For the year ended December 31, 2006, we recognizedsecurities, capital or credit markets;
our ability to repay our debt; and
other factors discussed in earnings an unrealized gain on derivative instruments not qualifying for hedge accounting“Risk Factors” and in the amount“Management’s Discussion and Analysis of $40.2 million. For financial reporting purposes, this unrealized gain was combined with a $2.1 million realized loss in 2006 resulting in a total unrealizedFinancial Condition and realized gain on derivative instruments not qualifying for hedge accounting in the amountResults of $38.1 million for 2006. This gain was recognized because the natural gas hedges were deemed ineffective for 2006, and all previously effective oil hedges were deemed ineffective for the fourth quarterOperations—Summary of 2006.
For the year ended December 31, 2005, we recognized in earnings an unrealized loss on derivative instruments not qualifying for hedge accounting in the amount of $27.0 million. For financial reporting purposes, this unrealized loss was combined with a $10.7 million realized loss in 2005 resulting in a total unrealized and realized loss on derivative instruments not qualifying for hedge accounting in the amount of $37.7 million in 2005. For the year ended December 31, 2004, we recognized in earnings an unrealized gain on derivative instruments in the amount of $2.3 million. This loss and gain were recognized because the natural gas hedges were deemed to be ineffective for 2005, and for the fourth quarter of 2004, and accordingly, the changes in fair value of such hedges could no longer be reflected in other comprehensive income, a component of stockholders’ equity.
To the extent that the hedges are not deemed to be effective in the future, we will likewise be exposed to volatility in earnings resulting from changes in the fair value of our hedges. See Note 8 “Hedging Activities” to our consolidated financial statementsCritical Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2006 for further discussion.
Delays in development or production curtailment affecting our material properties may adversely affect our financial position2011 and results of operations.
The size of our operations and our capital expenditure budget limits the number of wells that we can develop in any given year. Complications in the development of any single material well may result in a material adverse affect on our financial condition and results of operations. In addition, a relatively small number of wells contribute a substantial portion of our production. If we were to experience operational problems resulting in the curtailment of production in any of these wells, our total production levels would be adversely affected, which would have a material adverse affect on our financial condition and results of operations.
Because our operations require significant capital expenditures, we may not have the funds available to replace reserves, maintain production or maintain interests in our properties.
We must make a substantial amount of capital expenditures for the acquisition, explorationother public filings, press releases and development of oil and natural gas reserves. Historically, we have paid for these expenditures with cash from operating activities, proceeds from debt and equity financings and asset sales. Our revenues or cash flows could be reduced because of lower oil and natural gas prices or for other reasons. If our revenues or cash flows decrease, we may not have the funds available to replace reserves or maintain production at current levels. If this occurs, our production will decline over time. Other sources of financing may not be available to us if our cash flows from operations are not sufficient to fund our capital expenditure requirements. Where we are not the majority owner or operator of an oil and gas property, such as the Lafitte field, we may have no control over the timing or amount of capital expenditures associated with the particular property. If we cannot fund such capital expenditures, our interests in some properties may be reduced or forfeited.
We may have difficulty financing our planned growth.
We have experienced and expect to continue to experience substantial capital expenditure and working capital needs, particularly as a result of our drilling program. In the future, we expect that we will require additional financing, in addition to cash generated from operations, to fund planned growth. We cannot be certain that additional financing will be available on acceptable terms or at all. In the event additional capital resources are unavailable, we may curtail drilling, development and other activities or be forced to sell some of our assets on an untimely or unfavorable basis.
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If we are not able to replace reserves, we may not be able to sustain production at present levels.
Our future success depends largely upon our ability to find, develop or acquire additional oil and gas reserves that are economically recoverable. Unless we replace the reserves we produce through successful development, exploration or acquisition activities, our proved reserves will decline over time. In addition, approximately 57% of our total estimated proved reserves by volume at December 31, 2006, were undeveloped. By their nature, estimates of undeveloped reserves are less certain. Recovery of such reserves will require significant capital expenditures and successful drilling operations. We may not be able to successfully find and produce reserves economically in the future. In addition, we may not be able to acquire proved reserves at acceptable costs.
We may incur substantial impairment writedowns.
If management’s estimates of the recoverable reserves on a property are revised downward or if oil and natural gas prices decline, we may be required to record additional non-cash impairment writedowns in the future, which would result in a negative impact to our financial position. We review our proved oil and gas properties for impairment on a depletable unit basis when circumstances suggest there is a need for such a review. To determine if a depletable unit is impaired, we compare the carrying value of the depletable unit to the undiscounted future net cash flows by applying management’s estimates of future oil and natural gas prices to the estimated future production of oil and gas reserves over the economic life of the property. Future net cash flows are based upon our independent reservoir engineers’ estimates of proved reserves. In addition, other factors such as probable and possible reserves are taken into consideration when justified by economic conditions. For each property determined to be impaired, we recognize an impairment loss equal to the difference between the estimated fair value and the carrying value of the property on a depletable unit basis.
Fair value is estimated to be the present value of expected future net cash flows. Any impairment charge incurred is recorded in accumulated depreciation, depletion, impairment and amortization to reduce our recorded basis in the asset. Each part of this calculation is subject to a large degree of judgment, including the determination of the depletable units’ estimated reserves, future cash flows and fair value. For the years ended December 31, 2006, and 2005, we recorded impairments of $24.8 million and $0.3 million, respectively. We did not record an impairment loss for the year ended December 31, 2004.
Management’s assumptions used in calculating oil and gas reserves or regarding the future cash flows or fair value of our properties are subject to change in the future. Any change could cause impairment expense to be recorded, impacting our net income or loss and our basis in the related asset. Any change in reserves directly impacts our estimate of future cash flows from the property, as well as the property’s fair value. Additionally, as management’s views related to future prices change, the change will affect the estimate of future net cash flows and the fair value estimates. Changes in either of these amounts will directly impact the calculation of impairment.
A majority of our production, revenue and cash flow from operating activities are derived from assets that are concentrated in a geographic area.
Approximately 84% of our estimated proved reserves at December 31, 2006, and a similar percentage of our production during 2006 were associateddiscussions with our Cotton Valley Trend. In March 2007, we sold substantially all of our South Louisiana properties to a private company. See Note 12 “Acquisitions and Divestitures” to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2006. Accordingly, if the level of production from the remaining properties substantially declines, it could have a material adverse effect on our overall production level and our revenue.
The oil and gas business involves many uncertainties, economic risks and operating risks that can prevent us from realizing profits and can cause substantial losses.
Our oil and gas operations are subject to the economic risks typically associated with exploration, development and production activities, including the necessity of significant expenditures to locate and acquire properties and to drill exploratory wells. In conducting exploration and development activities, the presence of unanticipated pressure or irregularities in formations, miscalculations or accidents may cause our exploration, development and production activities to be unsuccessful. This could result in a total loss of our investment in a particular property. If exploration efforts are unsuccessful in establishing proved reserves and exploration activities cease, the amounts accumulated asmanagement.
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unproved costs would be charged against earnings as impairments. In addition, the cost and timing of drilling, completing and operating wells is often uncertain.
The nature of the oil and gas business involves certain operating hazards such as well blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires, formations with abnormal pressures, pollution, releases of toxic gas and other environmental hazards and risks. Any of these operating hazards could result in substantial losses to us. As a result, substantial liabilities to third parties or governmental entities may be incurred. The payment of these amounts could reduce or eliminate the funds available for exploration, development or acquisitions. These reductions in funds could result in a loss of our properties. Additionally, some of our oil and gas operations are located in areas that are subject to weather disturbances such as hurricanes. Some of these disturbances can be severe enough to cause substantial damage to facilities and possibly interrupt production. In accordance with customary industry practices, we maintain insurance against some, but not all, of such risks and losses. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our financial position and results of operations.
