DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description under the subheading "Definitions." In this description, the
words "NGL Energy," "us," "our" and "we" refer only to NGL Energy Partners LP and not to any of its Subsidiaries, and the words "Finance Corp." refer solely to NGL Energy Finance Corp. The term
"Issuers" refers to NGL Energy and Finance Corp., collectively.
The
Issuers will issue the new notes under an indenture dated as of the Issue Date (the "indenture"), among the Issuers, the Guarantors and U.S. Bank National Association, as trustee
(the "trustee"), in exchange for the old notes issued under the indenture in a private transaction that was not subject to the registration requirements of the Securities Act. See "Notice to
Investors." The terms of the notes will include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended (the "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 new notes.
The
registered holder of a note will be treated as the owner of it for all purposes. Only registered holders will have rights under the indenture and all references to "holders" in this
description are to registered holders of notes.
Brief Description of the Notes and the Note Guarantees
The Notes
The new notes will:
-
-
be general unsecured obligations of each of the Issuers;
-
-
be non-recourse to our general partner;
-
-
rank pari passu in right of payment with all existing and future unsubordinated Indebtedness of
each of the Issuers, including the Existing Senior Notes;
-
-
rank senior in right of payment to any future subordinated Indebtedness of each of the Issuers;
-
-
be structurally subordinated to all obligations of any of our Subsidiaries;
-
-
be unconditionally guaranteed by the Guarantors on a senior unsecured basis; and
-
-
rank effectively junior in right of payment to all existing and future secured Indebtedness of each of the Issuers, including indebtedness
under the Credit Agreement and Term Loan Agreement, each of which is secured by substantially all of the assets of NGL Energy and the Guarantors, to the extent of the assets of the Issuers
constituting collateral securing such Indebtedness. See "Risk FactorsRisks Related to the NotesThe notes and the guarantees will be unsecured and effectively subordinated to
our and our subsidiary guarantors' existing and future secured indebtedness." and "Risk FactorsRisks Related to the NotesThe notes and the guarantees will be structurally
subordinated to all indebtedness of our non-guarantor subsidiaries."
The Note Guarantees
Initially, the notes will be guaranteed by each Restricted Subsidiary (other than Finance Corp.) that is a Domestic Subsidiary and an obligor
under the Credit Agreement. In the future, other
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Restricted
Subsidiaries will be required to guarantee the notes under the circumstances described below under "CovenantsAdditional Note Guarantees." Each guarantee of the
notes will:
-
-
be a general unsecured obligation of the applicable Guarantor;
-
-
rank pari passu in right of payment with all existing and future unsubordinated Indebtedness of
such Guarantor, including the guarantees of the Existing Senior Notes;
-
-
rank senior in right of payment to any future subordinated Indebtedness of such Guarantor; and
-
-
rank effectively junior in right of payment to all existing and future secured Indebtedness of such Guarantor, including indebtedness under the
Credit Agreement and Term Loan Agreement, to the extent of the assets of such Guarantor constituting collateral securing such Indebtedness.
As
of the Issue Date, all of our Restricted Subsidiaries guarantee the notes, other than GSR Northeast Terminals LLC, Indigo Injection #3-1, LLC, Matagorda Bay Costa Azul
Terminal, LLC, NGL Energy Services, LLC, NGL Gateway Terminals, Inc., NGL South Ranch Holdings, LLC and NGL Water Solutions New Mexico, LLC. As of the Issue Date,
none of these Subsidiaries guarantees (or is otherwise liable for) any Obligations under any Credit Facility, including the Credit Agreement, or the Existing Senior Notes.
As
of the Issue Date, all of our Subsidiaries, other than Sawtooth Caverns, LLC and NGL Supply Terminal Solution Mining, LLC, are "Restricted Subsidiaries." However, under
the circumstances
described below under the caption "CovenantsDesignation of Restricted and Unrestricted Subsidiaries," we will be permitted to designate certain of our other Subsidiaries as
"Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the indenture. In the event of a bankruptcy, liquidation or reorganization of any
Unrestricted Subsidiary, such Unrestricted Subsidiary will pay the holders of its debt and its trade creditors before it will be able to distribute any of its assets to NGL Energy.
Principal, Maturity and Interest
The Issuers will issue up to $450.0 million in aggregate principal amount of new notes in this exchange offer. The Issuers may issue
additional notes under the indenture from time to time after this offering. Any issuance of additional notes is subject to all of the covenants in the indenture, including the covenant described below
under the caption "CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock." The notes and any additional notes subsequently issued under the indenture will be
treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The Issuers will issue notes in denominations of
$2,000 and integral multiples of $1,000 in excess of $2,000. The notes will mature on April 15, 2026.
Interest
on the outstanding notes will accrue at the rate of 7.5% per annum and will be payable semiannually in arrears on April 15 and October 15 of each year. The Issuers
will make each interest payment to the holders of record on the immediately preceding April 1 and October 1.
Interest
on the new notes will accrue from the date of original issuance of the old notes or, if interest has already been paid on the old notes, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. If an interest payment date falls on a day that is not a Business Day, the interest payment to be made on
such interest payment date will be made on the next succeeding Business Day with the same force and effect as if made on such interest payment date, and no Liquidated Damages will accrue as a result
of such delayed payment.
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Methods of Receiving Payments on the Notes
If a holder of notes has given wire transfer instructions to NGL Energy, NGL Energy will pay all principal, interest and premium, if any, on
that holder's notes in accordance with those instructions to an account in the United States of America. All other payments on the notes will be made at the office or agency of the paying agent and
registrar in New York, New York, unless we elect to make interest payments by check mailed to the noteholders at their address set forth in the register of holders.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. The Issuers may change the paying agent or registrar without prior notice to the
holders of the notes, and NGL Energy 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 will be required to pay all taxes due on transfer. The Issuers will not
be required to transfer or exchange any note selected for redemption. Also, the Issuers 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
Initially, all of the notes will be guaranteed on a senior unsecured basis by each of NGL Energy's current Restricted Subsidiaries (except
Finance Corp.) that is a Domestic Subsidiary and an obligor under the Credit Agreement or the Existing Senior Notes. In the future, Restricted Subsidiaries will be required to guarantee the notes
under the circumstances described under "CovenantsAdditional Note Guarantees." These Note Guarantees will be joint and several obligations of the Guarantors. The obligations
of each Guarantor under its Note Guarantee will be limited as necessary to prevent that Note Guarantee from constituting a fraudulent conveyance under applicable law, although this limitation may not
be effective to prevent the Note Guarantees from being voided in bankruptcy. See "Risk FactorsRisks Related to the NotesFederal and state statutes allow courts, under
specific circumstances, to void guarantees and require noteholders to return payments received from subsidiary guarantors."
A
Guarantor may not sell or otherwise dispose of, in one or more related transactions, all or substantially all of its properties or assets to, or consolidate with or merge with or into
(regardless of whether such Guarantor is the surviving Person), another Person, other than NGL Energy or another Guarantor, unless:
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(1)
-
immediately
after giving effect to such transaction or series of related transactions, no Default or Event of Default exists; and
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(2)
-
either:
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(a)
-
(i)
such Guarantor is the surviving Person of such consolidation or merger or (ii) 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 such Guarantor) unconditionally assumes all the obligations of such Guarantor under the indenture
(including its Note Guarantee) pursuant to a supplemental indenture satisfactory to the trustee; or
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-
(b)
-
such
transaction or series of transactions does not violate the provisions of the indenture described under the caption "Repurchase at the Option of
HoldersAsset Sales."
The
Note Guarantee of a Guarantor will be released automatically:
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(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) NGL Energy or a Restricted Subsidiary of NGL Energy, if the sale or other disposition does not violate the
"Asset Sales" provisions of the indenture described below under the caption "Repurchase at the Option of HoldersAsset Sales";
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(2)
-
in
connection with any sale or other disposition of the Capital Stock of that Guarantor (by way of merger, consolidation or otherwise) to a Person that is not
(either before or after giving effect to such transaction) NGL Energy or a Restricted Subsidiary, if the sale or other disposition does not violate the "Asset Sale" provisions of the indenture
described below under the caption "Repurchase at the Option of HoldersAsset Sales" and the Guarantor ceases to be a Restricted Subsidiary as a result of the sale or other
disposition;
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(3)
-
if
NGL Energy designates such Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture;
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(4)
-
upon
legal defeasance, covenant defeasance or satisfaction and discharge of the indenture as provided below under the captions "Legal Defeasance and
Covenant Defeasance" and "Satisfaction and Discharge";
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(5)
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upon
the liquidation or dissolution of such Guarantor, provided no Default or Event of Default occurs as a result
thereof or has occurred or is continuing;
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(6)
-
upon
such Guarantor consolidating with, merging into or transferring all of its properties or assets to NGL Energy or another Guarantor, and as a result of, or in
connection with, such transaction such Guarantor dissolves or otherwise ceases to exist; or
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(7)
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at
such time as such Guarantor is no longer required to be a Guarantor pursuant to the provisions of the covenant described under the caption
"CovenantsAdditional Note Guarantees."
Optional Redemption
Except as described below in this section or in the next-to-last paragraph of "Repurchase at the Option of
HoldersChange of Control," the notes are not redeemable at our option until April 15, 2022. On and after April 15, 2022, NGL Energy may redeem all or a part of the notes,
from time to time, at the following redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest, if any, on the notes redeemed to but excluding, the
applicable redemption date (subject to the rights of holders of notes on the relevant record date to receive interest due on the relevant interest payment date) if redeemed during the twelve-month
period beginning on April 15 of the years indicated below:
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|
|
|
|
Year
|
|
Redemption
Price
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|
2022
|
|
|
103.750
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%
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2023
|
|
|
101.875
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%
|
2024 and thereafter
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|
|
100.000
|
%
|
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At
any time or from time to time prior to April 15, 2022, NGL Energy may also redeem all or part of the notes, at a redemption price equal to the Make-Whole Price, subject to the
rights of holders of notes on the relevant record date to receive interest due on the relevant interest payment date.
"Make-Whole Price" with respect to any notes to be redeemed, means an amount equal to the greater of:
-
(1)
-
100%
of the principal amount of such notes; and
-
(2)
-
the
sum of the present values of (a) the redemption price of such notes at April 15, 2022 (as set forth above) and (b) the remaining scheduled
payments of interest from the redemption date to April 15, 2022 (not including any portion of such payments of interest accrued as of the redemption date) discounted back to the redemption date
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 50 basis points;
plus, in the case of both (1) and (2), accrued and unpaid interest on such notes, if any, to the redemption date.
"Comparable Treasury Issue" means, with respect to notes to be redeemed, the U.S. Treasury security selected by an Independent Investment
Banker as having a maturity most nearly equal to the period from the redemption date to April 15, 2022, that would be utilized at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of a
comparable maturity; provided that if such period is less than one year, then the U.S. Treasury security having a maturity of one year shall be used.
"Comparable Treasury Price" means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations
for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if NGL Energy obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations.
"Independent Investment Banker" means RBC Capital Markets, LLC, Mizuho Securities USA LLC and Wells Fargo
Securities, LLC or one of their respective successors, or, if such firms or their respective successors, if any, as the case may be, are unwilling or unable to select the Comparable Treasury
Issue, an independent investment banking institution of national standing appointed by NGL Energy.
"Primary Treasury Dealer" means a U.S. government securities dealer in the City of New York.
"Reference Treasury Dealer" means each of RBC Capital Markets, LLC, Mizuho Securities USA LLC and Wells Fargo
Securities, LLC (or their respective affiliates that are Primary Treasury Dealers) and two additional Primary Treasury Dealers selected by NGL Energy, and their respective successors; provided,
however, that if any such firm or any such successor, as the case may be, shall cease to be a
Primary Treasury Dealer, NGL Energy shall substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by NGL Energy, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to NGL Energy by such
Reference Treasury Dealer at 5:00 p.m., New York City time, no later than the fourth Business Day preceding such redemption date.
"Treasury Rate" means, with respect to any redemption date, (1) the yield, representing the average of the daily rates for the
immediately preceding week, appearing in the most recently published statistical release designated "H.15" or any successor publication or data that is published or made available weekly by the Board
of Governors of the Federal Reserve System and that establishes yields
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on
actively traded U.S. Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no
maturity
is within three months before or after the stated maturity, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury
Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during
the week preceding the calculation date or does not contain such rates, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a
price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate shall be calculated by
NGL Energy no later than the fourth Business Day preceding the redemption date.
The
notice of redemption with respect to the foregoing redemption need not set forth the Make-Whole Price but only the manner of calculation thereof. NGL Energy will notify the trustee
of the Make-Whole Price with respect to any redemption promptly after the calculation, and the trustee shall not be responsible for such calculation.
Prior
to April 15, 2022, NGL Energy may on any one or more occasions redeem up to 35% of the principal amount of the notes with an amount of cash not greater than the amount of
the net cash proceeds from one or more Equity Offerings at a redemption price equal to 107.5% of the principal amount thereof, plus accrued and unpaid interest, if any, on the notes redeemed to the
redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided that
-
(1)
-
at
least 65% of the aggregate principal amount of the notes issued on the Issue Date (excluding notes held by NGL Energy and its Subsidiaries) remains outstanding
after each such redemption; and
-
(2)
-
the
redemption occurs within 180 days after the closing of such Equity Offering.
Unless
NGL Energy defaults in the payment of the redemption price, interest, if any, will cease to accrue on the notes or portions thereof called for redemption on the applicable
redemption date.
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 in global form, the trustee will select notes for redemption based on the method of The Depository Trust Company ("DTC") that most nearly approximates a pro rata selection), unless otherwise
required by law or applicable stock exchange requirements.
No
notes of $2,000 or less can be redeemed in part. Notices of optional redemption will be mailed by first class mail (or, in the case of notes in global form, pursuant to the applicable
procedures of DTC) at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address, except that redemption notices may be sent
more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture.
