Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the
meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where such new notes were acquired by
such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the consummation of the exchange offer, we will make this prospectus available to any broker-dealer for use
in connection with any such resale. See Plan of Distribution.
DESCRIPTION OF NOTES
We are offering to exchange up to $450,000,000 aggregate principal amount of our new 5.25% Senior Notes due 2025, which have been registered
under the Securities Act (the new notes), for any and all of our outstanding unregistered 5.25% Senior Notes due 2025 (the old notes). We issued the old notes on December 27, 2016 in a transaction exempt from
registration under the Securities Act. We are offering you new notes in exchange for old notes to satisfy our registration obligations under the registration rights agreement that we entered into in connection with the issuance of the old notes.
The new notes will be treated as a single class with any old notes that remain outstanding after the completion of the exchange offer.
The Company will issue the new notes, and the old notes are outstanding, under the indenture dated December 27, 2016, among itself, the guarantors party thereto and U.S. Bank National Association, as trustee. The terms of the old notes and the
new notes 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, which is filed as an exhibit to the registration statement of which this prospectus is a part, because it, and not this description, will define your rights as holders of the new notes.
If the exchange offer is consummated, holders of old notes who do not exchange their old notes for new notes will vote together with the
holders of the new notes for all relevant purposes under the indenture. In that regard, the indenture requires that certain actions by the holders under the indenture (including acceleration after an Event of Default) must be taken, and certain
rights must be exercised, by holders of specified minimum percentages of the aggregate principal amount of all outstanding notes issued under the indenture. In determining whether holders of the requisite percentage in aggregate principal amount of
notes have given any notice, consent or waiver or taken any other action permitted under the indenture, any old notes that remain outstanding after the exchange offer will be aggregated with the new notes, and the holders of these old notes and new
notes will vote together as a single class for all such purposes. Accordingly, all references in this Description of Notes to specified percentages in aggregate principal amount of the outstanding notes mean, at any time after the
exchange offer for the old notes is consummated, such percentage in aggregate principal amount of such old notes and the new notes then outstanding.
You can find the definitions of certain terms used in this description under the subheading Certain Definitions. In this
description, the word Company refers only to RSP Permian, Inc. and not to any of its Subsidiaries. Unless the context indicates otherwise, references in this description to the notes include both the old notes and the new
notes. Certain defined terms used in this description but not defined below under Certain Definitions have the meanings assigned to them in the indenture.
The registered holder of a new note will be treated as the owner of it for all purposes. Only registered holders have rights under the
indenture. All references to holders in this description are to registered holders of the notes.
Brief Description of the Notes and the
Note Guarantees
The Notes
The notes will be:
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general unsecured obligations of the Company;
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pari passu
in right of payment with all existing and future Senior Debt of the Company, including the Existing Notes;
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22
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senior in right of payment to any future subordinated Indebtedness of the Company; and
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unconditionally guaranteed by the Guarantors.
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The Note Guarantees
Like the old notes, the new notes will be guaranteed by RSP LLC, a Subsidiary of the Company, and by certain of its future Domestic
Subsidiaries. When the old notes were issued on December 27, 2016, they were initially guaranteed by RSP LLC and Silver Hill Energy Partners, LLC, a Subsidiary of RSP LLC. Effective as of March 30, 2017, Silver Hill Energy Partners, LLC
merged with and into RSP LLC and ceased to exist.
Each Note Guarantee will be:
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a general unsecured obligation of the Guarantor;
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pari passu
in right of payment with all existing and future Senior Debt of that Guarantor, including its guarantee of the Existing Notes; and
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senior in right of payment to any future subordinated Indebtedness of that Guarantor.
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However, the notes and the Note Guarantees will be effectively subordinated to all borrowings and other liabilities of the Guarantors under
the Credit Agreement, which is secured by substantially all of the assets of such Guarantor. The notes and the Note Guarantees will also be structurally subordinated to all indebtedness and other liabilities of any of our Subsidiaries that do not
Guarantee the notes. See Risk FactorsRisks Related to the NotesThe new notes and the guarantees will be unsecured obligations and will be effectively subordinated to all of our existing and future secured indebtedness to the extent
of the value of the collateral securing such indebtedness and structurally subordinated to liabilities of any non-guarantor subsidiaries. LPLS, L.L.C. is our only Subsidiary that does not Guarantee the notes. As of the date of this prospectus,
LPLS, L.L.C. has no Indebtedness outstanding, no revenues attributable to it and holds an immaterial amount of assets.
As of the date of
this prospectus, RSP LLC and LPLS, L.L.C., our only Subsidiaries, are Restricted Subsidiaries. However, under the circumstances described below under the caption Certain CovenantsDesignation of Restricted and Unrestricted
Subsidiaries, we will be permitted to designate certain of our Subsidiaries as Unrestricted Subsidiaries. Our Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the indenture and will not
guarantee the notes. In the event of a bankruptcy, liquidation or reorganization of any Unrestricted Subsidiary, such Unrestricted Subsidiary will pay the holders of its debt and its trade creditors before it will be able to distribute any of its
assets to the Company.
Principal, Maturity and Interest
The Company will issue the new notes with a maximum aggregate principal amount of up to $450.0 million. The Company may issue additional notes
under the indenture from time to time after the exchange offer closes. Any issuance of additional notes is subject to all of the covenants in the indenture, including the covenant described below under the caption Certain
CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock. The old notes, the new notes and any additional notes subsequently issued under the indenture will be treated as a single class for all purposes under the indenture,
including, waivers, amendments, redemptions and offers to purchase. The notes are issued in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000. The notes will mature on January 15, 2025.
Interest on the notes accrues at the rate of 5.25% per annum and is payable semi-annually in arrears on January 15 and July 15,
with the next payment being due January 15, 2018. The Company will make each interest payment to the holders of record on the immediately preceding January 1 and July 1. If a payment date falls on a day that is not a business day, the
payment to be made on such payment date will be made on the next succeeding business day with the same force and effect as if made on such payment date, and no additional interest will accrue as a result of such delayed payment.
23
Interest on the new notes will accrue from the last interest payment date on which interest was
paid on the old notes tendered in exchange therefor, or, of no interest has been paid on the old notes, from the date of the original issue of the old notes. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a holder of notes has given wire transfer instructions to the Company or the paying agent, the Company will pay all principal of, premium,
if any, on, and interest on, that holders notes in accordance with those instructions. All other payments on the notes will be made at the office or agency of the paying agent and registrar within the City and State of New York unless the
Company elects to make interest payments by check mailed to the noteholders at their respective addresses set forth in the register of holders.
Paying
Agent and Registrar for the Notes
The trustee has been appointed as the initial paying agent and registrar for the notes. The Company
may change the paying agent or registrar without prior notice to the holders of the notes, and the Company or any of its Subsidiaries may act as paying agent or registrar.
Transfer and Exchange
A holder may
transfer or exchange notes in accordance with the provisions of the indenture. The registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes due on transfer. The Company will not be required to transfer or exchange any note selected for redemption. Also, the Company will not be required to transfer or exchange any note for a period of 15 days
before a selection of notes to be redeemed or between a record date and the next succeeding interest payment date.
Note Guarantees
Currently, the notes are only guaranteed by RSP LLC, a Subsidiary of the Company. In the future, Domestic Subsidiaries of the Company that
Guarantee or otherwise become obligated with respect to Indebtedness under a Credit Facility will be required to Guarantee the notes under the circumstances described under Certain CovenantsAdditional Note Guarantees. These
Note Guarantees will be joint and several obligations of the Guarantors. The obligations of each Guarantor under its Note Guarantee will be limited as necessary to prevent that Note Guarantee from constituting a fraudulent conveyance under
applicable law, although this limitation may not be effective to prevent the Subsidiary Guarantees from being voided in bankruptcy. See Risk FactorRisks Related to the NotesFederal and state statutes allow courts, under specific
circumstances, to void guarantees and require noteholders to return payments received from guarantors.
A Guarantor may not:
(1) consolidate or merge with or into another Person (whether or not such Guarantor is the surviving Person), or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of such
Guarantor in one or more related transactions, to another Person, other than the Company or another Guarantor, unless:
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(1)
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immediately after giving effect to such transaction or series of transactions, no Default or Event of Default exists; and
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(a)
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the Person acquiring the properties or assets in any such sale, assignment, transfer, conveyance, or other
disposition or the Person formed by or surviving any such consolidation or merger (if other than the Guarantor) unconditionally assumes all the obligations of that Guarantor under its Note
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Guarantee, the indenture and (if then in effect) the registration rights agreement pursuant to a supplemental indenture and a supplement to the registration rights agreement, in form reasonably
satisfactory to the trustee; or
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(b)
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the Net Proceeds of such transaction or series of transactions are applied in a manner that does not violate the Asset Sales provisions of the indenture.
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The Note Guarantee of a Guarantor and its other obligations under the indenture will be automatically released:
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(1)
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in connection with any sale or other disposition of all or substantially all of the properties or assets of that Guarantor by way of merger, consolidation or otherwise, to a Person that is not (either before or after
giving effect to such transaction) the Company or a Restricted Subsidiary of the Company if the sale or other disposition does not violate the Asset Sales provisions of the indenture;
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(2)
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in connection with any sale or other disposition of Capital Stock of that Guarantor by way of merger, consolidation or otherwise to a Person that is not (either before or after giving effect to such transaction) the
Company or a Restricted Subsidiary of the Company, if the sale or other disposition does not violate the Asset Sales provisions of the indenture and the Guarantor ceases to be a Restricted Subsidiary of the Company as a result of the
sale or other disposition;
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(3)
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if the Company designates such Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture; or
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(4)
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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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See Repurchase at the Option of HoldersAsset Sales.
Optional Redemption
At any time prior to
January 15, 2020, the Company may, on any one or more occasions, redeem up to 35% of the aggregate principal amount of notes issued under the indenture, upon notice as provided in the indenture, at a redemption price equal to 105.25% of the
principal amount of the notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption (subject to the rights of holders of notes on the relevant record date to receive interest on the relevant interest payment date), with an
amount of cash not greater than the net cash proceeds of one or more Equity Offerings by the Company, provided that:
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(1)
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at least 65% of the aggregate principal amount of notes originally issued under the indenture (including any additional notes but excluding notes held by the Company and its Subsidiaries) remains outstanding immediately
after the occurrence of such redemption; and
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(2)
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the redemption occurs within 180 days of the date of the closing of such Equity Offering.
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At
any time prior to January 15, 2020, the Company may on any one or more occasions redeem all or a part of the notes, upon notice as provided in the indenture, at a redemption price equal to 100% of the principal amount of the notes redeemed,
plus the Applicable Premium, and accrued and unpaid interest, if any, to the date of redemption, subject to the rights of holders of notes on the relevant record date to receive interest due on the relevant interest payment date.
On or after January 15, 2020, the Company may on any one or more occasions redeem all or a part of the notes, upon notice as provided in
the indenture, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, on the notes redeemed, to the applicable date of redemption, if redeemed during the twelve-month period
beginning on January 15 of the years indicated below,
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subject to the rights of holders of notes on the relevant record date to receive interest on the relevant interest payment date:
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Year
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Percentage
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2020
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103.938
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%
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2021
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102.625
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%
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2022
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101.313
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%
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2023 and thereafter
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100.000
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%
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Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the notes
or portions thereof called for redemption on the applicable redemption date.
Except pursuant to the preceding paragraphs and the final
paragraph under Repurchase at the Option of HoldersChange of Control, the notes are not redeemable at the Companys option prior to January 15, 2020. The Company is not, however, prohibited from acquiring the notes
by means other than a redemption, whether pursuant to a tender offer, open market purchase or otherwise, so long as the acquisition does not violate the terms of the indenture.
Mandatory Redemption
The Company is not
required to make mandatory redemption or sinking fund payments with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a
Change of Control occurs, each holder of notes will have the right, except as provided below, to require the Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of that holders notes
pursuant to a Change of Control Offer on the terms set forth in the indenture. In the Change of Control Offer, the Company will offer to make a cash payment (a
Change of Control Payment
) equal to 101% of the aggregate principal
amount of notes repurchased, plus accrued and unpaid interest, if any, on the notes repurchased to the date of purchase (the
Change of Control Purchase Date
), subject to the rights of holders of notes on the relevant record date
to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Company will send a notice to each holder describing the transaction or transactions that constitute the Change of Control and
offering to repurchase notes properly tendered prior to the expiration date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is sent, pursuant to the procedures required by the
indenture and described in such notice.
Promptly following the expiration of the Change of Control Offer, the Company will, to the
extent lawful, accept for payment all notes or portions of notes properly tendered pursuant to the Change of Control Offer.
Promptly
after such acceptance, the Company will, on the Change of Control Purchase Date:
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(1)
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deposit with the paying agent an amount equal to the Change of Control Payment in respect of all notes or portions of notes properly tendered; and
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(2)
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deliver or cause to be delivered to the trustee the notes accepted for payment, together with an officers certificate stating the aggregate principal amount of notes or portions of notes being purchased by the
Company.
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The paying agent will promptly mail to each holder of notes properly tendered the Change of Control Payment for
such notes (or, if all the notes are then in global form, make such payment through the facilities of
26
DTC), and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date.
The provisions described above that require the Company to make a Change of Control Offer following a Change of Control are applicable whether
or not any other provisions of the indenture are applicable, except as described in the following paragraph. Except as described above with respect to a Change of Control, the indenture does not contain provisions that permit the holders of the
notes to require that the Company repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction.
The
Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by the Company and purchases all notes properly tendered and not withdrawn under the Change of Control Offer, (2) notice of redemption of all outstanding notes has been given pursuant to
the indenture as described above under the caption Optional Redemption, unless and until there is a default in payment of the applicable redemption price, or (3) in connection with or in contemplation of any Change of Control,
the Company has made an offer to purchase (an
Alternate Offer
) any and all notes validly tendered at a cash price equal to or higher than the Change of Control Payment and has purchased all notes properly tendered in accordance
with the terms of the Alternate Offer. Notwithstanding anything to the contrary contained in the indenture, a Change of Control Offer or Alternate Offer may be made in advance of a Change of Control, conditioned upon the consummation of such Change
of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer or Alternate Offer is made. The closing date of any such Change of Control Offer made in advance of a Change of Control may be
changed to conform to the actual closing date of the Change of Control;
provided
that such closing date is not earlier than 30 days nor later than 60 days from the date the Change of Control Offer notice is sent as described in the first
paragraph of this section.