Our debt instruments impose restrictions on us that may affect our ability to successfully operate our business.
Our senior credit facility contains customary restrictions, including covenants limiting our ability to incur additional debt, grant liens, make investments, consolidate, merge or acquire other businesses, sell assets, pay dividendsfactors and other distributions and enter into transactions with affiliates. We also are required to meet specified financial ratios under the terms of our credit facility. As of December 31, 2006, we were in compliance with all the financial covenants of our credit facility. These restrictions may make it difficult for us to successfully execute our business strategy or to compete in our industry with companies not similarly restricted.
We may be unable to identify liabilities associated with the properties that we acquire or obtain protection from sellers against them.
The acquisition of properties requires us to assess a number of factors including recoverable reserves, development and operating costs and potential environmental and other liabilities. Such assessments are inexact and inherently uncertain. In connection with the assessments, we perform a review of the subject properties, but such a review will not reveal all existing or potential problems. In the course of our due diligence, we may not inspect every well, platform or pipeline. We cannot necessarily observe structural and environmental problems, such as pipeline corrosion, when an inspection is made. We may not be able to obtain contractual indemnities from the seller for liabilities that we created. We may be required to assume the risk of the physical condition of the properties in addition to the risk that the properties may not perform in accordance with our expectations. The incurrence of an unexpected liability could have a material adverse effect on our financial position and results of operations.
We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.
Development, production and sale of natural gas and oil in the U.S. are subject to extensive laws and regulations, including environmental laws and regulations. We may be required to make large expenditures to comply with environmental and other governmental regulations. Matters subject to regulation include:
| • | | discharge permits for drilling operations; |
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| • | | bonds for ownership, development and production of oil and gas properties; |
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| • | | reports concerning operations; and |
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| • | | taxation. |
In addition, our operations are subject to stringent federal, state and local environmental laws and regulations governing the discharge of materials into the environment and environmental protection. Governmental authorities enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring difficult and costly actions. Failure to comply with these laws, regulations and permits may result in the assessment of
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administrative, civil and criminal penalties, the imposition of remedial obligations, and the issuance of injunctions limiting or prohibiting some or all of our operations. There is inherent risk of incurring significant environmental costs and liabilities in our business. Joint and several strict liabilities may be incurred in connection with discharges or releases of petroleum hydrocarbons and wastes on, under or from our properties and from facilities where our wastes have been taken for disposal. Private parties affected by such discharges or releases may also have the right to pursue legal actions to enforce compliance as well as seek damages for personal injury or property damage. In addition, changes in environmental laws and regulations occur frequently, and any such changes that result in more stringent and costly requirements could have a material adverse effect on our business.
Competition in the oil and gas industry is intense, and we are smaller and have a more limited operating history than some of our competitors.
We compete with major and independent oil and natural gas companies for property acquisitions. We also compete for the equipment and labor required to operate and to develop these properties. Some of our competitors have substantially greater financial and other resources than us. In addition, larger competitors may be able to absorb the burden of any changes in federal, state and local laws and regulations more easily than we can, which would adversely affect our competitive position. These competitors may be able to pay more for oil and natural gas properties and may be able to define, evaluate, bid for and acquire a greater number of properties than we can. Our ability to acquire additional properties and develop new and existing properties in the future will depend on our ability to conduct operations, to evaluate and select suitable properties and to consummate transactions in this highly competitive environment.
Our success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.
Our success will depend on our ability to retain and attract experienced engineers, geoscientists and other professional staff. We depend to a large extent on the efforts, technical expertise and continued employment of these personnel and members of our management team. If a significant number of them resign or become unable to continue in their present role and if they are not adequately replaced, our business operations could be adversely affected.
Some of our operations are exposed to the additional risk of tropical weather disturbances.
Some of our production and reserves were located in South Louisiana as of December 31, 2006. Operations in this area are subject to tropical weather disturbances. Some of these disturbances can be severe enough to cause substantial damage to facilities and possibly interrupt production. For example, Hurricanes Katrina and Rita in August and September of 2005, respectively, impacted our South Louisiana operations. In March 2007, we sold substantially all of our properties in South Louisiana to a private company. See Note 12 “Acquisitions and Divestitures” to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2006. As a result, our exposure to tropical weather disturbances will be significantly reduced in the future.
Losses could occur for uninsured risks or in amounts in excess of existing insurance coverage. We cannot assure you that we will be able to maintain adequate insurance in the future at rates we consider reasonable or that any particular types of coverage will be available. An event that is not fully covered by insurance could have a material adverse effect on our financial position and results of operations. Hurricane Katrina and Rita damage costs in excess of our insurance coverage resulted in a $1.7 million loss for 2006. The loss is included in “Lease Operating Expenses” on our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2006. In 2007, we expect to receive $2.5 million from our insurance provider for Hurricane Katrina damage costs. The receivable is included in “Accounts Receivable—Trade and other, net” on our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2006.
We have previously identified a material weakness in our internal controls over financial reporting and cannot assure you that we will not again identify a material weakness in the future.
As previously reported in our quarterly report on Form 10-Q for the quarter ended March 31, 2006, a material weakness was identified in our internal control over financial reporting with respect to recording the fair value of all
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outstanding derivatives. The Public Company Accounting Oversight Board’s Auditing Standard No. 2 defines a material weakness as a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
In order to remediate the material weakness, we implemented changes in our internal control over financial reporting during the quarter ended June 30, 2006. Specifically, we now automatically receive a mark to market valuation from our existing counterparties for all outstanding derivatives. For any new contracts entered into with a new counterparty, we will concurrently request this automatic distribution. We also added another layer of review for the fair value calculation prior to review by the Chief Financial Officer.
Our management believes that these additional policies and procedures have enhanced our internal control over financial reporting relating to the determination and review of fair value calculations on outstanding derivatives. Our management also believes that, as a result of these measures described above, the material weakness was remediated and that our internal control over financial reporting is effective as of June 30, 2006, September 30, 2006, December 31, 2006.
Terrorist attacks or similar hostilities may adversely impact our results of operations.
The impact that future terrorist attacks or regional hostilities (particularly in the Middle East) may have on the energy industry in general, and on us in particular, is unknown. Uncertainty surrounding military strikes or a sustained military campaign may affect our operations in unpredictable ways, including disruptions of fuel supplies and markets, particularly oil, and the possibility that infrastructure facilities, including pipelines, production facilities, processing plants and refineries, could be direct targets of, or indirect casualties of, an act of terror or war. Moreover, we have incurred additional costs since the terrorist attacks of September 11, 2001 to safeguard certain of our assets and we may be required to incur significant additional costs in the future.
The terrorist attacks on September 11, 2001, and the changes in the insurance markets attributable to such attacks have made certain types of insurance more difficult for us to obtain. There can be no assurance that insurance will be available to us without significant additional costs. Instability in the financial markets as a result of terrorism or war could also affect our ability to raise capital.
Risks Related to the Notes
Although the notes are referred to as “senior notes,” the notes are effectively subordinated to the rights of our existing and future secured creditors and any liabilities of our subsidiaries.
The notes are our senior unsecured obligations and rank equally in right of payment to all of our other existing and future senior indebtedness.
