DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description under the subheading "Certain Definitions." In this
description, the "Company" refers only to WildHorse Resource Development Corporation and not to any of its Subsidiaries. References to the "notes" in this section of the prospectus include
(i) the notes to be issued pursuant to this exchange offer, which we refer to as the "new notes," (ii) the notes that may be exchanged pursuant to this exchange offer, which we
collectively refer to as the "old notes," (iii) the notes registered with the SEC in exchange for private notes that were issued on February 1, 2017 and September 19, 2017, which
we refer to as the "original notes," unless the context otherwise requires.
The
Company will issue the new notes and issued the old notes under an indenture dated February 1, 2017, as supplemented, among itself, the Guarantors and U.S. Bank National
Association, as trustee, which we refer to herein as the "indenture." The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust
Indenture Act.
The
following description is a summary of the material provisions of the indenture. It does not restate the indenture in its entirety. We urge you to read the indenture because it, and
not this description,
defines your rights as holders of the notes. A copy of the indenture is filed as an exhibit to the registration statement of which this prospectus is a part. Certain defined terms used in this
description but not defined below under "Certain Definitions" have the meanings assigned to them in the indenture.
The
registered holder of a note will be treated as the owner of it for all purposes. Only registered holders have rights under the indenture and all references to "holders" in this
description are to registered holders of notes.
If
the exchange offer contemplated by this prospectus is consummated, holders of old notes who do not exchange those notes for new notes in the exchange offer will vote together will
holders of new notes for all relevant purposes under the indenture. In that regard, the indenture requires that certain actions by the holders thereunder must be taken, and certain rights must be
exercised, by specified minimum percentages of the aggregate principal amount of the outstanding securities issued under the indenture. In determining whether holders of the requisite percentage in
principal amount have given any notice, consent or waiver or taken any other action permitted under the indenture, any old notes that remain outstanding after the exchange offer will be aggregated
with the new notes and the holders of such old notes and the new notes will vote together as a single class for all such purposes. Accordingly, all references herein to specified percentages in
aggregate principal amount of the notes outstanding shall be deemed to mean, at any time after the exchange offer is consummated, such percentages in aggregate principal amount of the old notes and
the new notes then outstanding.
Brief Description of the Notes and the Note Guarantees
The New Notes
Like the old notes and the original notes, 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; and
-
-
unconditionally guaranteed by the Guarantors on a senior unsecured basis.
However,
the new notes, like the old notes and the original notes, will be structurally subordinated to the Indebtedness and other obligations of the Subsidiaries of the Company that are
not Guarantors, including the Company's Unrestricted Subsidiaries. See "Risk FactorsRisks Related to the Notes
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The
notes and the guarantees are unsecured and effectively subordinated to our and the guarantors' existing and future secured indebtedness and structurally subordinated to indebtedness of any future
non-guarantor subsidiaries."
The Note Guarantees
Initially, the new notes, like the old notes and the original notes, will be guaranteed by all of the Company's Restricted Subsidiaries. In the
future, other Restricted Subsidiaries of the Company that are not Guarantors may be required to guarantee the notes under the
circumstances described below under "Certain CovenantsAdditional Note Guarantees."
Each
guarantee of the new notes, like each guarantee of the old notes and the original notes, 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; and
-
-
senior in right of payment to any future subordinated Indebtedness of that Guarantor.
Accordingly,
the notes are structurally subordinated to the Indebtedness and other obligations of the Subsidiaries of the Company that are not Guarantors. See "Risk
FactorsRisks Related to the NotesThe notes and the guarantees are unsecured and effectively subordinated to our and the guarantors' existing and future secured indebtedness
and structurally subordinated to indebtedness of any future non-guarantor subsidiaries." Currently, all of the Company's Subsidiaries are "Restricted Subsidiaries." However, under the circumstances
described below under the caption "Certain CovenantsDesignation of Restricted and Unrestricted Subsidiaries," the Company is permitted to designate certain of its
Subsidiaries as "Unrestricted Subsidiaries." The Company's Unrestricted Subsidiaries are not subject to many of the restrictive covenants in the indenture and will not guarantee the notes.
Principal, Maturity and Interest
The Company issued $200 million in aggregate principal amount of old notes on April 20, 2018. The Company also previously issued
$500 million in aggregate of principal amount of
notes, substantially all of which were subsequently exchanged for registered notes. In addition to the new notes offered hereby, the Company may issue additional notes under the indenture from time to
time. Any such 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, the original notes and any additional notes subsequently issued under the indenture,
together with any Exchange Notes, will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase;
provided
,
however
, that if any such additional notes are not fungible with the notes, such additional
notes shall have a different CUSIP number (or other applicable identifying number). Unless expressly stated or the context requires otherwise, references to "notes" for all purposes of the indenture
and this "Description of Notes" section include any additional notes actually issued. The Company may issue notes only in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000.
The notes will mature on February 1, 2025.
Interest
on the notes accrues at the rate of 6.875% per annum and are payable semi-annually in arrears on February 1 and August 1. The Company makes each interest payment
to the holders of record on the immediately preceding January 15 and July 15.
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Interest
on the new notes will accrue from August 1, 2018, the most recent interest payment date, or, if interest has already been paid on the old notes, from the date it was most
recently paid. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.
If
an interest payment date falls on a day that is not a Business Day, the interest payment to be made on such interest payment date will be made, without penalty, on the next succeeding
Business Day with the same force and effect as if made on such interest payment date.
Methods of Receiving Payments on the Notes
The Company will pay principal of, and interest and premium, if any, on notes in global form registered in the name of Cede & Co.,
the nominee of DTC, in immediately available funds, directly to DTC. If a holder of certificated notes has given wire transfer instructions to the Company, the Company will pay all principal of, and
interest and premium, if any, on, that holder's notes in accordance with those instructions. All other payments on the certificated notes will be made at the
office or agency of the paying agent and registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the noteholders at their addresses set
forth in the register of holders.
Paying Agent and Registrar for the Notes
The trustee currently acts 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 and Exchange
A holder may transfer or exchange notes in accordance with the provisions of the indenture. The registrar and the trustee may require a holder,
among other things, to furnish appropriate endorsements and transfer documents in connection with a transfer of notes. Holders are required to pay all taxes due on transfer. The Company will not be
required to transfer or exchange any note selected for redemption. Also, the Company will not be required to transfer or exchange 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
Like the old notes and the original notes, the new notes will be guaranteed by all of the Company's Restricted Subsidiaries. In the future,
other Restricted Subsidiaries of the Company that are not Guarantors may be required to guarantee the notes under the circumstances described below under "Certain
CovenantsAdditional Note Guarantees." These Note Guarantees are joint and several obligations of the Guarantors. The obligations of each Guarantor under its Note Guarantee are 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 Related to the NotesA subsidiary guarantee could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy or similar
state law, which would prevent the holders of the notes from relying on the subsidiary guarantor to satisfy claims." A
Guarantor may not sell or otherwise dispose of, in one or a series of related transactions, all or substantially all of its properties or assets to, or consolidate with or merge with or into (whether
or not such Guarantor is the surviving Person) 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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(2) either:
(a) the
Person acquiring the properties or assets in any such sale 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 and the indenture pursuant to a supplemental indenture or other agreement in form reasonably
satisfactory to the trustee; or
(b) such
transaction or series of transactions does not violate the covenant described under the caption "Repurchase at the Option of HoldersAsset
Sales."
The
Note Guarantee of a Guarantor will automatically be released:
(1) in
connection with 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 covenant
described under the caption "Repurchase at the Option of HoldersAsset Sales";
(2) in
connection with any sale or other disposition of the Capital Stock of that Guarantor 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 covenant described under the caption "Repurchase at the Option of
HoldersAsset Sales" 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
legal defeasance or covenant defeasance as provided below under the caption "Legal Defeasance and Covenant Defeasance" or upon satisfaction and
discharge of the indenture as provided below under the caption "Satisfaction and Discharge";
(5) upon
the liquidation or dissolution of such Guarantor provided no Default or Event of Default has occurred that is continuing;
(6) upon
such Guarantor consolidating with, merging into or transferring all of its properties or assets to the Company or another Guarantor, and as a result of, or in
connection with, such transaction such Guarantor dissolving or otherwise ceasing to exist; or
(7) at
such time as such Guarantor ceases to guarantee or otherwise be an obligor with respect to any other Indebtedness of the Company or any other Guarantor in excess of
the De Minimis Guaranteed Amount, provided no Event of Default has occurred that is continuing.
See
"Repurchase at the Option of HoldersAsset Sales."
Optional Redemption
At any time prior to February 1, 2020, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of
notes (including, without limitation, the original notes, old notes, the new notes and additional notes, if any) issued under the indenture, in an amount not greater than the net cash proceeds of one
or more Equity Offerings by the Company, upon notice as provided in the indenture, at a redemption price equal to 106.875% 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
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holders
of notes on the relevant record date to receive interest on the relevant interest payment date);
provided
that:
(1) at
least 65% of the aggregate principal amount of notes (including, without limitation, the original notes, the old notes, the new notes and additional notes, if any)
originally issued under the indenture (excluding 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 February 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 as of, and accrued and unpaid interest 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.
Except
pursuant to the preceding paragraphs and the penultimate paragraph under "Repurchase at the Option of HoldersChange of Control," the notes will not be
redeemable at the Company's option prior to February 1, 2020.
On
or after February 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, subject to the rights of holders
of notes on the relevant record date to receive interest on the relevant interest payment date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below:
|
|
|
|
|
Year
|
|
Percentage
|
|
2020
|
|
|
105.156
|
%
|
2021
|
|
|
103.438
|
%
|
2022
|
|
|
101.719
|
%
|
2023 and thereafter
|
|
|
100.000
|
%
|
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund payments with respect to the notes. The Company may at any time and
from time to time purchase notes in the open market or otherwise, in each case without any restriction under the indenture.
Selection and Notice
If less than all of the notes are to be redeemed at any time, 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 or applicable stock exchange or depositary
requirements.
The
unredeemed portion of any note shall be in authorized denominations. 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 given more than
60 days prior to a redemption date if the notice is issued in connection with a defeasance or covenant defeasance of the notes or a satisfaction and discharge of the indenture. The notice of
redemption with respect to the redemption described in the second paragraph under the heading "Optional Redemption" need not set forth the
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Applicable
Premium but only the manner of calculation thereof. The Company will notify the trustee of the Applicable Premium with respect to any such redemption promptly after the calculation, and the
trustee shall not be responsible for such calculation. Notices of redemption, including, without limitation, upon an Equity Offering, may, at the Company's discretion, be subject to one or more
conditions precedent, including, without limitation, completion of the related Equity Offering. If a 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 Company by the date of
redemption, or by the date of redemption as so delayed.
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.
Notes
or portions thereof called for redemption will become due on the date fixed for redemption, subject to satisfaction of any conditions to such redemption. 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.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each holder of notes will have the right to require the Company to repurchase all or any part (equal to $2,000 or
an integral multiple of $1,000 in excess thereof) of that holder's notes pursuant to a cash tender offer ("Change of Control Offer") on the
terms set forth in the indenture. In the Change of Control Offer, the Company will offer a payment in cash ("Change of Control Payment") equal to 101% of the aggregate principal amount of notes
repurchased, plus accrued and unpaid interest 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, the Company will send a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering 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, pursuant to the procedures required by the indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control 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 provisions of the indenture by virtue of
such compliance.
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:
(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
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(2) deliver
or cause to be delivered to the trustee the notes properly accepted together with an officers' certificate stating the aggregate principal amount of notes or
portions of notes being purchased by the Company.
The
paying agent will promptly mail 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 to each holder of certificated notes 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 above with respect to a Change of Control, the indenture does 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 time 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 such Alternate Offer. Notwithstanding anything to the contrary contained in the indenture, a Change of Control Offer may be made in advance of a Change of Control, or 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 is made.
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 its notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the properties or assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain.
In
the event that upon consummation of a Change of Control Offer or Alternate Offer less than 10% of the aggregate principal amount of the notes (including, without limitation,
additional notes, if any) that were originally issued are held by holders other than the Company or Affiliates thereof, the Company will have the right, upon not less than 30 nor more than
60 days prior notice, given not more than 30 days following the purchase pursuant to the Change of Control 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 notes on the relevant record date to receive interest on the relevant interest payment date.
The
provisions under the indenture relative to the Company's obligation to make an offer to repurchase the notes as a result of a Change of Control may be waived or modified or
terminated with
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the
consent of the holders of a majority in principal amount of the notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the notes) prior to the
occurrence of such Change of Control.