The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease,
transfer, conveyance or other disposition of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase
substantially all, there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of notes to require the Company to repurchase the notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the properties or assets of the Company and its Subsidiaries taken as a whole to another Person may be uncertain.
In the event that holders of not less than 90% in aggregate principal amount of the outstanding notes accept a Change of Control Offer or
Alternate Offer and the Company (or any third party making such Change of Control Offer or Alternate Offer in lieu of the Company as described above) purchases all of the notes held by such holders, the Company will have the right, upon not less
than 30 nor more than 60 days prior notice, given not more than 30 days following the purchase pursuant to the Change of Control Offer or Alternate Offer described above, to redeem all of the notes that remain outstanding following such purchase at
a redemption price equal to the Change of Control Payment, plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest, if any, on the notes that remain outstanding, to the date of redemption (subject to the rights
of holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date).
Asset Sales
The Company will not, and
will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:
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(1)
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the Company or any of its Restricted Subsidiaries, as the case may be, receives consideration at the time of the
Asset Sale at least equal to the Fair Market Value (measured as of the date of the definitive
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27
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agreement with respect to such Asset Sale) of the assets or Equity Interests issued or sold or otherwise disposed of; and
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(2)
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at least 75% of the aggregate consideration received in the Asset Sale by the Company or such Restricted Subsidiary and all other Asset Sales since the Prior Issue Date is in the form of cash or Cash Equivalents
(collectively, Cash Consideration). For purposes of this provision, each of the following will be deemed to be cash:
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(a)
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any liabilities, as shown on the Companys most recent consolidated balance sheet, of the Company or any of its Restricted Subsidiaries (other than contingent liabilities and liabilities that are by their terms
subordinated to the notes or any Note Guarantee) that are assumed by the transferee of any such assets pursuant to a novation or indemnity agreement that releases the Company or such Restricted Subsidiary from or indemnifies the Company or such
Restricted Subsidiary against further liability;
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(b)
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with respect to any Asset Sale of oil and natural gas properties by the Company or any of its Restricted Subsidiaries where the Company or such Restricted Subsidiary retains an interest in such property, the aggregate
costs and expenses of the Company or such Restricted Subsidiary related to the exploration, development, completion or production of such properties and activities related thereto that the transferee (or an Affiliate thereof) agrees to pay;
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(c)
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any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are, within 180 days of the Asset Sale, converted by the Company or such Restricted
Subsidiary into cash, to the extent of the cash received in that conversion;
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(d)
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any Capital Stock or assets of the kind referred to in clause (2) or (4) of the next paragraph; and
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(e)
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any Designated Non-cash Consideration received by the Company or such Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value, taken together with all other Designated Non-cash Consideration
received pursuant to this clause (e) since the Prior Issue Date, not to exceed an amount equal to 5.0% of the Companys Adjusted Consolidated Net Tangible Assets (determined at the time of receipt of such Designated Non-cash
Consideration), with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value.
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Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or one or more of its Restricted Subsidiaries may apply
an amount equal to the amount of such Net Proceeds at its option to any combination of the following:
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(1)
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to repay, repurchase or redeem any Senior Debt;
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(2)
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to acquire all or substantially all of the assets, or any Capital Stock, of one or more other Persons primarily engaged in the Oil and Gas Business, if, after giving effect to any such acquisition of Capital Stock, such
Person becomes a Restricted Subsidiary of the Company;
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(3)
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to make capital expenditures in respect of the Companys or any of its Restricted Subsidiaries Oil and Gas Business; or
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(4)
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to acquire other assets that are not classified as current assets under GAAP and that are used or useful in the Oil and Gas Business.
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The requirement of clause (2) or (4) of the immediately preceding paragraph shall be deemed to be satisfied if a bona fide binding
contract committing to make the acquisition referred to therein is entered into by the Company or any of its Restricted Subsidiaries with a Person other than an Affiliate of the Company within the time period specified in the preceding paragraph and
such Net Proceeds are subsequently applied in accordance with such contract within 180 days following the date such agreement is entered into.
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Pending the final application of any Net Proceeds, the Company or any of its Restricted
Subsidiaries may invest the Net Proceeds in any manner that is not prohibited by the indenture.
If the Net Proceeds from Asset Sales that
are not applied or invested as provided in the second and third paragraphs of this section will constitute
Excess Proceeds
When the aggregate amount of Excess Proceeds exceeds $20.0 million, within five days thereof, the Company
will make an offer (an
Asset Sale Offer
) to all holders of notes and all holders of other Indebtedness that is
pari passu
with the notes containing provisions similar to those set forth in the indenture with respect to
offers to purchase, prepay or redeem such Indebtedness with the proceeds of sales of assets, to purchase, prepay or redeem, on a
pro rata
basis, the maximum principal amount of notes and such other
pari passu
Indebtedness (plus all
accrued interest on the notes and other Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be purchased, prepaid or redeemed out of the Excess Proceeds. The offer price in any Asset
Sale Offer will be equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase, prepayment or redemption, subject to the rights of holders of notes on the relevant record date to receive interest due on
the relevant interest payment date, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company or any of its Restricted Subsidiaries may use those Excess Proceeds for any purpose not otherwise
prohibited by the indenture. If the aggregate principal amount of notes tendered in such Asset Sale Offer exceeds the amount of Excess Proceeds allocated to the purchase of notes, the trustee will select the notes to be purchased on a
pro
rata
basis (except that any notes represented by a note in global form will be selected by such method as DTC or its nominee or successor may require or, where such nominee or successor is the trustee, a method that most nearly approximates
pro rata
selection as the trustee deems fair and appropriate unless otherwise required by law), based on the amounts tendered (with such adjustments as may be deemed appropriate by the Company so that only notes in denominations of $2,000, or
an integral multiple of $1,000 in excess thereof, will be purchased). Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to
the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to a Change of Control Offer or an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the
Change of Control or Asset Sales provisions of the indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of
Control or Asset Sales provisions of the indenture by virtue of such compliance.
The Credit Agreement contains, and
future agreements may contain, direct or indirect prohibitions of certain events, including events that would constitute a Change of Control or an Asset Sale and including repurchases of or other prepayments in respect of the notes. The exercise by
the holders of notes of their right to require the Company to repurchase the notes upon a Change of Control or an Asset Sale could cause a default under these other agreements, even if the Change of Control or Asset Sale itself does not, due to the
financial effect of such repurchases on the Company and its Subsidiaries. In the event a Change of Control or Asset Sale occurs at a time when the Company is effectively prohibited from purchasing notes, the Company could seek the consent of the
relevant senior lenders to the purchase of notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain a consent or repay those borrowings, the Company will remain effectively prohibited from
purchasing notes. In that case, the Companys 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 Companys
ability to pay cash to the holders of notes upon a repurchase may be limited by the Companys then existing financial resources. See Risk FactorsRisks Related to the NotesWe may not be able to repurchase the notes upon a
change of control.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee will select notes for redemption on a
pro rata
basis (or, in
the case of notes issued in global form as discussed under Book-Entry, Delivery and
29
Form, based on a method as DTC or its nominee or successor may require or, where such nominee or successor is the trustee, a method that most nearly approximates
pro rata
selection
as the trustee deems fair and appropriate unless otherwise required by law) unless otherwise required by law or applicable stock exchange or depositary requirements.
No notes of $2,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail (or sent electronically if DTC is
the recipient) at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address, except that redemption notices may be sent more than 60 days prior to a redemption date if the notice
is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture.
Any such redemption may, at the
Companys discretion, be subject to one or more conditions precedent specified in the notice of redemption. If such redemption is subject to the satisfaction of one or more conditions precedent, the related notice shall describe each such
condition, and if applicable, shall state that, in the Companys discretion, the date of redemption may be delayed until such time as any or all such conditions shall be satisfied or waived (
provided
that in no event shall such date of
redemption be delayed to a date later than 60 days after the date on which such notice was sent), or such redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied or waived
by the date of redemption, or by the date of redemption as so delayed.
If any note is to be redeemed in part only, the notice of
redemption that relates to that note will state the portion of the principal amount of that note that is to be redeemed. A new note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the holder of
notes upon cancellation of the original note. Subject to the provisions of the preceding paragraph, notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest will cease to accrue on notes or
portions of notes called for redemption, unless the Company defaults in making the redemption payment.
Certain Covenants
Changes in Covenants if Notes Rated Investment Grade
If at any time:
|
(1)
|
the notes are rated Baa3 or better by Moodys or BBB- or better by S&P (or, if either such entity ceases to rate the notes for reasons outside of the control of the Company, the equivalent investment grade
credit rating from any other nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Exchange Act selected by the Company as a replacement agency); and
|
|
(2)
|
no Default or Event of Default shall have occurred and be continuing,
|
then, beginning on that
date and subject to the provisions of the following paragraph, the covenants specifically listed under the following captions in this prospectus will be suspended:
|
(1)
|
Repurchase at the Option of HoldersAsset Sales;
|
|
(2)
|
Restricted Payments;
|
|
(3)
|
Incurrence of Indebtedness and Issuance of Preferred Stock;
|
|
(4)
|
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries;
|
|
(5)
|
Designation of Restricted and Unrestricted Subsidiaries;
|
|
(6)
|
Transactions with Affiliates; and
|
|
(7)
|
clause (4) of the covenant described below under the caption Merger, Consolidation or Sale of Assets.
|
30
During any period that the foregoing covenants have been suspended (the
Suspension
Period
), the Companys Board of Directors may not designate any of its Subsidiaries as Unrestricted Subsidiaries pursuant to the covenant described below under the caption Designation of Restricted and Unrestricted
Subsidiaries or the second paragraph of the definition of Unrestricted Subsidiaries.
Notwithstanding the foregoing, if
the ratings assigned to the notes by both such rating agencies should subsequently decline to below Baa3 and BBB- from Moodys or S&P, respectively, the foregoing covenants will be reinstituted as of and from the date both such ratings were
below investment grade. Calculations under the reinstated Restricted Payments covenant will be made as if the Restricted Payments covenant had been in effect since the date of the indenture except that no default will be
deemed to have occurred solely by reason of a Restricted Payment made while that covenant was suspended. Furthermore, all Indebtedness incurred, or Disqualified Stock or Preferred Stock issued, during the Suspension Period will be deemed to have
been incurred or issued pursuant to clause (2) of the definition of Permitted Debt.
In addition, for purposes of the
covenant described under Transactions with Affiliates, all agreements and arrangements entered into by the Company or any Restricted Subsidiary with an Affiliate of the Company during the Suspension Period will be deemed to have
been entered into prior to the date of the indenture and permitted by clause (7) of such covenant, and for purposes of the covenant described under Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries, all
contracts entered into during the Suspension Period that contain any of the restrictions contemplated by such covenant will be deemed to have been existing on the date of the indenture.
There can be no assurance that the notes will ever achieve an investment grade rating or that any such rating will be maintained.
Restricted Payments
The Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:
|
(1)
|
declare or pay any dividend or make any other payment or distribution on account of the Companys or any of its Restricted Subsidiaries Equity Interests (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Companys or any of its Restricted Subsidiaries Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the Company and other than dividends or distributions payable to the Company or a Restricted Subsidiary of the Company);
|
|
(2)
|
repurchase, redeem or otherwise acquire or retire for value (including in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the
Company;
|
|
(3)
|
make any payment on or with respect to, or repurchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Company or any Guarantor that is contractually subordinated to the notes or to any
Note Guarantee (excluding (a) any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries and (b) any such subordinated Indebtedness repaid, acquired or retired for value in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of payment, acquisition or retirement), except a payment of interest or principal at the Stated Maturity thereof; or
|
31
|
(4)
|
make any Restricted Investment
|
(all such payments and other actions set forth in these clauses
(1) through (4) above being collectively referred to as
Restricted Payments
),
unless, at the time of and
after giving effect to such Restricted Payment:
|
(a)
|
no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;
|
|
(b)
|
the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four- quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption Incurrence of Indebtedness and Issuance of
Preferred Stock; and
|
|
(c)
|
such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries since the Prior Issue Date (excluding Restricted Payments permitted by
clauses (2), (3), (4), (5), (6), (7), (8), (9) and (10) of the next succeeding paragraph), is less than the sum, without duplication, of:
|
|
(i)
|
50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from July 1, 2014 to the end of the Companys most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit);
plus
|
|
(ii)
|
100% of the aggregate net cash proceeds and the Fair Market Value of property or securities other than cash (including Capital Stock of Persons, other than the Company or a Subsidiary of the Company, engaged primarily
in the Oil and Gas Business or assets used in the Oil and Gas Business), in each case received by the Company since the Prior Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company
(other than (i) Disqualified Stock and (ii) net cash proceeds received from an issuance or sale of such Equity Interests to a Subsidiary of the Company or an employee stock ownership plan, option plan or similar trust to the extent such
sale to an employee stock ownership plan, option plan or similar trust is financed by loans from or Guaranteed by the Company or any Restricted Subsidiary (unless such loans have been repaid with cash on or prior to the date of determination));
plus
|
|
(iii)
|
to the extent not already included in Consolidated Net Income for such period, if any Restricted Investment that was made by the Company or any of its Restricted Subsidiaries after the Prior Issue Date is sold for cash
(other than to the Company or any Subsidiary of the Company) or otherwise cancelled, liquidated or repaid for cash, the cash return of capital with respect to such Restricted Investment resulting from such sale, liquidation or repayment (less any
out-of-pocket costs incurred in connection with any such sale);
plus
|
|
(iv)
|
the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Companys balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the
Prior Issue Date of any such Indebtedness for Equity Interests (other than Disqualified Stock) of the Company (less the amount of any cash, or the Fair Market Value of any other property (other than such Equity Interests), distributed by the Company
upon such conversion or exchange and excluding the net cash proceeds from the conversion or exchange financed, directly or indirectly, using funds borrowed from the Company or any Subsidiary), together with the net proceeds, if any, received by the
Company or any of its Restricted Subsidiaries upon such conversion or exchange;
plus
|
|
(v)
|
to the extent that any Unrestricted Subsidiary of the Company designated as such after the Prior Issue Date is
redesignated as a Restricted Subsidiary pursuant to the terms of the
|
32
|
indenture or is merged or consolidated with or into, or transfers or otherwise disposes of all of substantially all of its properties or assets to or is liquidated into, the Company or a
Restricted Subsidiary after the Prior Issue Date, the lesser of, as of the date of such redesignation, merger, consolidation, transfer, disposition or liquidation, (A) the Fair Market Value of the Companys Restricted Investment in such
Subsidiary (or of the properties or assets disposed of, as applicable) as of the date of such redesignation, merger, consolidation, transfer, disposition or liquidation and (B) such Fair Market Value as of the date on which such Subsidiary was
originally designated as an Unrestricted Subsidiary after the Prior Issue Date;
plus
|
|
(vi)
|
any dividends or distributions received in cash by the Company or a Guarantor after the Prior Issue Date from an Unrestricted Subsidiary of the Company, to the extent that such dividends or distributions were not
otherwise included in the Consolidated Net Income of the Company for such period.