If
any note is to be redeemed in part only, the notice of redemption that relates to such note shall state the portion of the principal amount thereof to be redeemed. A new note in
principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original note. Notes called for redemption become due on the date
fixed for redemption, unless the redemption is subject to a condition precedent that is not satisfied or waived. On and after the redemption date, interest ceases to accrue on notes or portions of
notes called for redemption, unless NGL Energy defaults in making the redemption payment. Any redemption or
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notice
of redemption may, at our discretion, be subject to one or more conditions precedent and, in the case of a redemption with the net cash proceeds of an Equity Offering, be given prior to and
conditioned on the completion of the related Equity Offering. In our discretion, any redemption date for any redemption that is subject to one or more conditions precedent may be delayed until such
time as any or all such conditions precedent are satisfied.
Open Market Purchases; No Mandatory Redemption or Sinking Fund
We may at any time and from time to time purchase notes in the open market or otherwise. The Issuers are not required to make mandatory
redemption or sinking fund payments with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each holder of notes will have the right, except as provided below, to require NGL Energy 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 an offer ("Change of Control Offer") on the terms set forth in the indenture. In the
Change of Control Offer, NGL Energy will offer to make a cash payment (a "Change of Control Payment") equal to 101% of the aggregate principal amount of notes repurchased plus accrued and unpaid
interest 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, NGL Energy will send a notice to each holder of notes describing the transaction or transactions that constitute
the Change of Control and offering to repurchase properly tendered notes on the Change of Control Purchase 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. NGL Energy 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
of any series 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, NGL Energy
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, NGL Energy 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, NGL Energy 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
-
(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 NGL Energy.
The
paying agent will promptly mail or wire transfer to each holder of notes properly tendered the Change of Control Payment for such notes (or, if all the notes are then in global form,
make such payment through the facilities of DTC), and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new note equal in principal amount to
any unpurchased portion of the notes surrendered, if any; provided that each such new note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000. Any note so
accepted
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for
payment will cease to accrue interest on and after the Change of Control Purchase Date, unless NGL Energy defaults in making the Change of Control Payment. NGL Energy 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 NGL Energy to make a Change of Control Offer following a Change of Control will be applicable regardless of whether any other provisions of
the indenture are applicable, except as described in the following paragraph. Except as described above with respect to a Change of Control, the indenture will not contain provisions that permit the
holders of the notes to require that the Issuers repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction.
NGL
Energy 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 NGL Energy 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 "Selection and Notice," 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, NGL Energy has made an offer to purchase (an
"Alternate Offer") any and all notes validly tendered at a cash price equal to or higher than the Change of Control Payment and has purchased all notes properly tendered in accordance with the terms
of the Alternate Offer. Notwithstanding anything to the contrary contained in the indenture, a Change of Control Offer or Alternate Offer may be made in advance of a Change of Control, conditioned
upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer or Alternate Offer is made.
In
the event that holders of not less than 90% in aggregate principal amount of the outstanding notes accept a Change of Control Offer or Alternate Offer and NGL Energy (or any third
party making such Change of Control Offer in lieu of NGL Energy as described above) purchases all of the notes held by such holders, NGL Energy will have the right, upon not less than 30 nor more than
60 days' prior notice, given not more than 30 days following the purchase pursuant to the Change of Control Offer or Alternate Offer described above, to redeem all of the notes that
remain outstanding following such purchase at a redemption price equal to the Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest
on the notes that remain outstanding, to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date that is on or
prior to the redemption date).
The
definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the properties or assets of
NGL Energy and its Restricted 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 Issuers to repurchase its notes as a result of a sale, lease, transfer, conveyance or other disposition of
less than all of the assets of NGL Energy and its Restricted Subsidiaries taken as a whole to another Person or group may be uncertain.
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Asset Sales
NGL Energy will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:
-
(1)
-
NGL
Energy or any of its Restricted Subsidiaries receives consideration (including by way of relief from, or any Person assuming responsibilities for, any
liabilities, contingent or otherwise) 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 consideration received in the Asset Sale by NGL Energy or such Restricted Subsidiaries (considered together on a cumulative basis, with all
consideration received by NGL Energy or any of its Restricted Subsidiaries in respect of other Asset Sales consummated since the Measuring Date) 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 NGL Energy's most recent consolidated balance sheet, of NGL Energy or any Restricted Subsidiary (other than contingent liabilities and
Subordinated Debt) that are assumed by the transferee of any such assets pursuant to a customary novation or indemnity agreement (or other legal documentation with the same effect) that releases NGL
Energy or such Restricted Subsidiary from or indemnifies NGL Energy or such Restricted Subsidiary against further liability;
-
(b)
-
any
securities, notes or other obligations received by NGL Energy or any such Restricted Subsidiary from such transferee that are, within 90 days after the
Asset Sale, converted by NGL Energy or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion; and
-
(c)
-
any
Additional Assets of the kind referred to in clause (2) of the next paragraph of this covenant.
Within
365 days after the receipt of any Net Proceeds from an Asset Sale or, if NGL Energy has entered into a binding commitment or commitments with respect to any of the actions
described in clauses (2) or (3) below, within the later of (x) 365 days after the receipt of any Net Proceeds from an Asset Sale and (y) 180 days after the
entering into of such commitment or commitments, NGL Energy or one or more of its Restricted Subsidiaries may apply an amount equal to the amount of such Net Proceeds:
-
(1)
-
to
repay, redeem or repurchase any Senior Debt provided that such repayment, redemption or repurchase may close up to
45 days after the end of such 365-day period;
-
(2)
-
to
invest in or acquire Additional Assets; or
-
(3)
-
to
make capital expenditures in respect of a Permitted Business.
Pending
the final application of any Net Proceeds, NGL Energy or any of its Restricted Subsidiaries may temporarily reduce revolving credit borrowings or otherwise invest the Net
Proceeds in any manner that is not prohibited by the indenture.
An
amount equal to any Net Proceeds from Asset Sales that are not applied or invested as provided in in clauses (1) through (3) of the immediately preceding paragraph will
constitute "Excess Proceeds." Within ten Business Days after the aggregate amount of Excess Proceeds exceeds $30.0 million, the Issuers 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 the maximum principal amount of notes and such other pari
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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 but excluding 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, NGL Energy 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 and other pari passu Indebtedness tendered in (or required to be prepaid or redeemed in connection with) such Asset Sale Offer exceeds the amount of Excess
Proceeds, the trustee will select the notes and such other pari passu Indebtedness to be purchased on a pro rata basis (except that any notes represented by a note in global form will be selected by
such method as DTC or its nominee or successor may require or, where such nominee or successor is the trustee, a method that most nearly approximates pro rata selection as the trustee deems fair and
appropriate unless otherwise required by law), based on the amounts tendered or required to be prepaid or redeemed (with such adjustments as may be deemed appropriate by NGL Energy so that only notes
in denominations of $2,000, or an integral multiple of $1,000 in excess thereof, will be purchased). Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.
Notwithstanding
the foregoing, the sale, conveyance or other disposition of all or substantially all of the properties or assets of NGL Energy and its Restricted Subsidiaries, taken as a
whole, will be governed by the provisions of the indenture described under the caption "Repurchase at the Option of HoldersChange of Control" and/or the provisions described
under the caption "CovenantsMerger, Consolidation or Sale of Substantially All
Assets" and not by the provisions of the indenture described under the caption "Repurchase at the Option of HoldersAsset Sales."
NGL
Energy 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, or compliance with the Asset Sale provisions of the indenture would constitute a violation of any such laws or regulations, NGL Energy will comply with the applicable
securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the indenture by virtue of such compliance.
The
agreements governing NGL Energy's other Indebtedness contain, and future agreements may contain, prohibitions of certain events, including events that would constitute a Change of
Control or an Asset Sale and including repurchases of or other prepayments in respect of the notes. The exercise by the holders of notes of their right to require the Issuers to repurchase the notes
upon a Change of Control or an Asset Sale could cause a default under these other agreements, even if the Change of Control or Asset Sale itself does not, due to the financial effect of such
repurchases on NGL Energy. In the event a Change of Control or Asset Sale occurs at a time when NGL Energy is prohibited from purchasing notes, NGL Energy could seek the consent of its senior lenders
to the purchase of notes or could attempt to refinance the borrowings that contain such prohibition. If NGL Energy does not obtain consent or repay those borrowings, NGL Energy will remain prohibited
from purchasing notes. In that case, NGL Energy's failure to purchase tendered notes would constitute an Event of Default under the indenture which could, in turn, constitute a default under the other
indebtedness. Finally, the Issuers' ability to pay cash to the holders of notes upon a repurchase may be limited by NGL Energy's then-existing financial resources. See "Risk FactorsRisks
Relating to the NotesWe may not have the funds necessary to finance the repurchase of the notes in connection with a change of control offer required by the indenture."
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Covenants
Covenant Termination
From and after the occurrence of an Investment Grade Rating Event, and provided that no Default or Event of Default shall have occurred and be
continuing, we and our Restricted Subsidiaries will no longer be subject to the following provisions of the indenture (collectively, the "Terminated Covenants"):
-
(a)
-
clause (4)
of the covenant described under "CovenantsMerger, Consolidation or Sale of Substantially All Assets"; and
-
(b)
-
the
provisions of the indenture described above under the following headings:
-
-
"Repurchase at the Option of HoldersAsset Sales";
-
-
"CovenantsRestricted Payments";
-
-
"CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock";
-
-
"CovenantsDividend and Other Payment Restrictions Affecting Restricted Subsidiaries"; and
-
-
"CovenantsTransactions with Affiliates."
Furthermore,
after an Investment Grade Rating Event, NGL Energy may not designate any of its Subsidiaries as Unrestricted Subsidiaries.
Consequently,
after the date on which we and our Restricted Subsidiaries are no longer subject to the Terminated Covenants, the notes will be entitled to substantially reduced covenant
protection. However, we and our Restricted Subsidiaries will remain subject to all other covenants in the indenture. There can be no assurance that the notes will ever achieve or maintain an
Investment Grade Rating.
Restricted Payments
NGL Energy 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 NGL Energy's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation involving NGL Energy or any of its Restricted Subsidiaries) or to the direct or indirect holders of NGL Energy'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 NGL Energy and other
than dividends or distributions payable to NGL Energy or a Restricted Subsidiary);
-
(2)
-
purchase,
redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving NGL Energy) any
Equity Interests of NGL Energy or any direct or indirect parent of NGL Energy;
-
(3)
-
make
any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Subordinated Debt (other than intercompany
Indebtedness between or among NGL Energy and any of its Restricted Subsidiaries), except a payment of interest or principal within one year of the Stated Maturity thereof; or
-
(4)
-
make
any Restricted Investment;
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(all
such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect
to such Restricted Payment, 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 and
either:
-
(I)
-
if
the Fixed Charge Coverage Ratio for NGL Energy's most recently ended four full fiscal quarters for which internal financial statements are available at the time
of such Restricted Payment (the "Trailing Four Quarters") is not less than 1.75 to 1.0, such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by NGL Energy and its Restricted Subsidiaries during the fiscal quarter in which such Restricted Payment is made (excluding Restricted Payments permitted by
clauses (2), (3), (4), (5), (6), (7), (8), (9), (10) and (11) of the next succeeding paragraph), is less than the sum, without duplication, of:
-
(a)
-
Available
Cash from Operating Surplus with respect to NGL Energy's preceding fiscal quarter; plus
-
(b)
-
100%
of the aggregate net cash proceeds, and the Fair Market Value of any Capital Stock of Persons engaged primarily in a Permitted Business or other long-term
assets that are used or useful in a Permitted Business, in each case received by NGL Energy since the Measuring Date from (x) a contribution to the common equity capital of NGL Energy from any
Person (other than a Restricted Subsidiary) or (y) the issuance and sale (other than to a Restricted Subsidiary) of Equity Interests (other than Disqualified Stock) of NGL Energy or from the
issuance or sale (other than to a Restricted Subsidiary) of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of NGL Energy that have been converted into or
exchanged for such Equity Interests (other than Disqualified Stock); plus
-
(c)
-
to
the extent that any Restricted Investment that was made after the Measuring Date is sold for cash or Cash Equivalents or otherwise liquidated or repaid for cash
or Cash Equivalents, the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any); plus
-
(d)
-
the
amount equal to the net reduction in Restricted Investments since the Measuring Date resulting from (i) dividends, repayments of loans or advances, or
other transfers of assets, in each case, to NGL Energy or any of its Restricted Subsidiaries from any Person (including, without limitation, any Unrestricted Subsidiary) or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries, in each case, to the extent such amounts have not been included in Available Cash for any period commencing on or after the
Measuring Date (items (b), (c) and (d) being referred to as "Incremental Funds"); minus
-
(e)
-
the
aggregate amount of Incremental Funds previously expended pursuant to this clause (I) and clause (II) below; or
-
(II)
-
if
the Fixed Charge Coverage Ratio for the Trailing Four Quarters is less than 1.75 to 1.0, such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by NGL Energy and its Restricted Subsidiaries during the fiscal quarter in which such Restricted Payment is made (excluding Restricted Payments permitted by
clauses (2), (3), (4), (5), (6), (7), (8), (9), (10) and (11) of the next succeeding paragraph), is less than the sum, without duplication, of:
-
(a)
-
$200.0 million,
less the aggregate amount of all prior Restricted Payments made by NGL Energy and its Restricted Subsidiaries pursuant to this
clause (II)(a) since the Measuring Date; plus
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-
(b)
-
Incremental
Funds to the extent not previously expended pursuant to this clause (II) or clause (I) above;
provided, however, that the only Restricted Payments permitted to be made pursuant to this clause (II) are distributions on NGL Energy's
preferred, common and subordinated units plus the related distributions on the General Partner's general partner interest and any distributions with respect to incentive distribution rights.