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 a Restricted Subsidiary, 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 definitive agreement with respect to 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 a Restricted Subsidiary and all other Asset Sales since the date of the
indenture 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 Restricted Subsidiary (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 against further liability (or in lieu of such absence of liability, the acquiring Person or its parent company agrees to indemnify and
hold the Company or such Restricted Subsidiary harmless from and against any loss, liability or cost in respect of such assumed liabilities accompanied by the posting of a letter of credit (issued by
a commercial bank that has an Investment Grade Rating) in favor of the Company or such Restricted Subsidiary for the full amount of such liabilities and for so long as such liabilities remain
outstanding unless such indemnifying party (or its long term debt securities) shall have an Investment Grade Rating (with no indication of a negative outlook or credit watch with negative
implications, in any case, that contemplates such indemnifying party (or its long term debt securities) failing to have an Investment Grade Rating) at the time the indemnity is entered into);
(b) with
respect to any Asset Sale of Oil and Gas Properties by the Company or any of its Restricted Subsidiaries where the Company or such Restricted Subsidiary retains an
interest in such property, 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 that the transferee (or an Affiliate thereof) agrees to pay;
(c) any
securities, notes or other obligations received by the Company or any 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) Additional
Assets; 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), not to exceed an amount equal to 5.0% 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.
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Within
360 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or any Restricted Subsidiary) may apply such Net Proceeds at its option to any combination
of the following:
(1) to
repay, redeem or repurchase any Senior Debt;
(2) to
invest in or acquire Additional Assets; or
(3) to
make capital expenditures in respect of the Company's or any Restricted Subsidiaries' Oil and Gas Business.
The
requirement of clause (2) or (3) of the preceding paragraph shall be deemed to be satisfied if a bona fide binding contract committing to make the investment,
acquisition or expenditure referred to therein is entered into by the Company (or any Restricted Subsidiary) with a Person other than a Restricted Subsidiary within the time period specified in the
preceding paragraph and such Net Proceeds are subsequently applied in accordance with such contract within six months following the date such agreement is entered into.
Pending
the final application of any Net Proceeds, the Company (or any Restricted Subsidiary) may temporarily reduce Indebtedness under any Credit Facility or otherwise expend or invest
the Net Proceeds in any manner that is not prohibited by the indenture.
Any
Net Proceeds from Asset Sales that are not applied or invested as provided in the second paragraph of this covenant will constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $25.0 million, within five 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 with
the proceeds of sales of assets to purchase, prepay or redeem, on a pro rata basis (based on principal amounts of notes and
pari passu
Indebtedness (or,
in the case of
pari passu
Indebtedness issued with significant original issue discount, based on the accreted value thereof) tendered), the maximum
principal amount of notes and such other
pari passu
Indebtedness (plus all accrued interest on the 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 Restricted Subsidiary may use those
Excess Proceeds for any purpose not otherwise prohibited by the indenture. If the aggregate principal amount of notes 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), based on
the principal amounts tendered (with such adjustments as may be deemed appropriate by the Company so that only notes in denominations of $2,000, and any 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 may satisfy the foregoing obligation with respect to any Excess Proceeds
by making an Asset Sale Offer prior to the expiration of the relevant 360 day period or with respect to Excess Proceeds of $25.0 million or less.
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The provisions under the indenture relative to the Company's obligation to make an offer to repurchase the notes as a result of an Asset Sale may be waived or
modified with the written consent of a majority in principal amount of the outstanding notes.
The
Company will comply with the requirements of Rule 14e-1 under 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 an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the "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 "Asset Sales"
provisions of the indenture by virtue of such compliance.
Certain Covenants
Termination of Covenants if Notes Rated Investment Grade
If on any date following the date of the indenture:
(1) the
notes are rated Baa3 or better by Moody's and 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);
(2) no
Default or Event of Default shall have occurred and be continuing; and
(3) the
Company has delivered to the trustee an officers' certificate certifying to the foregoing provisions of this paragraph,
then,
the Company and its Restricted Subsidiaries will no longer be subject to the provisions of the indenture described below under the following captions in this description of notes:
(a) "Repurchase
at the Option of HoldersAsset Sales";
(b) "Certain
CovenantsRestricted Payments";
(c) "Certain
CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock";
(d) "Certain
CovenantsLiens";
(e) "Certain
CovenantsDividend and Other Payment Restrictions Affecting Restricted Subsidiaries";
(f) clause (4)
of the covenant described below under the caption "Certain CovenantsMerger, Consolidation or Sale of Assets";
(g) "Certain
CovenantsTransactions with Affiliates"; and
(h) "Certain
CovenantsDesignation of Restricted and Unrestricted Subsidiaries."
There
can be no assurance that the notes will ever be rated as investment grade or, if such rating is achieved, that 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,
without limitation, any
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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, without limitation, 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 other than through the exchange therefor solely of Equity Interests (other than Disqualified Stock) of the Company and
other than any acquisition or retirement for value from, or payment to, the Company or any Restricted Subsidiary 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 repurchase or other acquisition or retirement for value of any such Indebtedness in anticipation of satisfying a sinking fund or other payment obligation due within one year of the date
of such repurchase or other acquisition or retirement for value), 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) being collectively referred to as
"Restricted Payments"),
unless,
at the time of and after giving effect to such Restricted Payment,
(a) no
Default (except a Reporting 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
applicable 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 "Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock"; and
(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) through (12) 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 January 1, 2017 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 any Capital Stock of Persons engaged primarily in the Oil and Gas Business or any other assets that
are used or useful in the Oil and Gas Business other than cash, 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 Disqualified Stock) or received by the Company from the issue or sale of convertible or
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exchangeable
Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests since the date of the Indenture or
from the issue or sale of options, warrants or rights to purchase such Equity Interests that have been exercised for such Equity Interests since the date of the Indenture (other than, in either case,
Equity Interests (or Disqualified Stock or debt securities) sold to a Restricted Subsidiary of the Company or to 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)); 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 sold (other than to the Company or any Restricted Subsidiary of the Company) or otherwise cancelled, liquidated or repaid, 100% of the aggregate cash,
and the Fair Market Value of
any property other than cash, constituting the return of capital to the Company or any of its Restricted Subsidiaries with respect to such Restricted Investment resulting from such sale, cancellation,
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 Restricted Subsidiary of the Company) subsequent to the date of the Indenture of any such Indebtedness of the Company or its Restricted Subsidiaries convertible or exchangeable 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 Restricted 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 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 Restricted 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) the
amount equal to the net reduction in Restricted Investments made since the date of the Indenture resulting from dividends, distributions, redemptions or
repurchases, proceeds of sales or other dispositions thereof, interest payments, repayments of loans or advances, releases of guarantees or other transfers of assets (including transfers as a result
of a merger or liquidation), in each case to the Company or any of its Restricted Subsidiaries from any Person (including, without limitation, Unrestricted Subsidiaries) in respect of Restricted
Investments; plus
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(vii) to
the extent not included in clause (vi), any dividends received in cash by the Company or any of its Restricted Subsidiaries since the date of the Indenture
from an Unrestricted Subsidiary, to the extent such dividends were not otherwise included in the Consolidated Net Income of the Company for such period.
The
preceding provisions will not prohibit any of the following actions:
(1) the
payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or giving of the
redemption notice, as the case may be, if at the date of declaration or notice, the dividend 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, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of the Company to the
holders of its Equity Interests on a pro rata basis (or a basis more favorable to the Company);
(4) the
repurchase, redemption, defeasance, satisfaction and discharge 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 or any Disqualified Stock of the Company out or with the net cash proceeds from a substantially concurrent incurrence of, or in
exchange for, Permitted Refinancing Indebtedness;
(5) 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, equity option agreement, unitholders' 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 calendar year (with any portion of such $5.0 million amount that is unused in any calendar year to be carried forward to successive calendar years and added to such
amount), plus (a) the cash proceeds received by the Company or any of its Restricted Subsidiaries from sales of Equity Interests of the Company to employees or directors of the Company that
occur after the date of the Indenture (to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of
clause (c)(ii) of the preceding paragraph), plus (b) the cash proceeds of key man life insurance policies received by the Company or any of its Restricted Subsidiaries after the date of
the Indenture, less (c) the amount of payments previously effected by using amounts specified in the foregoing clauses (a) and (b);
(6) loans
or advances to employees of the Company or employees or directors of any Subsidiary of the Company, in each case as permitted by Section 402 of the
Sarbanes-Oxley Act of 2002, the proceeds of which are used to purchase Capital Stock of the Company, or to refinance loans or advances made pursuant to this clause (6), in an aggregate amount
not in excess of $2.0 million at any one time outstanding;
(7) the
repurchase or other acquisition or retirement for value of Equity Interests deemed to occur upon the exercise, conversion or exchange of units or other equity
options, warrants,
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incentives
or other rights to acquire Equity Interests to the extent such Equity Interests represent a portion of the exercise, conversion or exchange price of those unit or other equity options or
other rights and any repurchase or other acquisition or retirement for value of Equity Interests made in lieu of withholding taxes in connection with any exercise, conversion or exchange of units or
other equity options, warrants, incentives or other rights to acquire Equity Interests;
(8) the
repurchase, redemption or other acquisition or retirement for value of Equity Interests of the Company or any Restricted Subsidiary of the Company representing
fractional units of such Equity Interests in connection with a merger or consolidation involving the Company or such Restricted Subsidiary or any other transaction permitted by the indenture;
(9) the
declaration and payment of regularly scheduled or accrued dividends 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 in accordance with the covenant described below under the caption "Certain CovenantsIncurrence of Indebtedness and Issuance of
Preferred Stock";
(10) 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 units upon (i) the exercise of options or warrants, incentives or other rights to acquire Equity Interests or (ii) the exercise, conversion or exchange
of Equity Interests of any such Person;
(11) the
purchase, redemption or other acquisition or retirement for value of Indebtedness that is subordinated or junior in right of payment to the notes or any Note
Guarantee at a purchase price not greater than (i) 101% of the principal amount of such subordinated or junior Indebtedness in the event of a Change of Control or (ii) 100% of the
principal amount of such subordinated or junior Indebtedness in the event of an Asset Sale, in each case, plus accrued and unpaid interest thereon, in connection with any change of control offer or
prepayment offer 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 described under the caption "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 described under the caption
"Repurchase at the Option of HoldersAsset Sales"; and
(12) any
Restricted Payment, which when combined with the outstanding amount of all other Restricted Payments effected pursuant to this clause (12), does not exceed
$25.0 million at any one time outstanding.
The
amount of all Restricted Payments (other than cash) will be the Fair Market Value, on the date of the Restricted Payment, of the Restricted Investment proposed to be made or the
asset(s) or securities proposed to be transferred or issued by the Company or any of its Restricted Subsidiaries, as the case may be, pursuant to the Restricted Payment, except that the Fair Market
Value of any non-cash dividend paid within 60 days after the date of declaration will be determined as of such date of declaration. The Fair Market Value of any Restricted Investment, assets or
securities that are required to be valued by this covenant will be determined in accordance with the definition of that term. For purposes of determining compliance with this "Restricted Payments"
covenant, in the event that a Restricted Payment (or payment or other transaction that, except for being a Permitted Investment or Permitted Payment, would constitute a Restricted Payment) meets the
criteria of more than one of the categories of Restricted Payments described in the preceding clauses (1) through (12) of this covenant, or is permitted pursuant to the first paragraph
of this covenant or is a Permitted Investment or Permitted Payment, the Company will be permitted to classify (or later classify or reclassify in whole or in part in its sole discretion) such
Restricted Payment or other such transaction
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(or
portion thereof) on the date made or later reclassify such Restricted Payment or other such transaction (or portion thereof) in any manner that complies with this covenant. "Permitted Payment"
means any transaction expressly excluded from clauses (1), (2) and (3) of the first paragraph of this covenant.