|
The preceding provisions will not
prohibit:
|
(1)
|
the payment of any dividend or distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or distribution or giving of the redemption notice, as the case
may be, if at the date of declaration or notice, the dividend, distribution or redemption payment would have complied with the provisions of the indenture;
|
|
(2)
|
the making of any Restricted Payment in exchange for, or out of or with the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other
than Disqualified Stock) or from the substantially concurrent contribution of common equity capital to the Company; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will not be considered to be
net proceeds of Equity Interests for purposes of clause (c)(ii) of the preceding paragraph and will not be considered to be net cash proceeds from an Equity Offering for purposes of the Optional Redemption provisions of the indenture;
|
|
(3)
|
the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis;
|
|
(4)
|
the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of the Company or any Guarantor that is contractually subordinated to the notes or to any Note Guarantee with the net
cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness;
|
|
(5)
|
repurchases of Indebtedness of the Company or any Guarantor that is contractually subordinated in right of payment to the notes or a Note Guarantee at a purchase price not greater than (i) 101% of the principal
amount of such subordinated Indebtedness in the event of a Change of Control or (ii) 100% of the principal amount of such subordinated Indebtedness in the event of an Asset Sale, in each case, plus accrued and unpaid interest thereon, to the
extent required by the terms of such Indebtedness, but only if:
|
|
(a)
|
in the case of a Change of Control, the Company has first complied with and fully satisfied its obligations under the provisions described under Repurchase at the Option of HoldersChange of
Control; or
|
|
(b)
|
in the case of an Asset Sale, the Company has complied with and fully satisfied its obligations in accordance with the covenant under the heading Repurchase at the Option of HoldersAsset Sales;
|
|
(6)
|
so long as no Default or Event of Default has occurred and is continuing, the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former officer, director or employee (or permitted
|
33
|
transferees thereof) of the Company or any of its Restricted Subsidiaries (or any direct or indirect parent company thereof) pursuant to any equity subscription agreement, stock option agreement,
shareholders agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $5.0 million in any twelve- month period (with unused amounts in any
twelve-month period being carried over to succeeding twelve-month periods) and in addition, cancellation of Indebtedness owing to the Company from any current or former officer, director or employee (or any permitted transferees thereof) of the
Company or any of its Restricted Subsidiaries (or any direct or indirect parent company thereof), in connection with a repurchase or other acquisition or retirement for value of Equity Interests of the Company from such Persons will not be deemed to
constitute a Restricted Payment for purposes of this covenant or any other provisions of the indenture;
|
|
(7)
|
the repurchase of Equity Interests deemed to occur upon the exercise of stock or other equity options to the extent such Equity Interests represent a portion of the exercise price of those stock or other equity options
and any repurchase or other acquisition of Equity Interests made in lieu of withholding taxes in connection with any exercise or exchange of stock options, warrants, incentives or other rights to acquire Equity Interests;
|
|
(8)
|
so long as no Default or Event of Default has occurred and is continuing or would be caused thereby, the declaration and payment of regularly scheduled or accrued dividends or distributions to holders of any class or
series of Disqualified Stock of the Company or any Preferred Stock of any Restricted Subsidiary of the Company issued on or after the Prior Issue Date in accordance with the Fixed Charge Coverage Ratio test described below under the caption
Incurrence of Indebtedness and Issuance of Preferred Stock;
|
|
(9)
|
payments of cash, dividends, distributions, advances or other Restricted Payments by the Company or any of its Restricted Subsidiaries to allow the payment of cash in lieu of the issuance of fractional shares upon
(i) the exercise of options or warrants or (ii) the conversion or exchange of Capital Stock of any such Person; and
|
|
(10)
|
so long as no Default or Event of Default has occurred and is continuing or would be caused thereby, other Restricted Payments in an aggregate amount not to exceed $50.0 million since the Prior Issue Date.
|
The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment
(or, in the case of a dividend or distribution, on the date of declaration) of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The
Fair Market Value of any assets or securities that are required to be valued by this covenant will be determined, in the case of amounts of $40.0 million or more, by the Board of Directors of the Company whose resolution with respect thereto will be
delivered to the trustee.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, issue, assume, Guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to (collectively,
incur
) any Indebtedness (including Acquired Debt), and the Company will not issue any Disqualified Stock and will not permit any of
its Restricted Subsidiaries to issue any Preferred Stock;
provided, however
, that the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and the Guarantors may incur Indebtedness (including Acquired Debt) or
issue Preferred Stock, if the Fixed Charge Coverage Ratio for the Companys most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock or such Preferred Stock is issued, as the case may be, would have been at least 2.25 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred or the Disqualified Stock or the Preferred Stock had been issued, as the case may be, at the beginning of such four-quarter period.
34
The first paragraph of this covenant will not prohibit the incurrence of any of the following
items of Indebtedness or issuances of Disqualified Stock or Preferred Stock, as applicable (collectively,
Permitted Debt
):
|
(1)
|
the incurrence by the Company and any Guarantor of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with
letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and the Guarantors thereunder) not to exceed the greater of (i) $1,100.0 million and (ii) $350.0 million plus 35.0% of the
Companys Adjusted Consolidated Net Tangible Assets determined as of the date of such incurrence;
|
|
(2)
|
the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness;
|
|
(3)
|
the incurrence by the Company and the Guarantors of Indebtedness represented by the old notes and the related Note Guarantees issued on the date of the indenture and the exchange notes (including the new notes) and the
related Note Guarantees issued pursuant to any registration rights agreement;
|
|
(4)
|
the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment used in the business of the Company or any of its Restricted Subsidiaries, in an aggregate principal amount
at any time outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (4), not to exceed the greater of (i) $120.0 million
and (ii) 3.0% of the Companys Adjusted Consolidated Net Tangible Assets determined as of the date of such incurrence;
|
|
(5)
|
the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge
any Indebtedness (other than intercompany Indebtedness) of the Company or any of its Restricted Subsidiaries or any Disqualified Stock of the Company, in each case that was permitted by the indenture to be incurred under the first paragraph of this
covenant or clause (2), (3), (4), (5), (14) or (15) of this paragraph;
|
|
(6)
|
the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that:
|
|
(a)
|
if the Company or any Guarantor is the obligor on such Indebtedness and the payee is not the Company or a Guarantor, such Indebtedness must be unsecured and expressly subordinated to the prior payment in full in cash of
all Obligations then due with respect to the notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and
|
|
(b)
|
(i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (ii) any sale or other
transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as
the case may be, that was not permitted by this clause (6);
|
|
(7)
|
the issuance by any of the Companys Restricted Subsidiaries to the Company or to any of its Restricted Subsidiaries of any Preferred Stock; provided, however, that:
|
|
(a)
|
any subsequent issuance or transfer of Equity Interests that results in any such Preferred Stock being held by a Person other than the Company or a Restricted Subsidiary of the Company; and
|
|
(b)
|
any sale or other transfer of any such Preferred Stock to a Person that is not either the Company or a Restricted Subsidiary of the Company,
|
35
will be deemed, in each case, to constitute an issuance of such Preferred Stock by such
Restricted Subsidiary that was not permitted by this clause (7);
|
(8)
|
the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations in the ordinary course of business and not for speculative purposes;
|
|
(9)
|
the Guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company to the extent that the Guaranteed Indebtedness was permitted to be incurred by another
provision of this covenant; provided that if the Indebtedness being Guaranteed is subordinated to or pari passu with the notes, then the Guarantee must be subordinated or pari passu, as applicable, to the same extent as the Indebtedness Guaranteed;
|
|
(10)
|
the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of workers compensation claims, self-insurance obligations, bankers acceptances, performance, bid, plugging and
abandonment, appeal, reimbursement, performance, surety and similar bonds, and completion guarantees provided by the Company or a Restricted Subsidiary of the Company in the ordinary course of business and any Guarantees or letters of credit
functioning as or supporting any of the foregoing bonds or obligations and workers compensation claims in the ordinary course of business;
|
|
(11)
|
the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds, so long as such Indebtedness is covered within five business days;
|
|
(12)
|
the incurrence by the Company or any of its Restricted Subsidiaries of in-kind obligations relating to net oil or natural gas balancing positions arising in the ordinary course of business;
|
|
(13)
|
any obligation arising from agreements of the Company or any Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn outs, or similar obligations, in each case, incurred or
assumed in connection with the disposition or acquisition of any business, assets or Capital Stock of a Restricted Subsidiary in a transaction permitted by the indenture; provided that such obligation is not reflected as a liability on the face of
the balance sheet of the Company or any Restricted Subsidiary;
|
|
(14)
|
any Permitted Acquisition Indebtedness; and
|
|
(15)
|
the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness or the issuance by the Company of any Disqualified Stock in an aggregate principal amount (or accreted value, as applicable)
at any time outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred or Disqualified Stock issued pursuant to this clause (15), not to exceed, at any
one time outstanding, the greater of (i) $100.0 million and (ii) 5% of the Companys Adjusted Consolidated Net Tangible Assets determined as of the date of such incurrence or issuance.
|
The Company will not incur, and will not permit any Guarantor to incur, any Indebtedness (including Permitted Debt) that is contractually
subordinated in right of payment to any other Indebtedness of the Company or such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the notes or the applicable Note Guarantee on substantially identical
terms;
provided, however
, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company or any Guarantor solely by virtue of being unsecured or by virtue of being secured on
a junior priority basis.
For purposes of determining compliance with this Incurrence of Indebtedness and Issuance of Preferred
Stock covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (15) above, or is entitled to be incurred pursuant to the first
paragraph of this covenant, the Company will be permitted to divide, classify and reclassify such item of Indebtedness on the date of its incurrence, or later redivide or reclassify all or a portion of such item of
36
Indebtedness, in any manner that complies with this covenant. Indebtedness under the Credit Agreement 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 or Disqualified Stock dividends or distributions,
the accretion or amortization of original issue discount, the payment of interest on any Indebtedness not secured by a Lien in the form of additional Indebtedness with the same terms, the reclassification of Preferred Stock or Disqualified Stock as
Indebtedness due to a change in accounting principles, and the payment of dividends or distributions on Preferred Stock or Disqualified Stock in the form of additional shares or units of the same class of Preferred Stock or Disqualified Stock will
not be deemed to be an incurrence of Indebtedness or an issuance of Preferred Stock or Disqualified Stock for purposes of this covenant;
provided
, in each such case, that the amount thereof is included in Fixed Charges of the Company as
accrued to the extent required by the definition of such term.
The amount of any Indebtedness outstanding as of any date will be:
|
(1)
|
the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;
|
|
(2)
|
the principal amount of the Indebtedness, in the case of any other Indebtedness; and
|
|
(3)
|
in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:
|
|
(a)
|
the Fair Market Value of such assets at the date of determination; and
|
|
(b)
|
the amount of the Indebtedness of the other Person.
|
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur or assume any
Lien (an
Initial Lien
) of any kind (other than Permitted Liens) securing Indebtedness upon any of their property or assets owned on the date of the indenture or thereafter acquired, unless the notes or any Note Guarantee of such
Restricted Subsidiary, as applicable, are secured on an equal and ratable basis with the Indebtedness so secured until such time as such Indebtedness is no longer secured by the Initial Lien.
Any Lien created for the benefit of the holders of the notes pursuant to the preceding paragraph shall provide by its terms that such Lien
shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien.
Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:
|
(1)
|
pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries; provided that the priority that any series of Preferred Stock of a Restricted Subsidiary has in receiving dividends, distributions or liquidating distributions before dividends,
distributions or liquidating distributions are paid in respect of common stock of such Restricted Subsidiary shall not constitute a restriction on the ability to make dividends or distributions on Capital Stock for purposes of this covenant;
|
|
(2)
|
make loans or advances to the Company or any of its Restricted Subsidiaries (it being understood that the subordination of loans or advances made to the Company or any of its Restricted Subsidiaries to other
Indebtedness incurred by the Company or any of its Restricted Subsidiaries shall not be deemed a restriction on the ability to make loans or advances); or
|
37
|
(3)
|
sell, lease or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.
|
However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:
|
(1)
|
agreements governing Existing Indebtedness and Credit Facilities as in effect on the date of the indenture and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings
of those agreements; provided that the encumbrances or restrictions contained in the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not, in the reasonable good faith judgment of an
officer of the Company, materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of the indenture;
|
|
(2)
|
the indenture, the notes and the Note Guarantees;
|
|
(3)
|
agreements governing other Indebtedness permitted to be incurred under the provisions of the covenant described above under the caption Incurrence of Indebtedness and Issuance of Preferred Stock and
any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the encumbrances or restrictions contained therein are not, in the reasonable good faith judgment of an
officer of the Company, materially more restrictive, taken as a whole, than those contained in the indenture, the notes and the Note Guarantees or the Credit Agreement as in effect on the date of the indenture;
|
|
(4)
|
applicable law, rule, regulation or order;
|
|
(5)
|
any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or
Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of
the Person, so acquired, and any amendments, restatements, modifications, renewals, extensions, supplements, increases, refundings, replacements or refinancings thereof; provided, that the encumbrances and restrictions in any such amendments,
restatements, modifications, renewals, extensions, supplements, increases, refundings, replacements or refinancings are, in the reasonable good faith judgment of an officer of the Company, no more restrictive, taken as a whole, than those in effect
on the date of the acquisition; provided further, that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred;
|
|
(6)
|
customary non-assignment provisions in Hydrocarbon purchase and sale or exchange agreements or similar operational agreements or in licenses, easements or leases, in each case, entered into in the ordinary course of
business;
|
|
(7)
|
purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause
(3) of the preceding paragraph;
|
|
(8)
|
any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;
|
|
(9)
|
Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are, in the reasonable good faith judgment of an officer of the Company,
not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;
|
|
(10)
|
Liens permitted to be incurred under the provisions of the covenant described above under the caption Liens that limit the right of the debtor to dispose of the assets subject to such Liens;
|
38
|
(11)
|
provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements (including
agreements entered into in connection with a Restricted Investment) entered into with the approval of the Companys Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements;
|
|
(12)
|
encumbrances or restrictions applicable only to a Restricted Subsidiary that is not a Domestic Subsidiary;
|
|
(13)
|
encumbrances or restrictions on cash or other deposits or net worth imposed by customers or lessors under contracts or leases entered into in the ordinary course of business; and
|
|
(14)
|
customary encumbrances and restrictions contained in agreements of the types described in the definition of Permitted Business Investments.
|
Merger, Consolidation or Sale of Assets
The Company will not: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving Person), or
(2) sell, assign, transfer, convey, lease or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person,
unless:
|
(1)
|
either: (a) the Company is the surviving Person; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance,
lease or other disposition has been made is an entity organized or existing under the laws of the United States, any state of the United States or the District of Columbia; and, if such entity is not a corporation, a co-obligor of the notes is a
corporation organized or existing under any such laws;
|
|
(2)
|
the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance, lease or other disposition has been made assumes all the
obligations of the Company under the notes, the indenture and (if then in effect) the registration rights agreement pursuant to a supplemental indenture and a supplement to the registration rights agreement, in form reasonably satisfactory to the
trustee;
|
|
(3)
|
immediately after giving effect to such transaction, no Default or Event of Default exists; and
|
|
(4)
|
the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance, lease or other disposition has been made would, on
the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period (a) be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption Incurrence of Indebtedness and Issuance of Preferred Stock or (b) have had a
Fixed Charge Coverage Ratio equal to or greater than the actual Fixed Charge Coverage Ratio for the Company for such four-quarter period.
|
This Merger, Consolidation or Sale of Assets covenant will not apply to any sale, assignment, transfer, conveyance, lease or other
disposition of properties or assets between or among the Company and its Restricted Subsidiaries. Clauses (3) and (4) of the first paragraph of this covenant will not apply to (1) any merger or consolidation of the Company with or
into one of its Restricted Subsidiaries for any purpose or (2) with or into an Affiliate solely for the purpose of reincorporating the Company in another jurisdiction.
Upon any consolidation or merger or any sale, assignment, transfer, conveyance, lease or other disposition of all or substantially all of the
properties or assets of the Company in accordance with the foregoing in which the Company is not the surviving entity, the surviving Person formed by such consolidation or into or with which the
39
Company is merged or to which such sale, assignment, transfer, conveyance, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of,
the Company under the indenture with the same effect as if such surviving Person had been named as the Company in the indenture, and thereafter (except in the case of a lease of all or substantially all of the Companys properties or assets),
the Company will be relieved of all obligations and covenants under the indenture and the notes.
Although there is a limited body of case
law interpreting the phrase substantially all, there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular
transaction would involve all or substantially all of the properties or assets of a Person.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the
Company (each, an Affiliate Transaction), unless:
|
(1)
|
the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person or, if in the good faith judgment of the Board of Directors of the Company, no comparable transaction is available with which to compare such Affiliate Transaction, such Affiliate Transaction is
otherwise fair to the Company or the relevant Restricted Subsidiary from a financial point of view; and
|
|
(2)
|
the Company delivers to the trustee:
|
|
(a)
|
with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $20.0 million, an officers certificate certifying that such Affiliate
Transaction or series of related Affiliate Transactions complies with this covenant; and
|
|
(b)
|
with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $40.0 million, a resolution of the Board of Directors of the Company set forth in an
officers certificate certifying that such Affiliate Transaction or series of related Affiliated Transactions complies with this covenant and that such Affiliate Transaction or series of related Affiliate Transactions has been approved by a
majority of the disinterested members of the Board of Directors of the Company, if any.
|
The following items will not be
deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:
|
(1)
|
any employment or consulting agreement, employee benefit plan, officer or director indemnification, compensation or severance agreement or any similar arrangement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and payments pursuant thereto;
|
|
(2)
|
transactions between or among the Company or its Restricted Subsidiaries;
|
|
(3)
|
transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or through a Restricted Subsidiary, an Equity Interest in,
or controls, such Person;
|
|
(4)
|
payment of reasonable and customary fees and reimbursements of expenses (pursuant to indemnity arrangements or otherwise) of officers, directors, employees or consultants of the Company or any of its Restricted
Subsidiaries;
|
|
(5)
|
any issuance of Equity Interests (other than Disqualified Stock) of the Company to Affiliates of the Company;
|
40
|
(6)
|
Restricted Payments that do not violate the provisions of the indenture described above under the caption Restricted Payments and any Permitted Investment;
|
|
(7)
|
transactions effected in accordance with the terms of the agreements described under the caption Certain Relationships and Related Party Transactions in the Companys definitive proxy statement on
Schedule 14A filed with the SEC on April 29, 2016, as such agreements were in effect on the date of the indenture, and any amendment or replacement of any of such agreements so long as such amendment or replacement agreement is no less
advantageous to the Company in any material respect than the agreement so amended or replaced;
|
|
(8)
|
payments to an Affiliate in respect of the notes or any other Indebtedness of the Company or any of its Restricted Subsidiaries on the same basis as concurrent payments are made or offered to be made in respect thereof
to non-Affiliates;
|
|
(9)
|
loans or advances to or reimbursements of expenses incurred by employees for moving, entertainment and travel expenses and similar expenditures in the ordinary course of business;
|
|
(10)
|
transactions between the Company or any of its Restricted Subsidiaries and any other Person, a director of which is also on the Board of Directors of the Company or any direct or indirect parent company of the Company,
and such common director is the sole cause for such other Person to be deemed an Affiliate of the Company or any of its Restricted Subsidiaries; provided, however, that such director abstains from voting as a member of the Board of Directors of the
Company or any direct or indirect parent company of the Company, as the case may be, on any transaction with such other Person;
|
|
(11)
|
in the case of contracts for exploring for, producing, marketing, storing or otherwise handling Hydrocarbons, or activities or services reasonably related or ancillary thereto, or other operational contracts, any such
contracts entered into in the ordinary course of business and otherwise in compliance with the terms of the indenture (a) which are fair to the Company and its Restricted Subsidiaries or are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party, in either case in the reasonable determination of the Board of Directors of the Company or the senior management thereof, and (b) with respect to which the Company has complied with
clauses 2(a) and 2(b) of the prior paragraph to the extent applicable; and
|
|
(12)
|
any transaction in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the trustee a letter from an accounting, appraisal or investment banking firm of national standing stating that
such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or that such transaction meets the requirements of clause (1) of the preceding paragraph.
|
Business Activities
The Company
will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than the Oil and Gas Business, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole.
Additional Note Guarantees
If the
Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of the indenture that incurs Indebtedness under a Credit Facility, then, in either case, that Subsidiary will become a Guarantor by
executing a supplemental indenture in substantially the form specified in the indenture and delivering an opinion of counsel to the trustee within 30 days after the date that Subsidiary incurred such Indebtedness.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not
cause a Default. If a Restricted Subsidiary is designated as an
41
Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary designated as Unrestricted will be
deemed to be either (1) an Investment made as of the time of the designation that will reduce the amount available for Restricted Payments under the covenant described above under the caption Restricted Payments or (2) a
Permitted Investment under one or more clauses of the definition of Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary will be evidenced to the trustee by filing with the trustee a certified copy of a resolution of the Board of Directors giving effect to such designation and an officers certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the caption Restricted Payments. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary,
it will thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the caption Incurrence of Indebtedness and Issuance of Preferred Stock, the Company will be in default of such covenant.
The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the
Company;
provided
that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted
if (1) such Indebtedness is permitted under the covenant described under the caption Incurrence of Indebtedness and Issuance of Preferred Stock, calculated on a pro forma basis as if such designation had occurred at the
beginning of the applicable reference period and (2) no Default or Event of Default would be in existence following such designation.
Reports
Whether or not required
by the rules and regulations of the SEC, so long as any notes are outstanding, the Company will furnish to the holders of notes or cause the trustee to furnish to the holders of notes (or file with the SEC for public availability), within the time
periods specified in the SECs rules and regulations:
|
(1)
|
all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if the Company were required to file such reports, including a Managements Discussion and Analysis of
Financial Condition and Results of Operations and, with respect to the annual information only, a report thereon by the Companys certified independent accountants; and
|
|
(2)
|
all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports.
|
The availability of the foregoing reports on the SECs EDGAR filing system will be deemed to satisfy the foregoing delivery requirements.
All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such
reports. The Company will at all times comply with Trust Indenture Act §314(a).
If, at any time, the Company is no longer subject to
the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in the preceding paragraphs of this covenant with the SEC within the time periods specified above unless the
SEC will not accept such a filing. The Company will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Companys filings for any reason, the
Company will post the reports referred to in the preceding paragraphs on its website within the time periods that would apply if the Company were required to file those reports with the SEC.
42
For the avoidance of doubt, such reports will not be required to contain any information or item
not applicable to an emerging growth company (as defined in the Jumpstart Our Business Startups Act) for so long as the Company qualifies as such.
If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information
required by the preceding paragraphs will include, to the extent material, a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Managements Discussion and Analysis of
Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries
of the Company.
Any and all Defaults or Events of Default arising from a failure to furnish in a timely manner any report required by
this covenant shall be deemed cured (and the Company shall be deemed to be in compliance with this covenant) upon filing or posting such report as contemplated by this covenant (but without regard to the date on which such report is so filed or
posted); provided that such cure shall not otherwise affect the rights of the holders under Events of Defaults and Remedies if the principal of, premium, if any, on, and interest on, the notes have been accelerated in accordance
with the terms of the indenture and such acceleration has not been rescinded or cancelled prior to such cure.
In addition, the Company
shall furnish to noteholders, prospective investors, broker-dealers and securities analysts, upon their request, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the notes are not freely
transferable under the Securities Act.
Events of Default and Remedies
Each of the following is an
Event of Default
:
|
(1)
|
default for 30 days in the payment when due of interest on the notes;
|
|
(2)
|
default in the payment when due (at Stated Maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the notes;
|
|
(3)
|
failure by the Company to comply with the provisions described under the captions Repurchase at the Option of HoldersChange of Control, Repurchase at the Option of HoldersAsset
Sales or Certain CovenantsMerger, Consolidation or Sale of Assets;
|
|
(4)
|
failure by the Company for 180 days after notice from the trustee or holders of at least 25% in aggregate principal amount of the notes then outstanding to comply with the provisions described under Certain
CovenantsReports;
|
|
(5)
|
failure by the Company for 60 days after notice to the Company by the trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding to comply with any of its other agreements in the
indenture;
|
|
(6)
|
default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries
(or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee existed on the date of the indenture, or is created thereafter, if that default:
|
|
(a)
|
is caused by a failure to pay principal of, premium, if any, on, or interest, if any, on, such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a
Payment Default
); or
|
|
(b)
|
results in the acceleration of such Indebtedness prior to its Stated Maturity,
|
43
and, in each case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $35.0 million or more;
provided, however
, that if, prior to any acceleration of the notes,
(i) any such Payment Default is cured or waived, (ii) any such acceleration is rescinded, or (iii) such Indebtedness is repaid during the 10 business day period commencing upon the end of any applicable grace period for such Payment
Default or the occurrence of such acceleration, as the case may be, any Default or Event of Default (but not any acceleration of the notes) caused by such Payment Default or acceleration shall be automatically rescinded, so long as such rescission
does not conflict with any judgment, decree or applicable law;
|
(7)
|
failure by the Company or any of its Restricted Subsidiaries to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of $35.0 million (to the extent not covered by insurance
by a reputable and creditworthy insurer as to which the insurer has not disclaimed coverage), which judgments are not paid, discharged or stayed, for a period of 60 days;
|
|
(8)
|
except as permitted by the indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect, or any Guarantor, or any Person acting
on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee; and
|
|
(9)
|
certain events of bankruptcy or insolvency described in the indenture with respect to the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of its Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary.
|
In the case of an Event of Default arising from certain events
of bankruptcy or insolvency with respect to the Company, any Restricted Subsidiary of the Company that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant
Subsidiary, all outstanding notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the trustee or the holders of at least 25% in aggregate principal amount of the then
outstanding notes may declare all the notes to be due and payable immediately.
The holders of a majority in aggregate principal amount of
the then outstanding notes by written notice to the trustee may, on behalf of the holders of all of the notes, rescind an acceleration and its consequences under the indenture, if, among other things, (1) the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction and (2) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, on, and interest on, the notes that has become due solely by such declaration of
acceleration, have been cured or waived.
If a Default or Event of Default occurs and is continuing and is known to the Trustee, the
Trustee must send to each holders notice of the Default or Event of Default within 90 days after it occurs. The trustee, however, may withhold from holders of the notes notice of any continuing Default or Event of Default if it determines that
withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal of, premium, if any, on or interest on, the notes.
