Item 1.01 Entry into a Material Definitive Agreement.
Purchase Agreement
On June 26, 2018, Chaparral
Energy, Inc. (the Company) and certain subsidiary guarantors named therein (the Guarantors) entered into a Purchase Agreement with J.P. Morgan Securities LLC, as representative of the several Initial Purchasers named therein
(collectively, the Initial Purchasers), to sell to the Initial Purchasers $300.0 million aggregate principal amount of 8.750% Senior Notes due 2023 (the Notes). On June 29, 2018, the Company completed its private
placement of the Notes to the Initial Purchasers. The Notes were sold at par and resulted in net proceeds to the Company of approximately $292.0 million. The Company intends to use the proceeds from the offering of the Notes to repay the entire
balance of its existing indebtedness under its senior secured revolving credit facility, to pay fees and expenses related to the issuance of the Notes and for general corporate purposes. The Purchase Agreement contains customary representations and
warranties of the parties and indemnification and contribution provisions whereby the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, have agreed to indemnify each other against certain liabilities.
The Notes were issued and sold to the Initial Purchasers pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended
(the Securities Act) pursuant to Section 4(a)(2) thereunder. The Initial Purchasers intend to resell the Notes (i) inside the United States to persons reasonably believed to be qualified institutional buyers, as
defined in Rule 144A (Rule 144A) under the Securities Act in private sales exempt from registration under the Securities Act in accordance with Rule 144A, and (ii) to other eligible purchasers pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S under the Securities Act (Regulation S) in accordance with Regulation S. The Notes have not been registered under the Securities Act or applicable state securities laws and may
not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.
Relationships
The Initial Purchasers and their
respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal
investment, hedging, financing and brokerage activities. Each of the Initial Purchasers and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory, commercial banking and investment
banking services for the Company, for which they received or will receive customary fees and expenses. Associated Investment Services, Inc. (AIS), a Financial Industry Regulatory Authority member, a subsidiary of Associated Banc-Corp, is being paid
a referral fee by Samuel A. Ramirez & Company, Inc. Each of the Initial Purchasers and/or their respective affiliates, except Samuel A. Ramirez & Company, Inc., act as lenders under the Companys senior secured revolving
credit facility and as a result will receive a portion of the proceeds from the sale of the Notes.
The description of the provisions of the Purchase Agreement set forth above is qualified in its entirety by
reference to the full and complete terms set forth in the Purchase Agreement, a copy of which is attached to this Current Report on Form
8-K
as Exhibit 10.1.
Indenture
On June 29, 2018, the Company
successfully completed the issuance and sale of $300.0 million aggregate principal amount of the Notes. The Company issued the Notes pursuant to an indenture, dated as of June 29, 2018 (the Indenture), by and among the Company, the
Guarantors and UMB Bank, N.A., as trustee (the Trustee). The Notes are guaranteed (the Guarantees) on a senior basis by the Guarantors.
Interest on the Notes will accrue from and including June 29, 2018 at a rate of 8.750% per year. Interest on the Notes is payable in cash
semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2019. The Notes will mature on July 15, 2023. The Notes will be the Companys senior unsecured obligations and will rank equal in
right of payment with all of the Companys existing and future senior indebtedness, senior to all of the Companys existing and future subordinated indebtedness and effectively subordinated to all of the Companys existing and future
secured indebtedness, to the extent of the value of the collateral securing such indebtedness. Similarly, the Guarantees will be each Guarantors senior unsecured obligations and will rank equal in right of payment with all of such
Guarantors existing and future senior indebtedness, senior to all of such Guarantors existing and future subordinated indebtedness and effectively subordinated to all of such Guarantors existing and future secured indebtedness, to
the extent of the value of the collateral securing such indebtedness. In addition, the Notes and the Guarantees will be structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) and preferred
stock of any of the Companys subsidiaries that do not guarantee the Notes.
The Indenture contains covenants that limit the ability of the Company
and its restricted subsidiaries to:
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incur additional indebtedness or issue certain preferred stock;
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pay dividends or repurchase or redeem capital stock;
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make certain investments;
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enter into certain types of transactions with affiliates;
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enter into agreements restricting their ability to pay dividends or make other payments;
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consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets; and
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create unrestricted subsidiaries.
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These limitations are subject to a number of important qualifications and
exceptions.
Upon an Event of Default (as defined in the Indenture), the Trustee or the holders of at least 25% in aggregate principal amount of the
outstanding Notes may declare the entire principal of, premium, if any, and accrued and unpaid interest, if any, on all the Notes to be due and payable immediately.
Prior to July 15, 2020, the Company may, at its option, redeem all or, from time to time, a part of the Notes at a redemption price equal to 100% of the
principal amount thereof, plus an applicable make-whole premium and accrued and unpaid interest, if any, to the date of redemption. On or after July 15, 2020, the Company may, at its option, redeem all or, from time to time, a part of the Notes
at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably to par and accrued and unpaid interest, if any, to the date of redemption.
On any one or more occasions prior to July 15, 2020, the Company, at its option, may redeem up to 35% of the aggregate principal amount of the Notes with
proceeds of one or more qualified equity offerings at a redemption price of 108.750% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, and liquidated damages provided that:
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(1)
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at least 60% of the aggregate principal amount of Notes issued under the Indenture remains outstanding after each such redemption; and
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(2)
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such redemption occurs within 180 days after the closing of any such qualified equity offering.
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If the
Company experiences certain kinds of changes of control, holders of the Notes will be entitled to require the Company to purchase all or a portion of the Notes at 101% of their principal amount, plus accrued and unpaid interest.
The description of the provisions of the Indenture set forth above is qualified in its entirety by reference to the full and complete terms set forth in the
Indenture, a copy of which is attached to this Current Report on Form
8-K
as Exhibit 4.1.