For
purposes of this covenant and the definition of "Permitted Investments," a contribution, sale or incurrence will be deemed to be "substantially concurrent" if the related Restricted
Payment or purchase, repurchase, redemption, defeasance, satisfaction and discharge, retirement or other acquisition for value or payment of principal or acquisition of assets or Capital Stock occurs
no later than 180 days after such contribution, sale or incurrence.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, 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 Company's Restricted Subsidiaries 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 2.0 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 or any Restricted Subsidiary (whether as borrower or guarantor) of Indebtedness and letters of credit under one or more 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 its Restricted Subsidiaries thereunder) not to exceed the greatest of (i) $450.0 million, (ii) the Borrowing Base and (iii) $250.0 million plus 35.0%
of Adjusted Consolidated Net Tangible Assets determined on the date of such 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 (a) the old notes that were issued on either or both February 1, 2017 and
September 19, 2017, and April 20, 2018; (b) the Exchange Notes issued pursuant to any registration rights agreement; and (c) any 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 or other Indebtedness, in each case, incurred for the purpose of financing all or any part of the purchase price or other acquisition cost or cost of design, construction, installation,
development, repair or improvement of property, plant or equipment used in the business of the Company or any of its Restricted Subsidiaries (together with improvements, additions, accessions and
contractual rights relating primarily thereto), and any Permitted Refinancing Indebtedness incurred
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to
renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (4), in an aggregate principal amount, when taken together with the outstanding
amount of all other Indebtedness or Permitted Refinancing Indebtedness incurred pursuant to this clause (4), not to exceed the greater of (a) $50.0 million and (b) 5.0% of
Adjusted Consolidated Net Tangible Assets determined at 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) or Disqualified Stock or Preferred Stock that was permitted by the indenture to be
incurred under the first paragraph of this covenant or clause (2), (3), (5), (15) or (17) of this paragraph;
(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;
(9) the
Guarantee by the Company or any of the Guarantors 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, and if the Guarantee is by a Restricted
Subsidiary that is not a Guarantor, the Indebtedness guaranteed could have otherwise been incurred by such Restricted Subsidiary under this covenant;
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(10) the
incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of self-insurance obligations or bid, plugging and abandonment, appeal,
reimbursement, performance, surety and similar bonds and completion guarantees issued or provided by, or for the account of, the Company or a Restricted Subsidiary in the ordinary course of business
and any Guarantees or
obligations with respect to 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;
(13) the
incurrence of any obligation arising from agreements of the Company or any Restricted Subsidiary of the Company providing for indemnification, guarantees (other
than guarantees of Indebtedness), adjustment of purchase price, holdbacks, 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 such obligation is not reflected on the face of the balance sheet of the Company or
any Restricted Subsidiary;
(14) the
pledge of (or a Guaranty limited in recourse solely to) Equity Interests in an Unrestricted Subsidiary or Joint Venture held by the Company or a Restricted
Subsidiary to secure Indebtedness of such Unrestricted Subsidiary or Joint Venture and solely to the extent such Indebtedness constitutes Non-Recourse Debt;
(15) the
incurrence by the Company or its Restricted Subsidiaries of Permitted Acquisition Indebtedness;
(16) the
incurrence by the Company or its Restricted Subsidiaries of Indebtedness consisting of the financing of insurance premiums in customary amounts consistent with the
operations and business of the Company and the Restricted Subsidiaries; and
(17) the
incurrence by the Company or any Restricted Subsidiary of additional Indebtedness or the issuance by the Company of any Disqualified Stock or by any Restricted
Subsidiary of Preferred Stock in an aggregate principal amount, when taken together with the outstanding amount of all other Indebtedness incurred or Disqualified Stock or Preferred Stock issued
pursuant to this clause (17), not to exceed the greater of (i) $50.0 million and (ii) 5.0% of Adjusted Consolidated Net Tangible Assets determined on the date of such
incurrence or issuance.
Indebtedness
permitted by this covenant need not be permitted solely by reference to one provision permitting such Indebtedness or Disqualified Stock or Preferred Stock but may be
permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness or Disqualified Stock or Preferred Stock. For purposes of determining
compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of Indebtedness or Disqualified Stock or Preferred Stock meets the criteria of
more than one of the categories of Permitted Debt described in clauses (1) through (17) 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 or Disqualified Stock or Preferred Stock on the date of its incurrence or issuance, or later redivide or reclassify all
or a portion of such item of Indebtedness or Disqualified Stock or Preferred Stock, in any manner (including by dividing and classifying such item
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of
Indebtedness or Disqualified Stock or Preferred Stock in more than one type of Indebtedness or Disqualified Stock or Preferred Stock permitted under such covenant) that complies with this covenant.
The
dollar equivalent principal amount of any Indebtedness denominated in a foreign currency and incurred pursuant to any dollar-denominated restriction on the incurrence of Indebtedness
shall be calculated based on the relevant exchange rates in effect at the time of incurrence, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness;
provided
that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the
applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction
shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced. Notwithstanding
any other provision of this covenant, the maximum amount of Indebtedness that the Company and the Restricted Subsidiaries may incur pursuant to this covenant shall not be deemed to be exceeded solely
as a result of fluctuations in the exchange rates of currencies. The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such Permitted Refinancing Indebtedness is denominated that is in effect on
the date of such refinancing.
The
accrual of interest or Preferred Stock dividends, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness not secured by a Lien or on
the notes in the form of additional Indebtedness with the same term and the payment of dividends on Preferred Stock or Disqualified Stock in the form of additional securities 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
that the
amount thereof is included in Fixed Charges of the Company as accrued to the extent required by the definition of such term. For
purposes of this covenant, (i) the accrual of an obligation to pay a premium in respect of Indebtedness or Disqualified Stock or Preferred Stock arising in connection with the issuance of a
notice of redemption or making of a mandatory offer to purchase such Indebtedness or Disqualified Stock or
Preferred Stock, and (ii) unrealized losses or charges in respect of Hedging Agreements (including those resulting from the application of FASB ASC Topic No. 815, Derivatives and
Hedging) will, in the case of (i) or (ii), not be deemed to be an incurrence of Indebtedness or Disqualified Stock or Preferred Stock. Further, the accounting reclassification of any obligation
or Disqualified Stock or Preferred Stock of the Company or any of its Restricted Subsidiaries as Indebtedness or Disqualified Stock or Preferred Stock will not be deemed an incurrence of Indebtedness
or issuance of Disqualified Stock or Preferred Stock for purposes of this covenant.
The
"amount" or "principal amount" of any Indebtedness or Preferred Stock or Disqualified Stock outstanding at any time of determination as used herein shall be as set forth below or, if
not set forth below, determined in accordance with GAAP:
(1) the
accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;
(2) the
principal amount of the Indebtedness, in the case of any other Indebtedness;
(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;
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(4) in
the case of any Capital Lease Obligation, the amount determined in accordance with the definition thereof;
(5) in
the case of any Preferred Stock, (x) if other than Disqualified Stock, the greater of its voluntary or involuntary liquidation preference and its maximum fixed
redemption price or repurchase price or (y) if Disqualified Stock, as specified in the definition thereof;
(6) in
the case of any Interest Rate Agreements included in the definition of "Permitted Debt," zero;
(7) in
the case of all other unconditional obligations, the amount of the liability thereof determined in accordance with GAAP; and
(8) in
the case of all other contingent obligations, the maximum liability at such date of such Person.
For
purposes of determining any particular amount of Indebtedness, (i) guarantees of, or obligations in respect of letters of credit relating to, Indebtedness otherwise included
in the determination of such amount shall not also be included and (ii) if obligations in respect of letters of credit are incurred pursuant to a Credit Facility and are being treated as
incurred pursuant to clause (1) of the definition of "Permitted Debt" and the letters of credit relate to other Indebtedness, then the amount of such other Indebtedness equal to the face amount
of such letters of credit shall not be included. If Indebtedness is secured by a letter of credit that serves only to secure such Indebtedness, then the total amount deemed incurred shall be equal to
the greater of (x) the principal of such Indebtedness and (y) the amount that may be drawn under such letter of credit.
Liens
The Company will not and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or otherwise cause
or suffer to exist or become effective any 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 (or, in the case of Indebtedness subordinated to the
notes or any Note Guarantee, prior or senior thereto, with the same relative priority as the notes or Note Guarantee shall have with respect to such subordinated Indebtedness) until such time as such
Indebtedness is no longer secured by a Lien. Any Lien created for the benefit of the holders of the notes pursuant to the preceding sentence shall provide by its terms that such Lien shall be
automatically and unconditionally released and discharged upon the release and discharge of the initial Lien, provided no Event of Default has occurred and is continuing at the time of such release
and discharge.
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 pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries;
provided
that (i) the priority that any series of Preferred Stock of a Restricted Subsidiary has in receiving
dividends or liquidating distributions before dividends or liquidating distributions are paid in respect of common stock of such Restricted Subsidiary shall not constitute a restriction on the ability
to pay or make dividends or distributions on Capital Stock for purposes of this covenant and (ii) the subordination of indebtedness owed to the
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Company
or any Restricted Subsidiary to other indebtedness incurred by any Restricted Subsidiary shall not be deemed a restriction on the ability to pay indebtedness;
(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
Restricted Subsidiary to other Indebtedness incurred by the Company or any Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances); or
(3) sell,
lease or transfer any of its 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 the Credit Agreement as in effect on the date of the indenture and any amendments, restatements, modifications, renewals,
supplements, refundings, replacements or refinancings of those agreements;
provided
that the amendments, restatements, modifications, renewals,
supplements, refundings, replacements or refinancings are not 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, as determined in good faith by the Company;
(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 "Certain
CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock" and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of
those agreements;
provided
that the restrictions therein are not 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, as determined in good faith by the Company;
(4) applicable
law, rule, regulation, order, approval, license, permit or similar restriction;
(5) any
instrument governing Indebtedness or Capital Stock or other agreement of a Person acquired (including by merger or consolidation), or the assets of which are
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 or other agreement 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;
provided
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 Hydrocarbon purchase and sale or exchange agreements or similar operational agreements or in licenses, easements or leases, in
each case, entered into in the ordinary course of business;
(7) purchase
money obligations for property acquired in the ordinary course of business and Capital Lease Obligations 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 not materially more restrictive,
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taken
as a whole, than those contained in the agreements governing the Indebtedness being refinanced, as determined in good faith by the Company;
(10) Liens
permitted to be incurred under the provisions of the covenant described above under the caption "Certain CovenantsLiens" 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, shareholders' agreements, partnership agreements and other similar agreements (including agreements entered into in connection with a Restricted Investment) entered into with the approval
of the Board of Directors of the Company or in the ordinary course of business, which limitation is applicable only to the assets or property that is the subject of such agreements;
(12) any
agreement or instrument relating to any property or assets acquired after the date of the indenture, so long as such encumbrance or restriction relates only to the
property or assets so acquired and is not and was not created in anticipation of such acquisition;
(13) encumbrances
or restrictions on cash, Cash Equivalents or other deposits or net worth requirements imposed by customers or lessors under contracts or leases entered
into in the ordinary course of business;
(14) any
Preferred Stock issued by a Restricted Subsidiary of the Company;
provided
that issuance of such Preferred Stock is
permitted pursuant to the covenant described above under the caption
"Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock" and the terms of such Preferred Stock do not expressly restrict the ability of a Restricted
Subsidiary of the Company to pay dividends or make any other distributions on its Equity Interests (other than requirements to pay dividends or liquidation preferences on such Preferred Stock prior to
paying any dividends or making any other distributions on such other Equity Interests);
(15) any
encumbrance or restriction contained in the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was incurred if (x) either
(a) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant in such Indebtedness or agreement or (b) any such
encumbrance or restriction will not materially affect the Company's ability to make principal or interest payments on the notes, as determined in good faith by the Company and (y) the
encumbrance or restriction is not materially more disadvantageous to the Holders than is customary in comparable financings or agreements, as determined in good faith by the Company;
(16) Oil
and Gas Hedging Contracts or Interest Rate Agreements permitted from time to time under the indenture;
(17) encumbrances
and restrictions contained in contracts entered into in the ordinary course of business, not relating to any Indebtedness, and that do not, taken as a
whole, detract from the value of, or from the ability of the Company and its Restricted Subsidiaries to realize the value of, property or assets of the Company or any Restricted Subsidiary in any
manner material to the Company or any Restricted Subsidiary, as determined in good faith by the Company;
provided
that such encumbrances or restrictions
will not materially affect the Company's ability to make principal or interest payments on the notes, as determined in good faith by the Company;
(18) customary
encumbrances and restrictions contained in agreements of the types described in the definition of "Permitted Business Investments"; or
(19) any
Permitted Investment.
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In
each case set forth above, notwithstanding any stated limitation on the assets or property that may be subject to such encumbrance or restriction, an encumbrance or restriction on a
specified asset or property or group or type of assets or property may also apply to all improvements, additions,
accessions and contractual rights relating primarily thereto and all proceeds thereof (including dividends, distributions and increases in respect thereof).
Merger, Consolidation or Sale of Assets
The Company will not, directly or indirectly: (x) consolidate or merge with or into another Person (whether or not the Company is the
survivor), or (y) sell, assign, transfer, convey, lease or otherwise dispose of all or substantially all of its properties or assets, 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 a Person organized or existing under the laws of the United States, any state of the United States or
the District of Columbia;
provided
,
however
, that at any time such surviving Person is a limited
liability company or limited partnership, there shall be a co-issuer of the notes that is a corporation organized or existing under the laws of the United States, any state of the United States or the
District of Columbia;
(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 and the indenture pursuant to a supplemental indenture or other agreement in a form reasonably
satisfactory to the trustee;
(3) immediately
after such transaction, no Default or Event of Default exists;
(4) 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, either (i) 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 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 (ii) the Fixed
Charge Coverage Ratio of 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, is equal to or greater than the Fixed Charge Coverage Ratio of the Company immediately prior to such transaction; and
(5) the
Company has delivered to the trustee an officers' certificate and an opinion of counsel, each stating that such consolidation, merger or disposition and such
supplemental indenture, if any, comply with the indenture.
Notwithstanding
the restrictions described in the foregoing clause (4), (i) any Restricted Subsidiary of the Company may consolidate with or merge into the Company and
(ii) the Company may consolidate with or merge into or dispose all or substantially all of its properties or assets to any Guarantor; and the Company, in the case of (i) or (ii), will
not be required to comply with the preceding clause (4) in connection with any such consolidation, merger or disposition.