Subject to the provisions of the indenture relating to the duties of the trustee in case an Event of Default occurs and is continuing, the
trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any holders of notes unless such holders have offered to the trustee indemnity or security reasonably satisfactory to it
against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest when due, no holder of a note may pursue any remedy with respect to the indenture or the notes unless:
|
(1)
|
such holder has previously given the trustee written notice that an Event of Default is continuing;
|
|
(2)
|
holders of at least 25% in aggregate principal amount of the then outstanding notes make a written request to the trustee to pursue the remedy;
|
44
|
(3)
|
such holder or holders offer and, if requested, provide to the trustee security or indemnity reasonably satisfactory to the trustee against any loss, liability or expense;
|
|
(4)
|
the trustee does not comply with such request within 60 days after receipt of the request and the offer, or provision if requested, of security or indemnity; and
|
|
(5)
|
during such 60-day period, holders of a majority in aggregate principal amount of the then outstanding notes do not give the trustee a direction inconsistent with such request.
|
The Company will be required to deliver to the trustee annually an officers certificate regarding compliance with the indenture. Within
30 days of any officer of the Company becoming aware of any Default or Event of Default, the Company will be required to deliver to the trustee a statement specifying such Default or Event of Default and what action the Company intends to take, if
any, regarding such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder or other owner of any Capital Stock of the Company or any Guarantor, as such, will
have any liability for any obligations of the Company or the Guarantors under the notes, the indenture or the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes by
accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
The Company may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an officers certificate,
elect to have all of its obligations discharged with respect to the outstanding notes and all obligations of the Guarantors discharged with respect to their Note Guarantees (Legal Defeasance) except for:
|
(1)
|
the rights of holders of outstanding notes to receive payments in respect of the principal of, premium, if any, on, or interest on, such notes when such payments are due from the trust referred to below;
|
|
(2)
|
the Companys 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 Companys and the Guarantors obligations in connection therewith; and
|
|
(4)
|
the Legal Defeasance provisions of the indenture.
|
In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company and the Guarantors released with respect to certain covenants (including the Companys obligation to make Change of Control Offers and Asset Sale Offers) that are described in
the indenture (
Covenant Defeasance
) and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, all Events of
Default described under Events of Default and Remedies (except those relating to payments on the notes or bankruptcy or insolvency events) will no longer constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
|
(1)
|
the Company must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the notes,
cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants delivered to
the trustee, to pay the principal of, premium, if any, on,
|
45
|
and interest on, the outstanding notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the notes are being
defeased to such stated date for payment or to a particular redemption date;
|
|
(2)
|
in the case of Legal Defeasance, the Company must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that (a) the Company received from, or there has been published by, the
Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the
holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
|
|
(3)
|
in the case of Covenant Defeasance, the Company must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that the holders of the outstanding notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not
occurred;
|
|
(4)
|
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 Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;
|
|
(6)
|
the Company must deliver to the trustee an officers certificate stating that the deposit was not made by the Company with the intent of preferring the holders of notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and
|
|
(7)
|
the Company must deliver to the trustee an officers certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
|
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the indenture, the notes or the Note Guarantees may be amended or supplemented with
the consent of the holders of a majority in aggregate principal amount of the then outstanding notes (including additional notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for,
or purchase of, the notes), and any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, on, or interest on, the notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of the indenture, the notes or the Note Guarantees may be waived with the consent of the holders of a majority in aggregate principal amount of the then outstanding notes
(including additional notes, if any) voting as a single class (including consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes).
Without the consent of each holder of notes affected, an amendment, supplement or waiver may not (with respect to any notes held by a
non-consenting holder):
|
(1)
|
reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver;
|
46
|
(2)
|
reduce the principal of or change the fixed maturity of any note or alter or waive any of the provisions with respect to the redemption or repurchase of the notes (except provisions relating to minimum required notice
of optional redemption or those provisions relating to the covenants described above under the caption Repurchase at the Option of Holders);
|
|
(3)
|
reduce the rate of or change the time for payment of interest on any note;
|
|
(4)
|
waive a Default or Event of Default in the payment of principal of, premium, if any, on, or interest on, the notes (except a rescission of acceleration of the notes by the holders of a majority in aggregate principal
amount of the then outstanding notes and a waiver of the payment default that resulted from such acceleration);
|
|
(5)
|
make any note payable in money other than that stated in the notes;
|
|
(6)
|
make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of holders of notes to receive payments of principal of, premium, if any, on, or interest on, the notes (other than
as permitted by clause (7) below);
|
|
(7)
|
waive a redemption or repurchase payment with respect to any note (other than a payment required by one of the covenants described above under the caption Repurchase at the Option of Holders);
|
|
(8)
|
release any Guarantor from any of its obligations under its Note Guarantee or the indenture, except in accordance with the terms of the indenture; or
|
|
(9)
|
make any change in the preceding amendment, supplement or waiver provisions.
|
Notwithstanding
the preceding, without the consent of any holder of notes, the Company, the Guarantors and the trustee may amend or supplement the indenture, the notes or the Note Guarantees:
|
(1)
|
to cure any ambiguity, defect or inconsistency;
|
|
(2)
|
to provide for uncertificated notes in addition to or in place of certificated notes;
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|
(3)
|
to provide for the assumption of the Companys or a Guarantors obligations to holders of notes and Note Guarantees in the case of a merger or consolidation or disposition of all or substantially all of the
Companys or such Guarantors properties or assets, as applicable;
|
|
(4)
|
to make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of any holder, including to comply with requirements
of the SEC or DTC in order to maintain the transferability of the notes pursuant to Rule 144A under the Securities Act (Rule 144A) or Regulation S under the Securities Act (Regulation S);
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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;
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|
(6)
|
to conform the text of the indenture, the notes or the Note Guarantees to any provision of the Description of Notes in our offering memorandum relating to the old notes;
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|
(7)
|
to provide for the issuance of additional notes in accordance with the limitations set forth in the indenture as of the date of the indenture;
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|
(8)
|
to secure the notes or the Note Guarantees pursuant to the requirements of the covenant described above under the subheading Certain CovenantsLiens;
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|
(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.
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47
The consent of the holders is not necessary under the indenture to approve the particular form of
any proposed amendment, supplement or waiver. It is sufficient if such consent approves the substance of the proposed amendment, supplement or waiver. After an amendment, supplement or waiver under the indenture requiring the approval of the holders
becomes effective, the Company will send to the holders a notice briefly describing the amendment, supplement or waiver. However, the failure to give such notice, or any defect in the notice, will not impair or affect the validity of the amendment,
supplement or waiver.
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:
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(a)
|
all notes that have been authenticated, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited in trust and thereafter repaid to the Company, have
been delivered to the trustee for cancellation; or
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|
(b)
|
all notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the giving of a notice of redemption or otherwise or will become due and payable within one year and the
Company or any Guarantor has irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the notes not delivered to the trustee for cancellation for principal of, premium, if any, on, or interest on, the
notes to the date of Stated Maturity or redemption;
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|
(2)
|
in respect of clause 1(b), no Event of Default has occurred and is continuing on the date of the deposit (other than an Event of Default resulting from the borrowing of funds to be applied to such deposit and any
similar deposit relating to other Indebtedness and, in each case, the granting of Liens to secure such borrowings) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company
or any Guarantor is a party or by which the Company or any Guarantor is bound (other than with respect to the borrowing of funds to be applied concurrently to make the deposit required to effect such satisfaction and discharge and any similar
concurrent deposit relating to other Indebtedness, and in each case the granting of Liens to secure such borrowings);
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|
(3)
|
the Company or any Guarantor has paid or caused to be paid all other sums payable by it under the indenture; and
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|
(4)
|
the Company has delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of the notes at Stated Maturity or on the redemption date, as the case may be.
|
In addition, the Company must deliver an officers certificate and an opinion of counsel to the trustee stating that
all conditions precedent to satisfaction and discharge have been satisfied.
Concerning the Trustee
U.S. Bank National Association is the trustee under the indenture. Such bank is a lender under the Credit Agreement and the trustee under the
indenture for the Existing Notes.
If the trustee becomes a creditor of the Company or any Guarantor, the indenture limits the right of
the trustee to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it
48
acquires any conflicting interest (as defined in the Trust Indenture Act after a Default has occurred and is continuing it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee (if the indenture has been qualified under the Trust Indenture Act) or resign.
The holders of a
majority in aggregate principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee or of exercising any trust or power
conferred on the trustee, subject to certain exceptions. In case an Event of Default has occurred and is continuing, the trustee will be required, in the exercise of its powers, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder of notes, unless such holder has offered to the trustee indemnity or security
reasonably satisfactory to it against any loss, liability or expense.
Governing Law
The indenture, the notes and the Note Guarantees are governed by, and will be construed in accordance with, the laws of the State of New York.
Book-Entry, Delivery and Form
The
new notes will be represented by one or more notes in registered, global form without interest coupons (collectively, the Global Notes). The Global Notes will be deposited with the trustee as custodian for DTC, and registered in the name
of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below.
Except as set
forth below, the Global Notes may be transferred, in whole but not in part, only to another nominee of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for definitive new notes in registered certificated form
(Certificated Notes) except in the limited circumstances described below. See Exchange of Global Notes for Certificated Notes.
Depository Procedures
The following
description of the operations and procedures of DTC, Euroclear Bank S.A./N.V., as operator of the Euroclear System (Euroclear), and Clearstream Banking, S.A. (Clearstream) are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. The Company takes no responsibility for these operations and procedures and urges investors to contact the system or
their participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the Participants) and to facilitate the clearance and settlement of transactions in those securities between the Participants through electronic book-entry changes in
accounts of its Participants. The Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Access to DTCs system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the Indirect Participants). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by it:
|
(1)
|
upon deposit of the Global Notes, DTC will credit the accounts of the Participants designated by the exchange agent with portions of the principal amount of the Global Notes; and
|
49
|
(2)
|
ownership of these interests in the Global Notes will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Notes).
|
Investors in the Global Notes who are Participants may hold their interests therein directly through DTC. Investors in the Global Notes who
are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Clearstream) which are Participants. Euroclear and Clearstream will hold interests in the Global Notes on behalf of their participants
through customers securities accounts in their respective names on the books of their respective depositaries. All interests in a Global Note, including those held through Euroclear or Clearstream, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems. The laws of some jurisdictions may require that certain Persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be limited to that extent. Because DTC can act only on behalf of the Participants, which in turn act on behalf of the
Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the
lack of a physical certificate evidencing such interests.
Except as described below, owners of beneficial interests in the Global
Notes will not have notes registered in their names, will not receive physical delivery of 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, premium, if any, on, or interest on, a Global Note registered in the name of DTC or its nominee will
be payable to DTC in its capacity as the registered holder under the indenture. Under the terms of the indenture, the Company, the Guarantors and the trustee will treat the Persons in whose names the notes, including the Global Notes, are registered
as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, none of the Company, the Guarantors, the trustee nor any agent of any of the foregoing has or will have any responsibility or liability for:
|
(1)
|
any aspect of DTCs records or any Participants or Indirect Participants records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any of DTCs records or any Participants or Indirect Participants records relating to the beneficial ownership interests in the Global Notes; or
|
|
(2)
|
any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.
|
DTC has advised the Company that its current practice, at the due date of any payment in respect of securities such as the notes (including
principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe that it will not receive payment on such payment date. Each relevant Participant is credited with
an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be
governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the trustee, the Company or the Guarantors. None of the Company, the
Guarantors or 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 Company, the Guarantors and the trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all purposes.
Transfers between the Participants will be
effected in accordance with DTCs 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.
50
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 DTCs rules on behalf of Euroclear or Clearstream, as the case may be, by their respective depositaries; however, such cross-market transactions will require
delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream,
as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Note in DTC,
and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or
Clearstream.
DTC has advised the Company that it will take any action permitted to be taken by a holder of notes only at the direction of
one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the notes as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the Global Notes for Certificated Notes, and to distribute such notes to its Participants.
Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among
participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. None of the Company, the Guarantors, the trustee or any of their
respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes in minimum denominations of $2,000 and in integral multiples of $1,000 in excess of
$2,000, if:
|
(1)
|
DTC (a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes or (b) has ceased to be a clearing agency registered under the Exchange Act and, in either case, the
Company fails to appoint a successor depositary within 90 days;
|
|
(2)
|
the Company, at its option, but subject to DTCs requirements, notifies the trustee in writing that it elects to cause the issuance of the Certificated Notes; or
|
|
(3)
|
there has occurred and is continuing an Event of Default, and DTC notifies the trustee of its decision to exchange such Global Note for Certificated Notes.
|
In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the trustee by
or on behalf of DTC in accordance with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of DTC (in accordance with its customary procedures).
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any Global Note, except in the limited circumstances provided in the
indenture.
Same Day Settlement and Payment
The Company will make payments in respect of the notes represented by the Global Notes, including principal, premium, if any, and interest, by
wire transfer of immediately available funds to the accounts specified
51
by DTC or its nominee. The Company will make all payments of principal, premium, if any, and interest 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 be eligible to trade in DTCs Same-Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore,
be required by DTC to be settled in immediately available funds. The Company expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note
from a Participant will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream)
immediately following the settlement date of DTC. DTC has advised the Company that cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream participant to a Participant
will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTCs settlement date.
Certain Definitions
Set forth below are
certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all defined terms used therein, as well as any other capitalized terms used herein for which no definition is provided.