The
preceding provisions will not prohibit:
-
(1)
-
the
payment of any dividend or distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or
distribution or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend, distribution or redemption payment would have complied with the provisions
of the indenture;
-
(2)
-
the
making of any Restricted Payment in exchange for, or out of the net cash proceeds of the substantially concurrent (a) contribution (other than from a
Restricted Subsidiary) to the equity capital of NGL Energy or (b) sale (other than to a Restricted Subsidiary) of Equity Interests of NGL Energy (other than Disqualified Stock), with a sale
being deemed substantially concurrent if such purchase, redemption, defeasance or other acquisition or retirement for value occurs not more than 120 days after such sale; provided, however, that the amount of any such net cash proceeds that are utilized for any such
purchase, redemption, defeasance or other acquisition or retirement for value will be excluded (or deducted, if included) from the calculation of Available Cash and Incremental Funds;
-
(3)
-
the
purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Debt with the net cash proceeds from an incurrence of, or in
exchange for, Permitted Refinancing Indebtedness;
-
(4)
-
the
payment of any dividend or distribution by a Restricted Subsidiary to the holders of its Equity Interests on a pro rata basis;
-
(5)
-
as
long as no Default has occurred and is continuing or would be caused thereby, the purchase, redemption or other acquisition or retirement for value of any Equity
Interests of NGL Energy or any Restricted Subsidiary held by any of current or former directors or employees of the General Partner, NGL Energy or of any Restricted Subsidiary; provided, however, that the aggregate price paid for all such purchased, redeemed, acquired or retired
Equity Interests may not exceed $7.5 million in any fiscal year (with any portion of such $7.5 million amount that is unused in any fiscal year to be carried forward to successive fiscal
years and added to such amount) plus, to the extent not previously applied or included, (a) the cash proceeds received by NGL Energy or any of its Restricted Subsidiaries from sales of Equity
Interests of NGL Energy to employees or directors of the General Partner, NGL Energy or its Affiliates that occur after the Measuring Date (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 (I)(b) or (II)(b) of the first paragraph of this covenant) and (b) the cash proceeds
of key man life insurance policies received by NGL Energy or any of its Restricted Subsidiaries after the Measuring Date;
-
(6)
-
the
purchase, redemption or other acquisition or retirement for value of Equity Interests deemed to occur upon the exercise of unit options, warrants, incentives,
rights to acquire Equity Interests or other convertible securities if such Equity Interests represent a portion of the exercise or exchange price thereof, and any purchase, redemption or other
acquisition or retirement for value of Equity Interests made in lieu of withholding taxes in connection with
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The
amount of all Restricted Payments (other than cash) will be the Fair Market Value, determined as of 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 NGL Energy or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment, except that the Fair Market Value of
any non-cash dividend or distribution paid within 60 days after the date of its declaration shall 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
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"Restricted
Payments" covenant, (x) in the event that 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, NGL Energy will be permitted to classify (or later classify or reclassify in
whole or in part in its sole discretion) such Restricted Payment (or portion thereof) on the date made or later reclassify such Restricted Payment (or portion thereof) in any manner that complies with
this covenant; and (y) in the event a Restricted Payment is made pursuant to clause (I) or (II) of the first paragraph of this covenant, NGL Energy will be permitted to classify
whether all or any portion thereof is being (and in the absence of such classification shall be deemed to have classified the minimum amount possible as having been) made with Incremental Funds.
Incurrence of Indebtedness and Issuance of Preferred Stock
NGL Energy 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"; with "incurrence" having a correlative meaning) any Indebtedness (including
Acquired Debt), and NGL Energy will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that NGL Energy
may incur Indebtedness (including Acquired Debt) and issue Disqualified Stock, and its Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) and issue preferred stock, if the Fixed
Charge Coverage Ratio for NGL Energy'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.
Notwithstanding
the foregoing, 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 NGL Energy or any of its Restricted Subsidiaries of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal
amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of NGL Energy and its
Restricted Subsidiaries thereunder) not to exceed the greater of (a) $2.45 billion and (b) $700.0 million plus 35.0% of the Total Assets of NGL Energy determined on the
date of such incurrence;
-
(2)
-
the
incurrence by NGL Energy or its Restricted Subsidiaries of Existing Indebtedness;
-
(3)
-
the
incurrence by the Issuers and the Guarantors of Indebtedness represented by (a) the notes and the related Note Guarantees to be issued on the Issue Date
and (b) the Exchange Notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement;
-
(4)
-
the
incurrence by NGL Energy or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money
obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment used
in the business of NGL Energy or any of its Restricted Subsidiaries, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to extend, renew, refund, refinance,
replace, defease or discharge any Indebtedness incurred pursuant to this clause (4) at any time; provided that, immediately after giving effect
to any such incurrence, the principal
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NGL
Energy will not incur, and will not permit any Guarantor to incur, any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other
Indebtedness of NGL Energy or such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the notes or the applicable Note Guarantee on substantially identical
terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of NGL Energy or any Guarantor solely by virtue of being
unsecured or by virtue of being secured on a junior priority basis.
For
purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of Indebtedness (including Acquired
Debt) meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (15) above, or is entitled to be incurred pursuant to the first paragraph
of this covenant, NGL Energy will be permitted in its sole discretion to divide, redivide, classify or reclassify such item of Indebtedness on the date of its incurrence, and later divide, redivide,
classify or reclassify all or a
portion of such item of Indebtedness, in any manner that complies with this covenant. Indebtedness under Credit Facilities outstanding on the date on which notes are first issued and authenticated
under the indenture will initially be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt. The accrual of interest
or preferred stock dividends, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the
reclassification of any obligation of NGL Energy or any Restricted Subsidiary as Indebtedness due to a change in accounting principles, and the payment of dividends on preferred stock or Disqualified
Stock in the form of additional shares 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
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this
covenant; provided that, in each such case, the amount thereof is included in Fixed Charges of NGL Energy as accrued to the extent required by the definition of such term.
For
purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness
denominated in a foreign currency shall be utilized, calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term Indebtedness, or
first committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing
would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness
being refinanced. Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that NGL Energy or any Restricted Subsidiary may incur pursuant to this covenant shall not be
deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values. The principal amount of any Permitted Refinancing 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.
Liens
NGL Energy will not, and will not permit any of its Restricted Subsidiaries to, 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
are secured on an equal and ratable basis
with the Indebtedness so secured until such time as such Indebtedness is no longer secured by a Lien (other than a Permitted Lien).
Any
Lien securing the notes or Note Guarantees created pursuant to the preceding paragraph shall provide by its terms that such Lien shall be automatically and unconditionally released
and discharged upon the unconditional release and discharge of the initial Lien whose existence resulted in the creation of such Lien securing the notes or Note Guarantees.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
NGL Energy 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 NGL Energy or any of its Restricted Subsidiaries, or pay any Indebtedness owed to NGL Energy or
any of its Restricted Subsidiaries; provided that 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 make
dividends or distributions on Capital Stock for purposes of this covenant;
-
(2)
-
make
loans or advances to NGL Energy or any of its Restricted Subsidiaries (it being understood that the subordination of loans or advances made to NGL Energy or any
such Restricted Subsidiary to other Indebtedness incurred by NGL Energy or any such Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances); or
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-
(3)
-
sell,
lease or transfer any of its properties or assets to NGL Energy 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 the Credit Agreement, any Existing Indebtedness or any Credit Facilities or any other agreements or instruments, in each case as in effect on
the Issue Date and any amendments, restatements, modifications, renewals, extensions, increases, supplements, refundings, replacements or refinancings of those agreements or the Indebtedness to which
they relate; provided that the encumbrances or restrictions contained in the amendments, restatements, modifications, renewals, extensions, increases,
supplements, refundings, replacements or refinancings are, in the reasonable good faith judgment of the Chief Financial Officer of the General Partner, 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 Issue Date;
-
(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
"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 encumbrances or restrictions therein are, in the reasonable good faith judgment of the Chief
Financial Officer of the General Partner, not materially more restrictive, taken as a whole, than the provisions contained in the Credit Agreement and in the indenture as in effect on the Issue Date;
-
(4)
-
the
issuance of preferred stock by a Restricted Subsidiary or the payment of dividends thereon in accordance with the terms thereof; provided that issuance of such preferred stock is permitted pursuant to
the covenant described under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock" and the terms of such preferred stock do not expressly restrict the ability of a Restricted Subsidiary to pay dividends or make any other distributions on
its Capital Stock (other than requirements to pay dividends or liquidation preferences on such preferred stock prior to paying any dividends or making any other distributions on such other Capital
Stock);
-
(5)
-
applicable
law, rule, regulation, order, approval, license, permit or similar restriction;
-
(6)
-
any
instrument governing Indebtedness or Capital Stock of a Person acquired by NGL Energy or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired and any amendments, restatements, modifications, renewals, extensions,
increases, supplements, refundings, replacements or refinancings thereof; provided that, the encumbrances or restrictions contained in any such
amendments, restatements, modifications, renewals, extensions, increases, supplements, refundings, replacements or refinancings are, in the reasonable good faith judgment of the Chief Financial
Officer of the General Partner, not materially more restrictive, taken as a whole, than those in effect on the date of the acquisition; provided, further,
that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred;
-
(7)
-
customary
non-assignment provisions in contracts or licenses, easements or leases, in each case, entered into in the ordinary course of business;
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-
(8)
-
purchase
money obligations, security agreements or mortgage financings 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;
-
(9)
-
any
agreement for the sale or other disposition of the Equity Interests in, or all or substantially all of the properties or assets of, a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending the sale or other disposition;
-
(10)
-
Permitted
Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;
-
(11)
-
Liens
permitted to be incurred under the provisions of the covenant described above under the caption "CovenantsLiens" that limit the
right of the debtor to dispose of the assets subject to such Liens;
-
(12)
-
provisions
limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale
agreements and other similar agreements (including agreements entered into in connection with a Restricted Investment) entered into with the approval of NGL Energy's Board of Directors, which
limitation is applicable only to the assets that are the subject of such agreements;
-
(13)
-
any
instrument governing Indebtedness of a FERC Subsidiary; provided that such Indebtedness was otherwise permitted
by the terms of the indenture to be incurred;
-
(14)
-
encumbrances
or restrictions on cash, Cash Equivalents or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of
business;
-
(15)
-
any
agreement or instrument relating to any property or assets acquired after the Issue Date, 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;
-
(16)
-
Hedging
Obligations permitted from time to time under the indenture; and
-
(17)
-
Indebtedness
incurred or Capital Stock issued by any Restricted Subsidiary; provided that the restrictions contained
in the agreements or instruments governing such Indebtedness or Capital Stock (a) apply only in the event of a payment default or a default with respect to a financial covenant in such
agreement or instrument or (b) will not materially affect NGL Energy's ability to make principal, interest and premium, if any, on the notes, as determined in the reasonable good faith judgment
of the Chief Executive Officer and the Chief Financial Officer of the General Partner.
Merger, Consolidation or Sale of Assets
Neither of the Issuers may (1) consolidate or merge with or into another Person (regardless of whether such Issuer is the surviving
entity), or (2) 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) such Issuer is the surviving entity; or (b) the Person formed by or surviving any such consolidation or merger (if other than such Issuer)
or to which such sale, assignment, transfer, conveyance 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 Finance Corp. may not consolidate or merge with or into
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Notwithstanding
the restrictions described in the foregoing clause (4), any Restricted Subsidiary (other than Finance Corp.) may consolidate with, merge into or dispose of all or
part of its properties or assets to NGL Energy without complying with the preceding clause (4) in connection with any such consolidation, merger or disposition.
Notwithstanding
the second preceding paragraph, NGL Energy is permitted to reorganize as any other form of entity, provided
that:
-
(1)
-
the
reorganization involves the conversion (by merger, sale, contribution or exchange of assets or otherwise) of NGL Energy into a form of entity other than a
limited partnership 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 NGL Energy under the notes and the indenture (and the Registration
Rights Agreement, if any obligations thereunder remain unsatisfied) pursuant to a supplemental indenture or other agreement in a form reasonably satisfactory to the trustee;
-
(4)
-
immediately
after such reorganization no 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
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For
purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or
assets of one or more Restricted Subsidiaries, which properties or assets, if held by NGL Energy instead of such Restricted Subsidiaries, would constitute all or substantially all of the properties or
assets of NGL Energy on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties or assets of NGL Energy.
Notwithstanding
anything in the indenture to the contrary, in the event that NGL Energy becomes a corporation or NGL Energy or the Person formed by or surviving any consolidation or
merger (permitted in accordance with the terms of the indenture) is a corporation, Finance Corp. may be merged into NGL Energy or it may be dissolved and cease to be an Issuer.
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 an Issuer in
accordance with the
foregoing in which such Issuer is not the surviving entity, the surviving Person formed by such consolidation or into or with which such Issuer 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, such Issuer under the indenture with the same effect as if such
surviving Person had been named as such Issuer in the indenture, and thereafter (except in the case of a lease of all or substantially all of such Issuer's properties or assets), such Issuer will be
relieved of all obligations and covenants under the indenture and the notes.
Although
there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, in
certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve "all or substantially all" of the properties or assets of a Person.