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Notwithstanding
the second preceding paragraph, the Company may reorganize as any other form of entity in accordance with the following procedures
provided
that:
(1) the
reorganization involves the conversion (by merger, sale, contribution or exchange of assets or otherwise) of the Company into a form of entity other than a
corporation formed under Delaware law;
(2) the
entity so formed by or resulting from such reorganization is an entity organized or existing under the laws of the United States, any state thereof or the District
of Columbia;
(3) the
entity so formed by or resulting from such reorganization assumes all the obligations of the Company under the notes and the indenture pursuant to a supplemental
indenture or other agreement in a form reasonably satisfactory to the trustee;
(4) immediately
after such reorganization no Default (other than a Reporting Default) or Event of Default exists; and
(5) such
reorganization is not materially adverse to the holders or Beneficial Owners of the notes (for purposes of this clause (5) a reorganization will not be
considered materially adverse to the holders or Beneficial Owners of the notes solely because the successor or survivor of such reorganization (a) is subject to federal or state income taxation
as an entity or (b) is considered to be an "includible corporation" of an affiliated group of corporations within the meaning of Section 1504(b) of the Code or any similar state or local
law).
For
purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or
assets of one or more Restricted Subsidiaries of the Company, the Capital Stock of which constitutes all or substantially all of the properties or assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties or assets of the Company.
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, 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 and the notes
with the same effect as if such surviving Person had been named as the Company in the indenture and the notes, 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.
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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 consideration to or from the Company or a Restricted Subsidiary in excess of
$2.0 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 could have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person or, if, as determined in good faith by 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, an officers'
certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with this covenant and that such Affiliate Transaction or series of related Affiliate
Transactions has been approved by a majority of the members of the Board of Directors of the Company and 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 agreement, employee benefit plan, officer or director indemnification 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 and/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;
(4) payment
of reasonable and customary fees and reimbursement of expenses (pursuant to indemnity agreements or otherwise) of, or provision of directors' and officers'
liability insurance, compensation, indemnification and other benefits to, officers, directors, employees or consultants of the Company or any of its Subsidiaries;
(5) any
issuance of Equity Interests (other than Disqualified Stock) of the Company to Affiliates of the Company;
(6) any
Restricted Payments or Permitted Investments or Permitted Payments that are permitted by the provisions of the indenture described above under the caption
"Certain CovenantsRestricted Payments";
(7) transactions
between the Company or any of its Restricted Subsidiaries and any Person that would not otherwise constitute an Affiliate Transaction except for the fact
that one director of
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such
other Person is also a director of the Company or such Restricted Subsidiary, as applicable;
provided
that such director abstains from voting as a
director of the Company or such Restricted Subsidiary, as applicable, on any matter involving such other Person;
(8) 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, advisory
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;
(9) (a)
guarantees by the Company or any of its Restricted Subsidiaries of performance of obligations of the Company's Unrestricted Subsidiaries in the ordinary course of
business, except for guarantees of Indebtedness in respect of borrowed money, and (b) pledges by the Company or any Restricted Subsidiary of the Company of (or any Guarantee by the Company or
any Restricted Subsidiary limited in recourse solely to) Equity Interests in Unrestricted Subsidiaries for the benefit of lenders or other creditors of the Company's Unrestricted Subsidiaries;
(10) transactions
with Unrestricted Subsidiaries, customers, clients, suppliers or purchasers or sellers of goods or services, or lessors or lessees of property, in each
case in the ordinary course of business and otherwise in compliance with the terms of the indenture which are, in the aggregate (taking into account all the costs and benefits associated with such
transactions), not materially less favorable to the Company and its Restricted Subsidiaries than those that would have been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated person or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party, in each case, as determined in good faith by
the Company;
(11) transactions
(other than purchases or sales of assets) effected in accordance with the terms of (a) any other agreements with Affiliates of the Company that are
described in the offering memorandum dated January 27, 2017 and identified in the indenture, in each case as such agreements were in effect on the date of the indenture, (b) any
amendment or replacement of any of such agreements or (c) any agreement entered into after the date of the indenture that is similar to any such agreements, so long as, in the case of
clause (b) or (c), the terms of any such amendment or replacement agreement or future agreement, taken as a whole, are no less advantageous to the Company or no less favorable to the holders in
any material respect than the agreement so amended or replaced or the similar such agreement, respectively, as determined in good faith by the Company;
(12) 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 an unaffiliated party, in each case, as determined in good faith by the
Company; and
(13) loans
or advances to employees in the ordinary course of business not to exceed $2.0 million in the aggregate at any one time outstanding.
Additional Note Guarantees
If, after the date of the indenture, any Restricted Subsidiary of the Company that is not already a Guarantor Guarantees or otherwise becomes an
obligor with respect to any other Indebtedness of the Company or any Guarantor in excess of the De Minimis Guaranteed Amount, then such Restricted Subsidiary will become a Guarantor by executing a
supplemental indenture and delivering it to the
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trustee
within 20 Business Days of the date on which it Guaranteed or became an obligor with respect to such Indebtedness;
provided
,
however
, that the preceding
shall not apply to Subsidiaries of the Company that have properly been designated as Unrestricted Subsidiaries in accordance
with the indenture for so long as they continue to constitute Unrestricted Subsidiaries. Notwithstanding the preceding, any Note Guarantee of a Restricted Subsidiary that was incurred pursuant to this
paragraph
shall be subject to all limitations and provisions described under the caption "Note Guarantees" and provide by its terms that it shall be automatically and unconditionally released at such time as
such Guarantor ceases to Guarantee or otherwise be an obligor with respect to any other Indebtedness of the Company or any other Guarantor in excess of the De Minimis Guaranteed Amount, provided no
Event of Default has occurred and is continuing at the time of such release.
Designation of Restricted and Unrestricted Subsidiaries
Currently, all of the Subsidiaries of the Company are Restricted 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 an
Unrestricted Subsidiary will be deemed to either be an Investment made as a "Restricted Payment" as of the time of the designation that will reduce the amount available for Restricted Payments under
the covenant described above under the caption "Certain CovenantsRestricted Payments" or represent a Permitted Investment under one or more clauses of the definition of
Permitted Investments, as determined in good faith by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Subsidiary so designated
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 of the Company 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 "Certain CovenantsRestricted 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 "Certain
CovenantsIncurrence 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
"Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock," either as
"Permitted Debt" or pursuant to the first paragraph of such covenant with the Fixed Charge Coverage Ratio 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.
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
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holders
of notes (or file with the SEC for public availability), within the time periods specified in the SEC's rules and regulations applicable to a non-accelerated filer, after giving effect to all
applicable extensions and cure periods:
(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 report only, a report on the Company's consolidated financial
statements 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.
If
the Company has designated as an Unrestricted Subsidiary any of its Subsidiaries that is a Significant Subsidiary (or that, taken together with other Unrestricted Subsidiaries, would
be a Significant Subsidiary), then the quarterly and annual financial information required by the second preceding paragraph 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.
This
covenant does not impose any duty on the Company under the Sarbanes Oxley Act of 2002 and the related SEC rules that would not otherwise be applicable.
Any
and all Defaults or Events of Default arising from a failure to furnish or file in a timely manner a report or information required by this covenant shall be deemed cured (and the
Company shall be deemed to be in compliance with this covenant) upon furnishing or filing such report or information as contemplated by this covenant (but without regard to the date on which such
report or information is so furnished or filed);
provided
that such cure shall not otherwise affect the rights of the holders under "Events
of Defaults and Remedies" if the principal, interest and premium, if any, 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, for so long as the notes remain outstanding, the Company will furnish to the holders and Beneficial Owners of the notes and to securities analysts and prospective investors
in the notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
The
Company will be deemed to have furnished to the holders and Beneficial Owners of the notes and to securities analysts and prospective investors the reports referred to in
clauses (1) and (2) of the first paragraph of this covenant or the information referred to in the immediately preceding paragraph of this covenant if the Company has posted such reports
or information on the Company Website. For purposes of this covenant, the term "Company Website" means the collection of web pages that may be accessed on the World Wide Web using the URL address
http://www.wildhorserd.com
or such other address as the Company may from time to time maintain for public information.
Events of Default and Remedies
Each of the following is an "Event of Default":
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(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 for 30 days after written notice has been given, by certified mail, (1) to the Company by the trustee or (2) to the Company
and the trustee by the holders of at least 25% in aggregate principal amount of the notes then outstanding to comply with its obligations to offer to repurchase or repurchase notes described under the
captions (a) "Repurchase at the Option of HoldersChange of Control" or (b) "Repurchase at the Option of HoldersAsset Sales";
(4) failure
by the Company to comply with the provisions described under the caption "Certain CovenantsMerger, Consolidation or Sale of Assets";
(5) failure
by the Company for 180 days after written notice has been given, by certified mail, (1) to the Company by the trustee or (2) to the Company
and the trustee by the holders of at least 25% in aggregate principal amount of the notes then outstanding to comply with the provisions described under "Certain
CovenantsReports";
(6) failure
by the Company for 60 days after written notice has been given, by certified mail, (1) to the Company by the trustee or (2) to the Company
and the trustee by the holders of at least 25% in aggregate principal amount of the notes then outstanding to comply with any of the other agreements in the indenture;
(7) default
under any mortgage, indenture or instrument under which there is issued or by which there is 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, and interest and premium, 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 express maturity, and, in each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $25.0 million or more;
provided
,
however
, 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 during the 60 day period commencing upon the end of any applicable grace period for
such Payment Default or the occurrence of such acceleration, as the case may be, any Default or Event of Default (but not any acceleration of the notes) 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;
(8) 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
$25.0 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;
(9) 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
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obligations
under its Note Guarantee, except, in each case, by reason of the release of such Note Guarantee in accordance with the indenture; and
(10) 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.
Holders
of the notes may not enforce the indenture or the notes except as provided in the indenture. Subject to certain limitations, holders of a majority in aggregate principal amount
of the then outstanding notes may direct the trustee in its exercise of any trust or power. The trustee 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, or interest or premium, if any, on, the notes.
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 or waive any existing Default or Event of Default and its consequences under the indenture, if the rescission would not conflict with any judgment or decree, except a continuing Default
or Event of Default in the payment of principal of, or interest or premium, if any, on, the notes.
The
Company is 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 is required to deliver to the trustee a statement specifying such Default or Event of Default within 30 days after such Officer becomes aware of the occurrence
and continuance of such Default or Event of Default, unless such Default or Event of Default has been cured before the end of the 30-day period.
No Personal Liability of Directors, Officers, Employees and Stockholders
No past, present or future director, officer, partner, employee, incorporator, member, manager, stockholder, unitholder or other owner of the
Capital Stock of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or the Guarantors 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.
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 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, or interest or premium, if any, on, such notes when such payments are due
from the trust referred to below;
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(2) the
Company's obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the
maintenance of an office or agency for 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 its obligations and the obligations of the Guarantors released with respect to (x) all of the covenants
that are described under "Certain Covenants" and under "Repurchase at the Option of Holders" (other than the covenant described in the first paragraph under
"Certain CovenantsMerger, Consolidation or Sale of Assets," except to the extent described below), including the Company's obligation to make Change of Control Offers and
Asset Sale Offers, and (y) the limitations described in clause (4) of the first paragraph under "Certain CovenantsMerger, Consolidation or Sale of Assets"
("Covenant Defeasance") and thereafter any omission to comply with those covenants or limitations 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 as to the Company) 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, to pay the principal
of, and interest and premium, if any, 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 has 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 federal income tax law, in either case to the effect that, and based thereon such opinion of
counsel will confirm that, the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
(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 holders of the
outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(4) the
Company must deliver to the trustee an officer's certificate stating that 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
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similar
concurrent deposit relating to other Indebtedness), and the granting of Liens to secure such borrowings, all or a portion of which are to be applied to such deposit);
(5) the
Company must deliver to the trustee an officer's certificate stating that 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 Guarantor is a party or by which the Company or any Guarantor 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; and
(7) the
Company must deliver to the trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance
or the Covenant Defeasance, as the case may be, 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 voting as a single class (including, without limitation, 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, or interest
or premium, if any, 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, without limitation, additional notes, if any) voting as a single
class (including, without limitation, 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 of the notes (except provisions
related to minimum required notice of optional redemption and 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 default interest, on any note;
(4) waive
a Default or Event of Default in the payment of principal of, or interest or premium, if any, on, the notes (except (i) a payment required by one of the
covenants described above under the caption "Repurchase at the Option of Holders" or (ii) 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;
(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, or
interest or premium, if any,
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on,
the notes (other than a payment required by one of the covenants described above under the caption "Repurchase at the Option of Holders");
(7) waive
a redemption 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 and 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 sale 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;
(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" section of the Company's offering memorandum dated
January 27, 2017 relating to the issuance of the old notes on February 1, 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;
(10) to
evidence or provide for the acceptance of appointment under the indenture of a successor trustee; or
(11) to
provide for the reorganization of the Company as any other form of entity in accordance with the third paragraph of "Certain
CovenantsMerger, Consolidation or Sale of Assets."