Acquired Debt
means, with respect to any specified Person:
|
(1)
|
Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and
|
|
(2)
|
Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.
|
Adjusted Consolidated Net Tangible Assets means (without duplication), with respect to any specified Person, as of any date of
determination:
|
(i)
|
the discounted future net revenues from Proved Reserves of such Person and its Restricted Subsidiaries calculated in accordance with SEC guidelines (before any state or federal income taxes) as estimated in a reserve
report prepared as of the end of such Persons most recently completed fiscal year, which reserve report is prepared or audited by independent petroleum engineers as to Proved Reserves accounting for at least 80% of all such discounted future
net revenues and by such Persons petroleum engineers with respect to any other Proved Reserves covered by such report, as increased by, as of the date of determination, the estimated discounted future net revenues from:
|
|
(A)
|
estimated Proved Reserves of such Person and its Restricted Subsidiaries acquired since the date of such year-end reserve report, and
|
|
(B)
|
estimated Proved Reserves of such Person and its Restricted Subsidiaries attributable to extensions, discoveries and other additions and upward revisions of estimates of Proved Reserves (including previously estimated
development costs incurred during the period and the accretion of discount since the prior period end) since the date of such year-end reserve report due to exploration, development or exploitation, production or other activities which would, in
accordance with standard industry practice, cause such revisions,
|
52
and
decreased by
, as of the date of determination, the discounted future net revenue
attributable to:
|
(C)
|
estimated Proved Reserves of such Person and its Restricted Subsidiaries reflected in such reserve report produced or disposed of since the date of such year-end reserve report, and
|
|
(D)
|
reductions in estimated Proved Reserves of such Person and its Restricted Subsidiaries reflected in such reserve report attributable to downward revisions of estimates of Proved Reserves since such year-end due to
changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions;
|
in the case of the preceding clauses (A) through (D), calculated on a pre-tax basis in accordance with SEC guidelines (utilizing the
prices utilized in such year-end reserve report) and estimated by Such Persons petroleum engineers or any independent petroleum engineers engaged by such Person for such purpose;
|
(ii)
|
the capitalized costs that are attributable to oil and gas properties of such Person and its Restricted Subsidiaries to which no Proved Reserves are attributable, based on such Persons books and records as of a
date no earlier than the last day of such Persons most recent quarterly or annual period for which internal financial statements are available;
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|
(iii)
|
the Consolidated Net Working Capital of such Person and its Restricted Subsidiaries as of a date no earlier than the last day of such Persons most recent quarterly or annual period for which internal financial
statements are available; and
|
|
(A)
|
the net book value and
|
|
(B)
|
the appraised value, as estimated by independent appraisers,
|
in each case, of other tangible
assets (including Investments in unconsolidated Subsidiaries) of such Person and its Restricted Subsidiaries as of a date no earlier than the last day of such Persons most recent quarterly or annual period for which internal financial
statements are available;
provided
that if no such appraisal has been performed, such Person will not be required to obtain such an appraisal and only clause (iv)(A) of this definition will apply,
minus
, to the extent not otherwise taken into account in the immediately preceding clause (a),
|
(ii)
|
any net gas balancing liabilities of such Person and its Restricted Subsidiaries as of the last day of such Persons most recent annual or quarterly period for which internal financial statements are available;
|
|
(iii)
|
to the extent included in clause (a)(i) above, the discounted future net revenues, calculated on a pre-tax basis in accordance with SEC guidelines (utilizing the prices utilized in such Persons year-end reserve
report), attributable to reserves that are required to be delivered to third parties to fully satisfy the obligations of such Person and its Restricted Subsidiaries with respect to Volumetric Production Payments on the schedules specified with
respect thereto; and
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|
(iv)
|
the discounted future net revenues, calculated on a pre-tax basis in accordance with SEC guidelines, attributable
to reserves subject to Dollar-Denominated Production Payments that, based on the estimates of production and price assumptions included in determining the
|
53
|
discounted future net revenues specified in (a)(i) above, would be necessary to fully satisfy the payment obligations of such Person and its Restricted Subsidiaries with respect to
Dollar-Denominated Production Payments on the schedules specified with respect thereto.
|
If such Person changes its method of
accounting from the successful efforts method to the full costs method or a similar method of accounting, Adjusted Consolidated Net Tangible Assets will continue to be calculated as if such Person were still using the successful efforts
method of accounting.
Affiliate
of any specified Person means any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, control, as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms controlling, controlled by and
under common control with have correlative meanings.
Applicable Premium
means, with respect to any note at
the time of computation, the greater of:
|
(1)
|
1.0% of the principal amount of the note; or
|
|
(a)
|
the present value at such time of (i) the redemption price of the note at January 15, 2020 (such redemption price being set forth in the table appearing above under the caption Optional
Redemption) plus (ii) all required interest payments due on the note through January 15, 2020 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such time
plus 50 basis points discounted to the redemption date on a semi-annual basis (assuming a 360 day year consisting of twelve 30 day months); over
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|
(b)
|
the principal amount of the note.
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Asset Sale
means:
|
(1)
|
the sale, lease, conveyance or other disposition of any assets or rights by the Company or any of the Companys Restricted Subsidiaries; provided that the sale, lease, conveyance or other disposition of all or
substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption Repurchase at the Option of HoldersChange of
Control or the provisions described above under the caption Certain CovenantsMerger, Consolidation or Sale of Assets and not by the provisions of the Asset Sales covenant; and
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|
(2)
|
the issuance of Equity Interests by any of the Companys Restricted Subsidiaries or the sale by the Company or any of the Companys Restricted Subsidiaries of Equity Interests in any of the Companys
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 $10.0 million;
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|
(2)
|
a disposition of assets between or among the Company and its Restricted Subsidiaries;
|
|
(3)
|
an issuance of Equity Interests by a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company;
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|
(4)
|
the sale, lease or other disposition of products, services or accounts receivable in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete assets in the ordinary course of
business (including the abandonment or other disposition of intellectual property) that is, in the reasonable judgment of the Company, no longer economically practicable to maintain or useful in the conduct of the business of the Company and its
Restricted Subsidiaries taken as whole;
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54
|
(5)
|
licenses and sublicenses by the Company or any of its Restricted Subsidiaries of software or intellectual property, including seismic data and interpretations thereof, in the ordinary course of business;
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|
(6)
|
any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business;
|
|
(7)
|
the granting of Liens not prohibited by the covenant described above under the caption Liens and dispositions in connection with Permitted Liens;
|
|
(8)
|
the sale or other disposition of cash or Cash Equivalents or other financial instruments (other than Oil and Gas Hedging Contracts);
|
|
(9)
|
a Restricted Payment that does not violate the covenant described above under the caption Certain CovenantsRestricted Payments or a Permitted Investment;
|
|
(10)
|
sale or other disposition of Hydrocarbons or other mineral products in the ordinary course of business;
|
|
(12)
|
dispositions of crude oil and natural gas properties; provided that at the time of any such disposition such properties do not have associated with them any Proved Reserves; and
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|
(13)
|
any Production Payments and Reserve Sales; provided that any such Production Payments and Reserve Sales, other than incentive compensation programs on terms that are reasonably customary in the Oil and Gas Business for
geologists, geophysicists and other providers of technical services to the Company or a Restricted Subsidiary of the Company, shall have been created, incurred, issued, assumed or Guaranteed in connection with the financing of, and within 60 days
after the acquisition of, the property that is subject thereto.
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Asset Sale Offer
has the meaning
assigned to that term in the indenture.
Asset Swap
means any substantially contemporaneous (and in any event occurring
within 180 days of each other) purchase and sale or exchange of any assets or properties used or useful in the Oil and Gas Business between the Company or any of its Restricted Subsidiaries and another Person;
provided
, that the Fair Market
Value of the properties or assets traded or exchanged by the Company or such Restricted Subsidiary (together with any cash) is reasonably equivalent to the Fair Market Value of the properties or assets (together with any cash) to be received by the
Company or such Restricted Subsidiary, and
provided further
that any net cash received must be applied in accordance with the provisions described above under the caption Repurchase at the Option of HoldersAsset Sales
if then in effect.
Beneficial Owner
has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the
Exchange Act, except that in calculating the beneficial ownership of any particular person (as that term is used in Section 13(d)(3) of the Exchange Act), such person will be deemed to have beneficial ownership of all
securities that such person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms Beneficially Owns and
Beneficially Owned have a corresponding meaning. For purposes of this definition, a Person shall be deemed not to Beneficially Own securities that are the subject of a stock purchase agreement, merger agreement, amalgamation agreement,
arrangement agreement or similar agreement until consummation of the transactions or, as applicable, series of related transactions contemplated thereby.
Board of Directors
means:
|
(1)
|
with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;
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|
(2)
|
with respect to a partnership, the board of directors of the general partner of the partnership;
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55
|
(3)
|
with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and
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|
(4)
|
with respect to any other Person, the board or committee of such Person serving a similar function.
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Capital Lease Obligation
means, at the time any determination is to be made, the amount of the liability in respect of a
capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be prepaid by the lessee without payment of a penalty. Notwithstanding the foregoing, any lease (whether entered into before or after the date of the indenture) that would have been classified as an operating
lease pursuant to (i) GAAP as in effect or (ii) any accounting standards currently implemented by the Company, in each case on the date of the indenture will be deemed not to represent a Capital Lease Obligation.
Capital Stock
means:
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(1)
|
in the case of a corporation, corporate stock;
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|
(2)
|
in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
|
|
(3)
|
in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and
|
|
(4)
|
any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt
securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
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Cash Equivalents
means:
|
(1)
|
United States dollars;
|
|
(2)
|
securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United
States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition;
|
|
(3)
|
certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers acceptances with maturities not exceeding one year and overnight bank deposits, in
each case, with any lender party to the Credit Agreement or with any domestic commercial bank or any branch or agency of a non-U.S. bank licensed to conduct business in the United States, in each case having combined capital and surplus of at least
$100.0 million and a short term deposit rating no lower than A2 or P2 by S&P or Moodys, respectively;
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|
(4)
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repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
|
|
(5)
|
commercial paper having one of the two highest ratings obtainable from Moodys or S&P and, in each case, maturing within one year after the date of creation thereof; and
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|
(6)
|
money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.
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Change of Control
means the occurrence of any of the following:
|
(1)
|
the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or substantially all of the properties or
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56
|
assets of the Company and its Subsidiaries taken as a whole to any Person (including any person (as that term is used in Section 13(d)(3) of the Exchange Act)), which occurrence
is followed by a Rating Decline within 90 days;
|
|
(2)
|
the adoption of a plan relating to the liquidation or dissolution of the Company; or
|
|
(3)
|
the consummation of any transaction (including any merger or consolidation), the result of which is that any Person (including any person (as defined above) becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares, which occurrence is followed by a Rating Decline within 90 days.
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Change of Control Offer
has the meaning assigned to that term in the indenture.
Code
means the Internal Revenue Code of 1986, as amended.
Consolidated EBITDAX
means, with respect to any specified Person for any period, the Consolidated Net Income of such Person
for such period plus, without duplication:
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(1)
|
provision for taxes based on income or profits (including state franchise taxes accounted for as income taxes in accordance with GAAP) of such Person and its Restricted Subsidiaries for such period, to the extent that
such provision for taxes was deducted in computing such Consolidated Net Income;
plus
|
|
(2)
|
the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income;
plus
|
|
(3)
|
depreciation, depletion, amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period), impairment and other non-cash charges and expenses
(excluding any such non-cash charge or expense to the extent that it represents an accrual of or reserve for cash charges or expenses in any future period or amortization of a prepaid cash charge or expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent that such depreciation, depletion, amortization, impairment and other non-cash charges or expenses were deducted in computing such Consolidated Net Income;
plus
|
|
(4)
|
if such Person accounts for its oil and natural gas operations using successful efforts or a similar method of accounting, consolidated exploration expense of such Person and its Restricted Subsidiaries;
minus
|
|
(5)
|
non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business; and
minus
|
|
(6)
|
to the extent increasing such Consolidated Net Income for such period, the sum of (a) the amount of deferred revenues that are amortized during such period and are attributable to reserves that are subject to
Volumetric Production Payments and (b) amounts recorded in accordance with GAAP as repayments of principal and interest pursuant to Dollar-Denominated Production Payments,
|
in each case, on a consolidated basis and determined in accordance with GAAP.
Consolidated Net Income
means, with respect to any specified Person for any period, the aggregate of the net income (loss)
of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP and without any reduction in respect of Preferred Stock dividends or distributions;
provided that
:
|
(1)
|
all extraordinary gains or losses and all gains or losses realized in connection with any Asset Sale or the disposition of securities or the early extinguishment of Indebtedness, together with any related provision for
taxes on any such gain or loss, will be excluded;
|
|
(2)
|
the net income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or similar
distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;
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57
|
(3)
|
the net income (but not loss) of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that net income is not at
the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, partners or members;
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|
(4)
|
the cumulative effect of a change in accounting principles will be excluded;
|
|
(5)
|
unrealized losses and gains under derivative instruments included in the determination of Consolidated Net Income, including those resulting from the application of FASB ASC 815, will be excluded; and
|
|
(6)
|
any asset impairment writedowns on Oil and Gas Properties under GAAP or SEC guidelines will be excluded.
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Consolidated Net Working Capital
of any Person as of any date of determination means the amount (shown on the balance sheet
of such Person and its Restricted Subsidiaries prepared on a consolidated basis in accordance with GAAP as of the end of the most recent fiscal quarter of such Person for which internal financial statements are available) by which (a) all
current assets of such Person and its Restricted Subsidiaries other than current assets from Oil and Gas Hedging Contracts, exceeds (b) all current liabilities of the Company and its Restricted Subsidiaries, other than (i) current
liabilities included in Indebtedness, (ii) current liabilities associated with asset retirement obligations relating to oil and gas properties and (iii) any current liabilities from Oil and Natural Gas Hedging Contracts, in each case as
set forth in the consolidated financial statements of the Company prepared in accordance with GAAP (excluding any adjustments made pursuant to FASB ASC 815).
continuing
means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured
or waived.
Credit Agreement
means that certain Credit Agreement, dated as of December 19, 2016, by and among RSP
Permian, Inc., RSP Permian, L.L.C., JPMorgan Chase Bank, N.A., as administrative agent, Comerica Bank and Citibank, N.A., as syndication agents, and the lenders party thereto, including any related notes, Guarantees, collateral documents,
instruments and agreements executed in connection therewith, and, in each case, as amended, restated, modified, renewed, refunded, replaced in any manner (whether upon or after termination or otherwise) or refinanced (including by means of sales of
debt securities to institutional investors) in whole or in part from time to time.