Transactions with Affiliates
NGL Energy 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 NGL Energy (each, an "Affiliate Transaction"), unless:
-
(1)
-
the
Affiliate Transaction is on terms that are no less favorable to NGL Energy or the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by NGL Energy or such Restricted Subsidiary with an unrelated Person or, if in the good faith judgment of the Board of Directors of NGL Energy, no comparable transaction is
available with which to compare such Affiliate Transaction, such Affiliate Transaction is otherwise fair to NGL Energy or the relevant Restricted Subsidiary from a financial point of view; and
-
(2)
-
NGL
Energy 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 but less
than or equal to $40.0 million, an Officers' Certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with this covenant; and
-
(b)
-
with
respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $40.0 million, a
resolution of the Board of Directors of NGL Energy set forth in an Officers' Certificate certifying that such Affiliate
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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 either the
Conflicts Committee of the Board of Directors of NGL Energy (so long as the members of the Conflicts Committee approving the Affiliate Transaction or series of related Affiliate Transactions are
disinterested) or a majority of the disinterested members of the Board of Directors of NGL Energy, 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, consulting or similar agreement or arrangement, employee benefit plan, equity award, equity option, equity appreciation, officer or director
indemnification agreement, restricted unit agreement, severance agreement or other compensation plan or arrangement entered into by the General Partner, NGL Energy or any of its Restricted
Subsidiaries in the ordinary course of business and payments, awards, grants or issuances of securities made pursuant thereto;
-
(2)
-
transactions
between or among NGL Energy and/or its Restricted Subsidiaries;
-
(3)
-
transactions
with a Person (other than an Unrestricted Subsidiary) that is an Affiliate of NGL Energy solely because NGL Energy owns, directly or through a
Subsidiary, an Equity Interest in, or controls, such Person;
-
(4)
-
payment
of reasonable fees and reimbursements of expenses (pursuant to indemnity arrangements or otherwise) of, and compensation paid to, and indemnity or insurance
provided on behalf of, officers, directors, employees or consultants of the General Partner, NGL Energy or any of its Restricted Subsidiaries, including, but not limited to, reimbursement or
advancement of out-of-pocket expenses and provisions of officers' and directors' liability insurance;
-
(5)
-
any
issuance of Equity Interests (other than Disqualified Stock) to, or receipt of capital contributions from, Affiliates of NGL Energy;
-
(6)
-
Restricted
Payments that do not violate the provisions of the indenture described above under the caption "CovenantsRestricted Payments" or
any Permitted Investments;
-
(7)
-
payments
to the General Partner with respect to reimbursement for expenses in accordance with the Partnership Agreement as in effect on the Issue Date and as it may
be amended, provided that any such amendment is not less favorable to NGL Energy in any material respect than the agreement prior to such amendment;
-
(8)
-
transactions
between NGL Energy or any of its Restricted Subsidiaries and any other Person, a director of which is also on the Board of Directors of NGL Energy, and
such common director is the sole cause for such other Person to be deemed an Affiliate of NGL Energy or any of its Restricted Subsidiaries; provided, however, that such director abstains from voting as a member of the Board of Directors of NGL Energy on any transaction with such other Person;
-
(9)
-
(a)
guarantees by NGL Energy or any of its Restricted Subsidiaries of performance of obligations of Unrestricted Subsidiaries in the ordinary course of business,
except for guarantees of Indebtedness in respect of borrowed money, and (b) pledges by NGL Energy or any of its Restricted Subsidiaries of Equity Interests in Unrestricted Subsidiaries for the
benefit of lenders or other creditors of Unrestricted Subsidiaries;
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-
(10)
-
payments
to an Affiliate in respect of the notes or the Note Guarantees or any other Indebtedness of NGL Energy or any Restricted Subsidiary on the same basis as
concurrent payments made or offered to be made in respect thereof to non-Affiliates;
-
(11)
-
payment
of loans or advances to employees not to exceed $5.0 million in the aggregate at any one time outstanding;
-
(12)
-
any
Affiliate Transaction with a Person in its capacity as a holder of Indebtedness or Capital Stock of NGL Energy or any Restricted Subsidiary if such Person is
treated no more favorably than the other holders of Indebtedness or Capital Stock of NGL Energy or such Restricted Subsidiary;
-
(13)
-
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 NGL Energy and its Restricted Subsidiaries than those that would have been obtained in a comparable transaction by NGL Energy or such Restricted
Subsidiary with an unrelated person, in the good faith determination of NGL Energy's Board of Directors or any officer of NGL Energy involved in or otherwise familiar with such transaction, or are on
terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;
-
(14)
-
any
transaction in which NGL Energy 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 NGL Energy or such Restricted Subsidiary from a financial point of view or that such transaction meets
the requirements of clause (1) of the preceding paragraph; and
-
(15)
-
in
the case of contracts for gathering, transporting, treating, processing, marketing, distributing, storing or otherwise handling Hydrocarbons, or activities or
services reasonably related or ancillary thereto, or other operational contracts, any such contracts that are entered into in the ordinary course of business on terms substantially similar to those
contained in similar contracts entered into by NGL Energy or any of its Restricted Subsidiaries and third parties, or if neither NGL Energy nor any of its Restricted Subsidiaries has entered into a
similar contract with a third party, then the terms of which are no less favorable than those available from third parties on an arm's-length basis.
Business Activities of Finance Corp.
Finance Corp. will not hold any material assets, become liable for any material obligations, engage in any trade or business, or conduct any
business activity, other than the issuance of capital stock to NGL Energy, the incurrence of Indebtedness as a co-issuer, co-obligor or guarantor of Indebtedness incurred by NGL Energy (including
without limitation the notes) that is permitted to be incurred by NGL Energy under the covenant described under "CovenantsIncurrence of Indebtedness and Issuance of Preferred
Stock" above, and activities incidental thereto.
Additional Note Guarantees
If, on any date after the Issue Date, any Domestic Subsidiary that is not already a Guarantor, Guarantees (or otherwise becomes liable for) any
Obligations under any Credit Facility, including the Credit Agreement, then, within 20 Business Days after such date, such Domestic Subsidiary will unconditionally Guarantee the notes and concurrently
become a Guarantor by executing a supplemental indenture in substantially the form specified in the indenture. Each Note Guarantee of a
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Guarantor
will be released automatically at such time as such Guarantor is discharged or otherwise released from all its Obligations in respect of its Guarantee of (or other liability for) any
Obligations under any Credit Facility; provided that such discharge or other release did not result directly from
payment by such Guarantor in satisfaction of (a) its liability as a guarantor pursuant to such Guarantee, or (b) its primary liability for such Obligations (after demand or default under
such Credit Facility). Furthermore, each Note Guarantee shall be subject to release as described under "Note Guarantees."
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors of NGL Energy 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 NGL Energy and its Restricted
Subsidiaries in the Subsidiary designated as an Unrestricted Subsidiary will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted
Payments under the covenant described above under the caption "CovenantsRestricted Payments" or under one or more clauses of the definition of Permitted Investments, as
determined by NGL Energy. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors of NGL Energy may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not cause a Default.
Any
designation of a Subsidiary of NGL Energy 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 NGL Energy 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 "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 as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," NGL Energy will be in default of such covenant.
The
Board of Directors of NGL Energy may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if: (1) such Indebtedness is
permitted under the covenant described under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro
forma basis as if such designation had occurred at the beginning of the applicable reference period; and (2) no Default or Event of Default would be in existence
following such designation.
Reports
Regardless of whether required by the rules and regulations of the SEC, so long as any notes are outstanding, NGL Energy will file with the SEC
(unless the SEC will not accept such a filing) within the time periods specified in the SEC's rules and regulations, and upon request, NGL Energy will furnish (without exhibits) to the trustee for
delivery to the holders of the notes:
-
(1)
-
all
quarterly and annual reports that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if NGL Energy were required to file
such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations"
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NGL
Energy will be deemed to have furnished such reports and information described above to the holders of Notes (and the trustee shall be deemed to have delivered such reports and
information to the holders of the notes) if NGL Energy has filed such reports or information, respectively, with the SEC using the EDGAR filing system (or any successor filing system of the SEC) or,
if the SEC will not accept such reports or information, if NGL Energy has posted such reports or information, respectively, on its website, and such reports or information, respectively, are available
to holders of notes through internet access.
For
the avoidance of doubt, (a) such information will not be required to contain the separate financial information for Guarantors as contemplated by Rule 3-10 of
Regulation S-X or any financial statements of unconsolidated subsidiaries or 50% or less owned Persons as contemplated by Rule 3-09 of Regulation S-X or any schedules required by
Regulation S-X, or in each case any successor provisions, and (b) such information shall not be required to comply with Regulation G under the Exchange Act or Item 10(e) of
Regulation S-K with respect to any non-GAAP financial measures contained therein.
Except
as provided above, all such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports.
If
NGL Energy has designated any of its Subsidiaries as Unrestricted Subsidiaries, then, to the extent material, the quarterly and annual financial information required by the preceding
paragraphs will include 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 NGL Energy and its Restricted Subsidiaries separate from the financial condition and results of operations
of its Unrestricted Subsidiaries.
Any
and all Defaults or Events of Default arising from a failure to furnish in a timely manner any financial information required by this covenant shall be deemed cured (and NGL Energy
shall be deemed to be in compliance with this covenant) upon furnishing such financial information as contemplated by this covenant (but without regard to the date on which such financial statement or
report is so furnished); provided that such cure shall not otherwise affect the rights of the holders under "Events of Defaults and
Remedies" if the principal of, premium, if any, on, and interest, if any, on, the notes have been accelerated in accordance with the terms of the indenture and such acceleration has not been rescinded
or cancelled prior to such cure.
In
addition, NGL Energy will hold and participate in annual conference calls with the holders of the notes, beneficial owners of the notes, bona fide prospective investors, securities
analysts and market makers to discuss the financial information required to be furnished pursuant to clause (1) above no later than ten Business Days after distribution of such financial
information. NGL Energy shall be permitted to combine this conference call with any other conference call for other debt or equity holders or lenders.
In
addition, NGL Energy and the Guarantors agree that, for so long as any notes remain outstanding, if at any time they are not required to file with the SEC the reports required by the
preceding paragraphs, they will furnish to the holders of notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act.
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Events of Default and Remedies
Each of the following is an "Event of Default" with respect to the notes:
-
(1)
-
default
for 30 days in the payment when due of interest on the notes;
-
(2)
-
default
in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the notes;
-
(3)
-
failure
by NGL Energy to comply with its obligations under "CovenantsMerger, Consolidation or Sale of Substantially All Assets" or to
consummate a purchase of notes when required pursuant to the covenants described under the caption "Repurchase at the Option of Holders";
-
(4)
-
failure
by NGL Energy or any of its Restricted Subsidiaries for 30 days after written notice from the trustee or the holders of at least 25% in aggregate
principal amount of the then outstanding notes to comply with the provisions described under the captions "CovenantsRestricted Payments" or
"CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock" or to comply with the provisions described under the captions "Repurchase at the Option of
Holders" to the extent not described in clause (3) above;
-
(5)
-
(a)
except as addressed in subclause (b) of this clause (5), failure by NGL Energy or any of its Restricted Subsidiaries for 60 days after
written notice from the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding notes to comply with any of the other agreements in the indenture or the notes or
(b) failure by NGL Energy for 180 days after notice from the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding notes to comply with the
covenant described under the caption "CovenantsReports";
-
(6)
-
default
under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed
by NGL Energy or any of its Restricted Subsidiaries (or the payment of which is guaranteed by NGL Energy or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or
is created after the Issue Date, if that default:
-
(a)
-
is
caused by a failure to pay principal of, premium on, if any, or interest, if any, on such Indebtedness prior to the expiration of the grace period provided in
such Indebtedness on the date of such default (a "Payment Default"); or
-
(b)
-
results
in the acceleration of such Indebtedness prior to its Stated Maturity, and, in each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $30.0 million or more; provided that if,
prior to any acceleration of the notes, (i) any such default is cured or waived, (ii) any such acceleration of such
Indebtedness is rescinded, or (iii) such Indebtedness is repaid, within a period of 10 Business Days from the continuation of such default beyond the applicable grace period or the occurrence
of such acceleration, as the case may be, any Default or Event of Default (but not any acceleration of the notes) shall be automatically rescinded, so long as such rescission does not conflict with
any judgment or decree;
-
(7)
-
failure
by NGL Energy or any Significant Subsidiary or group of NGL Energy's Restricted Subsidiaries that, taken together (as of the latest audited consolidated
financial statements for NGL Energy and its Restricted Subsidiaries), would constitute a Significant Subsidiary to pay final judgments (entered by a court or courts of competent jurisdiction)
aggregating in excess of $30.0 million (net of any amounts that a reputable and creditworthy insurance company has
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The
indenture will provide that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to NGL Energy, any Restricted Subsidiary that is
a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all principal of, and accrued but unpaid interest on, all outstanding
notes will become due and payable immediately without further action or notice. However, the effect of such provision may be limited by applicable law. 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 principal of, and accrued but unpaid interest on, all the outstanding
notes to be due and payable immediately, by notice in writing to NGL Energy and, in the case of a notice by holders, also to the trustee specifying the respective Event of Default and that it is a
notice of acceleration.
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, interest or premium, if any.
Subject
to the provisions of the indenture relating to the duties of the trustee, in case an Event of Default occurs and is continuing, the trustee will be under no obligation to
exercise any of the rights or powers under the indenture at the request or direction of any holders of notes unless such holders have offered to the trustee reasonable indemnity or security against
any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest, when due, no holder of a note may pursue any remedy with respect to the
indenture or the notes unless:
-
(1)
-
such
holder has previously given the trustee written notice that an Event of Default is continuing;
-
(2)
-
holders
of at least 25% in aggregate principal amount of the then outstanding notes make a written request to the trustee to pursue the remedy;
-
(3)
-
such
holder or holders offer and provide to the trustee security or indemnity reasonably satisfactory to the trustee against any loss, liability or expense;
-
(4)
-
the
trustee does not comply with such request within 60 days after receipt of the request and the offer of security or indemnity; and
-
(5)
-
during
such 60-day period, holders of a majority in aggregate principal amount of the then outstanding notes do not give the trustee a direction inconsistent with
such request.
The
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
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any
existing Default or Event of Default and its consequences under the indenture, if the rescission would not violate any judgment or decree, except a continuing Default or Event of Default, in the
payment of interest or premium, if any, on, or the principal of, the notes.
The
Issuers are required to deliver to the trustee annually a statement regarding compliance with the indenture. Within five Business Days of any executive officer of the General Partner
or Finance Corp. becoming aware of any Default or Event of Default, the Issuers will be required to deliver to the trustee a statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Unitholders and No Recourse to General
Partner
None of the General Partner or any director, officer, partner, employee, incorporator, manager, unitholder or other owner of Capital Stock of
the General Partner, the Issuers or any Guarantor, as such, will have any liability for any obligations of the Issuers or the Guarantors under the notes, the indenture, the Note Guarantees or for any
claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
The Issuers may at any time, at the option of their respective Board of Directors evidenced by a resolution set forth in an Officers'
Certificate, elect to have all of their 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;
-
(2)
-
the
Issuers' obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the
maintenance of an office or agency for 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 Issuers' and the Guarantors' obligations in connection therewith; and
-
(4)
-
the
Legal Defeasance provisions of the indenture.
In
addition, the Issuers may, at their option and at any time, elect to have their obligations and the obligations of the Guarantors released with respect to the provisions of the
indenture described above under "Repurchase at the Option of Holders" and under "Covenants" (other than the covenant described under
"CovenantsMerger, Consolidation or Sale of Assets," except to the extent described below) and the limitation imposed by clause (4) under
"CovenantsMerger, Consolidation or Sale of Assets" (such release and termination being referred to as "Covenant Defeasance"),
and thereafter any failure to comply with such obligations or provisions will not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, the
Events of Default described under clauses (3) through (7) under the caption "Events of Default and Remedies" and the Event of Default described under clause (9) under
the caption "Events of Default and Remedies" (but only with respect to Subsidiaries of NGL Energy), in each case, will no longer constitute an Event of Default with respect to the notes.
