (4), not to exceed the greater of (i) $40.0 million and (ii) 3.5% of the
Company's Adjusted Consolidated Net Tangible Assets determined as of the date of such incurrence;
(5) the
incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to
renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) of the Company or any of its Restricted Subsidiaries or any Disqualified Stock of the
Company, in each case that was incurred under the first paragraph of this covenant or clause (2), (3), (4), (5), (14), (15), or (16) of this paragraph;
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(6) the
incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries;
provided
,
however
, that:
(a) if
the Company or any Guarantor is the obligor on such Indebtedness and the payee is not the Company or a Guarantor, such Indebtedness must be unsecured and expressly
subordinated to the prior payment in full in cash of all Obligations then due with respect to the notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and
(b) (i)
any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary of the Company and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company, will be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);
(7) the
issuance by any of the Company's Restricted Subsidiaries to the Company or to any of its Restricted Subsidiaries of any Preferred Stock;
provided
,
however
,
that:
(a) any
subsequent issuance or transfer of Equity Interests that results in any such Preferred Stock being held by a Person other than the Company or a Restricted Subsidiary
of the Company; and
(b) any
sale or other transfer of any such Preferred Stock to a Person that is not either the Company or a Restricted Subsidiary of the Company,
will
be deemed, in each case, to constitute an issuance of such Preferred Stock by such Restricted Subsidiary that was not permitted by this clause (7);
(8) the
incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations not for speculative purposes;
(9) the
Guarantee by the Company or any of the Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the Company to the extent that the
Guaranteed Indebtedness was permitted to be incurred by another provision of this covenant;
provided
that if the Indebtedness being Guaranteed is
subordinated to or
pari passu
with the notes, then the Guarantee must be subordinated or
pari passu
, as
applicable, to the same extent as the Indebtedness Guaranteed;
(10) the
incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of workers' compensation claims, self-insurance obligations, bankers'
acceptances, performance, bid, plugging and abandonment, appeal, reimbursement, performance, surety and similar bonds, and completion guarantees provided by the Company or a Restricted Subsidiary of
the Company in the ordinary course of business and any Guarantees or letters of credit functioning as or supporting any of the foregoing bonds or obligations and workers' compensation claims in the
ordinary course of business;
(11) the
incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft
or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five business days;
(12) the
incurrence by the Company or any of its Restricted Subsidiaries of in-kind obligations relating to net oil or natural gas balancing positions arising in the
ordinary course of business;
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(13) any
obligation arising from agreements of the Company or any Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn
outs, or similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or Capital Stock of a Restricted Subsidiary in a transaction
permitted by the indenture;
provided
that such obligation is not reflected as a liability on the face of the balance sheet of the Company or any
Restricted Subsidiary;
(14) any
Permitted Acquisition Indebtedness;
(15) the
incurrence by the Company or any Restricted Subsidiary of Indebtedness consisting of the financing of insurance premiums in customary amounts consistent with the
operations and business of the Company and its Restricted Subsidiaries; and
(16) the
incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness or the issuance by the Company of any Disqualified Stock in an aggregate
principal amount (or accreted value, as applicable) at any time outstanding (other than Indebtedness permitted by clauses (1) through (15) above or the first paragraph of this covenant),
including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred or Disqualified Stock issued pursuant to this
clause (16), not to exceed, at any one time outstanding, the greater of (i) $50.0 million and (ii) 5.0% of the Company's Adjusted Consolidated Net Tangible Assets
determined as of the date of such incurrence or issuance.
The
Company will not incur, and will not permit any Guarantor to incur, any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other
Indebtedness of the Company or such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the notes or the applicable Note Guarantee on substantially identical
terms;
provided
,
however
, that no Indebtedness will be deemed to be contractually subordinated in right
of payment to any other Indebtedness of the Company or any Guarantor solely by virtue of being unsecured or by virtue of being secured on a junior priority basis.
For
purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of Indebtedness meets the criteria of
more than one of the categories of Permitted Debt described in clauses (1) through (16) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company
will be permitted to divide, classify and reclassify such item of Indebtedness on the date of its incurrence, or later redivide or reclassify all or a portion of such item of Indebtedness, in any
manner that complies with this covenant. Indebtedness under Credit Facilities outstanding on the date on which notes are first issued and authenticated under the indenture will initially be deemed to
have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt and may not be reclassified. The accrual of interest or Preferred Stock
or Disqualified Stock dividends or distributions, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness not secured by a Lien in the form of additional
Indebtedness with the same terms, the reclassification of Preferred Stock or Disqualified Stock as Indebtedness due to a change in accounting principles, and the payment of dividends or distributions
on Preferred Stock or Disqualified Stock in the form of additional shares or units of the same class of Preferred Stock or Disqualified Stock will not be deemed to be an incurrence of Indebtedness or
an issuance of Preferred Stock or Disqualified Stock for purposes of this covenant;
provided
, in each such case, that the amount thereof is included in
Fixed Charges of the Company as accrued to the extent required by the definition of such term.
The
amount of any Indebtedness outstanding as of any date will be:
(1) the
accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;
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(2) the
principal amount of the Indebtedness, in the case of any other Indebtedness; and
(3) in
respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:
(a) the
Fair Market Value of such assets at the date of determination; and
(b) the
amount of the Indebtedness of the other Person.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur or assume any Lien (an
"Initial Lien") of any kind (other than Permitted Liens) securing Indebtedness upon any of their property or assets now owned or hereafter acquired, unless the notes or any Note Guarantee of such
Restricted Subsidiary, as applicable, are secured on an equal and ratable basis with the Indebtedness so secured until such time as such Indebtedness is no longer secured by the Initial Lien.
Any
Lien created for the benefit of the holders of the notes pursuant to the preceding paragraph shall provide by its terms that such Lien shall be automatically and unconditionally
released and discharged upon the release and discharge of the Initial Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create 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 its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or
participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;
provided
that the
priority that any series of Preferred Stock of a Restricted Subsidiary has in receiving dividends, distributions or liquidating distributions before dividends, distributions or liquidating
distributions are paid in respect of common stock of such Restricted Subsidiary shall not constitute a restriction on the ability to make dividends or distributions on Capital Stock for purposes of
this covenant;
(2) make
loans or advances to the Company or any of its Restricted Subsidiaries (it being understood that the subordination of loans or advances made to the Company or any
of its Restricted Subsidiaries to other Indebtedness incurred by the Company or any of its Restricted Subsidiaries shall not be deemed a restriction on the ability to make loans or advances); or
(3) sell,
lease or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.
However,
the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:
(1) agreements
governing Existing Indebtedness and Credit Facilities, or any other agreements or instruments, as in effect on the date of the indenture and any amendments,
restatements, modifications, renewals, extensions, supplements, increases, refundings, replacements or refinancings of those agreements;
provided
that
the encumbrances or restrictions contained in the amendments, restatements, modifications, renewals, extensions, supplements, increases, refundings, replacements or refinancings are not in the good
faith judgment of an officer of the Company materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the
date of the indenture;
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(2) the
indenture, the notes and the Note Guarantees;
(3) agreements
governing other Indebtedness permitted to be incurred under the provisions of the covenant described above under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock" and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements;
provided
that the
encumbrances or restrictions contained therein are not, in the reasonable good faith judgment of an officer of the Company, materially
more restrictive, taken as a whole, than those contained in the indenture, the notes and the Note Guarantees or the Credit Agreement as in effect on the date of the indenture;
(4) applicable
law, rule, regulation, order, approval, permit or similar restriction;
(5) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, and any amendments, restatements, modifications, renewals, extensions,
supplements, increases, refundings, replacements or refinancings thereof;
provided
, that the encumbrances and restrictions in any such amendments,
restatements, modifications, renewals, extensions, supplements, increases, refundings, replacements or refinancings are, in the reasonable good faith judgment of an officer of the Company, no more
restrictive, taken as a whole, than those in effect on the date of the acquisition;
provided further
, that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the indenture to be incurred;
(6) customary
non-assignment provisions in contracts, licenses, easements or leases, in each case, entered into in the ordinary course of business;
(7) purchase
money obligations for property acquired and security agreements, mortgages, Capital Lease Obligations or similar instruments that impose restrictions on the
property purchased or leased of the nature described in clause (3) of the preceding paragraph;
(8) any
agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other
disposition;
(9) Permitted
Refinancing Indebtedness;
provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are, in the reasonable good faith judgment of an officer of the Company, not materially more restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced;
(10) Liens
permitted to be incurred under the provisions of the covenant described above under the caption "Liens" that limit the right of the debtor to dispose
of the assets subject to such Liens;
(11) provisions
limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale
agreements and other similar agreements (including agreements entered into in connection with a Restricted Investment) entered into with the approval of the Company's Board of Directors, which
limitation is applicable only to the assets that are the subject of such agreements;
(12) encumbrances
or restrictions applicable only to a Restricted Subsidiary that is not a Domestic Subsidiary;
(13) encumbrances
or restrictions on cash or other deposits or net worth imposed by customers or lessors under contracts or leases entered into in the ordinary course of
business;
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(14) Indebtedness
incurred by any Restricted Subsidiary, provided that the restrictions contained in the agreements or instruments governing such Indebtedness
(A) apply only in the event of a payment default or a default with respect to a financial covenant in such agreement or instrument and (B) will not materially affect the Company's
ability to pay all principal, interest and premium, if any, on the notes, in the reasonable good faith judgment of an officer of the Company; and
(15) customary
encumbrances and restrictions contained in agreements of the types described in the definition of "Permitted Business Investments."
Merger, Consolidation or Sale of Assets
The Company will not: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving Person), or
(2) sell, assign, transfer, convey, lease or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or
more related transactions, to another Person, unless:
(1) either:
(a) the Company is the surviving Person; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or
to which such sale, assignment, transfer, conveyance, lease or other disposition has been made is an entity organized or existing under the laws of the United States, any state of the United States or
the District of Columbia; and, if such entity is not a corporation, a co-obligor of the notes is a corporation organized or existing under any such laws;
(2) the
Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance, lease
or other disposition has been made assumes all the obligations of the Company under the notes, the indenture and (if then in effect) the registration rights agreement pursuant to a supplemental
indenture and a supplement to the registration rights agreement, in form reasonably satisfactory to the trustee;
(3) immediately
after giving effect to such transaction, no Default or Event of Default exists; and
(4) the
Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance,
lease or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the
beginning of the applicable four-quarter period (a) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock" or (b) have had a Fixed Charge Coverage Ratio equal to or greater than the actual Fixed Charge Coverage Ratio for the
Company for such four-quarter period.
This
"Merger, Consolidation or Sale of Assets" covenant will not apply to any sale, assignment, transfer, conveyance, lease or other disposition of properties or assets between or among
the Company and its Restricted Subsidiaries. Clauses (3) and (4) of the first paragraph of this covenant will not apply to (1) any merger or consolidation of the Company with or
into one of its Restricted Subsidiaries for any purpose or (2) with or into an Affiliate solely for the purpose of reincorporating the Company in another jurisdiction.
Upon
any consolidation or merger or any sale, assignment, transfer, conveyance, lease or other disposition of all or substantially all of the properties or assets of the Company in
accordance with the foregoing in which the Company is not the surviving entity, the surviving Person formed by such consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer,
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conveyance,
lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the indenture with the same effect as if such
surviving Person had been named as the Company in the indenture, and thereafter (except in the case of a lease of all or substantially all of the Company's properties or assets), the Company will be
relieved of all obligations and covenants under the indenture and the notes.