Credit Facilities
means, one or
more debt facilities (including the Credit Agreement), indentures or commercial paper facilities, in each case, with banks or other institutional lenders, accredited investors or institutional investors providing for revolving credit loans, term
loans, term debt, debt securities, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, extended, increased, refunded, replaced in any manner (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in
part from time to time.
Customary Recourse Exceptions
means, with respect to any Non-Recourse Debt of an Unrestricted
Subsidiary, exclusions from the exculpation provisions with respect to such Non-Recourse Debt for the voluntary bankruptcy of such Unrestricted Subsidiary, fraud, misapplication of cash, environmental claims, waste, willful destruction and other
circumstances customarily excluded by lenders from exculpation provisions or included in separate indemnification agreements in non-recourse financings.
Default
means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
58
Designated Non-cash Consideration
means the Fair Market Value of non-cash
consideration received by the Company or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an officers certificate, setting forth the basis of such valuation and
executed by the chief financial officer and one other officer of the Company, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of or collection on such Designated Non-cash Consideration.
Disqualified Stock
means any Capital Stock that, by its terms (or by the terms of any security into which it is
convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase or redeem such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption
Certain Covenants Restricted Payments. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of the indenture will be the maximum amount that the Company and its Restricted Subsidiaries may become
obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.
Dollar-Denominated Production Payments
means production payment obligations recorded as liabilities in accordance with
GAAP, together with all undertakings and obligations in connection therewith.
Domestic Subsidiary
means any Restricted
Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that Guarantees or otherwise provides direct credit support for any Indebtedness of the Company.
Equity Interests
of any Person means (1) any and all Capital Stock of such Person and (2) all rights to purchase,
warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such Capital Stock of such Person, but excluding from all of the foregoing any debt securities convertible into
Equity Interests, regardless of whether such debt securities include any right of participation with Equity Interests.
Equity
Offering
means a public or private sale of Equity Interests of the Company (other than Disqualified Stock and other than to a Subsidiary of the Company) made for cash on a primary basis to the Company.
Existing Indebtedness
means all Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under
the Credit Agreement) in existence on the date of the indenture, until such amounts are repaid.
Existing Notes
means
the Companys outstanding 6.625% Senior Notes due 2022.
Fair Market Value
means the value that would be paid by a
willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Board of Directors of the Company in the case of amounts of $40.0 million or more and otherwise by
an officer of the Company (unless otherwise provided in the indenture).
FASB ASC 815
means Financial Accounting
Standards Board Accounting Standards Codification Topic No. 815, Derivatives and Hedging.
Fixed Charge Coverage
Ratio
means with respect to any specified Person for any period, the ratio of the Consolidated EBITDAX of such Person for such period to the Fixed Charges of such Person for such period. In
59
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. For purposes of this definition, whenever pro forma effect is to be given to any calculation under this definition, the pro forma calculations will be determined in good faith by the chief financial or accounting officer of the
specified Person;
provided
that such officer may in his or her discretion include any reasonably identifiable and factually supportable pro forma changes to Consolidated EBITDAX, including any pro forma expenses and cost reductions, that have
occurred or in the judgment of such officer are reasonably expected to occur within 12 months of the date of the applicable transaction (regardless of whether such expense or cost reduction or any other operating improvements could then be reflected
properly in pro forma financial statements prepared in accordance with Regulation S-X under the Securities Act or any other regulation or policy of the SEC) and that are set forth in an officers certificate signed by the chief financial or
accounting officer that states (a) the amount of each such adjustment and (b) that such adjustments are based on the reasonable good faith belief of the officers executing such officers certificate at the time of such execution and
the factual basis on which such good faith belief is based.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
|
(1)
|
acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations, or by any Person or any of its Restricted Subsidiaries acquired by the
specified Person or any of its Restricted Subsidiaries, and including all related financing transactions and including increases in ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date, or that are to be made on the Calculation Date, will be given pro forma effect (in accordance with Regulation S-X under the Securities Act) as if they had occurred on the first day of the four-quarter
reference period;
|
|
(2)
|
the Consolidated EBITDAX attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be
excluded;
|
|
(3)
|
the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be
excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date;
|
|
(4)
|
any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period;
|
|
(5)
|
any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period; and
|
|
(6)
|
if any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period
(taking into account any Hedging Obligation applicable to such Indebtedness if such Hedging Obligation has a remaining term as at the Calculation Date in excess of 12 months).
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60
Fixed Charges
means, with respect to any specified Person for any period, the
sum, without duplication, of:
|
(1)
|
the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (excluding (i) any interest attributable to Dollar-Denominated Production Payments,
(ii) write-off of deferred financing costs and (iii) accretion of interest charges on future plugging and abandonment obligations, future retirement benefits and other obligations that do not constitute Indebtedness, but including
amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers acceptance financings), and net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates;
plus
|
|
(2)
|
the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period;
plus
|
|
(3)
|
any interest on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not
such Guarantee or Lien is called upon;
plus
|
|
(4)
|
all dividends or distributions, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock of such Person or any series of Preferred Stock of its Restricted Subsidiaries, other than
dividends or distributions on Equity Interests payable solely in Equity Interests of such Person (other than Disqualified Stock) or to such Person or a Restricted Subsidiary of such Person,
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in each case, on a consolidated basis and determined in accordance with GAAP.
GAAP
means generally accepted accounting principles in the United States, which are in effect from time to time.
Government Securities
means securities that are:
|
(1)
|
direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or
|
|
(2)
|
obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America,
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which, in either case, are not callable or redeemable at the option of the
issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest
on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.
Guarantee
means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of
business, direct or indirect, in any manner including by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise). When used as a verb, Guarantee has a correlative meaning.
61
Guarantors
means any Subsidiary of the Company that Guarantees the notes in
accordance with the provisions of the indenture, and their respective successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of the indenture.
Hedging Obligations
means, with respect to any specified Person, the obligations of such Person under:
|
(1)
|
interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;
|
|
(2)
|
other agreements or arrangements designed to manage interest rates or interest rate risk; and
|
|
(3)
|
Oil and Gas Hedging Contracts.
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Hydrocarbons
means oil, natural gas, casing
head gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all constituents, elements or compounds thereof and products refined or processed therefrom.
Indebtedness
means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and
trade payables), whether or not contingent:
|
(1)
|
in respect of borrowed money;
|
|
(2)
|
evidenced by or issued in exchange for bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);
|
|
(3)
|
in respect of bankers acceptances;
|
|
(4)
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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
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|
(6)
|
representing any Hedging Obligations,
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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 all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person (including, with respect to
any Production Payment, any warranties or guarantees of production or payment by such Person with respect to such Production Payment, but excluding other contractual obligations of such Person with respect to such Production Payment). Subject to the
preceding sentence, neither Dollar-Denominated Production Payments nor Volumetric Production Payments shall be deemed to be Indebtedness.
In addition, Indebtedness of any Person shall include Indebtedness described in the preceding paragraph that would not appear as a
liability on the balance sheet of such Person if:
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(1)
|
such Indebtedness is the obligation of a partnership or joint venture that is not a Restricted Subsidiary (a Joint Venture);
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|
(2)
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such Person or a Restricted Subsidiary of such Person is a general partner of the Joint Venture (a Joint Venture General Partner); and
|
|
(3)
|
there is recourse, by contract or operation of law, with respect to the payment of such Indebtedness to property or assets of such Person or a Restricted Subsidiary of such Person; and then such Indebtedness shall be
included in an amount not to exceed:
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|
(a)
|
the lesser of (i) the net assets of the Joint Venture General Partner and (ii) the amount of such obligations to the extent that there is recourse, by contract or operation of law, to the property or assets of
such Person or a Restricted Subsidiary of such Person; or
|
62
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(b)
|
if less than the amount determined pursuant to clause (a) immediately above, the actual amount of such Indebtedness that is recourse to such Person or a Restricted Subsidiary of such Person, if the Indebtedness is
evidenced by a writing and is for a determinable amount and the related interest expense shall be included in Fixed Charges to the extent actually paid by such Person or its Restricted Subsidiaries.
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Notwithstanding the preceding, Indebtedness of a Person shall not include:
|
(1)
|
any indebtedness that has been defeased in accordance with GAAP or defeased pursuant to the deposit of cash or Cash Equivalents (in an amount sufficient to satisfy all such indebtedness obligations at maturity or
redemption, as applicable, and all payments of interest and premium, if any) in a trust or account created or pledged for the sole benefit of the holders of such indebtedness, and subject to no other Liens;
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|
(2)
|
any obligation of such Person in respect of a farm-in agreement or similar arrangement whereby such Person agrees to pay all or a share of the drilling, completion or other expenses of an exploratory or development well
(which agreement may be subject to a maximum payment obligation, after which expenses are shared in accordance with the working or participation interest therein or in accordance with the agreement of the parties) or perform the drilling, completion
or other operation on such well in exchange for an ownership interest in an oil or gas property; and
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|
(3)
|
any repayment or reimbursement obligation of such Person or any of its Restricted Subsidiaries with respect to Customary Recourse Exceptions, unless and until an event or circumstance occurs that triggers the
Persons or such Restricted Subsidiarys direct repayment or reimbursement obligation (as opposed to contingent or performance obligations) to the lender or other Person to whom such obligation is actually owed, in which case the amount of
such direct payment or reimbursement obligation shall constitute Indebtedness.
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Investments
means, with
respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities (excluding any interest in an oil or natural gas leasehold
to the extent constituting a security under applicable law), together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells
or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company
will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Companys Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption Certain CovenantsRestricted Payments. The acquisition by the Company or any Restricted Subsidiary of the Company of a Person that holds an Investment in a
third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined
as provided in the final paragraph of the covenant described above under the caption Certain CovenantsRestricted Payments. Except as otherwise provided in the indenture, the amount of an Investment will be determined at the
time the Investment is made and without giving effect to subsequent changes in value.
Lien
means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
63
Moodys
means Moodys Investors Service, Inc., and any successor to
the ratings business thereof.
Net Proceeds
means the aggregate amount of cash proceeds and Cash Equivalents received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including any cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received in any Asset Sale but excluding any non-cash
consideration deemed to be cash for purposes of the Asset Sales provisions of the indenture), net of the direct costs relating to such Asset Sale, including legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required
to be applied to the repayment of Indebtedness, other than revolving credit Indebtedness under a Credit Facility, secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment or indemnification
obligations in respect of the sale price of such asset or assets established in accordance with GAAP.
Non-Recourse
Debt
means Indebtedness:
|
(1)
|
as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) or (b) is
directly or indirectly liable as a guarantor or otherwise, except for Customary Recourse Exceptions; and
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|
(2)
|
as to which the lenders have been notified in writing that they will not have any recourse to the Capital Stock or assets of the Company or any of its Restricted Subsidiaries (other than the Equity Interests of an
Unrestricted Subsidiary), except for Customary Recourse Exceptions.
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Note Guarantee
means the Guarantee
by each Guarantor of the Companys Obligations under the indenture and the notes, as provided in the indenture.
Obligations
means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
Oil and Gas Business
means (i) the acquisition,
exploration, development, production, operation and disposition of interests in oil, gas and other Hydrocarbon properties, (ii) the gathering, marketing, treating, processing (but not refining), storage, selling and transporting of any
production from such interests or properties, (iii) any business relating to exploration for or development, production, treatment, processing (but not refining), storage, transportation or marketing of oil, gas and other minerals and products
produced in association therewith and (iv) any activity that is ancillary to or necessary or appropriate for the activities described in clauses (i) through (iii) of this definition.
Oil and Gas Hedging Contracts
means any puts, cap transactions, floor transactions, collar transactions, forward contract,
commodity swap agreement, commodity option agreement or other similar agreement or arrangement in respect of Hydrocarbons to be used, produced, processed or sold by the Company or any of its Restricted Subsidiaries that are customary in the Oil and
Gas Business and designed to protect such Person against fluctuation in Hydrocarbons prices and not for speculative purposes.
Oil and Gas Properties
means all properties, including equity or other ownership interest therein, owned by such Person or
any of its Restricted Subsidiaries which contain or are believed to contain Proved Reserves.
Permitted Acquisition
Indebtedness
means Indebtedness or Disqualified Stock of the Company or any of its Restricted Subsidiaries to the extent such Indebtedness or Disqualified Stock was Indebtedness or Disqualified Stock of any other Person existing at the
time (a) such Person became a Restricted Subsidiary of the Company or (b) such Person was merged or consolidated with or into the Company or any of its Restricted Subsidiaries;
64
provided that on the date such Person became a Restricted Subsidiary or the date such Person was merged or consolidated with or into the Company or any of its Restricted Subsidiaries, as
applicable, either
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(1)
|
immediately after giving effect to such transaction and any related financing transaction on a pro forma basis as if the same had occurred at the beginning of the applicable four-quarter period, the Company or such
Person (if the Company is not the survivor in the transaction) would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above
under the caption Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock, or
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(2)
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immediately after giving effect to such transaction and any related financing transaction on a pro forma basis as if the same had occurred at the beginning of the applicable four-quarter period, the Fixed Charge
Coverage Ratio of the Company or such Person (if the Company is not the survivor in the transaction) is equal to or greater than the Fixed Charge Coverage Ratio of the Company immediately prior to such transaction.
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Permitted Business Investments
means investments made in the ordinary course of, and of a nature that is or shall have
become customary in, the Oil and Gas Business as a means of actively exploiting, exploring for, acquiring, developing, processing, gathering, marketing or transporting oil and gas through agreements, transactions, interests or arrangements which
permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of Oil and Gas Business jointly with third parties, including (i) ownership
interests in oil, natural gas, other Hydrocarbon properties or any interest therein or gathering, transportation, processing, storage or related systems, (ii) Investments in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, developments agreements, area of mutual interest agreements, unitization agreements, pooling agreements, joint bidding agreements, service contracts, joint venture agreements, partnership
agreements (whether general or limited), subscription agreements, stock purchase agreements and other similar agreements with third parties, and (iii) direct or indirect ownership interests or Investments in drilling rigs, fracturing units and
other related equipment or in Persons that own or provide such equipment.