The notes initially are not guaranteed by any of our subsidiaries and accordingly are structurally subordinated to all of the indebtedness and other liabilities of our subsidiaries, including all outstanding borrowings under our senior credit facility, all of which are secured by assets and are direct obligations or guaranteed by our subsidiaries.
In addition, the notes are effectively subordinated to existing secured financings and any other secured indebtedness incurred by us to the extent of the value of the assets securing such indebtedness. As a result, in the event of any distribution or payment of our assets in any bankruptcy, liquidation or dissolution, holders of secured indebtedness will have prior claim to those assets that constitute their collateral. Holders of the notes will participate ratably with all holders of our unsecured indebtedness that is deemed to be of the same class as the notes, and potentially with all of our general creditors, based on the respective amounts owed to each holder or creditor, in our remaining assets. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts due on the notes.
As of December 31, 2006, we had approximately $26.5 million of outstanding senior indebtedness and other liabilities (excluding trade payables, accrued expenses and intercompany liabilities), all of which represented secured indebtedness and all of which are direct obligations or guaranteed by our subsidiaries. The notes are structurally subordinated to all of this indebtedness.
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As a holding company, our only source of cash is distributions from our subsidiaries.
We are a holding company with no operations of our own and we conduct all of our business through our subsidiaries. The notes are exclusively obligations of Goodrich Petroleum Corporation. We are wholly dependent on the cash flow of our subsidiaries and dividends and distributions to us from our subsidiaries in order to service our current indebtedness, including the notes, and any of our future obligations. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the notes or to make any funds available therefore. The ability of our subsidiaries to pay such dividends and distributions will be subject to, among other things, statutory or contractual restrictions. We cannot assure you that our subsidiaries will generate cash flow sufficient to pay dividends or distributions to us in order to pay interest or other payments on the notes.
A fundamental change may adversely affect us or the notes.
You may have the right to require us to repurchase your notes upon the occurrence of a fundamental change as described in “Description of Notes — Fundamental Change Permits Holders to Require Us to Purchase Notes.” Our senior credit facility currently prohibits, and future debt we may incur may limit our ability to, repurchase the notes upon a fundamental change. Also, if a fundamental change occurs, we cannot assure you that we will have enough funds to repurchase all the notes.
Furthermore, the fundamental change provisions, including the provisions requiring us to increase the applicable conversion rate by a number of additional shares related to conversions in connection with a fundamental change, may in certain circumstances make more difficult or discourage a takeover of our company and the removal of incumbent management.
We may not have the ability to raise the funds necessary to settle conversion of the notes or to purchase the notes upon a fundamental change or on other purchase dates, and our senior credit facility currently contains, and our future debt may contain, limitations on our ability to pay cash upon conversion or repurchase of the notes.
Upon conversion of the notes, we may pay up to the principal amount of the notes in cash. In addition, on December 1, 2011, December 1, 2016 and December 1, 2021, holders of the notes may require us to purchase their notes for cash. See “Description of Notes — Purchase of Notes by Us at the Option of the Holder.” Holders may also require us to purchase their notes upon a fundamental change as described under “Description of Notes — Fundamental Change Permits Holders to Require Us to Purchase Notes.” We cannot assure you that we would have sufficient financial resources, or would be able to arrange financing, to pay the settlement amount in cash, or the purchase price or fundamental change purchase price for the notes tendered by the holders in cash.
Further, our ability to pay the settlement amount in cash, or the purchase price or fundamental change purchase price for the notes in cash will be subject to limitations we may have in our credit facilities or any other indebtedness we may have in the future. For example, our existing senior credit facility currently prohibits us from paying the settlement amount in cash upon conversion of the notes and from paying the purchase price or fundamental change purchase price for the notes in cash. If you convert your notes or require us to repurchase them, we may seek the consent of our lenders or attempt to refinance our debt, but there can be no assurance that we will be able to do so.
Failure by us to pay the settlement amount upon conversion or purchase the notes when required will result in an event of default with respect to the notes, which may also result in the acceleration of our other indebtedness.
Future sales of our common stock or the issuance of other equity may adversely affect the market price of our common stock and the value of the notes.
Sales of our common stock or other equity-related securities could depress the market price of the notes, our common stock, or both, and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock or the value of the notes. The price of our common stock could be affected by possible sales of our common stock by investors who view the notes as a more attractive means of equity
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participation in our company and by hedging or arbitrage trading activity that we expect to develop involving our common stock. The hedging or arbitrage could, in turn, affect the market price of the notes.
The market price of the notes could be significantly affected by the market price of our common stock and other factors.
We expect that the market price of our notes will be significantly affected by the market price of our common stock. This may result in greater volatility in the market price of the notes than would be expected for nonconvertible debt securities. The market price of our common stock will likely continue to fluctuate in response to factors including the factors discussed elsewhere in “Risk Factors” and in “Forward-Looking Statements,” many of which are beyond our control.
The conditional conversion feature of the notes could result in your receiving less than the value of the common stock or cash and common stock, as applicable, into which a note would otherwise be convertible.
Prior to November 1, 2026, the notes are convertible only if specified conditions are met. If the specific conditions for conversion are not met, you will not be able to convert your notes, and you may not be able to receive the value of the common stock or cash and common stock, as applicable, into which the notes would otherwise be convertible.
Upon conversion of the notes, we may pay a settlement amount consisting of cash and shares of our common stock, if any, based upon a specified period of 10 trading days.
If we elect to settle our conversion obligation in cash and common stock, if any, or if we waive our right to satisfy our conversion obligation solely in shares of our common stock, we will be required to satisfy our conversion obligation to holders by paying cash, up to the principal amount of notes to be converted, and by delivering shares of our common stock with respect to the excess conversion value of the notes to be converted determined using the applicable stock price. Accordingly, upon conversion of a note, holders might not receive any shares of our common stock, or they might receive fewer shares of common stock relative to the conversion value of the note as of the conversion date. In addition, because of the 10 trading-day period relevant to determining the applicable stock price, settlement will be delayed until at least the 13th trading day following the related conversion date (and possibly later). See “Description of Notes — Conversion Rights — Payment Upon Conversion.” Upon conversion of the notes, you may receive less proceeds than expected because the value of our common stock may decline (or not appreciate as much as you may expect) between the conversion date and the day the settlement amount of your notes is determined.
The notes are not protected by restrictive covenants.
The indenture governing the notes does not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by us or any of our subsidiaries. The indenture contains no covenants or other provisions to afford protection to holders of the notes in the event of a fundamental change involving us except to the extent described under “Description of Notes — Fundamental Change Permits Holders to Require Us to Purchase Notes,” “Description of Notes — Conversion Rights — Conversion Rate Adjustments — Adjustment to Shares Delivered Upon Conversion Upon Certain Fundamental Changes” and “Description of Notes — Conversion Rights — Conversion Rate Adjustments — Conversion After a Public Acquirer Change of Control.”
The adjustment to the conversion rate for notes converted in connection with specified corporate transactions may not adequately compensate you for any lost value of your notes as a result of such transaction.