Although
there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, in
certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve "all or substantially all" of the properties or assets of a Person.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate of the
Company (each, an "Affiliate Transaction") involving aggregate payments or consideration in excess of $1 million, unless:
(1) the
Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with a Person that is not an Affiliate of the Company or, if in the good faith judgment of the Board of Directors of the Company, no
comparable transaction is available with which to compare such Affiliate Transaction, such Affiliate Transaction is otherwise fair to the Company or the relevant Restricted Subsidiary from a financial
point of view; and
(2) the
Company delivers to the trustee:
(a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $20.0 million, an officers'
certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with this covenant; and
(b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $40.0 million, a resolution
of the Board of Directors of the Company set forth in an officers' certificate certifying that such Affiliate Transaction or series of related Affiliated Transactions complies with this covenant and
that such Affiliate Transaction or series of related Affiliate Transactions has been approved by a majority of the disinterested members of the Board of Directors of the Company, if any.
The
following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:
(1) any
employment or consulting agreement, employee benefit plan, officer or director indemnification, compensation or severance agreement or any similar arrangement
entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto;
(2) transactions
between or among the Company or its Restricted Subsidiaries;
(3) transactions
with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or
through a Restricted Subsidiary, an Equity Interest in, or controls, such Person;
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(4) payment
of reasonable and customary fees and compensation paid to, and indemnity or insurance provided on behalf of, officers, directors, employees or consultants of the
Company or any of its Restricted Subsidiaries;
(5) any
issuance of Equity Interests (other than Disqualified Stock) of the Company to, or receipt of a capital contribution from, Affiliates of the Company;
(6) Restricted
Payments that do not violate the provisions of the indenture described above under the caption "Restricted Payments" and any Permitted
Investment;
(7) the
performance of obligations of the Company or any of its Restricted Subsidiaries under the terms of any written agreement to which the Company or any of its
Restricted Subsidiaries was a party on the date of the indenture (or any agreement in respect of the GCII Acquisition as in effect on the date of the First Closing of the GCII Acquisition), as such
agreements may be amended, modified or supplemented from time to time; provided, however, that any future amendment, modification or supplement to such an agreement entered into after the date of the
indenture will be permitted to the extent that its terms do not materially and adversely affect the rights of any holders of the notes (as determined in good faith by the board of directors of the
Company) as compared to the terms of such agreement in effect on the date of the indenture (or the date of the First Closing of the GCII Acquisition, as applicable);
(8) payments
to an Affiliate in respect of the notes or any other Indebtedness of the Company or any of its Restricted Subsidiaries on the same basis as concurrent payments
are made or offered to be made in respect thereof to non-Affiliates;
(9) loans
or advances to or reimbursements of expenses incurred by employees for moving, entertainment and travel expenses and similar expenditures in the ordinary course of
business;
(10) transactions
between the Company or any of its Restricted Subsidiaries and any other Person, a director of which is also on the Board of Directors of the Company or any
direct or indirect parent company of the Company, and such common director is the sole cause for such other Person to be deemed an Affiliate of the Company or any of its Restricted Subsidiaries;
provided
,
however
, that such director abstains from voting as a member of the Board of Directors of the
Company or any direct or
indirect parent company of the Company, as the case may be, on any transaction with such other Person;
(11) in
the case of contracts for exploring for, producing, marketing, storing or otherwise handling Hydrocarbons, or activities or services reasonably related or ancillary
thereto, or other operational contracts, any such contracts entered into in the ordinary course of business and otherwise in compliance with the terms of the indenture which are fair to the Company
and its Restricted Subsidiaries or are on terms at least as favorable as might reasonably have been obtained at such time from a Person that is not an Affiliate of the Company, in either case in the
reasonable determination of the Board of Directors of the Company or the senior management thereof,; and
(12) any
transaction in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the trustee a letter from an accounting, appraisal or
investment banking firm of national standing stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or that such transaction meets the
requirements of clause (1) of the preceding paragraph.
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Business Activities
The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than the Oil and Gas Business,
except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole.
Additional Note Guarantees
If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of the indenture that
(i) incurs or guarantees Indebtedness under any Credit Facility and (ii) is a Material Subsidiary, then, in either case, that Subsidiary will become a Guarantor by executing a
supplemental indenture in substantially the form specified in the indenture
and delivering an opinion of counsel to the trustee within 30 days after the date that Subsidiary incurred such Indebtedness.
Any
Guarantor that (i) is no longer liable for Indebtedness under any Credit Facility or (ii) is no longer a Material Subsidiary will be released from its Note Guarantee.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not
cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted
Subsidiaries in the Subsidiary designated as Unrestricted will be deemed to be either (1) an Investment made as of the time of the designation that will reduce the amount available for
Restricted Payments under the covenant described above under the caption "Restricted Payments" or (2) a Permitted Investment under one or more clauses of the definition of
Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
Any
designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the trustee by filing with the trustee a certified copy of a resolution of the Board of
Directors giving effect to such designation and an officers' certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described above under
the caption "Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be
an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock," the Company will
be in default of such covenant.
The
Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company;
provided
that such designation will be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the applicable reference period and
(2) no Default or Event of Default would be in existence following such designation.
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Payments for Consent
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any holder of notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the notes unless such
consideration is offered to be paid and is paid to all holders of the notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Notwithstanding
the foregoing, with respect to any payment of consideration for, or as an inducement to, any consent, waiver or amendment of any of the terms or provisions of the
indenture, the notes or the Note Guarantees in connection with an exchange offer, the Company and any of its Restricted Subsidiaries may exclude (i) holders or beneficial owners of the notes
that are not "qualified institutional buyers" as defined in Rule 144A under the Securities Act, or "non-U.S. Persons" as defined in Regulation S under the Securities Act, and
(ii) holders or beneficial owners of the notes in any jurisdiction (other than the United States) where the inclusion of such holders or beneficial owners would require the Company or any such
Restricted Subsidiary to comply with the registration requirements or other similar requirements under any securities laws of such jurisdiction, or the solicitation of such consent, waiver or
amendment from, or the granting of such consent or waiver, or the approval of such amendment by, holders or beneficial owners in such jurisdiction would be unlawful, in each case as determined by the
Company in its sole discretion.
Reports
Whether or not required by the rules and regulations of the SEC, so long as any notes are outstanding, the Company will furnish to the holders
of notes or cause the trustee to furnish to the holders of notes (or file with the SEC for public availability), within the time periods specified in the SEC's rules and regulations:
(1) all
quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if the Company were required to file such reports,
including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants; and
(2) all
current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports.
The
availability of the foregoing reports on the SEC's EDGAR filing system will be deemed to satisfy the foregoing delivery requirements.
All
such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. The Company will at all times comply with Trust
Indenture Act §314(a).
If,
at any time, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports
specified in the preceding paragraphs of this covenant with the SEC within the time periods specified above unless the SEC will not accept such a filing.
The
Company will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Company's filings
for any reason, the Company will post the reports referred to in the preceding paragraphs on its website within the time periods that would apply if the Company were required to file those reports
with the SEC.
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If,
at any time, the Company does not have a class of equity securities listed on a national securities exchange, the Company will schedule a conference call to be held reasonably
promptly, but not more than ten business days following the release of each report containing the financial information referred to in clause (1) above to discuss the information contained in
such report. The Company shall be permitted to combine this conference call with any other conference call for other debt or equity holders or lenders. The Company will take reasonable steps to notify
holders of notes about such call and provide them and prospective investors in the notes with instructions to obtain access to such conference call concurrently with and in the same manner as each
delivery of financial statements pursuant to clause (1) above.
For
the avoidance of doubt, (a) any such reports or other information delivered pursuant to the foregoing will not be required to contain the separate financial information for
Guarantors as contemplated by Rule 3-10 of Regulation S-X or any financial statements of unconsolidated subsidiaries or 50% or less owned persons as contemplated by Rule 3-09 of
Regulation S-X or any schedules required by Regulation S-X, or in each case any successor provisions and (b) such information shall not be required to comply with
Regulation G under the Exchange Act or Item 10(e) of Regulation S-K with respect to any non-GAAP financial measures contained therein.
If
the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraphs will include,
to the extent material, a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of the Company. No certifications or attestations concerning the financial statements or disclosure controls and procedures or internal controls that would
otherwise be required pursuant to the Sarbanes-Oxley Act of 2002 will be required, and nothing contained herein or in the indenture shall otherwise require the Company to comply with the terms of the
Sarbanes-Oxley Act of 2002 at any time when it would not otherwise be subject to such statute.
Any
and all Defaults or Events of Default arising from a failure to furnish in a timely manner any report required by this covenant shall be deemed cured (and the Company shall be deemed
to be in compliance with this covenant) upon filing or posting such report as contemplated by this covenant (but without regard to the date on which such report is so filed or posted);
provided
that
such cure shall not otherwise affect the rights of the holders under "Events of Defaults and Remedies" if the principal of,
premium, if any, on, and interest on, the notes have been accelerated in accordance with the terms of the indenture and such acceleration has not been rescinded or cancelled prior to such cure.
In
addition, the Company shall furnish to noteholders, prospective investors, broker-dealers and securities analysts, upon their request, any information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act so long as the notes are not freely transferable under the Securities Act.
Events of Default and Remedies
Each of the following is an "Event of Default":
(1) default
for 30 days in the payment when due of interest on the notes;
(2) default
in the payment when due (at Stated Maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the notes;
(3) failure
by the Company to comply with the provisions described under the captions "Certain CovenantsMerger, Consolidation or Sale of Assets" or
to consummate a purchase of notes when required pursuant to the covenants described under the caption "Repurchase at the
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Option
of HoldersChange of Control," or "Repurchase at the Option of HoldersAsset Sales,";
(4) failure
by the Company for 180 days after notice from the trustee or holders of at least 25% in aggregate principal amount of the notes then outstanding to comply
with the provisions described under "Certain CovenantsReports";
(5) failure
by the Company for 60 days after notice to the Company by the trustee or the holders of at least 25% in aggregate principal amount of the notes then
outstanding to comply with any of its other agreements in the indenture;
(6) default
under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is
created after the date of the indenture, if that default:
(a) is
caused by a failure to pay principal of, premium, if any, on, or interest, if any, on, such Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default"); or
(b) results
in the acceleration of such Indebtedness prior to its Stated 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 $35.0 million or more;
provided
,
however
, that if,
prior to any acceleration of the notes, (i) any such Payment Default is cured or waived, (ii) any such acceleration is rescinded, or (iii) such Indebtedness is repaid, any Default
or Event of Default caused by such Payment Default or acceleration shall be automatically rescinded, so long as such rescission does not conflict with any judgment, decree or applicable law;
(7) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of
$35.0 million (to the extent not covered by insurance by a reputable and creditworthy insurer as to which the insurer has not disclaimed coverage), which judgments are not paid, discharged or
stayed, for a period of 60 days;
(8) except
as permitted by the indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force
and effect, or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee; and
(9) certain
events of bankruptcy or insolvency described in the indenture with respect to the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary
or any group of its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary.