If the Issuers exercise either their Legal Defeasance or Covenant Defeasance option, each Guarantor will be released and relieved of any Obligations under the indenture, including its Obligations in
respect of its Subsidiary Guarantee.
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In
order to exercise either Legal Defeasance or Covenant Defeasance:
-
(1)
-
The
Issuers 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, or 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 Issuers 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 Issuers must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that (a) the
Issuers have received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Issue Date, 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 Issuers 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)
-
no
Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit (and any similar concurrent deposit relating to other Indebtedness), and the granting of Liens to secure such borrowings);
-
(5)
-
such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other
than the indenture and the agreements governing any other Indebtedness being defeased, discharged or replaced) to which the Issuers or any of the Guarantors is a party or by which the Issuers or any
of the Guarantors is bound;
-
(6)
-
the
Issuers must deliver to the trustee an Officers' Certificate stating that the deposit was not made by the Issuers with the intent of preferring the holders of
notes over the other creditors of the Issuers with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuers or others;
-
(7)
-
NGL
Energy must deliver to the trustee an Officers' Certificate, stating that all conditions precedent set forth in clauses (1) through (6) of this
paragraph have been complied with; and
-
(8)
-
NGL
Energy must deliver to the trustee an opinion of counsel, stating that all conditions precedent set forth in clauses (2), (3) and (5) of
this paragraph have been complied with.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the indenture or the notes or the Note Guarantees may be amended or supplemented
with the consent of the holders of at least 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
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connection
with a tender offer or exchange offer for, or purchase of, the notes), and any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal
of, premium on, if any, interest or Special Interest, 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 or 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; provided, however, that any purchase or repurchase of notes,
including pursuant to the covenants described above under the caption
"Repurchase at the Option of Holders," shall not be deemed a redemption of the notes;
-
(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, or Liquidated Damages, if any, on the notes (except a rescission of
acceleration of the notes by the holders of at least 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 currency 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 or Liquidated Damages, if any, on the notes;
-
(7)
-
waive
a redemption payment with respect to any note; provided, however, that any purchase or repurchase of notes,
including pursuant to the covenants described above under the caption "Repurchase at the Option of Holders," shall not be deemed a redemption of the notes;
-
(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 Issuers, 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 an Issuer'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 such Issuer's or 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;
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-
(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 or the notes to any provision of this Description of Notes to the extent that such provision in this Description of Notes was
intended to be a verbatim recitation of a provision of the indenture, the notes or the Note Guarantees;
-
(7)
-
to
provide for the issuance of additional notes in accordance with the limitations set forth in the indenture as of the Issue Date;
-
(8)
-
to
secure the notes or the Note Guarantees;
-
(9)
-
to
add any additional Guarantor or to evidence the release of any Guarantor from its Note Guarantee, in each case as provided in the indenture; or
-
(10)
-
to
evidence or provide for the acceptance of appointment under the indenture of a successor trustee.
The consent of the holders is not necessary under the indenture to approve the particular form of any proposed amendment, supplement or waiver. It is sufficient
if such consent approves the substance of the proposed amendment, supplement or waiver. After an amendment, supplement or waiver under the indenture requiring the approval of the holders becomes
effective, NGL Energy will send to the holders a notice briefly describing the amendment, supplement or waiver. However, the failure to give such notice, or any defect in the notice, will not impair
or affect the validity of the amendment, supplement or waiver.
Satisfaction and Discharge
The indenture will be satisfied and discharged and will cease to be of further effect as to all notes issued thereunder (except as to surviving
rights of registration of transfer or exchange of the notes and as otherwise specified in the indenture), when:
-
(1)
-
either:
-
(a)
-
all
notes that have been authenticated, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited
in trust and thereafter repaid to the Issuers, have been delivered to the trustee for cancellation; or
-
(b)
-
all
notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the sending of a notice of redemption or otherwise or
will become due and payable within one year and either an Issuer 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 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 and premium, if any, on the notes to the date of maturity or redemption;
-
(2)
-
in
respect of clause 1(b), no Default or Event of Default has occurred and is continuing on the date of the deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit and any similar deposit relating to other Indebtedness and, in each case, the granting of Liens to secure such borrowings) and the
deposit will not result in a breach or violation of, or constitute a default under, any other material instrument to which either Issuer or any Guarantor is a party or by which either Issuer or any
Guarantor is bound (other than with respect to the borrowing of funds to be
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In
addition, the Issuers must deliver (a) an Officers' Certificate, stating that all conditions precedent set forth in clauses (1) through (4) above have been
satisfied and (b) an opinion of counsel, stating that the condition precedent set forth in clause (4) above has been satisfied.
Concerning the Trustee
U.S. Bank National Association is the trustee under the indenture.
If
the trustee becomes a creditor of either Issuer 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 will be permitted to engage in other transactions; however, if it acquires any conflicting interest 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 will 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. The indenture provides that in case an Event of Default has occurred and is continuing, the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights
or powers under the indenture at the request of any holder of notes, unless such holder has offered to the trustee reasonable indemnity or security satisfactory to it against any loss, liability or
expense.
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 The Depository Trust Company ("DTC"), in New York, New York, 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."
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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 Issuers take no responsibility for these operations and
procedures and urge investors to contact the system or their participants directly to discuss these matters.
DTC
has advised the Issuers that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to
facilitate the clearance and
settlement of transactions in those securities between the Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers
(including the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants 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 Issuers 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 initial purchasers 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).
Except as described below, beneficial owners of 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 Issuers, 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 Issuers, the Guarantors, the trustee nor any agent of the Issuers, 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 Issuers that its current practice, upon receipt of any payment in respect of securities such as the notes (including principal and interest), is to credit the
accounts of the relevant
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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 Issuers or the Guarantors. None of the Issuers, the Guarantors nor the trustee will be liable for any delay by DTC or any of the Participants or the Indirect
Participants in identifying the beneficial owners of the notes, and the Issuers, 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.
Subject
to the transfer restrictions set forth under "Notice to Investors," 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.
Subject
to compliance with the transfer restrictions applicable to the notes described herein, 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 respective 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 Issuers 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.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes if:
-
(1)
-
DTC
(a) notifies the Issuers 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 case the Issuers fail to appoint a successor depositary;
-
(2)
-
the
Issuers, at their option, notify the trustee in writing that they elect to cause the issuance of Certificated Notes; provided that in no event shall the Regulation S Temporary Global Note be
exchanged for Certificated Notes prior to (a) the expiration of
the Restricted Period and (b) the receipt of any certificates required under the provisions of Regulation S; or
-
(3)
-
there
has occurred and is continuing an Event of Default with respect to the notes and DTC notifies the trustee of its decision to exchange the Global Notes 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
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Notes
will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear the applicable
restrictive legend referred to in "Notice to Investors," unless that legend is not required by applicable law.
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the transferor first delivers to the trustee a
written certificate (in the form provided in the indenture) to the effect that such transfer will comply with the appropriate transfer restrictions applicable to such notes. See "Notice to Investors."
Certifications by Holders of the Regulation S Temporary Global Notes
A holder of a beneficial interest in the Regulation S Temporary Global Notes must provide Euroclear or Clearstream, as the case may be,
with a certificate in the form required by the indenture certifying that the beneficial owner of the interest in the Regulation S Temporary Global Note is either a non-U.S. person or a U.S.
person that has purchased such interest in a transaction that is exempt from the registration requirements under the Securities Act, and Euroclear or Clearstream, as the case may be, must provide to
the trustee (or the paying agent if other than the trustee) a certificate in the form required by the indenture, prior to any exchange of such beneficial interest for a beneficial interest in the
Regulation S Permanent Global Notes.
Same Day Settlement and Payment
The Issuers will make payments in respect of the notes represented by the Global Notes (including principal, premium, if any, and interest) by
wire transfer of immediately available funds to the accounts specified by DTC or its nominee. The Issuers will make 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 expected 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 Issuers expect 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 Issuers 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.
Definitions
"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, regardless of whether
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, but excluding
Indebtedness
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"Additional Assets" means:
-
(1)
-
any
property or assets (other than Indebtedness and Capital Stock) to be used by NGL Energy or a Restricted Subsidiary in a Permitted Business;
-
(2)
-
the
Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by NGL Energy or another Restricted
Subsidiary; or
-
(3)
-
outstanding
Capital Stock of any Restricted Subsidiary held by Persons other than Affiliates; provided that all the
Capital Stock of such Restricted Subsidiary held by NGL Energy or any other Restricted Subsidiaries shall entitle NGL Energy or such other Restricted Subsidiary to not less than a pro rata portion of
all dividends or other distributions made by such Restricted Subsidiary upon any of such Capital Stock;
provided, however, that, in the case of clauses (2) and (3), such Restricted Subsidiary is primarily engaged in a Permitted Business.
"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.
"Asset Sale" means:
-
(1)
-
the
sale, lease, conveyance or other disposition of any assets or rights by NGL Energy or any of NGL Energy's Restricted Subsidiaries; provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of NGL Energy and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the indenture described above under the caption "Repurchase at the Option of HoldersChange of Control" and/or the
provisions of the indenture described above under the caption "CovenantsMerger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant; and
-
(2)
-
the
issuance of Equity Interests by any of NGL Energy's Restricted Subsidiaries or the sale by NGL Energy or any of NGL Energy's Restricted Subsidiaries of Equity
Interests in any of NGL Energy's Restricted Subsidiaries (other than, in each case, directors' qualifying shares or Equity Interests required by applicable law to be held by a Person other than NGL
Energy or any of NGL Energy's Restricted Subsidiaries).
Notwithstanding
the preceding, none of the following items will be deemed to be an Asset Sale:
-
(1)
-
any
single transaction or series of related transactions that involves assets having a Fair Market Value of less than $20.0 million;
-
(2)
-
a
transfer of assets between or among NGL Energy and its Restricted Subsidiaries;
-
(3)
-
an
issuance or sale of Equity Interests by a Restricted Subsidiary to NGL Energy or to a Restricted Subsidiary;
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-
(4)
-
the
sale, lease or other disposition of equipment, inventory, products, services, accounts receivable or other assets in the ordinary course of business (including
in connection with any compromise, settlement or collection of accounts receivable), and any sale or other disposition of damaged, worn-out or obsolete assets or assets that are no longer useful in
the conduct of the business of NGL Energy and its Restricted Subsidiaries (including the abandonment or other disposition of intellectual property that is, in the reasonable judgment of NGL Energy, no
longer economically practicable to maintain or useful in the conduct of the business of NGL Energy and its Restricted Subsidiaries taken as whole);
-
(5)
-
licenses
and sublicenses by NGL Energy or any of its Restricted Subsidiaries of software or intellectual property in the ordinary course of business;
-
(6)
-
any
surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims of any kind;
-
(7)
-
the
creation or perfection of a Lien not prohibited by the covenant described above under the caption "CovenantsLiens," including a
Permitted Lien and the exercise by any Person in whose favor a Permitted Lien is granted of any of its rights in respect of that Permitted Lien;
-
(8)
-
the
sale or other disposition of cash or Cash Equivalents;
-
(9)
-
the
sale or other disposition of Hedging Obligations or other financial instruments in the ordinary course of business;
-
(10)
-
(a)
a Restricted Payment that does not violate the covenant described above under the caption "CovenantsRestricted Payments," including,
without limitation, the issuance or sale of Equity Interests or the sale, lease or other disposition of products, services, equipment, inventory, accounts receivable or other assets pursuant to any
such Restricted Payment, or (b) the consummation of a Permitted Investment, including, without limitation, unwinding any Hedging Obligations, and including the issuance or sale of Equity
Interests or the sale, lease or other disposition of products, services, equipment, inventory, accounts receivable or other assets pursuant to any such Permitted Investment;
-
(11)
-
the
issuance, sale or other disposition of Equity Interests of an Unrestricted Subsidiary; and
-
(12)
-
any
trade or exchange by NGL Energy or any of its Restricted Subsidiaries of assets for properties or assets owned or held by another Person used or useful in a
Permitted Business (including Capital Stock of a Person engaged primarily in a Permitted Business that is or becomes a Restricted Subsidiary); provided
that (a) the assets or properties exchanged or received by NGL Energy or any of its Restricted Subsidiaries may not include cash or Cash Equivalents except for relatively minor amounts
necessary in order to achieve an exchange of equivalent value and (b) the Fair Market Value of the assets traded or exchanged by NGL Energy or such Restricted Subsidiary (together with any cash
or Cash Equivalents to be delivered by NGL Energy or such Restricted Subsidiary) is reasonably equivalent to the Fair Market Value of the assets (together with any cash or Cash Equivalents) to be
received by NGL Energy or such Restricted Subsidiary; and provided, further, that any cash received must be applied in accordance with the provisions of
the Asset Sale covenant.
"Available Cash" has the meaning assigned to such term in the Partnership Agreement, as in effect on the Issue Date.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in
calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all
securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of
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time.
The terms "Beneficially Owns" and "Beneficially Owned" have corresponding meanings. For purposes
of this definition, a Person shall be deemed not to Beneficially Own securities that are the subject of a stock purchase agreement, merger agreement, amalgamation agreement, arrangement agreement or
similar agreement until consummation of the transactions or, as applicable, series of related transactions contemplated thereby.
"Board of Directors" means:
-
(1)
-
with
respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;
-
(2)
-
with
respect to a partnership, the board of directors of the general partner of the partnership;
-
(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.
So
long as NGL Energy is organized as a limited partnership, references to its Board of Directors are to the Board of Directors of the General Partner.
"Business Day" means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York or another
place of payment are authorized or required by law to remain closed.
"Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease
or finance lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. Notwithstanding the foregoing, any lease (whether
entered into before or after the Measuring Date) that would have been classified as an operating lease pursuant to GAAP as in effect on the Measuring Date will be deemed not to represent a Capital
Lease Obligation, notwithstanding any change in GAAP that occurs after the Measuring Date.
"Capital Stock" means:
-
(1)
-
in
the case of a corporation, corporate stock;
-
(2)
-
in
the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
-
(3)
-
in
the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and
-
(4)
-
any
other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing
Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, regardless of whether such debt securities include any right of participation with Capital Stock.