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
mail to the holders a notice briefly describing the amendment, supplement or waiver. However, the failure to give such notice, or any defect in the notice, will not impair or affect the validity of
the amendment, supplement or waiver.
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Satisfaction and Discharge
The indenture will be 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 or will become due and payable within one year by reason of the
mailing of a notice of redemption or otherwise and either 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, or interest or premium, if any, on, the notes to the date of Stated
Maturity or redemption;
(2) the
Company has paid or caused to be paid all other sums payable by the Company under the indenture; and
(3) if
applicable, the Company has delivered irrevocable instructions to the trustee 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 an officers' certificate and an opinion of counsel to the trustee stating that all conditions precedent to satisfaction and discharge 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 limits 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 is 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 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 have the right to direct the time, method and place of conducting any proceeding for exercising any
remedy available to the trustee, subject to certain exceptions. In case an Event of Default has occurred and is continuing, the trustee is 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 is 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 reasonable indemnity or security satisfactory to it against any loss, liability or expense.
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Governing Law
The indenture, the notes and the Note Guarantees will be 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 issued initially only in the form of one or more global notes (collectively, the "Global Notes"). The Global Notes will be
deposited upon issuance with the trustee as custodian for DTC and registered in the name of DTC's nominee, Cede & Co., in each case for credit to an account of a direct or indirect
participant in DTC as described below. Beneficial interests in the Global Notes may be held through the Euroclear System ("Euroclear") and Clearstream Banking, S.A. ("Clearstream") (as indirect
participants in DTC).
The
Global Notes may be transferred, in whole but 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 notes in registered, certificated form ("Certificated Notes") except in the limited circumstances described below. See "Exchange of Global Notes for Certificated Notes." In
addition, 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 (including, if applicable, those
of Euroclear and Clearstream), which may change from time to time.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear and Clearstream are provided solely as a matter of convenience.
These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. The Company takes no responsibility for these operations and
procedures and urges investors to contact the system or their participants directly to discuss these matters.
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 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 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 exchange agent 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 in DTC's system 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 (including Euroclear and Clearstream) which are
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Participants
in such system. Euroclear and Clearstream may hold interests in the Global Notes on behalf of their participants through customers' securities accounts in their respective names on the
books of their depositories, which are Euroclear Bank S.A./ N.V, as operator of Euroclear, and Citibank, N.A., as operator of Clearstream. All interests in a Global Note, including those held
through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements
of such systems.
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 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
Certificated Notes and will not be considered the registered owners or "holders" thereof under the indenture for any purpose.
Payments
in respect of the principal of, and interest and premium, 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, neither the Company, the Guarantors, the trustee nor any agent of the Company, the
Guarantors or the trustee 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, 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 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. Neither the Company, the Guarantors nor the trustee will be liable for any delay by DTC, its nominee or any Participant or Indirect Participant 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.
Transfers
between the Participants will be effected in accordance with DTC's procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and
Clearstream will be effected in accordance with their respective rules and operating procedures.
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Cross-market transfers between the Participants, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in
accordance with DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by their respective depositaries; however, such cross-market transactions will require delivery of instructions
to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system.
Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its depositary to take action to effect final settlement on its behalf
by delivering or receiving interests in the relevant Global Note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream.
DTC
has advised the Company that it will take any action permitted to be taken by a holder of 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 notes, DTC reserves the right to exchange the Global Notes for Certificated Notes, and to distribute such notes to its Participants.
Although
DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, Euroclear and
Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at anytime. None of the Company, the Guarantors, the trustee or any
of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
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 Note or (b) has ceased to be a clearing agency
registered under the Exchange Act and, in either event, 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 they elect 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).
Neither
the Company, the Guarantors nor the trustee will be liable for any delay by DTC, its nominee or any Participant or Indirect Participant in identifying the beneficial owners of
interests in Global 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,
including, without limitation, with respect to the registration and delivery, and the respective principal amounts, of the Certificated Notes to be issued.
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Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any Global Note, except in the limited circumstances provided in the
indenture.
Same-Day Settlement and Payment
The Company makes payments in respect of the notes represented by the Global Notes (including principal, interest and premium, if any) by wire
transfer of immediately available funds to the accounts specified by DTC or its nominee. The Company makes all payments of principal, interest and premium, if any, with respect to Certificated Notes
in the manner described above under "Methods of Receiving Payments on the Notes." The notes represented by the Global Notes are 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. The Company expects that secondary trading
in any Certificated Notes will also be settled in immediately available funds.
Because
of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note from a Participant will be credited, and any
such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream)
immediately following the settlement date of DTC. DTC has advised the Company that cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a
Euroclear or Clearstream participant to a Participant will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of
the business day for Euroclear or Clearstream following DTC's settlement date.
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.
"
Additional Assets
" means:
(1) any
assets used or useful in the Oil and Gas Business, other than Indebtedness or Capital Stock;
(2) the
Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or any of its Restricted
Subsidiaries; or
(3) Capital
Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary;
provided, however
, that any such Restricted Subsidiary described in clause (2) or (3) is primarily engaged in the Oil and Gas Business.
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"
Adjusted Consolidated Net Tangible Assets
" means (without duplication), as of the date of determination,
(1) the
sum of:
(a) the
discounted future net revenues from proved oil and natural gas reserves of the Company and its Restricted Subsidiaries calculated in accordance with SEC guidelines
before any state or federal income taxes, as estimated in a reserve report prepared as of the end of either the Company's most recently completed fiscal year (or, if such date of determination is
within 45 days after the end of such most recently completed fiscal year and no reserve report as of the end of such fiscal year has at the time been prepared or audited by independent
petroleum engineers, the Company's second preceding fiscal year) or, at the Company's option, the Company's most recently completed fiscal quarter for which internal financial statements are
available, 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
calculated in accordance with SEC guidelines from:
(i) estimated
proved oil and natural gas reserves of the Company and its Restricted Subsidiaries acquired since the date of such year-end or quarterly reserve report, and
(ii) estimated
proved oil and natural gas reserves of the Company and its Restricted Subsidiaries attributable to extensions, discoveries and other additions and upward
revisions of estimates of proved oil and natural gas reserves (including previously estimated development costs incurred during the period and the accretion of discount since the prior period end)
since the date of such year-end or quarterly reserve report 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 estimated discounted future net revenue attributable to:
(iii) estimated
proved oil and natural gas reserves of the Company and its Restricted Subsidiaries reflected in such reserve report produced or disposed of since the date of
such year-end or quarterly reserve report, and
(iv) reductions
in estimated proved oil and natural gas reserves of the Company and its Restricted Subsidiaries reflected in such reserve report attributable to downward
revisions of estimates of proved
oil and natural gas reserves since such year-end or quarterly reserve report 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 (i) through (iv), calculated on a pre-tax basis in accordance with SEC guidelines (utilizing the prices utilized in the Company's year-end or quarterly
reserve report, as applicable) and estimated by the Company's petroleum engineers or, at the Company's election, any independent petroleum engineers engaged by the Company for that purpose;
(b) the
capitalized costs that are attributable to oil and natural gas properties of the Company and its Restricted Subsidiaries to which no proved oil and natural gas
reserves are attributable, based on the 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;
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(c) 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
(d) the
greater of:
(i) the
net book value and
(ii) the
appraised value, as estimated by independent appraisers, of other tangible assets (including Investments in unconsolidated Subsidiaries),
in
each case, of the Company and its Restricted Subsidiaries as of a date no earlier than the last day of the date 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 shall not be required to obtain such an appraisal and only
clause (d)(i) of this definition shall apply,
minus,
to the extent not otherwise taken into account in the immediately preceding clause (1),
(2) the
sum of
(a) minority
interests,
(b) any
net natural 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 to the extent not deducted in calculating Consolidated Net Working Capital of the Company and its Restricted Subsidiaries in accordance with
clause (1)(c) of this definition;
(c) to
the extent included in clause (1)(a) above, the discounted future net revenues, calculated in accordance with SEC guidelines (utilizing the prices utilized in
the Company's year-end or quarterly 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
(d) the
discounted future net revenues, calculated 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 clause (1)(a) 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 successful efforts method to the full cost 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 successful efforts 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 on any redemption date, the greater of:
(1) 1.0%
of the principal amount of the note; or
(2) the
excess of:
(a) the
present value at such redemption date of (i) the redemption price of the note at February 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 February 1, 2020 (in each case, excluding accrued
but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date 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.
"
as determined in good faith by the Company
" means a determination made in good faith by the Board of Directors of the Company or any
Officer of the Company involved in or otherwise familiar with the transaction for which such determination is being made, any such determination being conclusive for all purposes under the indenture.
"
Asset Sale
" means:
(1) the
sale, lease (other than operating leases entered into in the ordinary course of business), conveyance or other disposition of any assets or rights by the Company or
any of the Company's Restricted Subsidiaries; 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 (in either case other than Preferred Stock of any Restricted Subsidiary issued in
compliance with the covenant described above under the caption "Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock," and directors' qualifying shares
or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary);
provided
that, in the case of (1) or (2), the sale, assignment, transfer, conveyance, lease or other disposition of all or substantially all of
the properties or assets of the Company and its Subsidiaries (including by way of a merger or consolidation) will be governed by the provisions of the indenture described above under the caption
"Repurchase at the Option of HoldersChange of Control" and/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.
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 or Equity Interests having a Fair Market Value of less than $15.0 million;
(2) a
transfer of assets between or among the Company and its Restricted Subsidiaries;
(3) an
issuance or sale 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 products, services, inventory or accounts receivable in the ordinary course of business and any sale or other disposition of
surplus, 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);
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(5) the
abandonment, farm-out, lease or sublease of developed or undeveloped oil or natural gas properties, or the forfeiture of such properties, owned or held by the
Company or any of its Restricted Subsidiaries in the ordinary course of business;
(6) licenses
and sublicenses by the Company or any of its Restricted Subsidiaries of software, intellectual property or other general intangibles in the ordinary course of
business;
(7) any
surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims;
(8) the
granting, creation or incurrence of Liens not prohibited by the covenant described above under the caption "Certain CovenantsLiens" and
dispositions in connection with such Liens and the exercise by any Person in whose favor such Lien is granted of any of its rights in respect of such Lien;
(9) the
sale or other disposition of cash or Cash Equivalents or other financial instruments (other than Oil and Gas Hedging Contracts);
(10) a
disposition of assets that constitutes (or results in by virtue of the consideration received for such disposition) either a Restricted Payment that does not violate
the covenant described above under the caption "Certain CovenantsRestricted Payments" or a Permitted Investment or a Permitted Payment;
(11) a
sale or other disposition of Hydrocarbons or other mineral products in the ordinary course of business;
(12) an
Asset Swap;
(13) dispositions
of crude oil and natural gas properties (whether or not in the ordinary course of business);
provided
that
at the time of any such disposition such properties do not have associated with them any proved reserves;
(14) any
Production Payments and Reserve Sales;
provided
that any such Production Payments and Reserve Sales, other than
incentive compensation programs on terms that are customary in the Oil and Gas
Business
for geologists, geophysicists and other providers of technical services to the Company or a Restricted Subsidiary, shall have been created, incurred, issued, assumed or
Guaranteed in connection with the financing of, and within 60 days after the acquisition of, the property that is subject thereto;
(15) the
disposition of assets or Equity Interests received in settlement of debts owing to a Person as a result of foreclosure, perfection or enforcement of any Lien or
debt, which debts were owing to such Person; and
(16) any
sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary.
"
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 or Cash Equivalents) is reasonably equivalent to the Fair Market Value of the properties or assets (together with any cash or Cash Equivalents) to be
received by the Company or such Restricted Subsidiary, and
provided further
, that any net cash or Cash Equivalents received must be applied in
accordance with the provisions described above under the
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caption
"Repurchase at the Option of HoldersAsset Sales" if then in effect as if the Asset Swap were an Asset Sale.
"
Attributable Debt
" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the
obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or
may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with
GAAP;
provided
,
however
, that if such sale and leaseback transaction results in a Capital Lease
Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of "Capital Lease Obligation."
"
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 within one year 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 limited partnership, the board of directors of the general partner of the partnership;
(3) with
respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and
(4) with
respect to any other Person, the board or committee of such Person serving a similar function.
"
Borrowing Base
" means the maximum amount determined or re-determined by the lenders under the Credit Agreement as the aggregate lending
value to be ascribed to the Oil and Gas Properties of the Company and its Restricted Subsidiaries against which such lenders are prepared to provide loans, letters of credit or other Indebtedness to
the Company and the Restricted Subsidiaries under the Credit Agreement, using their customary practices and standards for determining reserve based loans and which are generally applied by commercial
lenders to borrowers in the Oil and Gas Business, as determined semi-annually during each year and/or on such other occasions as may be provided for by the Credit Agreement, and which is based upon,
inter alia, the review by such lenders of the hydrocarbon reserves, royalty interests and assets and liabilities of the Company and the Restricted Subsidiaries.