In
the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, any Restricted Subsidiary of the Company that is a Significant
Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, all outstanding notes will become due and payable immediately without
further action or notice. If any other Event of Default occurs and is continuing, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately by notice in writing to the Company and, in the case of a notice by holders, also to the trustee specifying the applicable Event of Default and that such
notice is a notice of acceleration.
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The
holders of a majority in aggregate principal amount of the then outstanding notes by written notice to the trustee may, on behalf of the holders of all of the notes, rescind an
acceleration and its consequences under the indenture, if, among other things, (1) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction and
(2) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, on, and interest on, the notes that has become due solely by such declaration of
acceleration, have been cured or waived.
If
a Default or Event of Default occurs and is continuing and is known to the trustee, the trustee must send to each holder notice of the Default or Event of Default within
90 days after it occurs. The trustee, however, may withhold from holders of the notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their
interest, except a Default or Event of Default relating to the payment of principal of, premium, if any, on or interest on, the notes.
Subject
to the provisions of the indenture relating to the duties of the trustee in case an Event of Default occurs and is continuing, the trustee will be under no obligation to exercise
any of the rights or powers under the indenture at the request or direction of any holders of notes unless such holders have offered to the trustee indemnity or security reasonably satisfactory to it
against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest when due, no holder of a note may pursue any remedy with respect to
the indenture or the notes unless:
(1) such
holder has previously given the trustee written notice that an Event of Default is continuing;
(2) holders
of at least 25% in aggregate principal amount of the then outstanding notes make a written request to the trustee to pursue the remedy;
(3) such
holder or holders offer and, if requested, provide to the trustee security or indemnity reasonably satisfactory to the trustee against any loss, liability or
expense;
(4) the
trustee does not comply with such request within 60 days after receipt of the request and the offer, or provision if requested, of security or indemnity; and
(5) during
such 60-day period, holders of a majority in aggregate principal amount of the then outstanding notes do not give the trustee a direction inconsistent with such
request.
The
Company will be required to deliver to the trustee annually an officers' certificate regarding compliance with the indenture. Upon any officer of the Company becoming aware of any
Default or Event of Default, the Company will be required to deliver to the trustee a statement specifying such
Default or Event of Default and what action the Company intends to take, if any, regarding such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder or other owner of any Capital Stock of the Company or any Restricted Subsidiary, as
such, will have any liability for any obligations of the Company or the Restricted Subsidiaries under the notes, the indenture or the Note Guarantees or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of notes 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.
Legal Defeasance and Covenant Defeasance
The Company may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an officers' certificate, elect to
have all of its obligations discharged with respect to the
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outstanding
notes and all obligations of the Guarantors discharged with respect to their Note Guarantees ("Legal Defeasance") except for:
(1) the
rights of holders of outstanding notes to receive payments in respect of the principal of, premium, if any, on, or interest on, such notes when such payments are due
from the trust referred to below;
(2) the
Company's obligations with respect to the notes concerning issuing temporary notes, registration of transfer of notes, mutilated, destroyed, lost or stolen notes and
the maintenance of an office or agency for payment and money for security payments held in trust;
(3) the
rights, powers, trusts, duties and immunities of the trustee under the indenture, and the Company's and the Guarantors' obligations in connection therewith; and
(4) the
Legal Defeasance provisions of the indenture.
In
addition, the Company may, at its option and at any time, elect to have the obligations of the Company and the Guarantors released with respect to the covenants (including the
Company's obligation to make Change of Control Offers and Asset Sale Offers), other than the covenant described under "Merger, Consolidation or Sale of Assets", that are described in the
indenture ("Covenant Defeasance") and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, all Events of Default described under "Events of Default and Remedies" (except those relating to payments on the notes or bankruptcy or insolvency events) will no
longer constitute an Event of Default with respect to the notes.
In
order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the
Company must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the notes, cash in U.S. dollars, non-callable Government Securities,
or a combination thereof, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants delivered to the
trustee, to pay the principal of, premium, if any, on, and interest on, the outstanding notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the
Company must specify whether the notes are being defeased to such stated date for payment or to a particular redemption date;
(2) in
the case of Legal Defeasance, the Company must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that (a) the
Company received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable U.S. federal
income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the beneficial owners of the outstanding notes will not recognize income, gain or loss
for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. 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;
(3) in
the case of Covenant Defeasance, the Company must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that the beneficial
owners of the outstanding notes will
not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(4) no
Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit (and any similar concurrent deposit relating to other Indebtedness), and the granting of Liens to secure such borrowings);
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(5) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than
the indenture and the agreements governing any other Indebtedness being defeased, discharged or replaced) to which the Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(6) the
Company must deliver to the trustee an officers' certificate stating that the deposit was not made by the Company with the intent of preferring the holders of notes
over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others;
(7) the
Company must deliver to the trustee an officers' certificate stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have
been complied with; and
(8) the
Company must deliver to the trustee an opinion of counsel stating that the conditions precedent described in clauses (2), (3) and (5) above
relating to the Legal Defeasance or the Covenant Defeasance have been complied with.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the indenture, the notes or the Note Guarantees may be amended or supplemented with
the consent of the holders of a majority in aggregate principal amount of the then outstanding notes (including additional notes, if any) voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the notes), and any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal
of, premium, if any, on, or interest on, the notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of the indenture, the notes or the
Note Guarantees may be waived with the consent of the holders of a majority in aggregate principal amount of the then outstanding notes (including additional notes, if any) voting as a single class
(including consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes).
Without
the consent of each holder of notes affected, an amendment, supplement or waiver may not (with respect to any notes held by a non-consenting holder):
(1) reduce
the principal amount of notes whose holders must consent to an amendment, supplement or waiver;
(2) reduce
the principal of or change the fixed maturity of any note or alter or waive any of the provisions with respect to the redemption or repurchase of the notes
(except provisions relating to minimum required notice of optional redemption or those provisions relating to the covenants described above under the caption "Repurchase at the Option of
Holders");
(3) reduce
the rate of or change the time for payment of interest, including additional interest, on any note;
(4) waive
a Default or Event of Default in the payment of principal of, premium, if any, on, or interest on, the notes (except a rescission of acceleration of the notes by
the holders of a majority in aggregate principal amount of the then outstanding notes and a waiver of the payment default that resulted from such acceleration);
(5) make
any note payable in money other than that stated in the notes;
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(6) make
any change in the provisions of the indenture relating to waivers of past Defaults or the rights of holders of notes to receive payments of principal of, premium,
if any, on, or interest on, the notes (other than as permitted by clause (7) below);
(7) waive
a redemption or repurchase payment with respect to any note (other than a payment required by one of the covenants described above under the caption
"Repurchase at the Option of Holders");
(8) release
any Guarantor from any of its obligations under its Note Guarantee or the indenture, except in accordance with the terms of the indenture; or
(9) make
any change in the preceding amendment, supplement or waiver provisions.
Notwithstanding
the preceding, without the consent of any holder of notes, the Company, the Guarantors and the trustee may amend or supplement the indenture, the notes or the Note
Guarantees:
(1) to
cure any ambiguity, defect or inconsistency;
(2) to
provide for uncertificated notes in addition to or in place of certificated notes;
(3) to
provide for the assumption of the Company's or a Guarantor's obligations to holders of notes and Note Guarantees in the case of a merger or consolidation or
disposition of all or substantially all of the Company's or such Guarantor's properties or assets, as applicable;
(4) to
make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of
any holder, including to comply with requirements of the SEC or DTC in order to maintain the transferability of the notes pursuant to Rule 144A under the Securities Act ("Rule 144A") or
Regulation S under the Securities Act ("Regulation S");
(5) to
comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act;
(6) to
conform the text of the indenture, the notes or the Note Guarantees to any provision of the "Description of Notes" in the Offering Memorandum dated
November 14, 2017;
(7) to
provide for the issuance of additional notes in accordance with the limitations set forth in the indenture as of the date of the indenture;
(8) to
secure the notes or the Note Guarantees pursuant to the requirements of the covenant described above under the subheading "Certain
CovenantsLiens";
(9) to
add any additional Guarantor or to evidence the release of any Guarantor from its Note Guarantee, in each case as provided in the indenture; or
(10) to
evidence or provide for the acceptance of appointment under the indenture of a successor trustee.
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 requiring the approval of the holders becomes effective, the Company will
send 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.
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Satisfaction and Discharge
The indenture will be satisfied and discharged and will cease to be of further effect as to all notes issued thereunder (except as to surviving
rights of registration of transfer or exchange of the notes and as otherwise specified in the indenture), when:
(1) either:
(a) all
notes that have been authenticated, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited in
trust and thereafter repaid to the Company, have been delivered to the trustee for cancellation; or
(b) all
notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the giving of a notice of redemption or otherwise or will
become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the
holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and
discharge the entire Indebtedness on the notes not delivered to the trustee for cancellation for principal of, premium, if any, on, or interest on, the notes to the date of Stated Maturity or
redemption;
(2) in
respect of clause 1(b), no Event of Default has occurred and is continuing on the date of the deposit (other than an Event of Default resulting from the
borrowing of funds to be applied to such deposit and any similar deposit relating to other Indebtedness and, in each case, the granting of Liens to secure such borrowings);
(3) the
deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which
the Company or any Guarantor is bound (other than with respect to the borrowing of funds to be applied concurrently to make the deposit required to effect such satisfaction and discharge and any
similar concurrent deposit relating to other Indebtedness, and in each case the granting of Liens to secure such borrowings);
(4) the
Company or any Guarantor has paid or caused to be paid all other sums payable by it under the indenture; and
(5) the
Company has delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of the notes at Stated Maturity or
on the redemption date, as the case may be.
In
addition, the Company must deliver to the trustee an officers' certificate stating that all conditions precedent to satisfaction and discharge have been satisfied, and an opinion of
counsel stating that the conditions precedent to satisfaction and discharge described in clauses (3) and (5) above have been satisfied.
Concerning the Trustee
U.S. Bank National Association is the trustee under the indenture.
If
the trustee becomes a creditor of the Company or any Guarantor, the indenture will limit the right of the trustee to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest (as
defined in the Trust Indenture Act) after a Default has occurred and is continuing it must eliminate such conflict within 90 days, apply
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to
the SEC for permission to continue as trustee (if the indenture has been qualified under the Trust Indenture Act) or resign.
The
holders of a majority in aggregate principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising
any remedy available to the trustee or of exercising any trust or power conferred on the trustee, subject to certain exceptions. In case an Event of Default has occurred and is continuing, the trustee
will be required, in the exercise of its powers, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any holder of notes, unless such holder has offered to the trustee indemnity or security reasonably satisfactory to it
against any loss, liability or expense.
Governing Law
The indenture, the notes and the Note Guarantees are governed by, and construed in accordance with, the laws of the State of New York.
Book-entry, Delivery and Form
The new notes will be represented by one or more permanent global notes in registered form, without interest coupons ("Global Notes"). The
Global Notes will be deposited upon issuance with the trustee as custodian for The Depository Trust Company ("DTC"), and registered in the name of DTC or its nominee, in each case, for credit to an
account of a direct or indirect participant in DTC as described below.
Except
as set forth below, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in
the Global Notes may not be exchanged for definitive notes in registered certificated form ("Certificated Notes") except in the limited circumstances described below. See "Exchange of
Global Notes for Certificated Notes." Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of notes
in certificated form.
Transfers
of beneficial interests in the Global Notes will be subject to the applicable rules and procedures of DTC and its direct or indirect participants, which may change from time to
time.