If a specified corporate transaction that constitutes a fundamental change occurs prior to December 1, 2011 we will, under certain circumstances, increase the applicable conversion rate by a number of additional shares of our common stock for notes converted in connection with such specified corporate transaction. The increase in the applicable conversion rate will be determined based on the date on which the specified corporate transaction becomes effective and the price paid per share of our common stock in such transaction, as described below under “Description of Notes — Conversion Rights — Conversion Rate Adjustments — Adjustments to Shares Delivered Upon Conversion Upon Certain Fundamental Changes.” The adjustment to the applicable conversion rate for notes
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converted in connection with a specified corporate transaction may not adequately compensate you for any lost value of your notes as a result of such transaction. In addition, if the effective date for the specified corporate transaction occurs on or after December 1, 2011 or if the price of our common stock in the transaction is greater than $200.00 per share or less than $43.96 (in each case, subject to adjustment), no adjustment will be made to the applicable conversion rate. In addition, in no event will the total number of shares of common stock issuable upon conversion as a result of this adjustment exceed 22.7480 shares per $1,000 principal amount of notes, subject to adjustments in the same manner as the base conversion rate as set forth under “Description of Notes — Conversion Rights — Conversion Rate Adjustments.”
Our obligation to increase the applicable conversion rate in connection with any such specified corporate transaction could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness of economic remedies.
The base conversion rate of the notes may not be adjusted for all dilutive events.
The base conversion rate of the notes is subject to adjustment only for certain specified events, including, but not limited to, the issuance of stock dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness, or assets, cash dividends and certain issuer tender or exchange offers as described under “Description of Notes — Conversion Rights — Conversion Rate Adjustments.” However, the base conversion rate will not be adjusted for other events, such as a third party tender or exchange offer or an issuance of common stock for cash, that may adversely affect the trading price of the notes or the common stock.
Some significant restructuring transactions may not constitute a fundamental change, in which case we would not be obligated to offer to repurchase the notes.
Upon the occurrence of a fundamental change, you have the right to require us to repurchase your notes. See “Description of Notes — Fundamental Change Permits Holders to Require Us to Purchase Notes.” However, the fundamental change provisions will not afford protection to holders of notes in the event of certain transactions. For example, transactions such as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a fundamental change requiring us to repurchase the notes. In the event of any such transaction, the holders would not have the right to require us to repurchase the notes, even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of notes.
There is no public market for the notes and we cannot assure you that an active trading market will develop for the notes.
There is no established trading market for the notes and we cannot assure you that an active trading market will ever develop for the notes. Although the notes were listed for trading in the PORTAL Market prior to registration, the notes sold pursuant to this prospectus are not eligible for trading on the PORTAL Market and we do not intend to apply for listing of the notes on any securities exchange or for quotation of the notes on any automated dealer quotation system. The lack of an active trading market could adversely affect your ability to sell the notes and the price at which you may be able to sell the notes. The liquidity of the trading market, if any, and future trading prices of the notes will depend on many factors, including, among other things, the market price of our common stock, our ability to complete the registration of the notes and the shares of common stock issuable upon conversion of the notes, prevailing interest rates, our operating results, financial performance and prospects, the market for similar securities and the overall securities market, and may be adversely affected by unfavorable changes in these factors. Historically, the market for convertible debt has been subject to disruptions that have caused volatility in prices. It is possible that the market for the notes will be subject to disruptions which may have a negative effect on the holders of the notes, regardless of our operating results, financial performance or prospects.
You may be deemed to have received a taxable distribution without the receipt of any cash.
The conversion rate of the notes will be adjusted in certain circumstances. Under Section 305(c) of the Internal Revenue Code of 1986 (the “Code”), adjustments (or failures to make adjustments) that have the effect of increasing your proportionate interest in our assets or earnings may in some circumstances result in a deemed distribution to
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you. Certain of the conversion rate adjustments with respect to the notes (including, without limitation, adjustments in respect of taxable dividends to holders of our common stock) will result in deemed distributions to the holders of notes even though they have not received any cash or property as a result of such adjustments. Any deemed distributions will be taxable as a dividend, return of capital, or capital gain in accordance with the earnings and profits rules under the Code. In addition, holders of the notes may, in certain circumstances, be deemed to have received a distribution subject to U.S. federal withholding taxes (including backup withholding taxes or withholding taxes for payments to foreign persons). If we pay withholding taxes on behalf of a holder, we may, at our option, set off such payments against payments of cash and common stock on the notes. See “Certain United States Federal Income Tax Considerations— U.S. Holders — Constructive Dividends” and “Certain United States Federal Income Tax Considerations — Treatment of Non-U.S. Holders — Payments on Common Stock and Constructive Dividends.”
U.S. holders will recognize income for U.S. federal income tax purposes significantly in excess of current cash payments on the notes.
We and each holder of the notes have agreed in the indenture to treat the notes, for United States federal income tax purposes, as “contingent payment debt instruments.” As a result of such treatment, U.S. holders (as defined below under “Certain United States Federal Income Tax Considerations”) of the notes are required to include interest in gross income significantly in excess of the stated interest on the notes. In addition, any gain recognized by a U.S. holder on the sale, exchange, repurchase, redemption, retirement or conversion of a note generally will be ordinary interest income; any loss generally will be ordinary loss to the extent of the interest previously included in income by the holder and, thereafter, capital loss. There is some uncertainty as to the proper application of the Treasury regulations governing contingent payment debt instruments and, if our treatment is successfully challenged by the Internal Revenue Service, it might be determined that, among other things, you should have accrued interest income at a lower or higher rate, or should have recognized capital gain or loss, rather than ordinary income or loss, upon the conversion or taxable disposition of the notes. Please read “Certain United States Federal Income Tax Considerations” below.
The effect of the issuance of our shares of common stock pursuant to the share lending agreement, including sales of our common stock in short sale transactions by purchasers of the notes, may lower the market price of our common stock.
Concurrently with the offering of the notes, we offered, in a transaction registered under the Securities Act and by means of a prospectus supplement, up to 3,122,263 shares of our common stock, all of which were borrowed by an affiliate of Bear, Stearns & Co. Inc., an initial purchaser in the offering of the notes, under a share lending agreement we entered into with such affiliate. We did not receive any proceeds of that offering of common stock.
Such loaned shares must be returned to us by December 1, 2026. We have been advised by Bear, Stearns & Co. Inc. that in connection with the offering of the notes, it, or its affiliates, intend to use such short sales to facilitate the establishment by note investors of hedged positions in the notes stock. The effect of the increase in the number of outstanding shares of our common stock issued pursuant to the share lending agreement could have a negative effect on the market price of our common stock. The market price of our common stock also could be negatively affected by other short sales of our common stock by the purchasers of the notes to hedge their investment in the notes.
The notes may receive a lower rating than anticipated by investors.
If one or more rating agencies rate the notes and assign to the notes a lower rating than is expected by investors, or reduces their rating in the future, the trading price of the notes and our common stock would be negatively affected.
If you hold notes, you are not entitled to any rights with respect to our common stock, but you are subject to all changes made with respect to our common stock.
If you hold notes, you are not entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock), but you are subject to all changes affecting the common stock. You will only be entitled to rights on the common stock if and when we deliver shares of common stock to you upon conversion of your notes and in limited cases under the anti-
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dilution adjustments of the notes. For example, in the event that an amendment is proposed to our certificate of incorporation or by-laws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to delivery of the common stock, you will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock.
The fundamental change purchase feature of the notes may delay or prevent an otherwise beneficial takeover attempt of our company.
The terms of the notes require us to purchase the notes for cash in the event of a fundamental change. A takeover of our company would trigger the requirement that we purchase the notes. This may have the effect of delaying or preventing a takeover of our company that would otherwise be beneficial to investors. See also “ — Risks Related to Our Common Stock — Provisions of our certificate of incorporation, bylaws, stockholder rights plan and Delaware law could deter takeover attempts.” and “Description of Capital Stock — Anti-Takeover Effects of Certificate, Bylaws and Stockholder Rights Plan.”