"
Business Day
" means any day other than a Legal Holiday.
"
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, with the amount of Indebtedness represented by such obligation being the capitalized amount
of such obligation determined in accordance with GAAP, and the Stated Maturity thereof being 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
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of
a penalty. Notwithstanding the foregoing, any lease (whether entered into before or after the date of the indenture) that would have been classified as an operating lease pursuant to GAAP as in
effect on the date of the indenture will be deemed not to represent a Capital Lease Obligation. For purposes of the covenant described above under the caption "Certain
CovenantsLiens," a Capital Lease Obligation will be deemed to be secured by a Lien on the property being leased.
"
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 exercisable for, exchangeable for or 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) securities
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 of those securities) having maturities of not more than one year
from the date of acquisition;
(3) marketable
general obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at the time of acquisition thereof, having a credit rating of "A" or better from either S&P or Moody's;
(4) certificates
of deposit, demand deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million or that is a lender under
the Credit Agreement;
(5) repurchase
obligations with a term of not more than seven days for underlying securities of the types described in clauses (2), (3) and (4) above
entered into with any financial institution meeting the qualifications specified in clause (4) above;
(6) 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 acquisition;
(7) money
market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (6) of this definition;
(8) with
respect to any Foreign Subsidiary of the Company, investments denominated in local currency that are similar to the items specified in clauses (1) through
(7) above; and
(9) marketable
short-term money market and similar securities having a rating of at least P-2 or A-2 from either Moody's or S&P, respectively, and in each case maturing
within 24 months after the date of the creation thereof.
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"
Cash Management Obligations
" means, with respect to any Person, any obligations of such Person to any lender in respect of treasury
management arrangements, depositary or other cash management services, including any treasury management line of credit.
"
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 (including Equity Interests of Restricted Subsidiaries) 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)) other than any Permitted Holder, in each case which occurrence is followed by a Rating Decline within 90 days
thereafter;
(2) the
adoption of a plan relating to the liquidation or dissolution of the Company; or
(3) the
consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than
any Permitted Holder, 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, units or the
like, which occurrence is followed by a Rating Decline within 90 days thereafter;
provided
that a transaction in which the Company becomes a
Subsidiary of another Person shall not constitute a Change of Control if, immediately following such transaction, the "persons" (as defined above) who were Beneficial Owners of the Voting Stock of the
Company immediately prior to such transaction Beneficially Own, directly or indirectly through one or more intermediaries, 50% or more of the total voting power of the Voting Stock of such other
Person of whom the Company has become a Subsidiary.
"
Code
" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute or statutes thereto.
"
Consolidated Cash Flow
" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such
period plus, without duplication:
(1) an
amount equal to any extraordinary expenses or loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale,
to the extent such expenses or losses were deducted in computing such Consolidated Net Income; plus
(2) 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
(3) 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
(4) depreciation,
depletion, amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period),
impairment, abandonment expense, non-cash equity based compensation expense 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, abandonment expense and other non-cash charges or expenses were deducted in computing such
Consolidated Net Income; plus
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(5) if
such Person accounts for its oil and gas operations using successful efforts or a similar method of accounting, consolidated exploration expense of such Person and
its Restricted Subsidiaries; minus
(6) 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
(7) 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;
provided
that:
(1) the
net income (or loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included, but only to the
extent of, in the case of net income, the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person, or, in the case of net loss, the amount of
cash that has been contributed by the specified Person or Restricted Subsidiary to fund such loss;
(2) the
net income of any Restricted Subsidiary of such Person (other than a Guarantor) 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, directly or indirectly, by operation of the terms of its charter, or any judgment,
decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, partners or members or any other loan instrument, agreement or other contractual
restriction;
(3) the
cumulative effect of a change in accounting principles will be excluded;
(4) any
gain (loss), net of taxes (less all fees and expenses relating thereto), realized upon the sale or other disposition of any property, plant or equipment of such
Person or its consolidated Restricted Subsidiaries (including pursuant to any sale or leaseback transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain
(loss) realized upon the sale or other disposition of any Capital Stock of any Person, together with any related provision for taxes on any such gain, will be excluded;
(5) to
the extent deducted in the calculation of Consolidated Net Income, any non-cash or other charges relating to any premium or penalty paid, write off of deferred
financing costs or other financial recapitalization charges in connection with redeeming or retiring any Indebtedness prior to its Stated Maturity will be excluded;
(6) any
"ceiling limitation" on Oil and Gas Properties or other asset impairment writedowns on Oil and Gas Properties or other non-current assets under GAAP or SEC
guidelines will be excluded; and
(7) any
unrealized non-cash gains or losses or charges in respect of Hedging Obligations (including those resulting from the application of FASB ASC 815) will be excluded.
"
Consolidated Net Working Capital
" means (a) all current assets of the Company and its Restricted Subsidiaries except current
assets from Oil and Gas Hedging Contracts, less (b) all current liabilities of the Company and its Restricted Subsidiaries, except (i) current liabilities included in Indebtedness,
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(ii) current
liabilities associated with future abandonment or asset retirement obligations relating to oil and natural gas properties and (iii) any current liabilities from Oil and 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 Credit Agreement, dated as of December 19, 2016, by and among the Company, as borrower, Wells
Fargo Bank, National Association, as administrative agent, and the other financial institutions 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, without limitation, the Credit Agreement), indentures or commercial
paper facilities, in each case, with banks or other lenders or investors providing for revolving credit loans, term loans, capital market financings, debt securities, 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), letters of credit, debt issuances or other borrowings, in
each case, as amended, restated, modified, renewed, refunded, replaced in any manner (whether upon or after termination or otherwise) or refinanced (including refinancing with any capital markets
transaction or otherwise by means of sales of debt securities to institutional investors) in whole or in part from time to time.
"
Customary Recourse Exceptions
" means, with respect to any Non-Recourse Debt of an Unrestricted Subsidiary, exclusions from the
exculpation provisions with respect to such Non-Recourse Debt for the voluntary bankruptcy of such Unrestricted Subsidiary, fraud, misapplication of cash, environmental claims, waste, willful
destruction and other circumstances customarily excluded by lenders from exculpation provisions or included in separate indemnification agreements in non-recourse financings.
"
Default
" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
"
De Minimis Guaranteed Amount
" means a principal amount of Indebtedness that does not exceed $5.0 million.
"
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, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of or
collection on such Designated Non-cash Consideration.
"
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 (other than in exchange for Capital Stock of the Company (other than Disqualified Stock)), in whole or in part,
on or prior to the date that is 91 days after the earlier of (a) the date on which no notes are outstanding and (b) the date on which the notes mature;
provided
that only the portion of
Capital Stock which is mandatorily redeemable or matures or is redeemable at the option of the holder thereof prior to
such date will be deemed to be Disqualified Stock;
provided further
that any Capital Stock issued pursuant to any plan of the Company or any of its
Affiliates for the benefit of one or more employees will not constitute Disqualified Stock solely because it may be required to be repurchased by
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the
Company or any of its Affiliates in order to satisfy applicable contractual, statutory or regulatory obligations. 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 (x) 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," or (y) the terms of such
Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions prior to the Company's purchase of the notes as is required to be purchased
pursuant to the provisions of the indenture. The amount (or principal 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.
"
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 exercisable for, exchangeable for or convertible into Equity Interests, regardless of whether such debt securities include any right of participation with Equity
Interests.
"
Equity Offering
" means a sale of Equity Interests of the Company (other than Disqualified Stock and other than to a Subsidiary of the
Company) made for cash or any cash contribution to the capital of the Company in respect of Equity Interests (other than Disqualified Stock), in each case after the date of the indenture.
"
Exchange Notes
" means the notes issued in an Exchange Offer pursuant to the indenture. Such term includes the new notes.
"
Exchange Offer
" has the meaning set forth for such term in the applicable registration rights agreement.
"
Existing Indebtedness
" means all Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement) 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.
"
Fixed Charge Coverage Ratio
" means with respect to any specified Person for any four-quarter reference period, the ratio of the
Consolidated Cash Flow 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 the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed
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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 (except
that in
making such computation, the amount of Indebtedness under any revolving Credit Facility outstanding on the date of such determination will be deemed to be (i) the average daily balance of such
Indebtedness during such four fiscal quarters or such shorter period for which such Credit Facility was outstanding or (ii) if such revolving Credit Facility was created after the end of such
four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such revolving Credit Facility to the date of such determination). If any
Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness will be calculated as if the average rate in effect from the
beginning of such period to the Calculation Date had been the applicable rate for the entire period (taking into account any interest Hedging Obligation applicable to such Indebtedness, but if the
remaining term of such interest Hedging Obligation is less than twelve months, then such interest Hedging Obligation shall only be taken into account for that portion of the period equal to the
remaining term thereof). If any Indebtedness that is being given pro forma effect bears an interest rate at the option of such Person, the interest rate shall be calculated by applying such
option rate chosen by such Person. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a Eurocurrency interbank offered rate,
or other rate, shall be deemed to have been based upon the rate actually chosen, or if none, then based upon such optional rate chosen as such Person may designate. Interest on any Indebtedness under
a revolving Credit Facility will be calculated based upon the average daily balance of such Indebtedness during the applicable period.
In
addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions
or Investments that have been made, or contributions received, by the specified Person or any of its Restricted Subsidiaries, including through mergers,
consolidations or otherwise (including acquisitions or Investments or contributions of assets used or useful in the Oil and Gas Business), or 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 four-quarter 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 as if they
had occurred on the first day of the four-quarter reference period;
(2) the
Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses or Investments (or ownership
interests therein) disposed of on or 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 or Investments (or ownership interests
therein) disposed of on or 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 to be a Restricted Subsidiary of the specified Person immediately following the Calculation Date will be deemed to have been a Restricted Subsidiary
at all times during such four-quarter reference period;
(5) any
Person that is not to be a Restricted Subsidiary of the specified Person immediately following the Calculation Date will be deemed not to have been a Restricted
Subsidiary at any time during such four-quarter reference period;
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(6) interest
income reasonably anticipated by such Person to be received during the applicable four-quarter reference period from cash or Cash Equivalents held by such
Person or any Restricted Subsidiary of such Person, which cash or Cash Equivalents exist on the Calculation Date or will exist as a result of the transaction giving rise to the need to calculate the
Fixed Charge Coverage Ratio, will be included; and
(7) if,
since the beginning of such four-quarter reference period, any Person (that subsequently became a Restricted Subsidiary or was merged or consolidated with or into
such Person or any of its Restricted Subsidiaries since the beginning of such four-quarter reference period) disposed of any operations or businesses or Investments (or ownership interests therein) or
made any acquisition or Investment or received any contribution that would have required an adjustment pursuant to clause (1), (2) or (3) above if made by such Person or any of
its Restricted Subsidiaries during such four-quarter reference period, Consolidated Cash Flow and Fixed Charges for such period will be calculated after giving pro forma effect thereto as if such
disposition or acquisition, contribution or Investment had occurred on the first day of such 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 a
responsible financial or accounting Officer of the Company, which determination shall be conclusive for all purposes under the indenture;
provided
that
such Officer may in such Officer's discretion include any reasonably identifiable and factually supportable pro forma changes to Consolidated Cash Flow or Fixed Charges, including any pro forma
expense and cost reductions or synergies that have occurred or are reasonably expected to occur within the 12 months immediately following the Calculation Date (regardless of whether those cost
savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or
policy of the SEC related thereto).
"
Fixed Charges
" means, with respect to any specified Person for any period, the sum, without duplication, of:
(1) the
consolidated interest expense (less interest income) 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, without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, 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 (other than Non-Recourse Debt of any Unrestricted Subsidiary or Joint Venture incurred pursuant to clause (14) of
the covenant described under the caption "Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock") 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
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(4) all
dividends, 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 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, in
each case, on a consolidated basis and determined in accordance with GAAP.
"
Foreign Subsidiary
" means any Restricted Subsidiary of the Company that is not a Domestic Subsidiary.
"
GAAP
" means generally accepted accounting principles in the United States, which are in effect from time to time. All ratio computations
based on GAAP contained in the indenture will be computed in conformity with GAAP.
"
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, without limitation, 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 (a) Interest Rate
Agreement and (b) Oil and Gas Hedging Contract.
"
Hydrocarbons
" means oil, natural gas, casing head gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons,
gaseous hydrocarbons and all constituents, elements or compounds thereof and products refined or processed therefrom.