Depository Procedures
The following description of the operations and procedures of DTC is provided solely as a matter of convenience. These operations and procedures
are solely within the control of DTC and are subject to changes by DTC. The Company takes no responsibility for these operations and procedures and urges investors to contact DTC or its Participants
directly to discuss these matters.
Neither the Company nor the trustee nor any of their respective agents will have any responsibility for the performance of DTC or its Participants or Indirect Participants of its obligations under the
rules and procedures governing its operations, and the information in this section is subject to change at any time.
DTC
has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in those securities between the Participants through electronic book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants
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may
beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each
security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants.
DTC
has also advised the Company that, pursuant to procedures established by it:
(1) upon
deposit of the Global Notes, DTC will credit the accounts of the Participants designated by the Participants with portions of the principal amount of the Global
Notes; and
(2) ownership
of these interests in the Global Notes will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by
DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Notes).
Investors
in the Global Notes who are Participants may hold their interests therein directly through DTC. Investors in the Global Notes who are not Participants may hold their interests
therein indirectly through organizations which are Participants.
The
laws of some jurisdictions may require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Note to
such Persons will be limited to that extent. Because DTC can act only on behalf of the Participants, which in turn act on behalf of the Indirect Participants, the ability of a Person having beneficial
interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests.
Except as described below, owners of beneficial interests in the Global Notes will not have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or "holders" thereof under the indenture for any purpose.
Payments
in respect of the principal of, premium, if any, on, or interest on or additional interest, if any, on a Global Note registered in the name of DTC or its nominee will be payable
to DTC in its capacity as the registered holder under the indenture. Under the terms of the indenture, the Company, the Guarantors and the trustee will treat the Persons in whose names the notes,
including the Global Notes, are registered as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, none of the Company, the Guarantors, the trustee
nor any agent of any of the foregoing has or will have any responsibility or liability for:
(1) any
aspect of DTC's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interests in the
Global Notes or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global
Notes; or
(2) any
other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.
DTC
has advised the Company that its current practice, at the due date of any payment in respect of securities such as the notes (including principal, interest, and additional interest,
if any), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe that it will not receive payment on such payment date. Each
relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by
the Participants and the Indirect Participants to the beneficial owners of the notes will be governed by standing instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of DTC, the trustee, the Company or the Guarantors. None of the Company, the Guarantors or the trustee will be liable for
any delay by DTC or any of the Participants
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or
the Indirect Participants in identifying the beneficial owners of the notes, and the Company, the Guarantors and the trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
DTC
has advised the Company that it will take any action permitted to be taken by a holder of the notes only at the direction of one or more Participants to whose account DTC has
credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the notes as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the indenture, DTC reserves the right to exchange the Global Notes for Certificated Notes, and to distribute such notes to its Participants.
DTC
is under no obligation to perform or to continue to perform such procedures attached herein, and may discontinue such procedures at any time. None of the Company, the Guarantors, the
trustee or any of their respective agents will have any responsibility for the performance by DTC or their respective Participants or Indirect Participants of their respective obligations under the
rules and procedures governing their operations.
Same Day Settlement and Payment
The Company will make payments in respect of the notes represented by the Global Notes, including principal, premium, if any, and interest by
wire transfer of immediately available funds to the accounts specified by DTC or its nominee. The Company will make all payments of principal, premium, if any, and interest with respect to
Certificated Notes by wire transfer of immediately available funds to the accounts specified by the holders of the Certificated Notes or, if no such account is specified, by mailing a check to each
such holder's registered address. The notes represented by the Global Notes are expected to be eligible to trade in DTC's Same-Day Funds Settlement System, and any permitted secondary market trading
activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. We expect that secondary trading in any Certificated Notes will also be settled in immediately
available funds.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes in minimum denominations of $2,000 and in integral multiples of $1,000 in excess of $2,000,
if:
(1) DTC
(a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes or (b) has ceased to be a clearing agency
registered under the Exchange Act and, in either case, the Company fails to appoint a successor depositary within 90 days;
(2) the
Company, at its option, but subject to DTC's requirements, notifies the trustee in writing that it elects to cause the issuance of the Certificated Notes; or
(3) there
has occurred and is continuing an Event of Default, and DTC notifies the trustee of its decision to exchange such Global Note for Certificated Notes.
In
addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the trustee by or on behalf of DTC in accordance with the
indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of DTC (in accordance with its customary procedures).
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the transferor first delivers to the trustee a
written certificate (in the form provided in the indenture) to
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the
effect that such transfer will comply with the appropriate transfer restrictions applicable to such notes.
Registration Rights; Additional 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 notes.
The
Company and the initial purchasers entered into the Registration Rights Agreement on November 29, 2017. The Company agreed for the benefit of holders of the old notes to file
with the SEC and use commercially reasonable efforts to cause to become effective a registration statement relating to an exchange offer to exchange the old notes for the new notes.
In
the event that applicable interpretations of the staff of the SEC do not permit the Company to effect the exchange offer or if, for any other reason, the Company does not complete the
exchange offer by the 360th day following the date of issuance of the old notes, the Company will use commercially reasonable efforts to cause to become effective a shelf registration statement
relating to resales of the old notes and to keep that shelf registration statement effective until all old notes covered by the shelf registration statement have been sold. The Company will, in the
event of such a shelf registration, provide to each holder copies of a prospectus, notify each holder when the shelf registration statement has become effective, and take certain other actions to
permit resales of the old notes. A holder of the old notes that sells notes under the shelf registration statement generally will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with those sales, and will be bound by the
provisions of the registration rights agreement that are applicable to such a holder of the old notes (including certain indemnification obligations).
If
the exchange offer is not completed (or, if required, the shelf registration statement is not declared effective or does not automatically become effective) on or before the
360th day following the date of original issue of the old notes, then the Company will pay additional interest to holders of notes with the effect that the annual interest rate borne by the
notes will be increased by one percentage point (1.0%) until the exchange offer is completed or the shelf registration statement is declared effective (or becomes automatically effective). All accrued
additional interest will be paid by the Company on the next scheduled interest payment date in the same manner as interest is paid on the notes. Following
the time that the notes are registered, the accrual of additional interest will cease. The provisions for additional interest will be the only monetary remedy available to holders under the
Registration Rights Agreement.
Notes
not tendered in the exchange offer will continue to be subject to all the terms and conditions specified in the Indenture, including transfer restrictions. Upon exchange of the old
notes for new notes, the Registration Rights Agreement will no longer be in effect.
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 still outstanding;
provided
,
however
, that without the
consent of each holder of the outstanding old notes affected, an amendment, supplement or waiver may not (with respect to any notes held by a non-consenting holder) change any provision of the
Registration Rights Agreement in a manner that could affect adversely the rights of such non-consenting holder to receive additional interest in the amount and on the payment dates as provided in the
registration rights agreement as in effect on the date of original issue of the old notes.
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Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all defined terms
used therein, as well as any other capitalized terms used herein for which no definition is provided.
"Acquired
Debt" means, with respect to any specified Person:
(1) Indebtedness
of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such
Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and
(2) Indebtedness
secured by a Lien encumbering any asset acquired by such specified Person.
"Adjusted
Consolidated Net Tangible Assets" means, as of any date of determination, without duplication:
(a) the
sum of:
(i) the
discounted future net revenues from Proved Reserves of the Company and its Restricted Subsidiaries calculated in accordance with SEC guidelines (before any state or
federal income taxes) and giving effect to Hedging Obligations as estimated in a reserve report prepared as of the end of the Company's most recently completed fiscal year, which reserve report is
prepared or audited by independent petroleum engineers as to Proved Reserves accounting for at least 80% of all such discounted future net revenues and by the Company's petroleum engineers with
respect to any other Proved Reserves covered by such report, as increased by, as of the date of determination, the estimated discounted future net revenues from:
(A) estimated
Proved Reserves of the Company and its Restricted Subsidiaries acquired since such year-end, and
(B) estimated
Proved Reserves of the Company and its Restricted Subsidiaries attributable to extensions, discoveries and other additions and upward revisions of estimates of
Proved Reserves (including previously estimated development costs incurred during the period and the accretion of discount since the prior period end) since such year-end due to exploration,
development or exploitation, production or other activities which would, in accordance with standard industry practice, cause such revisions, and
decreased
by
, as of the date of determination, the discounted future net revenue attributable to:
(C) estimated
Proved Reserves of the Company and its Restricted Subsidiaries reflected in such reserve report produced or disposed of since such year-end, and
(D) reductions
in estimated Proved Reserves of the Company and its Restricted Subsidiaries reflected in such reserve report attributable to downward revisions of estimates
of Proved Reserves since such year-end due to changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions;
in
the case of the preceding clauses (A) through (D), calculated on a pre-tax basis in accordance with SEC guidelines and estimated by the Company's petroleum engineers or any independent
petroleum engineers engaged by the Company for such purpose;
(ii) the
capitalized costs that are attributable to oil and gas properties of the Company and its Restricted Subsidiaries to which no Proved Reserves are attributable, based
on the
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Company's
books and records as of a date no earlier than the last day of the Company's most recent quarterly or annual period for which internal financial statements are available;
(iii) the
Consolidated Net Working Capital of the Company and its Restricted Subsidiaries as of a date no earlier than the last day of the Company's most recent quarterly or
annual period for which internal financial statements are available; and
(iv) the
greater of:
(A) the
net book value and
(B) the
appraised value, as estimated by independent appraisers,
in
each case, of other tangible assets (including Investments in unconsolidated Subsidiaries) of the Company and its Restricted Subsidiaries as of a date no earlier than the last day of the Company's
most recent quarterly or annual period for which internal financial statements are available;
provided
that if no such appraisal has been performed, the
Company will not be required to obtain such an appraisal and only clause (iv)(A) of this definition will apply,
minus
, to the extent not otherwise taken into account in the immediately preceding clause (a),
(b) the
sum of
(i) the
net book value of any Capital Stock in a Restricted Subsidiary that is not owned by the Company or any of its Restricted Subsidiaries;
(ii) to
the extent not otherwise taken into account in determining Adjusted Consolidated Net Tangible Assets, any net gas balancing liabilities of the Company and its
Restricted Subsidiaries as of the last day of the Company's most recent annual or quarterly period for which internal financial statements are available;
(iii) to
the extent included in clause (a)(i) above, the discounted future net revenues, calculated on a pre-tax basis in accordance with SEC guidelines (utilizing
the prices utilized in the Company's year-end reserve report), attributable to reserves that are required to be delivered to third parties to fully satisfy the obligations of the Company and its
Restricted Subsidiaries with respect to Volumetric Production Payments on the schedules specified with respect thereto; and
(iv) the
discounted future net revenues, calculated on a pre-tax basis in accordance with SEC guidelines, attributable to reserves subject to Dollar-Denominated Production
Payments that, based on the estimates of production and price assumptions included in determining the discounted future net revenues specified in (a)(i) above, would be necessary to fully satisfy the
payment obligations of the Company and its Restricted Subsidiaries with respect to Dollar-Denominated Production Payments on the schedules specified with respect thereto.
If
the Company changes its method of accounting from the full cost method to the successful efforts method or a similar method of accounting, "Adjusted Consolidated Net Tangible Assets"
will continue to be calculated as if the Company were still using the full cost method of accounting.