Conversion of the notes may dilute the ownership interest of existing stockholders, including holders who have previously converted their notes.
The conversion of the notes may dilute the ownership interests of existing stockholders, including holders who have previously converted their notes. Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
Risk Related to Our Common Stock
We do not intend to pay, and are restricted in our ability to pay, dividends on our common stock.
We have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings and other cash resources, if any, for the operation and development of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. Payment of any future dividends will be at the discretion of our board of directors after taking into account many factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. In addition, our current credit facility prohibits us from paying cash dividends on our common stock. Any future dividends may also be restricted by any loan agreements that we may enter into from time to time.
Insiders own a significant amount of common stock, giving them influence or control in corporate transactions and other matters, and the interests of these individuals could differ from those of other stockholders.
Members of our board of directors and our management team will beneficially own in excess of 40% of our outstanding shares of common stock after giving effect to the issuance of our common stock pursuant to the share lending agreement. As a result, these stockholders are in a position to significantly influence or control the outcome of matters requiring a stockholder vote, including the election of directors, the adoption of an amendment to our certificate of incorporation or bylaws and the approval of mergers and other significant corporate transactions. Their control of us may delay or prevent a change of control of us and may adversely affect the voting and other rights of other stockholders.
Our certificate of incorporation and bylaws contain provisions that could discourage an acquisition or change of control of us.
Our certificate of incorporation authorizes our board of directors to issue preferred stock without shareholder approval. If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire control of us. In addition, provisions of the certificate of incorporation and bylaws, such as limitations on shareholder proposals at meetings of shareholders and restrictions on the ability of our shareholders to call special meetings, could also make it more difficult for a third party to acquire control of us. Our bylaws provide that our board of directors is divided into three classes, each elected for staggered three-year terms. Thus, control of the
19
board of directors cannot be changed in one year; rather, at least two annual meetings must be held before a majority of the members of the board of directors could be changed.
These provisions of our certificate of incorporation and bylaws may delay, defer or prevent a tender offer or takeover attempt that a shareholder might consider in his or her best interest, including attempts that might result in a premium over the market price for the common stock. Please read “Description of Capital Stock” for additional details concerning the provisions of our certificate of incorporation and bylaws.
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FORWARD-LOOKING STATEMENTS
Some of the information, including all of the estimates and assumptions, contained in this prospectus, any prospectus supplement and theor any documents we have incorporated by reference contain forward-looking statements. These statements use forward-looking words such as “anticipate,” “believe,” “expect,” “estimate,” “may,” “project,” “will,” or other similar expressions and discuss “forward-looking” information, including the following:
| • | | anticipated capital expenditures; |
|
| • | | production; |
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| • | | future cash flows and borrowings; |
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| • | | pursuit of potential future acquisition opportunities; and |
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| • | | sources of funding for exploration and development. |
Although we believe that these forward-looking statements are based on reasonable assumptions, our expectations may not occur and we cannot guarantee that the anticipated future results will be achieved. A number of factors could cause our actual
future results to differ materially from the
anticipatedresults implied by these or any other forward-looking statements made by us or on our behalf. Although we believe our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. Our assumptions about future
results expressedevents may prove to be inaccurate. We caution you that the forward-looking statements contained in this prospectus
are not guarantees of future performance, and we cannot assure you that those statements will be realized or the forward-looking events and circumstances will occur. All forward-looking statements speak only as of the date of this prospectus.We do not intend to publicly update or revise any prospectus supplementforward-looking statements as a result of new information, future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider the risk factors and all of the documents we haveother information included in, or incorporated by reference. These factors include, among other things:
| • | | the volatility of natural gas and oil prices; |
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| • | | the requirement to take writedowns if natural gas and oil prices decline; |
|
| • | | our ability to replace, find, develop and acquire reserves; |
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| • | | our ability to meet our substantial capital requirements; |
|
| • | | our outstanding indebtedness; |
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| • | | the uncertainty of estimates of natural gas and oil reserves and production rates; |
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| • | | operating risks of natural gas and oil operations; |
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| • | | dependence upon operations concentrated in two primary areas; |
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| • | | delays due to weather or availability of pipeline crews or equipment; |
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| • | | drilling risks; |
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| • | | our hedging activities; |
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| • | | governmental regulation; |
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| • | | environmental matters; |
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| • | | competition; and |
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| • | | our financial results being contingent upon purchasers of our production meeting their obligations. |
Other factors that could cause actual results to differ materially fromreference into, this prospectus, including those anticipated are discussedincluded in our periodic filings with the SEC, including ourmost recent Annual Report on Form 10-K forand, if applicable, in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, in evaluating an investment in our securities. If any of these risks were to occur, our business, financial condition or results of operations could be adversely affected. In that case, the year ended December 31, 2006trading price of our securities could decline and theyou could lose all or part of your investment. When we offer and sell any securities pursuant to a prospectus supplement, we may include additional risk factors beginning on page 7 of this prospectus.
21
When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this prospectus, any prospectus supplement and the documents we have incorporated by reference. We will not update these forward-looking statements unless the securities laws require us to do so.
22
USE OF PROCEEDS
The selling security holders willExcept as may be stated in the applicable prospectus supplement, we intend to use the net proceeds we receive allfrom any sales of the proceeds from the salesecurities by us under this prospectus and any accompanying prospectus supplement for general corporate purposes, which may include, among other things:
reduction or refinancing of debt or other corporate obligations;
additions to our working capital;
capital expenditures; and
potential future acquisitions.
Any specific allocation of the notes and our common shares issuable upon exchangenet proceeds of an offering of securities to a specific purpose will be determined at the time of the notes. Weoffering and will not receive any proceeds from these sales.
be described in an accompanying prospectus supplement.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the New York Stock Exchange under the symbol “GDP.”
At April 2, 2007, the number of holders of record of our common stock without determination of the number of individual participants in security positions was 1,519 with 28,300,813 shares outstanding. High and low sales prices for our common stock for each calendar quarter are as follows:
| | | | | | | | | |
| | | Sales Price |
| | | High | | Low |
2005 | | | | | | | | |
| First quarter | | $ | 25.39 | | | $ | 14.61 | |
| Second quarter | | | 23.36 | | | | 14.74 | |
| Third quarter | | | 24.80 | | | | 19.00 | |
| Fourth quarter | | | 26.29 | | | | 19.25 | |
| | | | | | | | | |
2006 | | | | | | | | |
| First quarter | | $ | 29.60 | | | $ | 23.58 | |
| Second quarter | | | 28.95 | | | | 22.59 | |
| Third quarter | | | 35.95 | | | | 26.34 | |
| Fourth quarter | | | 44.57 | | | | 25.21 | |
| | | | | | | | | |
2007 | | | | | | | | |
| First quarter | | $ | 36.90 | | | $ | 28.09 | |
| Second quarter (through April 2, 2007) | | $ | 34.00 | | | $ | 32.71 | |
On April 2, 2007, the closing sale price of our common stock, as reported by the New York Stock Exchange, was $32.71 per share. We encourage you to obtain current market price quotations for our common stock.
DIVIDEND POLICY
We have neither declared nor paid any cash dividends on our common stock and do not anticipate declaring any dividends in the foreseeable future. We expect to retain our cash for the operation and expansion of our business, including exploration, development and production activities. In addition, our senior credit facility contains restrictions on the payment of dividends to the holders of common stock.