"
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) (a)
evidenced by bonds, notes, debentures or similar instruments or (b) constituting letters of credit (or reimbursement agreements in respect thereof) (other
than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1), (2)(a), (3), (4) or (6) of this definition) entered into
in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following payment on the letter of credit);
(3) in
respect of bankers' acceptances;
(4) representing
Capital Lease Obligations or Attributable Debt in respect of sale and leaseback transactions;
(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; or
(6) representing
any Hedging Obligations,
if
and to the extent any of the preceding items (other than letters of credit, Attributable Debt and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person
prepared
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in
accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others 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 that is 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 foregoing, the following shall not in any event constitute "Indebtedness":
(1) any
indebtedness which has been defeased or discharged in accordance with GAAP or defeased or discharged pursuant to the deposit of cash or Cash Equivalents (in an
amount sufficient to satisfy all such indebtedness at maturity or redemption, as applicable, and all payments of interest and premium, if any) in a trust or account created or pledged for the sole
benefit of the holders of such indebtedness, and subject to no other Liens, and the other applicable terms of the instrument governing such indebtedness;
(2) any
obligation of a Person in respect of a farm-in agreement or similar arrangement whereby such Person agrees to pay all or a share of the drilling, completion or other
expenses of an exploratory or development well (which agreement may be subject to a maximum payment obligations, after which expenses are shared in accordance with the working or participation
interest therein or in accordance with the agreement of the parties) or perform the drilling, completion or other operation on such well in exchange for an ownership interest in an oil or gas
property;
(3) any
unrealized losses or charges in respect of Interest Rate Agreements or Oil and Gas Hedging Contracts (including those resulting from the application of FASB ASC
815);
(4) all
contracts and other obligations, agreements, instruments or arrangements described in clauses (10), (18) and (19) of the definition of
"Permitted Liens"; and
(5) Cash
Management Obligations.
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"
Interest Rate Agreement
" means any interest rate swap agreement (whether from fixed to floating or from floating to fixed), interest rate
cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in interest rates and is not for speculative purposes.
"
Investment Grade Rating
" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's or BBB (or the
equivalent) 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).
"
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), advances or capital contributions, and purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP (excluding, in each case, (1) commission, travel and similar advances to
officers and employees made in the ordinary course of business, (2) any interest in an oil or natural gas leasehold to the extent constituting a security under applicable law and
(3) advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender, prepaid expenses or deposits and extensions of trade
credit on commercially reasonable terms in accordance with normal trade practices). 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 (other than
the sale of all of the outstanding Capital Stock of such Subsidiary), 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 penultimate 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 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 or write-ups,
write-downs or write-offs with respect to such Investment.
"
Joint Venture
" means any Person that is not a direct or indirect Subsidiary of the Company in which the Company or any of its Restricted
Subsidiaries makes any Investment.
"
Legal Holiday
" means a Saturday, a Sunday or a day on which banking institutions in the City of Houston, Texas or the City of New York,
New York are authorized by law, regulation or executive order to remain closed.
"
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.
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"
Midstream Assets
" means (i) assets other than cash and Cash Equivalents used primarily for gathering, transmission, compression,
storage, processing, marketing, fractionation, dehydration, stabilization or treatment of Hydrocarbons, carbon dioxide or water and (ii) Equity Interests of any Person whose assets consist, in
all material respects, of assets referred to in clause (i).
"
Midstream Business
" means the gathering, marketing, treating, processing, storage, selling, transporting transmission, compression,
fractionation, dehydration, stabilization or treatment of Hydrocarbons, carbon dioxide or water.
"
Moody's
" means Moody's Investors Service, Inc. and any successor to the ratings business thereof.
"
Net Proceeds
" means the aggregate cash proceeds and Cash Equivalents received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, 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 or Cash Equivalents for purposes of the "Asset Sales" provisions of the indenture), net of (i) the costs relating to such Asset Sale,
including, without limitation, legal, title and recording expenses, accounting and investment banking fees, and sales commissions, (ii) distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale, (iii) any relocation expenses and severance and associated costs, expenses and charges of personnel
relating to the assets subject to or incurred as a result of the Asset Sale, (iv) 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, (v) amounts required to be applied to the repayment of Indebtedness (other than revolving credit Indebtedness under a Credit Facility
that is secured by a Lien on the asset or assets that were the subject of such Asset Sale), and (vi) any 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, with respect to Indebtedness of any Unrestricted Subsidiary or Joint Venture, 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, except for Customary Recourse Exceptions and except by the pledge of (or a Guaranty
limited in recourse solely to) the Equity Interests of such Unrestricted Subsidiary or Joint Venture; and
(2) as
to which the lenders will not have any recourse to the Capital Stock or assets of the Company or any of its Restricted Subsidiaries (other than the Equity Interests
of such Unrestricted Subsidiary or Joint Venture), 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.
"
Officer
" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or any Vice President of such Person
(or, if such Person is a limited partnership, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Chief Accounting
Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or any Vice President of such Person's general partner).
"
Oil and Gas Business
" means (i) the acquisition, exploration, development, production, operation and disposition of interests in
oil, gas and other Hydrocarbon properties, (ii) the gathering, marketing,
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treating,
processing, storage, selling and transporting of any production from such interests or properties, (iii) any business relating to exploration for or development, production,
treatment, processing, storage, transportation or marketing of oil, gas and other minerals and products produced in association therewith and (iv) any activity that, as determined in good faith
by the Company, arises
from, relates to or is ancillary, complementary or incidental to or necessary or appropriate for the activities described in clauses (i) through (iii) 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 purchased, used, produced, processed or sold by the Company or any of its
Restricted Subsidiary that are customary in the Oil and Gas Business and designed to protect against or manage price risks, basis risks or other risks encountered in the Oil and Gas Business 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 oil and gas reserves" as defined in Rule 4-10 of Regulation S-X of the Securities Act.
"
Permitted Acquisition Indebtedness
" means Indebtedness or Disqualified Stock or Preferred Stock of the Company or any of its Restricted
Subsidiaries to the extent such Indebtedness or Disqualified Stock or Preferred Stock was Indebtedness or Disqualified Stock or Preferred 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, and in each case was not
incurred in contemplation of the foregoing,
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 of:
(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, or 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 natural gas through agreements,
transactions, interests or arrangements which permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through
the conduct of 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 or gathering, transportation, processing, storage or related systems,
(ii) entry into and Investments and expenditures in the form of or pursuant to operating agreements, processing agreements, farm-in agreements, farm-out agreements, development agreements, area
of mutual interest agreements, unitization agreements, pooling agreements, joint bidding agreements, service contracts, joint venture agreements, partnership agreements (whether general or limited),
subscription agreements, stock purchase agreements and other similar or customary agreements, (iii) working interests, royalty interests, mineral leases, production sharing agreements,
production sales and
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marketing
agreements, oil or gas leases, overriding royalty agreements, net profits agreements, production payment agreements or royalty trust agreements, (iv) Investments of operating funds on
behalf of co-owners of properties used in the Oil and Gas Business of the Company or its Restricted Subsidiaries pursuant to joint operating agreements, and (v) direct or indirect ownership
interests in drilling rigs, fracturing units and other related equipment.
"
Permitted Holders
" means each of (i) WHR Holdings, LLC, Esquisto Holdings, LLC and WHE AcqCo Holdings, LLC,
(ii) NGP Energy Capital Management, L.L.C., NGP IX US Holdings, L.P., NGP X US Holdings, L.P. and NGP XI US Holdings, L.P. and (iii) any affiliated funds or
investment vehicles managed by any of the persons described in clauses (i) and (ii) above, and any general partner, managing member, principal or managing director of any of the persons
described in clauses (i) and (ii) above.
"
Permitted Investments
" means:
(1) any
Investment in the Company (including, without limitation, through the purchase of any notes) or in a Restricted Subsidiary of the Company;
(2) any
Investment in cash and 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 or Asset Swap that was made pursuant to and in compliance with the covenant
described above under the caption "Repurchase at the Option of HoldersAsset Sales";
(5) any
acquisition of assets or Capital Stock solely in exchange for the issuance of, or with or out of the net cash proceeds of the substantially concurrent
(a) contribution (other than from a Restricted Subsidiary) to the equity capital of the Company in respect of, or (b) sale (other than to a Restricted Subsidiary) of, Equity Interests
(other than Disqualified Stock) of the Company,
provided
that in each such case, the amount of such issuance, contribution or sale will be disregarded
for purposes of clause (c)(ii) under the caption "Certain CovenantsRestricted Payments";
(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) Investments
in any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers'
compensation, performance and other deposits made in the ordinary course of business by the Company or any of its Restricted Subsidiaries;
(9) relocation
allowances for, and 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;
(10) repurchases
of the notes or Note Guarantees;
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(11) any
Guarantee of Indebtedness of (a) the Company or a Restricted Subsidiary or (b) any Person that is not an Affiliate of the Company, in each case
permitted to be incurred by the covenant described above under the caption "Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock";
(12) 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 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;
(13) 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 or consolidation with or into the Company or any of its Restricted Subsidiaries in a transaction that is not prohibited by the covenant described above under the caption
"Certain CovenantsMerger, Consolidation or Sale of Assets" after the date of the indenture to the extent that such Investments were not made in contemplation of such
acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;
(14) Permitted
Business Investments or Permitted Midstream Business Investments;
(15) Investments
received as a result of a foreclosure by, or other transfer of title to, the Company or any of its Restricted Subsidiaries with respect to any secured
Investment in default;
(16) receivables
owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business and payable or dischargeable in accordance with
customary trade terms;
provided
,
however
, that such trade terms may include such concessionary trade
terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
(17) Investments
consisting of Oil and Gas Hedging Contracts or Interest Rate Agreements permitted under the covenant described above under the caption "Certain
CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock";
(18) Guarantees
or other Investments arising from the incurrence of Indebtedness by the Company or any Restricted Subsidiary with respect to Indebtedness of any Unrestricted
Subsidiary or Joint Venture permitted under clause (14) of the covenant described above under the caption "Certain CovenantsIncurrence of Indebtedness and Issuance of
Preferred Stock";
(19) Guarantees
of performance or other obligations (other than Indebtedness) arising in the ordinary course in the Oil and Gas Business, including obligations under oil and
natural gas exploration, development, joint operating, and related agreements and licenses, concessions or operating leases related to the Oil and Gas Business;
(20) advances
and prepayments for asset purchases in the ordinary course of business in the Oil and Gas Business of the Company or any Restricted Subsidiary; and
(21) any
Investment in any Person having an aggregate Fair Market Value (measured on the date such Investment was made and without giving effect to subsequent changes in
value) that, when taken together with the Fair Market Value (as so measured) of all other Investments made pursuant to this clause (21) that are at the time outstanding, that does not exceed
the greater of (a) $50.0 million and (b) 5.0% of Adjusted Consolidated Net Tangible Assets determined at the time such Investment is made;
provided
,
however
, that if any Investment pursuant to this clause (21) is made in any Person that
is not a Restricted Subsidiary of the Company at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Company after such date, such Investment shall
thereafter be deemed to have been made pursuant
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to
clause (1) above and shall cease to have been made pursuant to this clause (21) for so long as such Person continues to be a Restricted Subsidiary of the Company (unless the Company
otherwise classifies such Investment in compliance with the indenture).
With
respect to any Investment, the Company may, in its sole discretion, classify all or any portion of any Investment in one or more of the above clauses so that the entire Investment
is a Permitted Investment.