"Affiliate"
of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For
purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with"
have correlative meanings.
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"Applicable
Premium" means, with respect to any note at the time of computation, the excess of:
(a) the
present value at such time of (i) the redemption price of the note at December 1, 2020 (such redemption price being set forth in the table appearing
above under the caption "Optional Redemption") plus (ii) all required interest payments due on the note through December 1, 2020 (excluding accrued but unpaid interest to
the redemption date), computed using a discount rate equal to the Treasury Rate as of such time plus 50 basis points discounted to the redemption date on a semi-annual basis (assuming a 360 day
year consisting of twelve 30 day months); over
(b) the
principal amount of the note.
"Asset
Sale" means:
(1) the
sale, lease, conveyance or other disposition of any assets or rights by the Company or any of the Company's Restricted Subsidiaries;
provided
that the sale, lease, conveyance or other disposition of all
or substantially all of the properties or assets of the Company and its
Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption "Repurchase at the Option of HoldersChange of Control" or
the provisions described above under the caption "Certain CovenantsMerger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sales covenant; and
(2) the
issuance of Equity Interests by any of the Company's Restricted Subsidiaries or the sale by the Company or any of the Company's Restricted Subsidiaries of Equity
Interests in any of the Company's Subsidiaries.
Notwithstanding
the preceding, none of the following items will be deemed to be an Asset Sale:
(1) any
single transaction or series of related transactions that involves assets having a Fair Market Value of less than $20.0 million;
(2) a
disposition of assets between or among the Company and its Restricted Subsidiaries;
(3) an
issuance of Equity Interests by a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company;
(4) the
sale, lease or other disposition of equipment, inventory, products, services, accounts receivable or other assets in the ordinary course of business (including in
connection with any compromise, settlement, or collection of accounts receivable) and any sale or other disposition of damaged, worn-out or obsolete assets (including the abandonment or other
disposition of intellectual property) that is, in the reasonable judgment of the Company, no longer economically practicable to maintain or useful in the conduct of the business of the Company and its
Restricted Subsidiaries taken as whole;
(5) licenses
and sublicenses by the Company or any of its Restricted Subsidiaries of software or intellectual property, including seismic data and interpretations thereof,
in the ordinary course of business;
(6) any
surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims;
(7) the
granting of Liens not prohibited by the covenant described above under the caption "Liens" and dispositions in connection with Permitted Liens;
(8) the
sale or other disposition of cash or Cash Equivalents or other financial instruments (other than Oil and Gas Hedging Contracts);
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(9) a
Restricted Payment that does not violate the covenant described above under the caption "Certain CovenantsRestricted Payments", including the
issuance or sale of Equity Interests or the sale, lease or other disposition of products, services, equipment, inventory, accounts receivable or other assets pursuant to any such Restricted Payment,
or a Permitted Investment, including the unwinding of any Hedging Obligations, and the issuance or sale of Equity Interests or the sale, lease or other disposition of products, services, equipment,
inventory, accounts receivable or other assets pursuant to any such Permitted Investment;
(10) sale
or other disposition of Hydrocarbons or other mineral products or inventory in the ordinary course of business;
(11) an
Asset Swap or the farm-out, lease or sublease of developed or undeveloped crude oil or natural gas properties owned or held by the Company or any Restricted
Subsidiary;
(12) dispositions
of crude oil and natural gas properties;
provided
that at the time of any such disposition such properties
do not have associated with them any Proved Reserves; and
(13) any
Production Payments and Reserve Sales;
provided
that any such Production Payments and Reserve Sales, other than
incentive compensation programs on terms that are reasonably customary in the Oil and Gas Business for geologists, geophysicists and other providers of technical services to the Company or a
Restricted Subsidiary of the Company, shall have been created, incurred, issued, assumed or Guaranteed in connection with the financing of, and within 90 days after the acquisition of, the
property that is subject thereto.
"Asset
Sale Offer" has the meaning assigned to that term in the indenture.
"Asset
Swap" means any substantially contemporaneous (and in any event occurring within 180 days of each other) purchase and sale or exchange of any assets or properties used or
useful in the Oil and Gas Business between the Company or any of its Restricted Subsidiaries and another Person;
provided
, that the Fair Market Value of
the properties or assets traded or exchanged by the Company 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 Company or such Restricted Subsidiary, and
provided further
that any net cash received must be applied in
accordance with the provisions described above under the caption "Repurchase at the Option of HoldersAsset Sales" if then in effect.
"Beneficial
Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any
particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right
to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms "Beneficially Owns" and "Beneficially
Owned" have a corresponding meaning. For purposes of this definition, a Person shall be deemed not to Beneficially Own securities that are the subject of a stock purchase agreement, merger agreement,
amalgamation agreement, arrangement agreement or similar agreement until consummation of the transactions or, as applicable, series of related transactions contemplated thereby.
"Board
of Directors" means:
(1) with
respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;
(2) with
respect to a partnership, the board of directors of the general partner of the partnership;
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(3) with
respect to a limited liability company, the managing member or members or managers or board of managers or any controlling committee of managing members or managers
thereof; and
(4) with
respect to any other Person, the board or committee of such Person serving a similar function.
"Borrowing Base" means , with respect to borrowings under the Credit Agreement and any amendment to and/or modification or replacement thereof in the form of a
reserve-based borrowing base credit facility, in each case with lenders that include commercial banks regulated by the U.S. Office of the Comptroller of the Currency, the maximum amount determined or
re-determined by the lenders thereunder as the aggregate lending value to be ascribed to the Oil and Gas Properties and other assets of the Company and its Restricted Subsidiaries against which such
lenders are prepared to provide loans, letters of credit or other Indebtedness to the credit parties, using customary practices and standards for determining reserve based borrowing base loans and
which are generally applied to borrowers in the Oil and Gas Business by commercial lenders, as determined semi-annually during each year and/or on such other occasions as may be required or provided
for therein.
"Business
Day" means any day other than a Saturday, Sunday, or a day on which banking institutions in New York City are authorized by law, regulation or executive order to remain closed.
"Capital
Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be
capitalized on a balance sheet prepared 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 prepaid by the lessee without payment of a penalty. Notwithstanding the foregoing, any arrangement (whether entered into before or after the date of the
indenture) that would not have been classified as a capital lease pursuant to GAAP as in effect on the date of the indenture will be deemed not to represent a Capital Lease Obligation.
"Capital
Stock" means:
(1) in
the case of a corporation, corporate stock;
(2) in
the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3) in
the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and
(4) 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, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
"Cash
Equivalents" means:
(1) United
States dollars;
(2) Government
Securities having maturities of not more than one year from the date of acquisition;
(3) certificates
of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding
one year and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank or any branch or agency of a non-U.S. bank licensed to conduct
business in the United States, in each case having combined capital and surplus of at least
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$100.0 million
and a short term deposit rating no lower than A2 or P2 by S&P or Moody's, respectively;
(4) repurchase
obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into
with any financial institution meeting the qualifications specified in clause (3) above;
(5) commercial
paper having one of the two highest ratings obtainable from Moody's or S&P and, in each case, maturing within one year after the date of creation thereof; and
(6) money
market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.
"Change
of Control" means the occurrence of any of the following:
(1) the
direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions,
of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole to any Person (including any "person" (as that term is used in Section 13(d)(3) of
the Exchange Act));
(2) the
adoption of a plan relating to the liquidation or dissolution of the Company;
(3) the
consummation of any transaction (including any merger or consolidation), the result of which is that any Person (including any "person" as defined above) becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or
(4) the
merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company or the merger of any Person with or into
a Subsidiary of the Company if Capital Stock of the Company is issued in connection therewith, unless holders of a majority of the aggregate voting power of the Voting Stock of the Company,
immediately prior to such transaction, hold securities of the surviving or transferee Person that represent, immediately after such transaction, at least a majority of the aggregate voting power of
the Voting Stock of the surviving Person.
"Change
of Control Offer" has the meaning assigned to that term in the indenture.
"Code"
means the Internal Revenue Code of 1986, as amended.
"Consolidated
EBITDAX" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period
plus
, without duplication:
(1) provision
for taxes based on income or profits (including state franchise taxes accounted for as income taxes in accordance with GAAP) of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income;
plus
(2) the
Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net
Income;
plus
(3) depreciation,
depletion, amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period),
impairment and other non-cash charges and expenses (excluding any such non-cash charge or expense to the extent that it represents an accrual of or reserve for cash charges or expenses in any future
period or amortization of a prepaid cash charge or expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation,
depletion, amortization, impairment and other non-cash charges or expenses were deducted in computing such Consolidated Net Income;
plus
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(4) exploration
and abandonment expense (if applicable) to the extent deducted in calculating such Consolidated Net Income;
plus
(5) the
accretion of interest charges on future plugging and abandonment obligations and future retirement benefits, to the extent such charges were deducted in calculating
such Consolidated Net Income;
plus
(6) if
such Person accounts for its oil and natural gas operations using successful efforts or a similar method of accounting, consolidated exploration expense of such
Person and its Restricted Subsidiaries;
minus
(7) non-cash
items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business; and
minus
(8) to
the extent increasing such Consolidated Net Income for such period, the sum of (a) the amount of deferred revenues that are amortized during such period and
are attributable to reserves that are subject to Volumetric Production Payments and (b) amounts recorded in accordance with GAAP as repayments of principal and interest pursuant to
Dollar-Denominated Production Payments,
in
each case, on a consolidated basis and determined in accordance with GAAP.
"Consolidated
Net Income" means, with respect to any specified Person for any period, the aggregate of the net income (loss) of such Person and its Restricted Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP and without any reduction in respect of Preferred Stock dividends or distributions;
provided
that:
(1) all
extraordinary gains or losses and all gains or losses realized in connection with any Asset Sale or the disposition of securities or the early extinguishment of
Indebtedness, together with any related provision for taxes on any such gain or loss, will be excluded;
(2) the
net income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included only to the
extent of the amount of dividends or similar distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;
(3) the
net income (but not loss) of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that net income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, partners or
members;
(4) the
cumulative effect of a change in accounting principles will be excluded;
(5) unrealized
losses and gains under derivative instruments included in the determination of Consolidated Net Income, including those resulting from the application of FASB
ASC 815, will be excluded; and
(6) any
asset impairment writedowns on Oil and Gas Properties under GAAP or SEC guidelines will be excluded.
"Consolidated
Net Working Capital" of any Person as of any date of determination means the amount (shown on the balance sheet of such Person and its Restricted Subsidiaries prepared on a
consolidated basis in accordance with GAAP as of the end of the most recent fiscal quarter of such Person for which internal financial statements are available) by which (a) all current assets
of such Person and its Restricted Subsidiaries other than current assets from Oil and Gas Hedging Contracts,
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exceeds
(b) all current liabilities of the Company and its Restricted Subsidiaries, other than (i) current liabilities included in Indebtedness, (ii) current liabilities
associated with asset retirement obligations relating to oil and gas properties and (iii) any current liabilities from Oil and Natural Gas Hedging Contracts, in each case as set forth in the
consolidated financial statements of the Company prepared in accordance with GAAP (excluding any adjustments made pursuant to FASB ASC 815).
"continuing"
means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived.