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RATIO OF EARNINGS TO FIXED CHARGES
For purposes of computing the ratioThe following table contains our consolidated ratios of earnings to fixed charges earnings consist of income before provision for income taxes plus fixed charges (excluding capitalized interest) and fixed charges consist of interest expensed and capitalized, amortization of debt discount and expense related to indebtedness, and the portion of rental expenses deemed to be representative of the interest factor attributable to leases for rental property. The following table sets forth our ratioratios of earnings to fixed charges plus preferred stock dividends for each of the periods indicated:
| | | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, |
| | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 |
| Ratio of earnings to fixed charges | | | 1.32 | | | | (a | ) | | | 15.48 | | | | 6.46 | | | | (b | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months
Ended
September 30,
2012 | | | Years Ended December 31, | |
| | | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
Ratio of earnings to fixed charges | | | (a | ) | | | (b | ) | | | (c | ) | | | (d | ) | | | 8.86 | | | | (e | ) |
Ratio of earnings to combined fixed charges and preference securities dividends | | | (f | ) | | | (g | ) | | | (h | ) | | | (i | ) | | | 6.38 | | | | (j | ) |
| | |
| (a) | | Earnings for the yearnine months ended December 31, 2005September 30, 2012 were inadequate to cover fixed charges. The coverage deficiency was $26,847 thousand.$8.5 million. |
|
| (b) | | Earnings for the year ended December 31, 20022011 were inadequate to cover fixed charges. The coverage deficiency was $1,428 thousand.$31.8 million. |
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| (c) | Earnings for the year ended December 31, 2010 were inadequate to cover fixed charges. The coverage deficiency was $262.2 million. |
| (d) | Earnings for the year ended December 31, 2009 were inadequate to cover fixed charges. The coverage deficiency was $318.3 million. |
| (e) | Earnings for the year ended December 31, 2007 were inadequate to cover fixed charges. The coverage deficiency was $59.5 million. |
| (f) | Earnings for the nine months ended September 30, 2012 were inadequate to cover fixed charges and preference securities dividends. The coverage deficiency was $13.1 million. |
| (g) | Earnings for the year ended December 31, 2011 were inadequate to cover fixed charges and preference securities dividends. The coverage deficiency was $37.8 million. |
| (h) | Earnings for the year ended December 31, 2010 were inadequate to cover fixed charges and preference securities dividends. The coverage deficiency was $268.3 million. |
| (i) | Earnings for the year ended December 31, 2009 were inadequate to cover fixed charges and preference securities dividends. The coverage deficiency was $326.0 million. |
| (j) | Earnings for the year ended December 31, 2007 were inadequate to cover fixed charges and preference securities dividends. The coverage deficiency was $65.5 million. |
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be either our senior debt securities (“Senior Debt Securities”) or our subordinated debt securities (“Subordinated Debt Securities”). The Senior Debt Securities and the Subordinated Debt Securities will be issued under separate indentures among us, the Subsidiary Guarantors of such Debt Securities, if any, and a trustee to be determined (the “Trustee”). Senior Debt Securities will be issued under a “Senior Indenture” and Subordinated Debt Securities will be issued under a “Subordinated Indenture.” Together, the Senior Indenture and the Subordinated Indenture are called “Indentures.”
SELLING SECURITY HOLDERS
We initiallyThe Debt Securities may be issued
and sold a total of $175,000,000 aggregate principal amount of the notes in private placements to certain initial purchasers on December 6, 2006 and December 8, 2006. The initial purchasers have advised us that they resold the notes in transactions exempt from the registration requirements of the Securities Act of 1933, as amended, to “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) in compliance with Rule 144A. The selling security holders, which term includes their transferees, pledgees, donees and successors, may from time to time
offerin one or more series. The particular terms of each series that are offered by a prospectus supplement will be described in the prospectus supplement.Unless the Debt Securities are guaranteed by our subsidiaries as described below, the rights of Goodrich Petroleum Corporation and sell pursuant to this prospectus any and allour creditors, including holders of the notes andDebt Securities, to participate in the Sharesassets of common stock issuableany subsidiary upon exchangethe latter’s liquidation or reorganization, will be subject to the prior claims of the notes.
The notes and the shares of common stock to be issued upon exchange of the notes are being registered pursuant to a registration rights agreement between us and the initial purchasers. In that agreement, we undertook to file a registration statement with regardsubsidiary’s creditors, except to the notes and the shares of common stock issuable upon exchange of the notes and, subject to certain exceptions, to keepextent that registration statement effective until the date there are no longer any registrable securities. See “Registration Rights.” The registration statement to which this prospectus relates is intended to satisfy our obligations under that agreement.
The selling security holders named belowwe may ourself be a creditor with recognized claims against such subsidiary.We have advised us that they currently intend to sell the notes and the shares of common stock set forth below pursuant to this prospectus. Additional selling security holders may choose to sell notes and the shares of common stock from time to time upon notice to us. None of the selling security holders named below has, within the past three years, held any position, office or other material relationship with us or any of our predecessors or affiliates.
Unless the securities were purchased pursuant to this registration statement, before a security holder not named below may use this prospectus in connection with an offering of securities, this prospectus will be amended or supplemented to include the name and amount of notes and common shares beneficially owned by the selling security holder and the amount of notes and common shares to be offered. Any amended or supplemented prospectus will also disclose whether any selling security holder selling in connection with that amended or supplemented prospectus has held any position, office or other material relationship with us or any of our predecessors or affiliates during the three years prior to the date of the amended or supplemented prospectus.