"Cash Equivalents" means:
-
(1)
-
United
States dollars;
-
(2)
-
Government
Securities having maturities of not more than one year from the date of acquisition;
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-
(3)
-
certificates
of deposit, demand deposit accounts and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances
with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in
excess of $250.0 million and a Thomson BankWatch Rating of "B" or better;
-
(4)
-
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;
-
(5)
-
repurchase
obligations with a term of not more than seven days for underlying securities of the types described in clauses (2), (3) or (4) above
entered into with any financial institution meeting the qualifications specified in clause (3) 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; and
-
(8)
-
deposits
in any currency available for withdrawal on demand with any commercial bank that is organized under the laws of any country in which NGL Energy or any
Restricted Subsidiary maintains its chief executive office or is engaged in a Permitted Business; provided that all such deposits are made in such
accounts in the ordinary course of business.
"Change of Control" means the occurrence of any of the following:
-
(1)
-
the
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 assets of NGL Energy and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Sections 13(d) of the Exchange Act), other than a
Permitted Holder, which occurrence is followed within 60 days thereafter by a Rating Decline;
-
(2)
-
the
adoption of a plan for the liquidation or dissolution of NGL Energy;
-
(3)
-
the
consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" or "group" (as those terms
are used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), other than a Permitted Holder, becomes the Beneficial Owner, directly or indirectly, of
more than 50% of the Voting Stock of the General Partner, measured by voting power rather than number of shares, units or the like, which occurrence is followed within 60 days thereafter by a
Rating Decline; or
-
(4)
-
the
removal of the General Partner by the limited partners of NGL Energy in accordance with the terms of the Partnership Agreement.
Notwithstanding
the preceding, a conversion of NGL Energy or any of its Restricted Subsidiaries from a limited partnership, corporation, limited liability company or other form of entity
to a limited liability company, corporation, limited partnership or other form of entity or an exchange of all of the outstanding Equity Interests in one form of entity for Equity Interests in another
form of entity shall not constitute a Change of Control, so long as following such conversion or exchange the "persons" (as that term is used in Section 13(d)(3) of the Exchange Act) who
Beneficially Owned the Capital Stock of NGL Energy immediately prior to such transactions continue to Beneficially Own in the aggregate more than 50% of the Voting Stock of such entity, or continue to
Beneficially Own sufficient Equity Interests in such entity or its general partner, as applicable, to elect a majority of its directors,
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managers,
trustees or other persons serving in a similar capacity for such entity or its general partner, as applicable, and, in either case, no "person," other than a Permitted Holder, Beneficially
Owns more than 50% of the Voting Stock of such entity or its general partner, as applicable.
"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 loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale (together
with any related provision for taxes and any related non-recurring 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), to the extent that such 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),
abandonment, impairment and other non-cash charges and expenses (excluding any such non-cash charge or expense to the extent that it represents an accrual of or reserve for cash charges or expenses in
any future period or amortization of a prepaid cash charge or expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such
depreciation, depletion, amortization, impairment and other non-cash charges or expenses were deducted in computing such Consolidated Net Income; plus
-
(5)
-
all
extraordinary, unusual or non-recurring expenses, including expenses related to the Fair Market Value of contingent consideration, to the extent that such
extraordinary, unusual or non-recurring expenses were deducted in computing such Consolidated Net Income; 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,
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)
-
any
gain (loss) 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 will be excluded;
-
(2)
-
the
net income (but not loss) of any Person that is not a Restricted Subsidiary of such specified Person or that is accounted for by the equity method of accounting
will be included only to the extent of the amount of dividends or similar distributions paid in cash to the specified Person or a Restricted Subsidiary of such specified Person;
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-
(3)
-
the
net income (but not loss) of any Restricted Subsidiary of such specified Person that is not 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 without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms of its charter or any instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, partners or members; provided, however, that the operation of this clause (3) shall be suspended with respect to
any Restricted Subsidiary that is acquired by NGL Energy or any of its Restricted Subsidiaries (regardless of whether such acquisition is effected pursuant to a merger or otherwise), but such
suspension shall cease immediately after the first six months following such acquisition;
-
(4)
-
the
cumulative effect of a change in accounting principles will be excluded;
-
(5)
-
any
unrealized losses and gains for such period under derivative instruments included in the determination of Consolidated Net Income, including, without limitation,
those resulting from the application of FASB ASC 815, will be excluded;
-
(6)
-
all
non-cash equity-based compensation expense, including all non-cash charges related to restricted Equity Interests and redeemable Equity Interests granted to
officers, directors and employees, will be excluded;
-
(7)
-
any
charges associated with any write-down, amortization or impairment of goodwill or other tangible or intangible assets will be excluded; and
-
(8)
-
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 (including, without limitation, premiums or penalties paid to counterparties in connection with the breakage,
termination or unwinding of Hedging Obligations) will be excluded.
"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 the Amended and Restated Credit Agreement, dated as of February 14, 2017, by and among NGL Energy, NGL
Energy Operating LLC, as borrowers' agent, the subsidiary borrowers party thereto, the subsidiary guarantors party thereto, the lenders party thereto, Deutsche Bank AG, New York Branch, as
technical agent, and Deutsche Bank Trust Company Americas, as administrative agent and as collateral agent, 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, any Credit Agreement), commercial paper facilities
or secured or unsecured capital markets financings, in each case, with banks or other institutional lenders or institutional investors providing for revolving credit loans, term loans, capital market
financings, private placements, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified, renewed, 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.
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"Customary Recourse Exceptions" means, with respect to any Non-Recourse Debt of an Unrestricted Subsidiary or Joint Venture,
(i) Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary or any Joint Venture owned by NGL Energy or any Restricted Subsidiary to the extent securing otherwise
Non-Recourse Debt of such Unrestricted Subsidiary or Joint Venture and (ii) exclusions from the exculpation provisions with respect to such Non-Recourse Debt for the voluntary bankruptcy of
such Unrestricted Subsidiary or Joint Venture, 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.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature.
Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require NGL Energy to repurchase or
redeem such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that NGL Energy 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
"CovenantsRestricted Payments." The amount of Disqualified Stock deemed to be outstanding at any time for purposes of the indenture will be the maximum amount that NGL Energy
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.
"Domestic Subsidiary" means any Restricted Subsidiary that was formed under the laws of the United States or any state of the United
States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of NGL Energy or any Restricted Subsidiary (other than a Foreign Subsidiary).
"Equity Interests" of any Person means Capital Stock and all warrants, options or other rights to acquire Capital Stock of such Person
(but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a sale of Equity Interests of NGL Energy (other than Disqualified Stock and other than to a Subsidiary of NGL
Energy) made for cash on a primary basis by NGL Energy after the Issue Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means an issue of notes with terms identical to the notes (except that the Exchange Notes will not be subject to
restrictions on transfer, registration rights or Liquidated Damages) issued in an Exchange Offer pursuant to the indenture.
"Existing Indebtedness" means all Indebtedness of NGL Energy and its Subsidiaries (other than Indebtedness under the Credit Agreement, the
notes or the Note Guarantees) in existence on the Issue Date, until such amounts are repaid.
"Fair Market Value" means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving
distress or necessity of either party, determined in good
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faith
by the Board of Directors of NGL Energy in the case of amounts of $40.0 million or more and otherwise by an officer of the General Partner (unless otherwise provided in the indenture).
"FASB ASC 815" means Financial Accounting Standards Board Accounting Standards Codification 815.
"FERC Subsidiary" means a Restricted Subsidiary that is subject to the regulatory jurisdiction of the Federal Energy Regulatory Commission
(or any successor thereof).
"Fitch" means Fitch Ratings, Inc. or any successor to the ratings business thereof.
"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 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. 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.
In
addition, for purposes of calculating the Fixed Charge Coverage Ratio:
-
(1)
-
acquisitions
that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers, consolidations or otherwise (including
acquisitions of assets used or useful in a Permitted 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 reference period and on or
prior to 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 (and ownership interests
therein) disposed of prior to the Calculation Date, will be excluded;
-
(3)
-
the
Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein)
disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to
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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 such Person, 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 and
are either (i) prepared and calculated in accordance with Regulation S-X under the Securities Act or (ii) set forth in an Officers' Certificate signed by the chief financial
officer of such Person that states (a) the amount of
each such adjustment and (b) that such adjustments are based on the reasonable good faith belief of the chief financial officer executing such Officers' Certificate at the time of such
execution and the factual basis on which such good faith belief is based.
"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 write-off
of deferred financing costs and accretion of interest charges on 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 any deferred payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings), and net of the effect of all payments made or
received pursuant to Hedging Obligations in respect of interest rates; plus
-
(2)
-
the
consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus
-
(3)
-
any
interest on Indebtedness of another Person that is guaranteed by the specified Person or one or more of its Restricted Subsidiaries or secured by a Lien on
assets of such specified Person or one or more of its Restricted Subsidiaries, regardless of whether such Guarantee or Lien is called upon; plus
-
(4)
-
all
dividends or distributions, whether paid or accrued and regardless of whether in cash, on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividends or distributions on Equity Interests payable solely in Equity Interests of such Person (other than Disqualified Stock) or to such Person or a Restricted Subsidiary
of such Person, in each case, determined on a consolidated basis in accordance with GAAP.
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"Foreign Subsidiary" means any Restricted Subsidiary that is not a Domestic Subsidiary.
"GAAP" means generally accepted accounting principles in the United States, that are in effect from time to time. All ratios and
computations based on GAAP contained in the indenture will be computed in conformity with GAAP. At any time after the Issue Date, NGL Energy may elect to apply International Financial Reporting
Standards ("IFRS") accounting principles in lieu of GAAP and, upon any such election, references herein to GAAP shall thereafter be construed to mean
IFRS (except as otherwise provided in the indenture); provided that any such election, once made, shall be irrevocable; provided, further, that any
calculation or determination in the indenture that requires the application of GAAP for periods that include fiscal quarters
ended prior to NGL Energy's election to apply IFRS shall remain as previously calculated or determined in accordance with GAAP. NGL Energy shall give notice of any such election made in accordance
with this definition to the trustee and the holders of notes.
"General Partner" means NGL Energy Holdings LLC, a Delaware limited liability company, and its successors and permitted assigns as
the general partner of NGL Energy.
"Government Securities" means direct obligations of, or obligations Guaranteed by, the United States of America, and the payment for which
the United States pledges its full faith and credit.
"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 of: (1) the Subsidiaries of NGL Energy, other than Finance Corp., executing the indenture as initial
Guarantors; and (2) the Restricted Subsidiaries of NGL Energy that become Guarantors 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:
-
(1)
-
interest
rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements, interest rate collar agreements or other
agreements or arrangements designed to manage interest rates or interest rate risk;
-
(2)
-
any
commodity futures contract, commodity option or other similar agreement or arrangement designed to protect such Person against fluctuations in the price of
Hydrocarbons used, produced, processed or sold; and
-
(3)
-
foreign
exchange contracts, currency protection agreements or other agreements or arrangements designed to protect such Person against fluctuations in currency
exchange rates.
"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, without duplication, any indebtedness of such Person, regardless of whether
contingent:
-
(1)
-
in
respect of borrowed money;
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-
(2)
-
evidenced
by or issued in exchange for bonds, notes, credit agreements, debentures or similar instruments or letters of credit (or reimbursement agreements in
respect thereof);
-
(3)
-
in
respect of bankers' acceptances;
-
(4)
-
representing
Capital Lease Obligations;
-
(5)
-
representing
the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such
services are completed; or
-
(6)
-
representing
any Hedging Obligations,
if
and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance
with GAAP. In addition, the term "Indebtedness" includes (a) all Indebtedness of others secured by a Lien on any asset of the specified Person
(regardless of whether such Indebtedness is assumed by the specified
Person); provided, that the amount of such Indebtedness will be the lesser of (i) the Fair Market Value of such asset at such date of
determination and (ii) the amount of such Indebtedness of such other Person, and (b) to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of
any other Person. Indebtedness shall be calculated without giving effect to the effects of FASB ASC 815 and related interpretations to the extent such effects would otherwise increase or decrease an
amount of Indebtedness for any purpose under the indenture as a result of accounting for any embedded derivatives created by the terms of such Indebtedness.
The
amount of any Indebtedness outstanding as of any date will be:
-
(1)
-
the
accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;
-
(2)
-
in
the case of any Hedging Obligation, the termination value of the agreement or arrangement giving rise to such Hedging Obligation that would be payable by such
Person at such date;
-
(3)
-
in
the case of any letter of credit, the face amount thereof;
-
(4)
-
the
principal amount of the Indebtedness, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness; and
-
(5)
-
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.
Notwithstanding
the foregoing, the following shall not constitute "Indebtedness":
-
(i)
-
accrued
expenses and trade accounts payable arising in the ordinary course of business;
-
(ii)
-
any
indebtedness that has been defeased in accordance with GAAP or defeased pursuant to the deposit of cash or Government Securities (in an amount sufficient to
satisfy all such indebtedness obligations at maturity or redemption, as applicable, and all payments of interest and premium, if any) in a trust or account created or pledged for the sole benefit of
the holders of such indebtedness, and subject to no other Liens, and the other applicable terms of the instrument governing such indebtedness;
-
(iii)
-
Hydrocarbon
balancing liabilities incurred in the ordinary course of business;
-
(iv)
-
any
unrealized losses or charges in respect of Hedging Obligations (including those resulting from the application of the FASB ASC 815);
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-
(v)
-
any
obligations in respect of (a) bid, performance, completion, surety, appeal and similar bonds, (b) bankers' acceptances, (c) workers'
compensation claims, health or other types of social security benefits, unemployment or other insurance or self-insurance obligations, reclamation and statutory obligations and (d) any
Guarantees or standby letters of credit functioning as or supporting any of the foregoing bonds or obligations, to the extent not drawn; provided, however,
that such bonds or obligations mentioned in subclause (a), (b), (c) or (d) of this clause (v) are incurred in the
ordinary course of the business of NGL Energy and its Restricted Subsidiaries and do not relate to obligations for borrowed money;
-
(vi)
-
any
obligation arising from any agreement providing for indemnities, guarantees, purchase price adjustments, holdbacks, earnouts, contingency payment obligations
based on the performance of the acquired or disposed assets or similar obligations (other than Guarantees of Indebtedness) incurred by any Person in connection with the acquisition or disposition of
any business, assets or Capital Stock;
-
(vii)
-
any
obligation arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the
ordinary course of business; provided that such obligation is extinguished within five Business Days of its incurrence;
-
(viii)
-
any
Treasury Management Arrangement;
-
(ix)
-
any
obligation arising out of advances on trade receivables, factoring of receivables, customer prepayments and similar transactions in the ordinary course of
business and consistent with past practice; and
-
(x)
-
all
contracts and other obligations, agreements, instruments or arrangements described in clauses (18), (28) and (29) of the definition of
"Permitted Liens."