"Credit
Agreement" means that certain Amended and Restated Credit Agreement dated as of November 28, 2012, as amended by that certain First Amendment to Credit Agreement dated as
of February 12, 2013, Second Amendment to Credit Agreement dated as of June 28, 2013, Third Amendment to Credit Agreement dated as of December 20, 2013, Fourth Amendment to Credit
Agreement dated as of June 3, 2014, Fifth Amendment to Amended and Restated Credit Agreement dated as of December 15, 2014, Sixth Amendment to Amended and Restated Credit Agreement dated
as of June 2, 2015, Seventh Amendment to Amended and Restated Credit Agreement dated as of January 28, 2016, Eighth Amendment to Amended and Restated Credit Agreement dated as of
May 3, 2016, Ninth Amendment to Amended and Restated Credit Agreement dated as of October 14, 2016, Tenth Amendment to Amended and Restated Credit Agreement dated as of April 28,
2017 and Eleventh Amendment to Amended and Restated Credit Agreement dated as of September 27, 2017, by and among SRC Energy Inc., SunTrust Bank, as administrative agent, and the lenders
party thereto, including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and, in each case, as amended, restated, modified, renewed,
refunded, replaced in any manner (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from
time to time.
"Credit
Facilities" means, one or more debt facilities (including the Credit Agreement) or other credit agreements, indentures, commercial paper facilities or other forms of debt
financing, in each case, with banks or other institutional lenders, accredited investors or institutional investors providing for revolving credit loans, term loans, term debt, debt securities,
capital market financings, private placements, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, extended, increased, refunded, replaced in any manner (whether upon or after termination or
otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time.
"Currency
Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement as to which such Person is a party or a beneficiary.
"Customary
Recourse Exceptions" means, with respect to any Non-Recourse Debt of an Unrestricted Subsidiary, exclusions from the exculpation provisions with respect to such Non-Recourse
Debt for the voluntary bankruptcy of such Unrestricted Subsidiary, fraud, misapplication of cash, environmental claims, waste, willful destruction and other circumstances customarily excluded by
lenders from exculpation provisions or included in separate indemnification agreements in non-recourse financings.
"Default"
means any breach of any term of the indenture that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
"Designated
Non-cash Consideration" means the Fair Market Value of non-cash consideration received by the Company or a Restricted Subsidiary in connection with an Asset Sale that is so
designated as Designated Non- cash Consideration pursuant to an officers' certificate, setting forth the basis of such
valuation, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of or collection on such Designated Non-cash Consideration.
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"Disqualified
Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the
option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of
the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock
that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase or redeem such Capital Stock upon the occurrence of a
change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to
such provisions unless such repurchase or redemption complies with the covenant described above under the caption "Certain CovenantsRestricted Payments." The amount of
Disqualified Stock deemed to be outstanding at any time for purposes of the indenture will be the maximum amount that the Company and its Restricted Subsidiaries may become obligated to pay upon the
maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.
"Dollar-Denominated
Production Payments" means production payment obligations recorded as liabilities in accordance with GAAP, together with all undertakings and obligations in
connection therewith.
"Domestic
Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or
that Guarantees or otherwise provides direct credit support for any Indebtedness of the Company (other than a Foreign Subsidiary).
"Equity
Interests" of any Person means (1) any and all Capital Stock of such Person and (2) all rights to purchase, warrants or options (whether or not currently
exercisable), participations or other equivalents of or interests in (however designated) such Capital Stock of such Person, but excluding from all of the foregoing any debt securities convertible
into or exchangeable for Equity Interests, regardless of whether such debt securities include any right of participation with Equity Interests.
"Equity
Offering" means a public or private sale of Equity Interests of the Company (other than Disqualified Stock and other than to a Subsidiary of the Company) made for cash on a
primary basis by the Company, or a cash contribution to the Company's common equity capital from any Person.
"Existing
Indebtedness" means all Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement or the notes or the Note Guarantees) in
existence on the date of the indenture, until such amounts are repaid.
"Fair
Market Value" means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party,
determined in good faith by the Board of Directors of the Company in the case of amounts of $20.0 million or more and otherwise by an officer of the Company (unless otherwise provided in the
indenture). Any such determination shall be conclusive.
"FASB
ASC 815" means Financial Accounting Standards Board Accounting Standards Codification Topic No. 815, Derivatives and Hedging.
"Fixed
Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated EBITDAX of such Person for such period to the Fixed Charges of such
Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases, redeems, defeases or otherwise discharges any
Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio
is being calculated and on or prior to the date on which the event for which the calculation of
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the
Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of Preferred Stock, and the use of the proceeds therefrom, as if the same had occurred
at the beginning of the applicable four-quarter reference period. For purposes of this definition, whenever pro forma effect is to be given to any calculation under this definition, the pro forma
calculations will be determined in good faith by the chief financial or accounting officer of the specified Person;
provided
that such officer may in
his or her discretion include any reasonably identifiable and factually supportable pro forma changes to Consolidated EBITDAX, including any pro forma expenses and cost reductions, that have occurred
or in the judgment of such officer are reasonably expected to occur within 12 months of the date of the applicable transaction (regardless of whether such expense or cost reduction or any other
operating improvements could then be reflected properly in pro forma financial statements prepared in accordance with Regulation S-X under the Securities Act or any other regulation or policy
of the SEC) and that are set forth in an officers' certificate signed by the chief financial or accounting officer that states (a) the amount of each such adjustment and (b) that such
adjustments are based on the reasonable good faith belief of the officers executing such officers' certificate at the time of such execution and the factual basis on which such good faith belief is
based.
In
addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions
that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations, or by any Person or any of
its Restricted Subsidiaries acquired by the specified Person or any of its Restricted Subsidiaries, and including all related financing transactions and including increases in ownership of Restricted
Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date, or that are to be made on the Calculation Date, will be given pro
forma effect (in accordance with Regulation S-X under the Securities Act) as if they had occurred on the first day of the four-quarter reference period;
(2) the
Consolidated EBITDAX attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein)
disposed of prior to the Calculation Date, will be excluded;
(3) the
Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed
of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its
Restricted Subsidiaries following the Calculation Date;
(4) any
Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period;
(5) any
Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter
period; and
(6) if
any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be calculated as if the rate in effect on the Calculation Date had
been the applicable rate for the entire period (taking into account any Hedging Obligation applicable to such Indebtedness if such Hedging Obligation has a remaining term as at the Calculation Date in
excess of 12 months).
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"Fixed
Charges" means, with respect to any specified Person for any period, the sum, without duplication, of:
(1) the
consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (excluding (i) any interest attributable
to Dollar-Denominated Production Payments, (ii) write-off of deferred financing costs and (iii) accretion of interest charges on future plugging and abandonment obligations, future
retirement benefits and other obligations that do not constitute Indebtedness, but including amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest
component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings), and
net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates;
plus
(2) the
consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period;
plus
(3) any
interest on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or
one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon;
plus
(4) all
dividends or distributions, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock of such Person or any series of Preferred Stock
of its Restricted Subsidiaries, other than dividends or distributions on Equity Interests payable solely in Equity Interests of such Person (other than Disqualified Stock) or to such Person or a
Restricted Subsidiary of such Person.
"Foreign
subsidiary" means any Restricted Subsidiary other than a Domestic Restricted Subsidiary.
"GAAP"
means generally accepted accounting principles in the United States, which are in effect from time to time.
"Government
Securities" means obligations issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States
government (
provided
that the full faith and credit of the United States is pledged in support thereof).
"Guarantee"
means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including by way of
a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any
Indebtedness (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). When used as a verb, "Guarantee" has a correlative meaning.
"Guarantors"
means any Subsidiary of the Company that Guarantees the notes in accordance with the provisions of the indenture, and their respective successors and assigns, in each case,
until the Note Guarantee of such Person has been released in accordance with the provisions of the indenture.
"Hedging
Obligations" means, with respect to any specified Person, the obligations of such Person under any Interest Rate and Currency Hedges, Oil and Gas Hedging Contracts and other
agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices, in each case entered into in the ordinary course of business and for
non-speculative purposes.
"Hydrocarbons"
means oil, natural gas, casing head gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, natural gas liquids, gaseous hydrocarbons and all
constituents, elements or compounds thereof and products refined or processed therefrom.
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"Indebtedness"
means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent:
(1) in
respect of borrowed money;
(2) evidenced
by or issued in exchange for bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);
(3) in
respect of bankers' acceptances;
(4) representing
Capital Lease Obligations;
(5) representing
the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services
are completed, except any such balance that constitutes an accrued expense or a trade payable; or
(6) representing
any Interest Rate and Currency Hedges,
if
and to the extent any of the preceding items (other than letters of credit and Interest Rate and Currency Hedges) would appear as a liability upon a balance sheet of the specified
Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others of the type set forth in clauses (1)-(5) above secured by a Lien on any asset
of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of
any other Person (including, with respect to any Production Payment, any warranties or guarantees of production or payment by such Person with respect to such Production Payment, but excluding other
contractual obligations of such Person with respect to such Production Payment). Subject to the preceding sentence, neither Dollar-Denominated Production Payments nor Volumetric Production Payments
shall be deemed to be Indebtedness.
In
addition, "Indebtedness" of any Person shall include Indebtedness described in the preceding paragraph that would not appear as a liability on the balance sheet of such Person if:
(1) such
Indebtedness is the obligation of a partnership or joint venture that is not a Restricted Subsidiary (a "Joint Venture");
(2) such
Person or a Restricted Subsidiary of such Person is a general partner of the Joint Venture (a "Joint Venture General Partner"); and
(3) there
is recourse, by contract or operation of law, with respect to the payment of such Indebtedness to property or assets of such Person or a Restricted Subsidiary of
such Person;
and
then such Indebtedness shall be included in an amount not to exceed:
(a) the
lesser of (i) the net assets of the Joint Venture General Partner and (ii) the amount of such obligations to the extent that there is recourse, by
contract or operation of law, to the property or assets of such Person or a Restricted Subsidiary of such Person; or
(b) if
less than the amount determined pursuant to clause (a) immediately above, the actual amount of such Indebtedness that is recourse to such Person or a
Restricted Subsidiary of such Person, if the Indebtedness is evidenced by a writing and is for a determinable amount and the related interest expense shall be included in Fixed Charges to the extent
actually paid by such Person or its Restricted Subsidiaries.
Notwithstanding
the preceding, "Indebtedness" of a Person shall not include:
(1) any
indebtedness that 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;
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(2) any
obligation of such Person in respect of a farm-in agreement or similar arrangement whereby such Person agrees to pay all or a share of the drilling, completion or
other expenses of an exploratory or development well (which agreement may be subject to a maximum payment obligation, after which expenses are shared in accordance with the working or participation
interest therein or in accordance with the agreement of the parties) or perform the drilling, completion or other operation on such well in exchange for an ownership interest in an oil or gas
property;
(3) any
repayment or reimbursement obligation of such Person or any of its Restricted Subsidiaries with respect to Customary Recourse Exceptions, unless and until an event
or circumstance occurs that triggers the Person's or such Restricted Subsidiary's direct repayment or reimbursement obligation (as opposed to contingent or performance obligations) to the lender or
other Person to whom such obligation is actually owed, in which case the amount of such direct payment or reimbursement obligation shall constitute Indebtedness;
(4) any
obligation in respect of any Oil and Gas Hedging Contract;
(5) any
obligations in respect of (a) bid, performance, completion, surety, appeal and similar bonds, (b) obligations in respect of bankers' acceptances,
(c) insurance obligations or bonds and other similar bonds and obligations and (d) any Guarantees or letters of credit functioning as or supporting any of the foregoing bonds or
obligations, in each case in the ordinary course of business and not relating to obligations for borrowed money;
(6) any
obligation arising from any agreement providing for indemnities, guarantees, purchase price adjustments, holdbacks, contingency payment obligations based on the
performance of the acquired or disposed assets or similar obligations (other than Guarantees of Indebtedness) incurred by any Person in connection with the acquisition or disposition of assets; and
(7) all
contracts and other obligations, agreements, instruments or arrangements described in clauses (18) and (27) of the definition of "Permitted Liens."
"Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Interest
Rate and Currency Hedges" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Investments"
means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or
other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other securities (excluding any interest in an oil or natural gas leasehold), together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any
direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company
will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Company's Investments in such Subsidiary that were not sold or disposed of
in an amount determined as provided in the final paragraph of the covenant described above under the caption "Certain CovenantsRestricted Payments." The acquisition by the
Company or any Restricted Subsidiary of the Company of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third
Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined as provided in
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the
final paragraph of the covenant described above under the caption "Certain CovenantsRestricted Payments." Except as otherwise provided in the indenture, the amount of an
Investment will be determined at the time the Investment is made and without giving effect to subsequent changes in value.
"Lien"
means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction, other than a precautionary financing
statement respecting a lease not intended as a security agreement.
"Material
Subsidiary" means any Domestic Subsidiary (a) that has consolidated assets that exceed $5.0 million individually, or $15.0 million when aggregated with all
other Domestic Subsidiaries that would not otherwise be deemed Material Subsidiaries, of the consolidated assets of the Company and its Restricted Subsidiaries as of the end of the most recent fiscal
quarter of the Company for which financial statements are required to be delivered under the indenture, or (b) whose consolidated cash flows exceed $5.0 million individually, or
$15.0 million when aggregated with all other Domestic Subsidiaries that would not otherwise be deemed Material Subsidiaries, of the consolidated cash flows of the Company and its Restricted
Subsidiaries for the period of four consecutive fiscal quarters of the Company most recently ended for which financial statements are required to be delivered under the indenture.
"Moody's"
means Moody's Investors Service, Inc., and any successor to the ratings business thereof.
"Net
Proceeds" means the aggregate amount of cash proceeds and Cash Equivalents received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including any
cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received in any Asset Sale but excluding any non-cash consideration deemed to be cash for purposes of
the "Asset Sales" provisions of the indenture), net of the costs relating to such Asset Sale, including legal, accounting and investment banking fees, and sales commissions, and any relocation
expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax
sharing arrangements, and amounts applied to the repayment of Indebtedness, secured by a Lien on the asset or assets that were the subject of such Asset Sale or in order to obtain a necessary consent
to such Asset Sale, distributions and other payments required to be made to holders of minority interests in subsidiaries or joint ventures as a result of the Asset Sale, and any escrow or reserve for
adjustment or indemnification obligations in respect of the sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse
Debt" means Indebtedness:
(1) as
to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument
that would constitute Indebtedness) or (b) is directly or indirectly liable as a guarantor or otherwise, in each case other than (i) Liens on and pledges of the Equity Interests of any
Unrestricted Subsidiary or any joint venture owned by the Company or any Restricted Subsidiary to the extent securing otherwise Non-Recourse Debt of such Unrestricted Subsidiary or joint venture and
(ii) Customary Recourse Exceptions; and
(2) as
to which the lenders have been notified in writing that they will not have any recourse to the Capital Stock or assets of the Company or any of its Restricted
Subsidiaries (other than the
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Equity
Interests of an Unrestricted Subsidiary or any joint venture owned by the Company or any Restricted Subsidiary), except for Customary Recourse Exceptions.
"Note
Guarantee" means the Guarantee by each Guarantor of the Company's Obligations under the indenture and the notes, as provided in the indenture.
"Obligations"
means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.
"Oil
and Gas Business" means (i) the acquisition, exploitation, exploration, development, production, operation and disposition of interests in oil, gas and other Hydrocarbon
properties, (ii) the gathering, marketing, treating, processing, refining, storage, selling and transporting of any production from such interests or properties and products produced in
association therewith, (iii) any business relating to exploration for or development, production, treatment, processing, refining, storage, transportation or marketing of oil, gas and other
minerals and products produced in association therewith, (iv) oil field sales and services and related activities, (v) development, purchase and sale of real estate and interests
therein, and (vi) any activity that is ancillary to or necessary or appropriate for the activities described in clauses (i) through (v) of this definition.
"Oil
and Gas Hedging Contracts" means any puts, cap transactions, floor transactions, collar transactions, forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement in respect of Hydrocarbons to be used, produced, processed or sold by the Company or any of its Restricted Subsidiaries that are customary in the Oil and Gas Business
and designed to protect such Person against fluctuation in Hydrocarbons prices and not for speculative purposes.
"Oil
and Gas Properties" means all properties, including equity or other ownership interest therein, owned by such Person or any of its Restricted Subsidiaries which contain or are
believed to contain Proved Reserves.
"Permitted
Acquisition Indebtedness" means Indebtedness or Disqualified Stock of the Company or any of its Restricted Subsidiaries to the extent such Indebtedness or Disqualified Stock
was Indebtedness or Disqualified Stock of any other Person existing at the time (a) such Person became a Restricted Subsidiary of the Company or (b) such Person was merged or
consolidated with or into the Company or any of its Restricted Subsidiaries;
provided
that on the date such Person became a Restricted Subsidiary or the
date such Person was merged or consolidated with or into the Company or any of its Restricted Subsidiaries, as applicable, either
(1) immediately
after giving effect to such transaction and any related financing transaction on a pro forma basis as if the same had occurred at the beginning of the
applicable four-quarter period, the Company or such Person (if the Company is not the survivor in the transaction) would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "Certain CovenantsIncurrence of Indebtedness and Issuance
of Preferred Stock," or
(2) immediately
after giving effect to such transaction and any related financing transaction on a pro forma basis as if the same had occurred at the beginning of the
applicable four-quarter period, the Fixed Charge Coverage Ratio of the Company or such Person (if the Company is not the survivor in the transaction) is equal to or greater than the Fixed Charge
Coverage Ratio of the Company immediately prior to such transaction.
"Permitted
Business Investments" means investments made in the ordinary course of, and of a nature that is or shall have become customary in, the Oil and Gas Business as a means of
actively exploiting, exploring for, acquiring, developing, processing, gathering, marketing or transporting oil and gas and other Hydrocarbons through agreements, transactions, interests or
arrangements which permit
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one
to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of Oil and Gas Business jointly with
third parties, including without limitation (i) ownership interests in oil, natural gas, other Hydrocarbon properties or any interest therein, processing facilities or gathering,
transportation, processing, storage or related systems and ancillary real property interest, (ii) Investments in the form of or pursuant to operating agreements, processing agreements, farm-in
agreements, farm-out agreements, developments agreements, area of mutual interest agreements, unitization agreements, pooling agreements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription agreements, stock purchase agreements and other similar agreements (including for limited liability companies) with third
parties, and (iii) direct or indirect ownership interests or Investments in drilling rigs, fracturing units and other related equipment or in Persons that own or provide such equipment.
"Permitted
Investments" means:
(1) any
Investment in the Company or in a Restricted Subsidiary of the Company;
(2) any
Investment in Cash Equivalents;
(3) any
Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment:
(a) such
Person becomes a Restricted Subsidiary of the Company; or
(b) such
Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its properties or assets to, or is liquidated into, the
Company or a Restricted Subsidiary of the Company;
(4) any
Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above
under the caption "Repurchase at the Option of HoldersAsset Sales," including pursuant to an Asset Swap;
(5) any
acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company;
(6) any
Investments received in compromise or resolution of (a) obligations of trade creditors or customers that were incurred in the ordinary course of business of
the Company or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or
(b) litigation, arbitration or other disputes;
(7) Investments
represented by Hedging Obligations;
(8) loans
or advances to officers, directors or employees made in the ordinary course of business of the Company or any Restricted Subsidiary of the Company in an aggregate
principal amount not to exceed $5.0 million at any one time outstanding;
(9) repurchases
of the notes;
(10) any
Guarantee of Indebtedness permitted to be incurred by the covenant entitled "Certain CovenantsIncurrence of Indebtedness and Issuance of
Preferred Stock" other than a Guarantee of Indebtedness of an Affiliate of the Company that is not a Restricted Subsidiary of the Company;
(11) any
Investment existing on, or made pursuant to binding commitments existing on, the date of the indenture and any Investment consisting of an extension, modification
or renewal of any Investment existing on, or made pursuant to a binding commitment existing on, the date of the
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indenture;
provided
that the amount of any such Investment may be increased (a) as required by the terms of such Investment as in existence on
the date of the indenture or (b) as otherwise permitted under the indenture;
(12) Investments
acquired after the date of the indenture as a result of the acquisition by the Company or any Restricted Subsidiary of the Company of another Person,
including by way of a merger, amalgamation or consolidation with or into the Company or any of its Restricted Subsidiaries, or all or substantially all of the properties or assets of another Person,
in each case, in a transaction that is not prohibited by the covenant described above under the caption "Certain CovenantsMerger, Consolidation or Sale of Assets" to the
extent that such Investments were not made in contemplation of such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger, amalgamation or
consolidation;
(13) Permitted
Business Investments;
(14) advances
and prepayments for asset purchases in the ordinary course of business;
(15) receivables
owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business and payable or dischargeable in accordance with
customary trade terms; provided that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
(16) surety
and performance bonds and workers' compensation, utility, lease, tax, performance and similar deposits and prepaid expenses in the ordinary course of business;
(17) guarantees
by the Company or any of its Restricted Subsidiaries of operating leases (other than Capital Lease Obligations) or of other obligations that do not
constitute Indebtedness, in each case entered into by the Company or any such Restricted Subsidiary in the ordinary course of business;
(18) Investments
in any units of any oil and gas royalty trust; and
(19) other
Investments in any Person other than an Affiliate of the Company that is not a Subsidiary of the Company having an aggregate Fair Market Value (measured on the
date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (14) that are at the
time outstanding not to exceed the greater of (a) $50.0 million and (b) 4.0% of Adjusted Consolidated Net Tangible Assets;
provided
,
however
,
that if any Investment pursuant to this clause (14) is made in any Person that
is not a Restricted Subsidiary at the date of the making of such Investment and such Person becomes a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been
made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (14) for so long as such Person continues to be a Restricted Subsidiary.