The following table is based solely on information provided by the selling security holders. This information represents the most current information provided to us by selling security holders.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Number of | | | | Number of |
| | | | | | | | | | | | | | | | | | | Shares of | | Number of | | Shares of |
| | | Amount of | | Percentage | | Percentage | | | | | | Common | | Shares of | | Common Stock |
| | | Notes | | of Notes | | of Notes | | Amount of | | Stock | | Common Stock | | Upon |
| | | Beneficially | | Beneficially | | Beneficially | | Notes to Be | | Beneficially | | That May Be | | Completion of |
| | | Owned ($) | | Owned | | Owned | | Sold ()(1) | | Owned(2)(3) | | Sold(1)(3) | | Offering(1) |
| ACE Tempest Reinsurance Ltd. (4) | | $ | 245,000 | | | | * | | | | 0.14 | % | | $ | 245,000 | | | | 4,371 | | | | 4,371 | | | | — | |
| Advent Convertible ARB Master (20) | | $ | 3,703,000 | | | | 2.12 | % | | | 2.12 | % | | $ | 3,703,000 | | | | 66,067 | | | | 66,067 | | | | — | |
| Advent Enhanced Phoenix (20) | | $ | 4,000,000 | | | | 2.29 | % | | | 2.29 | % | | $ | 4,000,000 | | | | 71,366 | | | | 71,366 | | | | — | |
| Alabama Children’s Hospital Foundation (5) | | $ | 25,000 | | | | * | | | | 0.01 | % | | $ | 25,000 | | | | 446 | | | | 446 | | | | — | |
| Alcon Laboratories (20) | | $ | 348,000 | | | | * | | | | 0.20 | % | | $ | 348,000 | | | | 6,209 | | | | 6,209 | | | | — | |
Aristeia International
Limited (6) | | $ | 6,925,000 | | | | 3.96 | % | | | 3.96 | % | | $ | 6,925,000 | | | | 123,552 | | | | 123,552 | | | | �� | |
| Aristeia Partners LP (6) | | $ | 1,075,000 | | | | * | | | | 0.61 | % | | $ | 1,075,000 | | | | 19,180 | | | | 19,180 | | | | — | |
| Arkansas Pers (5) | | $ | 590,000 | | | | * | | | | 0.34 | % | | $ | 590,000 | | | | 10,526 | | | | 10,526 | | | | — | |
| Arlington County Employees Retirement System (20) | | $ | 499,000 | | | | * | | | | 0.29 | % | | $ | 499,000 | | | | 8,903 | | | | 8,903 | | | | — | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Number of | | | | Number of |
| | | | | | | | | | | | | | | | | | | Shares of | | Number of | | Shares of |
| | | Amount of | | Percentage | | Percentage | | | | | | Common | | Shares of | | Common Stock |
| | | Notes | | of Notes | | of Notes | | Amount of | | Stock | | Common Stock | | Upon |
| | | Beneficially | | Beneficially | | Beneficially | | Notes to Be | | Beneficially | | That May Be | | Completion of |
| | | Owned ($) | | Owned | | Owned | | Sold ()(1) | | Owned(2)(3) | | Sold(1)(3) | | Offering(1) |
| Bear Stearns & Co. Inc. (7) | | $ | 30,060,000 | | | | 17.18 | % | | | 17.18 | % | | $ | 30,060,000 | | | | 536,315 | | | | 536,315 | | | | — | |
| Boilermakers Blacksmith Pension Trust (5) | | $ | 1,100,000 | | | | * | | | | 0.63 | % | | $ | 1,100,000 | | | | 19,626 | | | | 19,626 | | | | — | |
| British Virgin Islands Social Security Board (20) | | $ | 115,000 | | | | * | | | | 0.07 | % | | $ | 115,000 | | | | 2,052 | | | | 2,052 | | | | — | |
Chrysler Corporation Master Retirement
Trust (4) | | $ | 1,105,000 | | | | * | | | | 0.63 | % | | $ | 1,105,000 | | | | 19,715 | | | | 19,715 | | | | — | |
City University of
New York (20) | | $ | 100,000 | | | | * | | | | 0.06 | % | | $ | 100,000 | | | | 1,784 | | | | 1,784 | | | | — | |
| CNH CA Master Account, L.P. (8) | | $ | 4,000,000 | | | | 2.29 | % | | | 2.29 | % | | $ | 4,000,000 | | | | 71,366 | | | | 71,366 | | | | — | |
| Delaware Public Employees Retirement System (4) | | $ | 625,000 | | | | * | | | | 0.36 | % | | $ | 625,000 | | | | 11,151 | | | | 11,151 | | | | — | |
| Delta Airlines Master Trust — CV (4) | | $ | 190,000 | | | | * | | | | 0.11 | % | | $ | 190,000 | | | | 3,390 | | | | 3,390 | | | | — | |
Delta Airlines Master
Trust (5) | | $ | 235,000 | | | | * | | | | 0.13 | % | | $ | 235,000 | | | | 4,193 | | | | 4,193 | | | | — | |
Delta Pilots Disability & Survivorship Trust —
CV (4) | | $ | 135,000 | | | | * | | | | 0.08 | % | | $ | 135,000 | | | | 2,409 | | | | 2,409 | | | | — | |
F. M. Kirby Foundation,
Inc. (4) | | $ | 195,000 | | | | * | | | | 0.11 | % | | $ | 195,000 | | | | 3,479 | | | | 3,479 | | | | — | |
Florida Power and
Light (20) | | $ | 645,000 | | | | * | | | | 0.37 | % | | $ | 645,000 | | | | 11,508 | | | | 11,508 | | | | — | |
| Fore Convertible Master Fund, Ltd. (19) | | $ | 5,056,000 | | | | 2.89 | % | | | 2.89 | % | | $ | 5,056,000 | | | | 90,207 | | | | 90,207 | | | | — | |
| Fore Erisa Fund, Ltd. (19) | | $ | 444,000 | | | | * | | | | 0.25 | % | | $ | 444,000 | | | | 7,922 | | | | 7,922 | | | | — | |
| FPL Group Employees Pension Plan (5) | | $ | 450,000 | | | | * | | | | 0.26 | % | | $ | 450,000 | | | | 8,029 | | | | 8,029 | | | | — | |
| GMIMCO Trust (20) | | $ | 500,000 | | | | * | | | | 0.29 | % | | $ | 500,000 | | | | 8,921 | | | | 8,921 | | | | — | |
Governing Board Employees Benefit Plan of the City of
Detroit (20) | | $ | 9,000 | | | | * | | | | 0.01 | % | | $ | 9,000 | | | | 161 | | | | 161 | | | | — | |
Grady Hospital
Foundation (20) | | $ | 95,000 | | | | * | | | | 0.05 | % | | $ | 95,000 | | | | 1,695 | | | | 1,695 | | | | — | |
| Healthcare Georgia Foundation (20) | | $ | 41,000 | | | | * | | | | 0.02 | % | | $ | 41,000 | | | | 732 | | | | 732 | | | | — | |
| HFRCA Opportunity Master Fund (20) | | $ | 164,000 | | | | * | | | | 0.09 | % | | $ | 164,000 | | | | 2,926 | | | | 2,926 | | | | — | |
Highbridge International
LLC (9) | | $ | 19,500,000 | | | | 11.14 | % | | | 11.14 | % | | $ | 19,500,000 | | | | 347,909 | | | | 347,909 | | | | — | |
Independence Blue
Cross (20) | | $ | 431,000 | | | | * | | | | 0.25 | % | | $ | 431,000 | | | | 7,690 | | | | 7,690 | | | | — | |
| International Truck & Engine Corporation Non—Contributory Retirement Plan Trust (4) | | $ | 110,000 | | | | * | | | | 0.06 | % | | $ | 110,000 | | | | 1,963 | | | | 1,963 | | | | — | |
| International Truck & Engine Corporation Retiree Health Benefit Trust (4) | | $ | 65,000 | | | | * | | | | 0.04 | % | | $ | 65,000 | | | | 1,160 | | | | 1,160 | | | | — | |
| International Truck & Engine Corporation Retirement Plan for Salaried Employees Trust (4) | | $ | 60,000 | | | | * | | | | 0.03 | % | | $ | 60,000 | | | | 1,070 | | | | 1,070 | | | | — | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Number of | | | | Number of |
| | | | | | | | | | | | | | | | | | | Shares of | | Number of | | Shares of |