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, and any successor statute.
"Investment Grade Rating" means a rating equal to or higher than:
-
(1)
-
Baa3
(or the equivalent) by Moody's;
-
(2)
-
BBB
(or the equivalent) by S&P; or
-
(3)
-
BBB
(or the equivalent) by Fitch,
or,
if any such Rating Agency ceases to rate the notes for reasons outside of the control of NGL Energy, the equivalent investment grade credit rating from any other Rating Agency.
"Investment Grade Rating Event" means the first day on which (a) the notes have an Investment Grade Rating from at least two Rating
Agencies, (b) no Default or Event of Default with respect to the notes has occurred and is then continuing under the indenture and (c) NGL Energy has delivered to the trustee an
Officers' Certificate certifying as to the satisfaction of the conditions set forth in clauses (a) and (b) of this definition.
"Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates)
in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding (1) endorsements of negotiable instruments and documents in the ordinary course
of business, and commission, travel and similar advances to officers, employees and consultants made in the ordinary course of business and (2) advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of the Person making the advance), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other
securities (excluding any interest in an oil or natural gas leasehold to the extent constituting a security under applicable law), together with all items that are or would be classified as
investments on
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a
balance sheet prepared in accordance with GAAP. If NGL Energy or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any Restricted Subsidiary such that, after giving
effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of NGL Energy, NGL Energy will be deemed to have made an Investment on the date of any such sale or disposition
in an amount equal to the Fair Market Value of NGL Energy's Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in the final paragraph of the covenant
described above under the caption "CovenantsRestricted Payments." The acquisition by NGL Energy or any Restricted Subsidiary of a Person that holds an Investment in a third
Person will be deemed to be an Investment by NGL Energy 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 "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.
"Issue Date" means the first date on which notes are issued under the indenture.
"Joint Venture" means any Person that is not a direct or indirect Subsidiary of NGL Energy in which NGL Energy or any of its Restricted
Subsidiaries makes any Investment.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of
such asset, regardless of whether 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.
"Liquidated Damages" means all liquidated damages then owing pursuant to the Registration Rights Agreement.
"Measuring Date" means October 16, 2013.
"Moody's" means Moody's Investors Service, Inc. or any successor to the ratings business thereof.
"Net Proceeds" means the aggregate amount of cash proceeds and Cash Equivalents received by NGL Energy 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 for purposes of the "Asset Sales" provisions of the indenture), net of:
-
(1)
-
the
direct costs relating to such Asset Sale, including, without limitation, all legal, accounting, investment banking, title and recording tax expenses, commissions
and other fees and expense incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP (after taking into account any available tax
credits or deductions and any tax sharing agreements), as a consequence of such Asset Sale;
-
(2)
-
all
payments made on any Indebtedness that is secured by any assets subject to such Asset Sale, in accordance with the terms of such Indebtedness, or that must by
its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law be repaid out of the proceeds from such Asset Sale;
-
(3)
-
all
distributions and other payments required to be made to holders of minority interests in Subsidiaries or Joint Ventures as a result of such Asset Sale; and
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-
(4)
-
the
deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, or held in escrow, in either case for as long as required to
be held as reserve or in escrow for adjustment in respect of the sale price or for indemnification or any liabilities associated with the assets disposed of in such Asset Sale and retained by NGL
Energy or any Restricted Subsidiary after such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
-
(1)
-
as
to which neither NGL Energy nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, Guarantee,
indemnity, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable as a guarantor or otherwise, in each case of clause (a) and
(b) above, except for Customary Recourse Exceptions; and
-
(2)
-
as
to which the lenders have been notified in writing that they will not have any recourse to the Capital Stock or assets of NGL Energy or any of its Restricted
Subsidiaries (other than the Equity Interests of any Unrestricted Subsidiary or Joint Venture), except for Customary Recourse Exceptions.
"Note Guarantee" means any Guarantee of the Issuers' obligations under the indenture and the notes by any Guarantor in accordance with the
provisions of 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 or any Vice-President of such Person (or, with respect to NGL
Energy, so long as it remains a partnership, the General Partner).
"Officers' Certificate" means a certificate signed on behalf of NGL Energy by two Officers of NGL Energy or two Officers of the General
Partner, one of whom must be the principal executive officer, the principal financial officer or the principal accounting officer of such Person, that meets the requirements of the indenture
pertaining to such certificates.
"Operating Surplus" has the meaning assigned to such term in the Partnership Agreement, as in effect on the Issue Date.
"Partnership Agreement" means the Third Amended and Restated Agreement of Limited Partnership of NGL Energy dated as of June 24,
2016, as such may be further amended, modified or supplemented from time to time.
"Permitted Acquisition Indebtedness" means Indebtedness or Disqualified Stock of NGL Energy or any of its Restricted Subsidiaries to the
extent such Indebtedness or Disqualified Stock was Indebtedness or Disqualified Stock of:
-
(1)
-
a
Subsidiary prior to the date on which such Subsidiary became a Restricted Subsidiary; or
-
(2)
-
a
Person that was merged or consolidated into NGL Energy or a Restricted Subsidiary;
provided that on the date such Subsidiary became a Restricted Subsidiary or the date such Person was merged and consolidated into NGL Energy or a
Restricted Subsidiary, as applicable, after giving pro
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forma effect thereto and to any related financing transaction as if the same had occurred at the beginning of the applicable four-quarter period:
-
(a)
-
the
Restricted Subsidiary or NGL Energy, as applicable, would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test described under "CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock," or
-
(b)
-
the
Fixed Charge Coverage Ratio for the Restricted Subsidiary or NGL Energy, as applicable, would be greater than the Fixed Charge Coverage Ratio for such Restricted
Subsidiary or NGL Energy immediately prior to such transaction.
"Permitted Business" means either (a) gathering, transporting, compressing, treating, processing, marketing, distributing, storing
or otherwise handling Hydrocarbons, or activities or services reasonably related or ancillary thereto, including water treatment, disposal and transportation, and entering into Hedging Obligations
relating to any of the foregoing activities, or (b) any other business that generates gross income at least 90% of which constitutes "qualifying income" under Section 7704(d) of the
Internal Revenue Code.
"Permitted Business Investments" means Investments by NGL Energy or any of its Restricted Subsidiaries in any Unrestricted Subsidiary or
in any Joint Venture; provided that:
-
(1)
-
either
(a) at the time of such Investment and immediately thereafter, NGL Energy could incur $1.00 of additional Indebtedness under the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described above under the caption "CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock" or
(b) such Investment does not exceed the aggregate amount of Incremental Funds (as defined in the covenant described under "CovenantsRestricted Payments") not
previously expended at the time of making such Investment;
-
(2)
-
if
such Unrestricted Subsidiary or Joint Venture has outstanding Indebtedness at the time of such Investment, either (a) all such Indebtedness is Non-Recourse
Debt or (b) any such Indebtedness of such Unrestricted Subsidiary or Joint Venture that is recourse to NGL Energy or any of its Restricted Subsidiaries (which shall include, without limitation,
all Indebtedness of such Unrestricted Subsidiary or Joint Venture for which NGL Energy or any of its Restricted Subsidiaries may be directly or indirectly, contingently or otherwise, obligated to pay,
whether pursuant to the terms of such Indebtedness, by law or pursuant to any guarantee, including, without limitation, any "claw-back," "make-well" or "keep-well" arrangement) could, at the time such
Investment is made, be incurred at that time by NGL Energy and its Restricted Subsidiaries under the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above
under the caption "CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock"; and
-
(3)
-
such
Unrestricted Subsidiary's or Joint Venture's activities are not outside the scope of the Permitted Business.
"Permitted Debt" is defined in the covenant described under the caption "CovenantsIncurrence of Indebtedness and
Issuance of Preferred Stock."
"Permitted Holder" means: (i) any of Coady Enterprises, LLC, Shawn W. Coady, Thorndike, LLC, Todd M. Coady, SemGroup
Corporation, KrimGP2010, LLC, H. Michael Krimbill, EMG I NGL GP Holdings, LLC and EMG II NGL GP Holdings, LLC; (ii) any wife, lineal descendant, legal
guardian or other legal representative or estate of any of the Persons described in the preceding clause (i); (iii) any trust of which at least one of the trustees is any of the Persons
described in the preceding clauses (i) or (ii); and (iv) any other Person that is controlled directly or indirectly by any one or more of the Persons described in the preceding
clauses (i) through (iii).
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"Permitted Investments" means:
-
(1)
-
any
Investment in NGL Energy or in a Restricted Subsidiary;
-
(2)
-
any
Investment in Cash Equivalents;
-
(3)
-
any
Investment by NGL Energy or any Restricted Subsidiary in a Person, if as a result of such Investment:
-
(a)
-
such
Person becomes a Restricted Subsidiary; or
-
(b)
-
such
Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, NGL Energy or a
Restricted Subsidiary;
-
(4)
-
any
Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described
above under the caption "Repurchase at the Option of HoldersAsset Sales";
-
(5)
-
any
Investment in a Person to the extent in exchange for the issuance of Equity Interests (other than Disqualified Stock) of NGL Energy;
-
(6)
-
any
Investment received in compromise or resolution of (a) obligations of trade creditors or customers that were incurred in the ordinary course of business
of NGL Energy 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 as
a result of a foreclosure by, or other transfer of title to, NGL Energy or any of its Restricted Subsidiaries with respect to any secured investment in default; 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 NGL Energy or any of its Restricted Subsidiaries;
-
(9)
-
advances
to or reimbursements of employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of
business;
-
(10)
-
loans
or advances to officers, directors or employees made in the ordinary course of business of the General Partner, NGL Energy or any Restricted Subsidiary in an
aggregate principal amount not to exceed $5.0 million at any one time outstanding;
-
(11)
-
repurchases
of the notes;
-
(12)
-
advances
and prepayments for asset purchases in the ordinary course of business in a Permitted Business of NGL Energy or any of its Restricted Subsidiaries;
-
(13)
-
receivables
owing to NGL Energy 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 NGL Energy or any such Restricted
Subsidiary deems reasonable under the circumstances;
-
(14)
-
any
Guarantee of Indebtedness permitted to be incurred by the covenant entitled "CovenantsIncurrence of Indebtedness and Issuance of
Preferred Stock" other than a guarantee of Indebtedness of an Affiliate of NGL Energy that is not a Restricted Subsidiary;
-
(15)
-
any
Investment existing on, or made pursuant to binding commitments existing on, the Issue Date and any Investment consisting of an extension, modification or
renewal of any
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Investment
existing on, or made pursuant to a binding commitment existing on, the Issue Date; 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 Issue Date or (b) as otherwise permitted under the indenture;
-
(16)
-
surety
and performance bonds and workers' compensation, utility, lease, tax, performance and similar deposits and prepaid expenses in the ordinary course of
business;
-
(17)
-
guarantees
by NGL Energy or any of its Restricted Subsidiaries of operating leases (other than Capital Lease Obligations) or of other obligations that do not
constitute Indebtedness, in each case entered into by NGL Energy or any such Restricted Subsidiary in the ordinary course of business;
-
(18)
-
Permitted
Business Investments;
-
(19)
-
Investments
received as a result of a foreclosure by NGL Energy or any of its Restricted Subsidiaries with respect to any secured Investment in default;
-
(20)
-
Investments
acquired after the Issue Date as a result of the acquisition by NGL Energy or any Restricted Subsidiary of another Person, including by way of a merger,
amalgamation or consolidation with or into NGL Energy or any of its Restricted Subsidiaries, or all or substantially all of the assets of another Person, in each case, in a transaction that is not
prohibited by the covenant described above under the caption "Merger, Consolidation or Sale of Assets" after the Issue Date to the extent that such Investments were not made in
contemplation of such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger, amalgamation or consolidation; and
-
(21)
-
other
Investments in any Person (including Investments in any Joint Venture) having an aggregate Fair Market Value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (21) that are at the time outstanding that do not
exceed the greater of (a) $75.0 million and (b) 3.25% of the Total Assets of NGL Energy; provided, however, that if any Investment
pursuant to this clause (21) is made in any Person that is not a Restricted Subsidiary at the date of the making of such Investment and such Person becomes a Restricted Subsidiary after such
date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (21) for so long as such Person
continues to be a Restricted Subsidiary.