"
Permitted Liens
" means:
(1) Liens
on assets of the Company or any Restricted Subsidiary securing Indebtedness under Credit Facilities that was permitted by the terms of the indenture to be incurred
pursuant to clause (1) of the second paragraph under "Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock";
(2) Liens
in favor of the Company or the Guarantors;
(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 do not extend to any other property owned by such Person or any of its Restricted
Subsidiaries;
(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 do not extend to any property other
than that acquired;
(5) pledges
or deposits or other Liens to secure the performance of statutory obligations, insurance, surety or appeal bonds, workers' compensation, unemployment and similar
obligations, bid, leases (including, without limitation, statutory and common law landlord's liens), government contracts, plugging and abandonment obligations and performance bonds 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
securing Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations or other Indebtedness, in each case, incurred for
the purpose of financing all or any part of the purchase price or other acquisition cost or cost of design, construction, installation, development, repair or improvement of property, plant or
equipment used in the business of the Company or any of its Restricted Subsidiaries and acquired or designed, constructed, installed, developed, repaired or improved in the ordinary course of
business;
provided
that (a) such Liens are in favor of the seller or other transferor of such asset or property, in favor of the Person or
Persons designing, constructing, installing, developing, repairing or improving such asset or property, or in favor of the Person or Persons that provided the funding for the acquisition, design,
construction, installation, development, repair or improvement cost, as the case may be, of such asset or property, (b) such Liens are created no later than 360 days after the
acquisition, design, construction, installation, development, repair or improvement, (c) the aggregate principal amount of the Indebtedness secured by such Liens is otherwise permitted to be
incurred under the indenture and does not exceed the greater of (i) the cost of the asset or property so acquired, designed, constructed, installed, developed, repaired or improved plus related
financing costs and (ii) the fair market value of the asset or property so acquired, designed, constructed, installed, developed, repaired or improved, measured at the date of such acquisition,
or the date of completion of such design, construction, installation, development, repair or improvement
plus related financing costs, and (d) such Liens are limited to the asset or property so acquired, designed, constructed, installed, developed, repaired or improved (together with improvements,
additions, accessions and contractual rights relating primarily thereto and all proceeds thereof (including dividends, distributions and increases in respect thereof));
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(7) Liens
existing on the date of the indenture (other than Liens securing Indebtedness under the Credit Agreement);
(8) Liens
created for the benefit of (or to secure) the notes (or the Note Guarantees) or to secure other obligations under the indenture;
(9) Liens
on and pledges of the Equity Interests of any Unrestricted Subsidiary or any Joint Venture owned by the Company or any Restricted Subsidiary of the Company to the
extent securing Non-Recourse Debt or other Indebtedness of such Unrestricted Subsidiary or Joint Venture;
(10) Liens
on pipelines or pipeline facilities that arise by operation of law;
(11) Liens
reserved in oil and natural gas mineral leases for bonus or rental payments and for compliance with the terms of such leases;
(12) Liens
to secure any Indebtedness incurred to refinance or replace Indebtedness secured by any Lien described under clauses (3), (4), (6), (7), (8) and
(22) of this definition permitted to be incurred under the indenture;
provided
,
however
, that:
(a) the
new Lien is limited to all or part of the same property and assets that secured or, except in the case of Indebtedness secured by any Lien described under
clauses (3), (4) or (6) of this definition, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and
accessions to, such property or proceeds or distributions thereof); and
(b) the
Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed
amount, of the Indebtedness exchanged,
renewed, refunded, refinanced, replaced, defeased or discharged with such Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums,
related to such exchange, renewal, refunding, refinancing, replacement, defeasance or discharge;
(13) Liens
on insurance policies and proceeds thereof, or other deposits, to secure insurance premium financings;
(14) filing
of Uniform Commercial Code financing statements as a precautionary measure in connection with operating leases;
(15) bankers'
Liens, rights of setoff, rights of revocation, refund or chargeback with respect to money or instruments of the Company or any Restricted Subsidiary, Liens
arising out of judgments or awards not constituting an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings
and for which adequate reserves have been made;
(16) Liens
on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness;
(17) 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;
(18) 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;
(19) Liens
arising under oil and natural gas leases or subleases, overriding royalty interests, assignments, farm-out agreements, farm-in agreements, division orders,
contracts for the sale,
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purchase,
exchange, transportation, gathering or processing of Hydrocarbons, unitizations and pooling designations, declarations, orders and agreements, development agreements, joint venture
agreements, partnership agreements, operating agreements, royalties, working interests, net profits interests, joint interest billing arrangements, participation agreements, production sales
contracts, production payment agreements, royalty trust agreements, incentive compensation programs for geologists, geophysicists and other providers of technical services to the Company or a
Restricted Subsidiary, 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;
(20) Liens
to secure performance of Hedging Obligations of the Company or any of its Restricted Subsidiaries entered into in the ordinary course of business and not for
speculative purposes;
(21) Liens
arising under the indenture in favor of the trustee for its own benefit and similar Liens in favor of other trustees, agents and representatives arising under
instruments governing Indebtedness permitted to be incurred under the indenture;
provided
,
however
, that
such Liens are solely for the benefit of the trustees, agents or representatives in their capacities as such and not for the benefit of the holders of such Indebtedness;
(22) any
Lien incurred by the Company or any Restricted Subsidiary of the Company with respect to Indebtedness in aggregate principal amount that, when taken together with
the aggregate principal amount of all other Indebtedness secured by Liens incurred pursuant to this clause (22) then outstanding, together with all other then outstanding Indebtedness secured
by Liens incurred pursuant to clause (12) of this definition that had previously refinanced or replaced Indebtedness secured by Liens incurred under this clause (22), does not exceed the
greater of (a) $50.0 million and (b) 5.0% of Adjusted Consolidated Net Tangible Assets determined at the time such Lien is incurred;
(23) leases
and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Company or the Restricted Subsidiaries;
(24) any
Lien arising by reason of:
(a) taxes,
assessments or governmental charges or claims that are not yet delinquent or which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted;
provided
that any reserve or other appropriate provision as will be required in conformity with GAAP will have been
made therefor,
(b) good
faith deposits in connection with tenders, leases and contracts (other than contracts for the payment of Indebtedness),
(c) survey
exceptions, zoning restrictions, easements, licenses, reservations, title defects, rights of others for rights of way, utilities, sewers, electric lines,
telephone or telegraph lines, and other similar purposes, provisions, covenants, conditions, waivers, restrictions on the use of property or minor irregularities of title (and with respect to
leasehold interests, mortgages, obligations, Liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the leased property,
with or without consent of the lessee), none of which materially impairs the use of any parcel of property material to the operation of the business of the Company or the Restricted Subsidiaries or
the value of such property for the purpose of such business,
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(d) operation
of law or contract in favor of mechanics, carriers, warehousemen, landlords, materialmen, laborers, employees, suppliers and similar persons, incurred in the
ordinary course of business, to the extent such Liens relate only to the tangible property of the lessee which is located on such property, for sums which are not yet delinquent or are being contested
in good faith by negotiations or by appropriate proceedings which suspend the collection thereof; if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof, or
(e) normal
depository or cash-management arrangements with banks; and
(25) Liens
on any specific property or any interest therein, construction thereon or improvement thereto to secure all or any part of the costs incurred for surveying,
exploration, drilling, extraction, development, operation, production, construction, alteration, repair or improvement of, in, from, under or on such property and the plugging and abandonment of wells
located thereon (it being understood that, in the case of oil and gas producing properties, or any interest therein, costs incurred for development and production shall include costs incurred for all
facilities relating to such properties or to projects, ventures or other arrangements of which such properties form a part or which relate to such properties or interests and costs incurred for
processing, gathering, marketing, refining and storage of such production), in each case that do not secure Indebtedness for borrowed money.
In
each case set forth above, notwithstanding any stated limitation on the assets that may be subject to such Lien, a Permitted Lien on a specified asset or group or type of assets shall
also include any Lien on all improvements, additions, accessions and contractual rights relating primarily thereto and all proceeds thereof (including dividends, distributions and increases in respect
thereof).
"
Permitted Midstream Business Investments
" means Investments by the Company or any of its Restricted Subsidiaries in any Person (including
in any Unrestricted Subsidiary or Joint Venture) consisting of a capital contribution, or arising from the receipt of non-cash consideration from a transfer, to such Person of Midstream Assets;
provided
that:
(1) at
the time of any such Investment and immediately thereafter, the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio set forth in the first paragraph of the covenant described above under the caption "Certain CovenantsIncurrence of Indebtedness and Issuance of
Preferred Stock";
(2) if
such Person has outstanding Indebtedness at the time of any such Investment, either (a) all such Indebtedness is Non-Recourse Debt or (b) any such
Indebtedness of such Person that is not Non-Recourse Debt could, at the time such Investment is made, be incurred at that time by the Company and its Restricted Subsidiaries 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"; and
(3) such
Person is not engaged, in any material respect, in any business other than a Midstream Business.
"
Permitted Refinancing Indebtedness
" means any Indebtedness or Disqualified Stock or Preferred Stock of the Company or any of its
Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness or Disqualified Stock or Preferred
Stock of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness);
provided
that:
(1) the
principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Indebtedness or
Disqualified Stock or Preferred Stock exchanged, renewed, refunded, refinanced, replaced, defeased or discharged (plus
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all
accrued interest on the Indebtedness and all accrued dividends on the Disqualified Stock or Preferred Stock and the amount of all fees and expenses, including premiums, incurred in connection
therewith);
(2) such
Permitted Refinancing Indebtedness has a final maturity date that is either (a) no earlier than the final maturity 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 or Preferred Stock being exchanged, 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 exchanged, 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 (or shall be Capital Stock of the obligor on) the Indebtedness being exchanged, renewed, refunded, refinanced, replaced, defeased or discharged, as
determined in good faith by the Company;
(4) such
Indebtedness is not incurred by a Restricted Subsidiary of the Company (other than a Guarantor) if the Company or a Guarantor is the issuer or other obligor on the
Indebtedness being exchanged, renewed, refunded, refinanced, replaced, defeased or discharged;
(5) if
any Preferred Stock being exchanged, renewed, refunded, refinanced, replaced, defeased or discharged was Disqualified Stock of the Company, the Permitted Refinancing
Indebtedness shall be Disqualified Stock of the Company; and
(6) if
any Preferred Stock being exchanged, renewed, refunded, refinanced, replaced, defeased or discharged was Preferred Stock of a Restricted Subsidiary, the Permitted
Refinancing Indebtedness shall be Preferred Stock of such Restricted Subsidiary.
"
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 for geologists, geophysicists or other providers of technical services to the Company or any of its Restricted
Subsidiaries.
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"
Rating Category
" means:
(1) with
respect to S&P, any of the following categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories); and
(2) with
respect to Moody's, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories).
"
Rating Decline
" means a decrease in the rating of the notes by either Moody's or S&P by one or more gradations (including gradations
within Rating Categories as well as between Rating Categories). In determining whether the rating of the notes has decreased by one or more gradations, gradations within Rating Categories,
namely + or for S&P, and 1, 2, and 3 for Moody's, will be taken into account; for example, in the case of S&P, a rating decline either from BB+ to BB or
BB to B+ will constitute a decrease of one gradation.
"
Reporting Default
" means a Default described in clause (5) under "Events of Default and Remedies."
"
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. Except where
expressly stated otherwise, all references to Restricted Subsidiaries refer to Restricted Subsidiaries of the Company.
"
S&P
\" means Standard & Poor's Ratings Services and any successor to the ratings business thereof.
"
SEC
" means the Securities and Exchange Commission.
"
Senior Debt
" means
(1) all
Indebtedness of the Company or any of its Restricted Subsidiaries outstanding under Credit Facilities and all obligations under Hedging Obligations with respect
thereto;
(2) any
other Indebtedness of the Company or any of its Restricted Subsidiaries permitted to be incurred under the terms of the indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the notes or any Note Guarantee; and
(3) all
Obligations with respect to the items listed in the preceding clauses (1) and (2).
Notwithstanding
anything to the contrary in the preceding sentence, Senior Debt will not include:
(1) any
intercompany Indebtedness of the Company or any of its Restricted Subsidiaries to the Company or any Affiliate;
(2) any
Indebtedness that is incurred in violation of the indenture; or
(3) any
Capital Stock.
"
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 original documentation governing such Indebtedness, 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.
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"
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
or 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, or (b) such Person or any Subsidiary of such Person is the sole or controlling general partner
or manager or managing member of, or otherwise controls, such entity.
"
Trade Payables
" means, as to any Person, (a) accounts payable or other obligations of such Person created or assumed by such
Person in the ordinary course of business in connection with the obtaining
of goods or services and (b) obligations arising under contracts for the exploration, development, drilling, completion and plugging and abandonment of wells or for the construction, repair or
maintenance of related infrastructure or facilities.
"
Treasury Rate
" means, as of any redemption date, the yield to maturity as of such redemption date 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 the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the
redemption date to February 1, 2020;
provided
,
however
, that if the period from the redemption
date to February 1, 2020, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used. The
Company will (a) calculate the Treasury Rate on the second Business Day preceding the applicable redemption date and (b) prior to such redemption date file with the trustee an officers'
certificate setting forth the Applicable Premium and the Treasury Rate and showing the calculation of each in reasonable detail.
"
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 (or deemed designated) by the Company's Board of Directors 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 owing to any Person other than the Company or any of its Restricted Subsidiaries (other than any Guarantee of the notes
or the Note Guarantees or any Indebtedness that would be released upon such designation);
(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, together
with the terms of all other agreements, contracts, arrangements and understandings with such Unrestricted Subsidiary, taken as a whole, 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, as determined in good faith by the Company;
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(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; and
(4) has
not Guaranteed or otherwise become an obligor on any Indebtedness of the Company or any of its Restricted Subsidiaries, except to the extent such Guarantee or
obligation would be released upon such designation and except for (x) any Non-Recourse Debt with respect to which the Company or any Restricted Subsidiary has pledged (or provided a Guaranty
limited in recourse solely to) Equity Interests in such Subsidiary or (y) any Guarantee of the notes and the Note Guarantees, except, in the case of (1), (2), (3) or (4), for any such
Indebtedness that is subject to a Guarantee by or other obligation of, or any agreement, contract, arrangement or understanding with, or any equity subscription or credit support obligation of, the
Company or Restricted Subsidiary that constitutes an Investment in such Subsidiary that has been effected as a Restricted Payment or Permitted Investment that complies with the covenant described
above under the caption "Certain CovenantsRestricted Payments."
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 or Preferred 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 or (with respect to Preferred Stock) redemption or similar payment, including payment at final maturity, in respect of the Indebtedness (or Disqualified Stock or Preferred 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 principal amount of such Indebtedness (or Disqualified Stock or Preferred Stock).
"
Wholly Owned Restricted Subsidiary
" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly Owned Restricted Subsidiary.
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