"Permitted
Liens" means:
(1) Liens
on assets of the Company or any Guarantor securing Indebtedness and other Obligations under Credit Facilities that was incurred pursuant to clause (1) of
the definition of Permitted Debt or securing Hedging Obligations related thereto or securing Obligations with regard to Treasury Management Arrangements;
(2) Liens
in favor of the Company or a Restricted Subsidiary;
(3) Liens
on property of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company or is merged with or into or consolidated with the Company
or any Restricted Subsidiary of the Company;
provided
that such Liens were in existence prior to the contemplation of such Person becoming a Restricted
Subsidiary of the Company or such merger or
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consolidation
and do not extend to any assets other than those of the Person that becomes a Restricted Subsidiary of the Company or is merged with or into or consolidated with the Company or any
Restricted Subsidiary of the Company;
(4) Liens
on property (including Capital Stock) existing at the time of acquisition of the property by the Company or any Subsidiary of the Company;
provided
that such Liens were in existence prior to such
acquisition and not incurred in contemplation of, such acquisition;
(5) Liens
to secure the performance of statutory obligations, insurance, surety or appeal bonds, workers' compensation obligations, bid, plugging and abandonment and
performance bonds, deposits as security for tax and other obligations, or other obligations of a like nature incurred in the ordinary course of business (including Liens to secure letters of credit
issued to assure payment of such obligations);
(6) Liens
to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled "Certain
CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with or financed by such Indebtedness;
(7) Liens
existing on the date of the indenture (other than Liens pursuant to any Credit Facilities);
(8) Liens
created for the benefit of (or to secure) the notes (or the Note Guarantees);
(9) liens
for taxes, assessments or other governmental charges or which are being contested in good faith by appropriate proceedings provided appropriate reserves required
pursuant to GAAP have been made in respect thereof;
(10) Liens
on insurance policies and proceeds thereof, or other deposits, to secure insurance premium financings;
(11) filing
of Uniform Commercial Code financing statements as a precautionary measure in connection with operating leases;
(12) bankers'
Liens, rights of setoff, Liens arising out of judgments or awards not constituting an Event of Default, and notices of lis pendens and associated rights
related to litigation and Liens for taxes, assessments or other governmental charges being contested in good faith by appropriate proceedings and for which adequate reserves have been made;
(13) Liens
on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness;
(14) Liens
on specific items of inventory or other goods (and the proceeds thereof) of any Person securing such Person's obligations in respect of bankers' acceptances
issued or created in the ordinary course of business for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(15) grants
of software and other technology licenses in the ordinary course of business;
(16) Liens
arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into in the ordinary course of business;
(17) Liens
in respect of Production Payments and Reserve Sales;
provided
, that such Liens are limited to the property that is
subject to such Production Payments and Reserve Sales;
(18) Liens
arising under oil and gas leases or subleases, assignments, farm-out agreements, farm-in agreements, division orders, contracts for the sale, purchase, exchange,
transportation, gathering or processing of Hydrocarbons, unitizations and pooling designations, declarations,
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orders
and agreements, development agreements, joint venture agreements, partnership agreements, operating agreements, royalties, working interests, net profits interests, joint interest billing
arrangements, participation agreements, production sales contracts, area of mutual interest agreements, gas balancing or deferred production agreements, injection, repressuring and recycling
agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, licenses, sublicenses and other agreements which are customary in the Oil and Gas Business;
provided
,
however
, in all instances that such Liens are limited to the assets that are the subject of
the relevant agreement, program, order or contract;
(19) Liens
to secure performance of Hedging Obligations of the Company or any of its Restricted Subsidiaries not for speculative purposes;
(20) Liens
incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to Indebtedness that does not exceed in
aggregate principal amount, at any one time outstanding, the greater of (a) $50.0 million and (b) 5.0% of the Company's Adjusted Consolidated Net Tangible Assets determined as of
the date of such incurrence;
(21) landlords',
carriers', warehousemen's, mechanics', materialmen's, repairmen's or similar Liens arising by contract or statute in the ordinary course of business and
with respect to amounts which are not yet delinquent or are being contested in good faith by appropriate proceedings;
(22) encumbrances,
easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telephone lines and other similar purposes, or
zoning or other restrictions as to the use of
real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which do not in the aggregate materially adversely affect the value of said
properties or materially impair their use in the operation of the business of such Person;
(23) Liens
on pipelines and pipeline facilities that arise by operation of law;
(24) Liens
on and pledges of the Equity Interests of any Unrestricted Subsidiary or any joint venture owned by the Company or any Restricted Subsidiary to the extent
securing Non-Recourse Debt of such Unrestricted Subsidiary or joint venture;
(25) Liens
on escrowed proceeds of debt securities or other Indebtedness permitted by the indenture, or on cash similarly set aside at the time of the incurrence of any
Indebtedness permitted by the indenture, or government securities purchased with such cash;
(26) leases
and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Company and its Restricted Subsidiaries, taken
as a whole;
(27) 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 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 the Indebtedness; and
(28) any
Lien renewing, extending, refinancing or refunding a Lien permitted by this definition, including Permitted Refinancing Indebtedness,
provided
that (a) the principal amount of the Indebtedness
secured by such Lien is not increased except by an amount equal to a reasonable
premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection therewith and by an amount equal to any existing commitments unutilized thereunder and (b) no
assets encumbered by any such Lien other than the assets permitted to be encumbered immediately prior to such renewal, extension, refinance or refund are encumbered thereby (other than improvements
thereon, accessions thereto and proceeds thereof).
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"Permitted
Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries or any Disqualified Stock of the Company (a) issued in exchange
for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge, or (b) constituting an amendment to or a deferral or renewal of, other Indebtedness of the
Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness) or any Disqualified Stock of the Company;
provided
that:
(1) the
principal amount (or accreted value, if applicable), or in the case of Disqualified Stock, the amount thereof determined in accordance with the definition of
Disqualified Stock, of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness or the amount of the Disqualified Stock
renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness or accrued and unpaid dividends on the Disqualified Stock, as the case may be, and the
amount of all fees and expenses, including premiums, incurred in connection therewith);
(2) such
Permitted Refinancing Indebtedness has a final maturity date or redemption date, as applicable, that is (a) later than the final maturity date or redemption
date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness or Disqualified Stock being renewed, refunded, refinanced,
replaced, defeased or discharged or (b) more than 90 days after the final maturity date of the notes;
(3) if
the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the notes or the Note Guarantees, such
Permitted Refinancing Indebtedness is subordinated in right of payment to the notes or the Note Guarantees, as applicable, on terms at least as favorable to the holders of notes as those contained in
the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; and
(4) such
Indebtedness is incurred (other than by way of a Guarantee) or Disqualified Stock is issued either by the Company or by the Restricted Subsidiary of the Company
that was the obligor on the Indebtedness or Disqualified Stock being renewed, refunded, refinanced, replaced, defeased or discharged; provided that a Restricted Subsidiary that is also a Guarantor may
guarantee Permitted Refinancing Indebtedness incurred by the Company, regardless of whether such Restricted Subsidiary was an obligor or guarantor of the Indebtedness being refinanced.
"Person"
means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or
other entity.
"Preferred
Stock" means, with respect to any Person, any and all preferred or preference stock or other similar Equity Interests (however designated) of such Person whether outstanding
or issued after the date of the indenture.
"Production
Payments" means Dollar-Denominated Production Payments and Volumetric Production Payments, collectively.
"Production
Payments and Reserve Sales" means the grant or transfer by the Company or any of its Restricted Subsidiaries to any Person of a royalty, overriding royalty, net profits
interest, Production Payment, partnership or other interest in Oil and Gas Properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production
attributable to such properties where the holder of such interest has recourse solely to such production or proceeds of production, subject to the obligation of the grantor or transferor to operate
and maintain, or cause the subject interests to be operated and maintained, in a reasonably prudent manner or other customary standard or subject to the obligation of the grantor or transferor to
indemnify for environmental, title or other matters customary in the Oil and Gas Business, including any such grants or transfers pursuant to incentive compensation programs on terms that are
reasonably customary in the Oil and Gas Business
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for
geologists, geophysicists or other providers of technical services to the Company or any of its Restricted Subsidiaries.
"Proved
Reserves" means crude oil and natural gas reserves constituting "proved oil and gas reserves" as defined in Rule 4-10 of Regulation S-X of the Securities Act.
"Restricted
Investment" means an Investment other than a Permitted Investment.
"Restricted
Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.
"S&P"
means Standard & Poor's Ratings Services, and any successor to the ratings business thereof.
"Significant
Subsidiary" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such regulation is in effect on the date of the indenture.
"Stated
Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to
be paid in the documentation governing such Indebtedness as of the first date it was incurred in compliance with the terms of the indenture, and will not include any contingent obligations to repay,
redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof;
provided
that, in the case of debt
securities that are by their terms convertible into Capital Stock (or cash or a combination of cash and Capital Stock based on the value of the Capital Stock) of the Company, any obligation to offer
to repurchase such debt securities on a date(s) specified in the original terms of such securities, which obligation is not subject to any condition or contingency, will be treated as a Stated
Maturity date of such convertible debt securities.
"Subsidiary"
means, with respect to any specified Person:
(1) any
corporation, association or other business entity (other than a partnership or limited liability company) of which more than 50% of the total voting power of its
Voting Stock is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any
partnership or limited liability company of which (a) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general
and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof,
whether in the form of membership, general, special or limited partnership interests or otherwise, and (b) such Person or any Subsidiary of such Person is a controlling general partner or
otherwise controls such entity.
"Treasury
Management Arrangement" means any agreement or other arrangement governing the provision of treasury or cash management services, including deposit accounts, overdraft, credit
or debit card, funds transfer, automated clearinghouse, zero balance accounts, returned check concentration, controlled disbursement, lockbox, account reconciliation and reporting and trade finance
services and other cash management services.
"Treasury
Rate" means, in respect of any redemption date, the yield to maturity, as of the time of computation, of the most recently issued United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two business days prior to such time
(or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to December 1, 2020;
provided
,
however
, that if the period from the redemption date to December 1, 2020, is less than
one year, the weekly average yield on actually
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traded
United States Treasury securities adjusted to a constant maturity of one year will be used. The Company will (a) calculate the Treasury Rate no later than the second (and no earlier than
the fourth) Business Day preceding the applicable redemption date (or, in the case of any redemption in connection with a defeasance of the notes or a satisfaction and discharge of the indenture, on
the Business Day preceding such event) and (b) prior to such redemption date, file with the trustee a statement setting forth the Applicable Premium and the Treasury Rate and showing the
calculation of each in reasonable detail.
"Unrestricted
Subsidiary" means any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary through merger or consolidation
or Investment therein) that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such
Subsidiary:
(1) has
no Indebtedness other than Non-Recourse Debt;
(2) except
as permitted by the covenant described above under the caption "Certain CovenantsTransactions with Affiliates," is not party to any
agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;
(3) is
a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional
Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and
(4) has
not Guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries, except to the
extent such Guarantee would be released upon such designation.
All
Subsidiaries of an Unrestricted Subsidiary shall also be Unrestricted Subsidiaries.
"Volumetric
Production Payments" means production payment obligations recorded as deferred revenue in accordance with GAAP, together with all undertakings and obligations in connection
therewith.
"Voting
Stock" of any specified Person as of any date means the Capital Stock of such Person entitling the holders thereof (whether at all times or only so long as no senior class of
Capital Stock has voting power by reason of any contingency) to vote in the election of members of the Board of Directors of such Person;
provided
that
with respect to a limited partnership or other entity which does not have a Board of Directors, Voting Stock means the Capital Stock of the general partner of such limited partnership or other
business entity with the ultimate authority to manage the business and operations of such Person.
"Weighted
Average Life to Maturity" means, when applied to any Indebtedness or Disqualified Stock at any date, the number of years obtained by dividing:
(1) the
sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity or redemption, in respect of the Indebtedness or Disqualified Stock, by (b) the number of years (calculated to the nearest one-twelfth) that will
elapse between such date and the making of such payment; by
(2) the
then outstanding aggregate amount of such Indebtedness or Disqualified Stock.
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