"Permitted Liens" means, with respect to any Person:
-
(1)
-
Liens
securing Indebtedness incurred under Credit Facilities that is permitted to be incurred pursuant to clause (1) of the definition of Permitted Debt in
the covenant described under the caption "CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock";
-
(2)
-
Liens
securing Indebtedness incurred under the first paragraph of the covenant described above under the caption "CovenantsIncurrence of
Indebtedness and Issuance of Preferred Stock" not to exceed $250.0 million in the aggregate;
-
(3)
-
Liens
securing Indebtedness of Foreign Subsidiaries that is permitted to be incurred pursuant to clause (14) of the definition of Permitted Debt in the
covenant described under the caption "CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock";
-
(4)
-
Liens
to secure Hedging Obligations and/or Obligations with respect to Treasury Management Arrangements incurred in the ordinary course of business;
-
(5)
-
Liens
on property of a Person existing at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with NGL Energy or any
Restricted
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Subsidiary;
provided that such Liens were in existence prior to the contemplation of such Person becoming a Restricted Subsidiary or such merger or
consolidation and do not extend to any assets (other than improvements thereon, accessions thereto and proceeds thereof) other than those of the Person that becomes a Restricted Subsidiary or is
merged with or into or consolidated with NGL Energy or any Restricted Subsidiary;
-
(6)
-
Liens
on property (including Capital Stock) existing at the time of acquisition of the property by NGL Energy or any Subsidiary of NGL Energy, including any
acquisition by means of a merger or consolidation with or into NGL Energy or a Restricted Subsidiary; provided that such Liens were in existence prior
to such acquisition and not incurred in contemplation of, such acquisition;
-
(7)
-
Liens,
pledges or deposits by such Person under workers' compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection
with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits
or cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import or customs duties or for the payment
of rent, in each case incurred in the ordinary course of business;
-
(8)
-
landlords',
carriers', warehousemen's, mechanics', materialmen's, repairmen's or similar Liens arising by contract or statute in the ordinary course of business and
with respect to amount that are not yet delinquent or are being contested in good faith by appropriate proceedings;
-
(9)
-
Liens
to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the definition of Permitted Debt in the covenant described under
the caption "CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with or financed by such Indebtedness;
-
(10)
-
Liens
to secure Indebtedness of Restricted Subsidiaries that are not Guarantors permitted under the covenant entitled "CovenantsIncurrence
of Indebtedness and Issuance of Preferred Stock"; provided that such Liens may not extend to any property or assets of NGL Energy or any Guarantor other
than the Capital Stock of any non-Guarantor Restricted Subsidiaries;
-
(11)
-
Liens
on and pledges of the Equity Interests of any Unrestricted Subsidiary or any Joint Venture owned by NGL Energy or any Restricted Subsidiary to the extent
securing Non-Recourse Debt or other Indebtedness of such Unrestricted Subsidiary or Joint Venture;
-
(12)
-
Liens
on any asset or property acquired, constructed or improved by NGL Energy or any of its Restricted Subsidiaries; provided that (a) such Liens are in favor of the seller of such asset or property, in
favor of the Person or Persons developing, constructing,
repairing or improving such asset or property, or in favor of the Person or Persons that provided the funding for the acquisition, development, construction, repair or improvement cost, as the case
may be, of such asset or property, (b) such Liens are created within 360 days after the acquisition, development, construction, 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,
constructed or improved plus related financing costs and (ii) the Fair Market Value of the asset or property so acquired, constructed or improved, measured at the date of such acquisition, or
the date of completion of such construction or improvement, and (d) such Liens are limited to the asset or property so acquired, constructed or improved (including the proceeds thereof,
accessions thereto, upgrades thereof and improvements thereto);
-
(13)
-
Liens
existing on the Issue Date;
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-
(14)
-
Liens
for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been
made therefor;
-
(15)
-
Liens
imposed by law, such as carriers', warehousemen's, landlord's and mechanics' Liens, in each case, incurred in the ordinary course of business;
-
(16)
-
survey
exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, leases and subleases of real property, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the
aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of NGL Energy and its Restricted Subsidiaries, considered as a single
enterprise;
-
(17)
-
Liens
created for the benefit of (or to secure) the notes or the Note Guarantees or other obligations under the indenture and Liens securing any Indebtedness
equally and ratably with all Obligations due under the notes or any Note Guarantee pursuant to a contractual covenant that limits Liens in a manner substantially similar to the covenant described
above under "CovenantsLiens";
-
(18)
-
Liens
on pipelines or pipeline facilities that arise by operation of law;
-
(19)
-
Liens
to secure any Permitted Refinancing Indebtedness permitted to be incurred under the indenture; provided, however, that the new Lien is limited to all or
part of the same property and assets that secured or, under the written agreements pursuant to which the
original Lien arose, could secure the original Lien (plus improvements and accessions to, such property or proceeds or distributions thereof);
-
(20)
-
Liens
on insurance policies and proceeds thereof, or other deposits, to secure insurance premium financings;
-
(21)
-
filing
of Uniform Commercial Code financing statements as a precautionary measure in connection with operating leases;
-
(22)
-
bankers'
Liens, rights of setoff, Liens arising out of judgments, attachments 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;
-
(23)
-
Liens
on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness;
-
(24)
-
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;
-
(25)
-
grants
of software and other technology licenses in the ordinary course of business;
-
(26)
-
Liens
arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into in the ordinary course of business;
-
(27)
-
Liens
in favor of the Issuers or any of the Guarantors;
-
(28)
-
Liens
arising under operating agreements, joint venture agreements, partnership agreements, construction agreements, oil and gas leases, farmout agreements,
division orders, agreements for the purchase, gathering, processing, treatment, sale, transportation or exchange of
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Hydrocarbons,
unitization and pooling designations, declarations, orders and agreements, development agreements, participating agreements, area of mutual interest agreements, gas balancing agreements,
injection, repressuring and recycling agreements, salt water or other disposal agreements, and other agreements arising in the ordinary course of NGL Energy's or any of its Restricted Subsidiaries'
business that are customary in the Permitted Business;
-
(29)
-
Liens
on, or related to, properties or assets to secure all or part of the costs incurred in the ordinary course of a Permitted Business for gathering,
transporting, compressing, treating, processing, marketing, distributing, storing or otherwise handling Hydrocarbons, or activities or services reasonably related or ancillary thereto, including
entering into Hedging Obligations to support these businesses and the development, manufacture or sale of equipment or technology related to these activities;
-
(30)
-
Liens
arising solely by virtue of any statutory or common law provisions relating to bankers' Liens, rights of set-off or similar rights and remedies as to deposit
accounts or other funds maintained or deposited with a depositary institution; provided that:
-
(a)
-
such
deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by NGL Energy in excess of those set forth by
regulations promulgated by the Federal Reserve Board; and
-
(b)
-
such
deposit account is not intended by NGL Energy or any Restricted Subsidiary to provide collateral to the depository institution;
-
(31)
-
Liens
arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by NGL Energy and its Restricted Subsidiaries in the
ordinary course of business;
-
(32)
-
Liens
arising under the indenture in favor of the trustee under the indenture for its own benefit and similar Liens in favor of other trustees, agents and
representatives arising under instruments governing Indebtedness permitted to be incurred under the indenture; provided that such Liens are solely for
the benefit of the trustees, agents or representatives in their capacities as such and not for the benefit of the holders of the Indebtedness; and
-
(33)
-
Liens
incurred in the ordinary course of business of NGL Energy or any Restricted Subsidiary with respect to obligations at any one time outstanding not to exceed
the greater of (a) $75.0 million and (b) 3.25% of the Total Assets of NGL Energy.
"Permitted Refinancing Indebtedness" means any Indebtedness of NGL Energy or any of its Restricted Subsidiaries, any Disqualified Stock of
NGL Energy or any preferred stock of any Restricted Subsidiary (a) issued in exchange for, or the net proceeds of which are used to extend, renew, refund, refinance, replace, defease, discharge
or otherwise retire for value, in whole or in part, or (b) constituting an amendment, modification or supplement to or a deferral or renewal of (clauses (a) and (b), collectively, a
"Refinancing," and the term "Refinanced" has a correlative meaning) any other Indebtedness of NGL Energy
or any of its Restricted Subsidiaries (other than intercompany Indebtedness), any Disqualified Stock of NGL Energy or any preferred stock of a Restricted Subsidiary in a principal amount or, in the
case of Disqualified Stock of NGL Energy or preferred stock of a Restricted Subsidiary, liquidation preference, not to exceed (after deduction of reasonable and customary fees and expenses incurred in
connection with the Refinancing) the lesser of:
-
(1)
-
the
principal amount or, in the case of Disqualified Stock or preferred stock, liquidation preference, of the Indebtedness, Disqualified Stock or preferred stock so
Refinanced (plus, in the case of Indebtedness, the amount of premium, if any paid in connection therewith); and
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-
(2)
-
if
the Indebtedness being Refinanced was issued with any original issue discount, the accreted value of such Indebtedness (as determined in accordance with GAAP) at
the time of such Refinancing.
Notwithstanding the preceding, no Indebtedness, Disqualified Stock or preferred stock will be deemed to be Permitted Refinancing Indebtedness,
unless:
-
(i)
-
such
Indebtedness, Disqualified Stock or preferred stock has a final maturity date or redemption date, as applicable, no earlier than the final maturity date or
redemption date, as applicable, of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness, Disqualified Stock or preferred
stock being Refinanced;
-
(ii)
-
if
the Indebtedness, Disqualified Stock or preferred stock being Refinanced is contractually subordinated or otherwise junior in right of payment to the notes, such
Indebtedness (and any related Guarantee), Disqualified Stock or preferred stock is contractually subordinated or otherwise junior in right of payment to, the notes, on terms at least as favorable to
the holders of notes as those contained in the documentation governing the Indebtedness, Disqualified Stock or preferred stock being Refinanced at the time of the Refinancing; and
-
(iii)
-
such
Indebtedness or Disqualified Stock is incurred or issued by NGL Energy or such Indebtedness, Disqualified Stock or preferred stock is incurred or issued by
the Restricted Subsidiary who is the obligor on the Indebtedness being Refinanced or the issuer of the Disqualified Stock or preferred stock being Refinanced; provided that a Restricted Subsidiary that
is also a Guarantor may guarantee Permitted Refinancing Indebtedness incurred by NGL Energy, regardless of
whether such Restricted Subsidiary was an obligor or guarantor of the Indebtedness being Refinanced.
Notwithstanding
the foregoing, any Indebtedness incurred under Credit Facilities shall be subject to the refinancing provision of the definition of Credit Facilities and not pursuant to
the requirements set forth in this definition of Permitted Refinancing Indebtedness.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated
organization, limited liability company or government or other entity.
"Rating Agency" means each of S&P, Moody's and Fitch, or if (and only if) any of S&P, Moody's or Fitch shall not make a rating on the
notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by NGL Energy, which shall be substituted for S&P, Moody's or Fitch, as the case
may be.
"Rating Decline" means a decrease in the rating of the notes by at least two Rating Agencies 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,
such as + 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.
"Registration Rights Agreement" means (1) with respect to the notes issued on the Issue Date, the registration rights agreement
dated the Issue Date among the Issuers, the Guarantors on the Issue Date, and the initial purchasers of such notes that are signatories thereto, and (2) with respect to any additional notes,
any registration rights agreement among the Issuers and the other parties thereto relating to the registration by the Issuers of such additional notes under the Securities Act.
"Reporting Default" means a Default described in subclause (b) of clause (5) under "Events of Default and
Remedies."
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"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of NGL Energy, other than an Unrestricted Subsidiary.
"S&P" means S&P Global Inc., or any successor to the rating business thereof.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means:
-
(1)
-
all
Indebtedness of NGL Energy or any of its Restricted Subsidiaries outstanding under Credit Facilities and all Hedging Obligations with respect thereto;
-
(2)
-
the
notes and any other Indebtedness of NGL Energy 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:
-
(i)
-
any
intercompany Indebtedness of NGL Energy or any of its Subsidiaries to NGL Energy or any of its Affiliates;
-
(ii)
-
any
Indebtedness that is incurred in violation of the indenture; or
-
(iii)
-
any
trade payables or taxes owed or owing by NGL Energy or any of its Restricted Subsidiaries.
"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 Issue Date.
"Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the
payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the first date it was incurred in compliance with the terms of the indenture, and will
not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof; provided that, in the case of debt
securities that are by their terms convertible into Capital Stock (or cash or a combination of cash and Capital Stock
based on the value of the Capital Stock) of NGL Energy, any obligation to offer to repurchase such debt securities on a date(s) specified in the original terms of such securities, which obligation is
not subject to any condition or contingency, will be treated as a Stated Maturity date of such convertible debt securities.
"Subordinated Debt" means Indebtedness of NGL Energy or a Guarantor that is contractually subordinated in right of payment (by its terms
or the terms of any document or instrument relating thereto) to the notes or the Note Guarantee of such Guarantor, as applicable.
"Subsidiary" means, with respect to any specified Person:
-
(1)
-
any
corporation, association or other business entity (other than a partnership or a 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
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-
(2)
-
any
partnership or limited liability company of which (a) more than 50% of the capital accounts, distribution rights, total equity and voting interests or
general and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination
thereof, whether in the form of membership, general, special or limited partnership interests or otherwise, and (b) such Person or any Subsidiary of such Person is a controlling general partner
or otherwise controls such entity.
"Total Assets" of any Person means, as of any date, the amount that, in accordance with GAAP, would be set forth under the caption "Total
Assets" (or any like caption) on a consolidated balance sheet of such Person and its Restricted Subsidiaries, as of the end of the most recently ended fiscal quarter for which internal financial
statements are available; provided, however that such amount shall be adjusted to give pro forma effect to
any subsequent Investment, acquisition or disposition of any assets or Person (regardless of whether effected as a merger, purchase
or sale of Equity Interests, asset acquisition or disposition or other form of acquisition or disposition) by such Person or any of its Restricted Subsidiaries, including any such Investment,
acquisition or disposition that is pending and giving rise to the need to determine the amount of Total Assets, as if such transaction had occurred immediately prior to the end of such most recently
ended fiscal quarter.
"Treasury Management Arrangement" means any agreement or other arrangement governing the provision of treasury or cash management
services, including deposit accounts, overdraft, credit or debit card, funds transfer, automated clearinghouse, zero balance accounts, returned check concentration, controlled disbursement, lockbox,
account reconciliation and reporting and trade finance services and other cash management services.
"Unrestricted Subsidiary" means (i) each of the following Persons so long as it constitutes a Subsidiary of NGL Energy, unless and
until designated by the Board of Directors of NGL Energy as a Restricted Subsidiary in compliance with the provisions of the indenture described under the caption
"CovenantsDesignation of Restricted and Unrestricted Subsidiaries:" Sawtooth Caverns, LLC and NGL Supply Terminal Solution Mining, LLC and (ii) any
Subsidiary of NGL Energy (excluding Finance Corp.) that is designated by the Board of Directors of NGL Energy as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only
to the extent that such Subsidiary:
-
(1)
-
except
to the extent permitted by subclause (2)(b) of the definition of "Permitted Business Investments," has
no Indebtedness other than Non-Recourse Debt owing to any Person other than NGL Energy or any of its Restricted Subsidiaries;
-
(2)
-
is
a Person with respect to which neither NGL Energy nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and
-
(3)
-
has
not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of NGL Energy or
any of its Restricted Subsidiaries, except to the extent such Guarantee or credit support would be released upon such designation.
All
Subsidiaries of an Unrestricted Subsidiary shall also be Unrestricted Subsidiaries.
"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.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by
dividing:
-
(1)
-
the
sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect of the Indebtedness, 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.
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