Permitted Investments
means:
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(1)
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any Investment in the Company or in a Restricted Subsidiary of the Company;
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(2)
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any Investment in Cash Equivalents;
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(3)
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any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment:
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(a)
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such Person becomes a Restricted Subsidiary of the Company; or
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(b)
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such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its properties or assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company;
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(4)
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any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption Repurchase at the
Option of HoldersAsset Sales, including pursuant to an Asset Swap;
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(5)
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any acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company;
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(6)
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any Investments received in compromise or resolution of (a) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Company or any of its Restricted Subsidiaries,
including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (b) litigation, arbitration or other disputes;
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65
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(7)
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Investments represented by Hedging Obligations;
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(8)
|
loans or advances to officers, directors or employees made in the ordinary course of business of the Company or any Restricted Subsidiary of the Company in an aggregate principal amount not to exceed $2.5 million at any
one time outstanding;
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(9)
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repurchases of the notes;
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(10)
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any Guarantee of Indebtedness permitted to be incurred by the covenant entitled Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock other than a Guarantee of Indebtedness
of an Affiliate of the Company that is not a Restricted Subsidiary of the Company;
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(11)
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any Investment existing on, or made pursuant to binding commitments existing on, the date of the indenture and any Investment consisting of an extension, modification or renewal of any Investment existing on, or made
pursuant to a binding commitment existing on, the date of the indenture;
provided
that the amount of any such Investment may be increased (a) as required by the terms of such Investment as in existence on the date of the indenture or
(b) as otherwise permitted under the indenture;
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(12)
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Investments acquired after the date of the indenture as a result of the acquisition by the Company or any Restricted Subsidiary of the Company of another Person, including by way of a merger, amalgamation or
consolidation with or into the Company or any of its Restricted Subsidiaries, or all or substantially all of the properties or assets of another Person, in each case, in a transaction that is not prohibited by the covenant described above under the
caption Merger, Consolidation or Sale of Assets to the extent that such Investments were not made in contemplation of such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition,
merger, amalgamation or consolidation;
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(13)
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Permitted Business Investments; and
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(14)
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other Investments in any Person other than an Affiliate of the Company that is not a Subsidiary of the Company having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (14) that are at the time outstanding not to exceed the greater of (a) $100.0 million and (b) 5% of the Companys
Adjusted Consolidated Net Tangible Assets;
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provided, however
, that if any Investment pursuant to this clause
(14) is made in any Person that is not a Restricted Subsidiary at the date of the making of such Investment and such Person becomes a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been made pursuant
to clause (1) above and shall cease to have been made pursuant to this clause (14) for so long as such Person continues to be a Restricted Subsidiary.
Permitted Liens
means:
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(1)
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Liens on assets of the Company or any Guarantor securing Indebtedness and other Obligations under Credit Facilities that was permitted by the terms of the indenture to be incurred pursuant to clause (1) of the
definition of Permitted Debt or securing Hedging Obligations related thereto or securing Obligations with regard to Treasury Management Arrangements;
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(2)
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Liens in favor of the Company or a Restricted Subsidiary;
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(3)
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Liens on property of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company or is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company;
provided
that such Liens were in existence prior to the contemplation of such Person becoming a Restricted Subsidiary of the Company or such merger or consolidation and do not extend to any assets other than those of the Person that becomes a
Restricted Subsidiary of the Company or is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company;
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(4)
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Liens on property (including Capital Stock) existing at the time of acquisition of the property by the Company or any Subsidiary of the Company;
provided
that such Liens were in existence prior to such
acquisition and not incurred in contemplation of, such acquisition;
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(5)
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Liens to secure the performance of statutory obligations, insurance, surety or appeal bonds, workers compensation obligations, bid, plugging and abandonment and performance bonds or other obligations of a like
nature incurred in the ordinary course of business (including Liens to secure letters of credit issued to assure payment of such obligations);
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(6)
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Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled Certain CovenantsIncurrence of Indebtedness and Issuance
of Preferred Stock covering only the assets acquired with or financed by such Indebtedness;
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(7)
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Liens existing on the date of the indenture;
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(8)
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Liens created for the benefit of (or to secure) the notes (or the Note Guarantees);
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(9)
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Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under the indenture;
provided, however
, that:
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(a)
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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); and
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(b)
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the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Indebtedness renewed, refunded,
refinanced, replaced, defeased or discharged with such Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or
discharge;
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(10)
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Liens on insurance policies and proceeds thereof, or other deposits, to secure insurance premium financings;
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(11)
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filing of Uniform Commercial Code financing statements as a precautionary measure in connection with operating leases;
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(12)
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bankers Liens, rights of setoff, Liens arising out of judgments or awards not constituting an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith
by appropriate proceedings and for which adequate reserves have been made;
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(13)
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Liens on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness;
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(14)
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Liens on specific items of inventory or other goods (and the proceeds thereof) of any Person securing such Persons 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;
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(15)
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grants of software and other technology licenses in the ordinary course of business;
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(16)
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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;
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(17)
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Liens in respect of Production Payments and Reserve Sales; provided, that such Liens are limited to the property that is subject to such Production Payments and Reserve Sales;
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(18)
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Liens arising under oil and gas leases or subleases, assignments, farm-out agreements, farm-in agreements,
division orders, contracts for the sale, purchase, exchange, transportation, gathering or processing of Hydrocarbons, unitizations and pooling designations, declarations, orders and agreements, development agreements, joint venture agreements,
partnership agreements, operating
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67
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agreements, royalties, working interests, net profits interests, joint interest billing arrangements, participation agreements, production sales contracts, area of mutual interest agreements, gas
balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, licenses, sublicenses and other agreements which are customary in
the Oil and Gas Business;
provided, however
, in all instances that such Liens are limited to the assets that are the subject of the relevant agreement, program, order or contract;
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(19)
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Liens to secure performance of Hedging Obligations of the Company or any of its Restricted Subsidiaries entered into in the ordinary course of business and not for speculative purposes;
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(20)
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Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to Indebtedness that does not exceed in aggregate principal amount, at any time outstanding, the
greater of (a) $100.0 million and (b) 5% of the Companys Adjusted Consolidated Net Tangible Assets determined as of the date of such incurrence; and
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(21)
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any Lien renewing, extending, refinancing or refunding a Lien permitted by clauses (1) through (20) above,
provided
that (a) the principal amount of the Indebtedness secured by such Lien is not
increased except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection therewith and by an amount equal to any existing commitments unutilized thereunder and (b) no
assets encumbered by any such Lien other than the assets permitted to be encumbered immediately prior to such renewal, extension, refinance or refund are encumbered thereby (other than improvements thereon, accessions thereto and proceeds thereof).
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Permitted Refinancing Indebtedness
means any Indebtedness of the Company or any of its Restricted
Subsidiaries or any Disqualified Stock of the Company issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness) or any Disqualified Stock of the Company;
provided
that:
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(1)
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the principal amount (or accreted value, if applicable), or in the case of Disqualified Stock, the amount thereof determined in accordance with the definition of Disqualified Stock, of such Permitted Refinancing
Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness or the amount of the Disqualified Stock renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the
Indebtedness or accrued and unpaid dividends on the Disqualified Stock, as the case may be, and the amount of all fees and expenses, including premiums, incurred in connection therewith);
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(2)
|
such Permitted Refinancing Indebtedness has a final maturity date or redemption date, as applicable, that is (a) later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness or Disqualified Stock being renewed, refunded, refinanced, replaced, defeased or discharged or (b) more than 90 days after the final maturity date of the notes;
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(3)
|
if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the notes or the Note Guarantees, such Permitted Refinancing Indebtedness is subordinated
in right of payment to the notes or the Note Guarantees, as applicable, on terms at least as favorable to the holders of notes as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased
or discharged; and
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(4)
|
such Indebtedness is incurred (other than by way of a Guarantee) either by the Company or by the Restricted Subsidiary of the Company that was the obligor on the Indebtedness being renewed, refunded, refinanced,
replaced, defeased or discharged.
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Person
means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.
68
Preferred Stock
means, with respect to any Person, any and all preferred or
preference stock or other similar Equity Interests (however designated) of such Person whether outstanding or issued after the date of the indenture.
Prior Issue Date
means September 26, 2014, the original date of issuance of the Existing Notes.
Production Payments
means Dollar-Denominated Production Payments and Volumetric Production Payments, collectively.
Production Payments and Reserve Sales
means the grant or transfer by the Company or any of its Restricted Subsidiaries to
any Person of a royalty, overriding royalty, net profits interest, Production Payment, partnership or other interest in Oil and Gas Properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of
production attributable to such properties where the holder of such interest has recourse solely to such production or proceeds of production, subject to the obligation of the grantor or transferor to operate and maintain, or cause the subject
interests to be operated and maintained, in a reasonably prudent manner or other customary standard or subject to the obligation of the grantor or transferor to indemnify for environmental, title or other matters customary in the Oil and Gas
Business, including any such grants or transfers pursuant to incentive compensation programs on terms that are reasonably customary in the Oil and Gas Business for geologists, geophysicists or other providers of technical services to the Company or
any of its Restricted Subsidiaries.
Proved Reserves
means crude oil and natural gas reserves constituting proved
oil and gas reserves as defined in Rule 4-10 of Regulation S-X of the Securities Act.
Rating Decline
means the
occurrence of a decrease of one or more gradations (including gradations within rating categories as well as between rating categories) in the rating of the notes by either S&P or Moodys.
Restricted Investment
means an Investment other than a Permitted Investment.
Restricted Subsidiary
of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.
S&P
means S&P Global Ratings, and any successor to the ratings business thereof.
Senior Debt
means:
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(1)
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all Indebtedness of the Company or any Guarantor outstanding under Credit Facilities, all Hedging Obligations, all Treasury Management Arrangements and all Obligations with respect to any of the foregoing;
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(2)
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any other Indebtedness of the Company or any Guarantor 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
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(3)
|
all Obligations with respect to the items listed in the preceding clauses (1) and (2).
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Notwithstanding anything to the contrary in the preceding sentence, Senior Debt will not include:
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(1)
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any liability for federal, state, local or other taxes owed or owing by the Company;
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(2)
|
any intercompany Indebtedness of the Company or any of its Subsidiaries to the Company or any of its Affiliates;
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69
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(4)
|
the portion of any Indebtedness that is incurred in violation of the indenture;
provided
that Indebtedness under a Credit Facility will not cease to be Senior Debt by virtue of this clause (4) if
it was advanced on the basis of an officers certificate to the effect that it was permitted to be incurred under the indenture; or
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(5)
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Indebtedness which is classified as non-recourse in accordance with GAAP or any unsecured claim arising in respect thereof by reason of the application of section 1111(b)(1) of the Bankruptcy Code.
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Significant Subsidiary
means any Restricted Subsidiary that would be a significant subsidiary as defined in
Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of the indenture.
Stated Maturity
means, with respect to any installment of interest or principal on any series of Indebtedness, the date on
which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the first date it was incurred in compliance with the terms of the indenture, and will not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof; provided that, in the case of debt securities that are by their terms convertible into Capital Stock (or cash or a
combination of cash and Capital Stock based on the value of the Capital Stock) of the Company, any obligation to offer to repurchase such debt securities on a date(s) specified in the original terms of such securities, which obligation is not
subject to any condition or contingency, will be treated as a Stated Maturity date of such convertible debt securities.
Subsidiary
means, with respect to any specified Person:
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(1)
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any corporation, association or other business entity (other than a partnership or limited liability company) of which more than 50% of the total voting power of its Voting Stock is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
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(2)
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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.
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Treasury Management Arrangement
means any agreement or other arrangement governing the provision of treasury or cash
management services, including deposit accounts, overdraft, credit or debit card, funds transfer, automated clearinghouse, zero balance accounts, returned check concentration, controlled disbursement, lockbox, account reconciliation and reporting
and trade finance services and other cash management services.
Treasury Rate
means, in respect of any redemption date,
the yield to maturity, as of the time of computation, of the most recently issued United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has
become publicly available at least two business days prior to such time (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to
January 15, 2020;
provided, however
, that if the period from the redemption date to January 15, 2020, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant
maturity of one year will be used. The Company will (a) calculate the Treasury Rate no later than the second (and no earlier than the fourth) business day preceding the applicable redemption date (or, in the case of any redemption in connection
with a defeasance of the notes or a satisfaction and discharge of the indenture, on the business day preceding such event) and (b) prior to such redemption date, file with the trustee a statement setting forth the Applicable Premium and the
Treasury Rate and showing the calculation of each in reasonable detail.
70
Unrestricted Subsidiary
means any Subsidiary of the Company (including any
newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary through merger or consolidation or Investment therein) that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a resolution of
the Board of Directors, but only to the extent that such Subsidiary:
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(1)
|
has no Indebtedness other than Non-Recourse Debt;
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(2)
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except as permitted by the covenant described above under the caption Certain Covenants Transactions with Affiliates, is not party to any agreement, contract, arrangement or understanding with
the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of the Company;
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(3)
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is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or
preserve such Persons financial condition or to cause such Person to achieve any specified levels of operating results; and
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(4)
|
has not Guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries, except to the extent such Guarantee would be released upon such
designation.
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All Subsidiaries of an Unrestricted Subsidiary shall also be Unrestricted Subsidiaries.
Volumetric Production Payments
means production payment obligations recorded as deferred revenue in accordance with GAAP,
together with all undertakings and obligations in connection therewith.
Voting Stock
of any specified Person as of any
date means the Capital Stock of such Person entitling the holders thereof (whether at all times or only so long as no senior class of Capital Stock has voting power by reason of any contingency) to vote in the election of members of the Board of
Directors of such Person;
provided
that with respect to a limited partnership or other entity which does not have a Board of Directors, Voting Stock means the Capital Stock of the general partner of such limited partnership or other business
entity with the ultimate authority to manage the business and operations of such Person.
Weighted Average Life to
Maturity
means, when applied to any Indebtedness or Disqualified Stock at any date, the number of years obtained by dividing:
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(1)
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the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity or
redemption, in respect of the Indebtedness or Disqualified Stock, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by
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(2)
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the then outstanding aggregate amount of such Indebtedness or Disqualified Stock.
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71