| | | Amount of | | Percentage | | Percentage | | | | | | Common | | Shares of | | Common Stock |
| | | Notes | | of Notes | | of Notes | | Amount of | | Stock | | Common Stock | | Upon |
| | | Beneficially | | Beneficially | | Beneficially | | Notes to Be | | Beneficially | | That May Be | | Completion of |
| | | Owned ($) | | Owned | | Owned | | Sold ()(1) | | Owned(2)(3) | | Sold(1)(3) | | Offering(1) |
JMG Capital Partners,
LP (10) | | $ | 2,650,000 | | | | 1.51 | % | | | 1.51 | % | | $ | 2,650,000 | | | | 47,280 | | | | 47,280 | | | | — | |
| JMG Triton Offshore Fund, Ltd (11) | | $ | 1,350,000 | | | | * | | | | 0.77 | % | | $ | 1,350,000 | | | | 24,086 | | | | 24,086 | | | | — | |
| Kamunting Street Capital Management, L.P. (12) | | $ | 4,000,000 | | | | 2.29 | % | | | 2.29 | % | | $ | 4,000,000 | | | | 71,366 | | | | 71,366 | | | | — | |
| Louisiana CCRF (5) | | $ | 80,000 | | | | * | | | | 0.05 | % | | $ | 80,000 | | | | 1,427 | | | | 1,427 | | | | — | |
Lyxor Master Trust
Fund (20) | | $ | 133,000 | | | | * | | | | 0.08 | % | | $ | 133,000 | | | | 2,373 | | | | 2,373 | | | | — | |
| Microsoft Capital Group, L.P. (4) | | $ | 110,000 | | | | * | | | | 0.06 | % | | $ | 110,000 | | | | 1,963 | | | | 1,963 | | | | — | |
| National Railroad Investment Trust (4) | | $ | 595,000 | | | | * | | | | 0.34 | % | | $ | 595,000 | | | | 10,616 | | | | 10,616 | | | | — | |
Nisswa Master Fund
Ltd. (13) | | $ | 1,000,000 | | | | * | | | | 0.57 | % | | $ | 1,000,000 | | | | 29,942 | | | | 17,842 | | | | 12,100 | |
Nuveen Preferred & Convertible Fund
JQC (5) | | $ | 2,500,000 | | | | 1.43 | % | | | 1.43 | % | | $ | 2,500,000 | | | | 44,604 | | | | 44,604 | | | | — | |
| Nuveen Preferred & Convertible Income Fund JPC (5) | | $ | 1,765,000 | | | | 1.01 | % | | | 1.01 | % | | $ | 1,765,000 | | | | 31,490 | | | | 31,490 | | | | — | |
| Occidental Petroleum Corporation (20) | | $ | 225,000 | | | | * | | | | 0.13 | % | | $ | 225,000 | | | | 4,014 | | | | 4,014 | | | | — | |
| OCM Convertible Trust (4) | | $ | 335,000 | | | | * | | | | 0.19 | % | | $ | 335,000 | | | | 5,977 | | | | 5,977 | | | | — | |
| OCM Global Convertible Securities Fund (4) | | $ | 140,000 | | | | * | | | | 0.08 | % | | $ | 140,000 | | | | 2,498 | | | | 2,498 | | | | — | |
| Partner Reinsurance Company Ltd. (4) | | $ | 245,000 | | | | * | | | | 0.14 | % | | $ | 245,000 | | | | 4,371 | | | | 4,371 | | | | — | |
| Police & Fire Retirement System of the City of Detroit (20) | | $ | 318,000 | | | | * | | �� | | 0.18 | % | | $ | 318,000 | | | | 5,674 | | | | 5,674 | | | | — | |
| Pro Mutual (20) | | $ | 631,000 | | | | * | | | | 0.36 | % | | $ | 631,000 | | | | 11,258 | | | | 11,258 | | | | — | |
| Qwest Occupational Health Trust (4) | | $ | 75,000 | | | | * | | | | 0.04 | % | | $ | 75,000 | | | | 1,338 | | | | 1,338 | | | | — | |
| Qwest Pension Trust (4) | | $ | 465,000 | | | | * | | | | 0.27 | % | | $ | 465,000 | | | | 8,296 | | | | 8,296 | | | | — | |
| Raytheon Phoenix (20) | | $ | 337,000 | | | | * | | | | 0.19 | % | | $ | 337,000 | | | | 6,013 | | | | 6,013 | | | | — | |
S.A.C. Arbitrage Fund,
LLC (14) | | $ | 4,000,000 | | | | 2.29 | % | | | 2.29 | % | | $ | 4,000,000 | | | | 71,366 | | | | 71,366 | | | | — | |
| San Francisco City and County ERS (20) | | $ | 987,000 | | | | * | | | | 0.56 | % | | $ | 987,000 | | | | 17,610 | | | | 17,610 | | | | — | |
Sandelman Partners Multi—Strategy Master Fund
Ltd. (15) | | $ | 11,500,000 | | | | 6.57 | % | | | 6.57 | % | | $ | 11,500,000 | | | | 205,177 | | | | 205,177 | | | | — | |
| Satellite Convertible Arbitrage Master Fund LLC (16) | | $ | 10,000,000 | | | | 5.71 | % | | | 5.71 | % | | $ | 10,000,000 | | | | 227,335 | | | | 178,415 | | | | 48,920 | |
| Seattle City Employee Retirement System (20) | | $ | 59,000 | | | | * | | | | 0.03 | % | | $ | 59,000 | | | | 1,053 | | | | 1,053 | | | | — | |
| Stark Master Fund Ltd. (17) | | $ | 19,000,000 | | | | 10.86 | % | | | 10.86 | % | | $ | 19,000,000 | | | | 338,989 | | | | 338,989 | | | | — | |
27
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Number of | | | | Number of |
| | | | | | | | | | | | | | | | | | | Shares of | | Number of | | Shares of |
| | | Amount of | | Percentage | | Percentage | | | | | | Common | | Shares of | | Common Stock |
| | | Notes | | of Notes | | of Notes | | Amount of | | Stock | | Common Stock | | Upon |
| | | Beneficially | | Beneficially | | Beneficially | | Notes to Be | | Beneficially | | That May Be | | Completion of |
| | | Owned ($) | | Owned | | Owned | | Sold ()(1) | | Owned(2)(3) | | Sold(1)(3) | | Offering(1) |
| Starvest Convertible Securities Fund (20) | | $ | 31,000 | | | | * | | | | 0.02 | % | | $ | 31,000 | | | | 553 | | | | 553 | | | | — | |
| State of Oregon Equity (5) | | $ | 1,700,000 | | | | * | | | | 0.97 | % | | $ | 1,700,000 | | | | 30,331 | | | | 30,331 | | | | — | |
Teachers Retirement System of the City of
New York (20) | | $ | 831,000 | | | | * | | | | 0.47 | % | | $ | 831,000 | | | | 14,826 | | | | 14,826 | | | | — | |
| Trust for the Defined Benefit Plans of ICI American Holdings, Inc. (4) | | $ | 115,000 | | | | * | | | | 0.07 | % | | $ | 115,000 | | | | 2,052 | | | | 2,052 | | | | — | |
| Trustmark Insurance Company (20) | | $ | 204,000 | | | | * | | | | 0.12 | % | | $ | 204,000 | | | | 3,640 | | | | 3,640 | | | | — | |
UnumProvident
Corporation (4) | | $ | 160,000 | | | | * | | | | 0.09 | % | | $ | 160,000 | | | | 2,855 | | | | 2,855 | | | | — | |
| US Bank FBO Essentia Health Systems (5) | | $ | 60,000 | | | | * | | | | 0.03 | % | | $ | 60,000 | | | | 1,070 | | | | 1,070 | | | | — | |
| Vanguard Convertible Securities Fund, Inc. (4) | | $ | 2,015,000 | | | | 1.15 | % | | | 1.15 | % | | $ | 2,015,000 | | | | 35,951 | | | | 35,951 | | | | — | |
Vicis Capital Master
Fund (18) | | $ | 2,000,000 | | | | 1.14 | % | | | 1.14 | % | | $ | 2,000,000 | | | | 35,683 | | | | 35,683 | | | | — | |
Virginia Retirement
System (4) | | $ | 880,000 | | | | * | | | | 0.50 | % | | $ | 880,000 | | | | 15,701 | | | | 15,701 | | | | — | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 153,336,000 | | | | 87.62 | % | | | 87.62 | % | | $ | 153,336,000 | | | | 2,796,764 | | | | 2,735,744 | | | | 61,020 | |
| | |
* | | Less than 1%. |
|
(1) | | Because a selling security holder may sell all or a portion of the notes and common shares issuable upon exchange of the notes pursuant to this prospectus, an estimate cannot be given as to the number or percentage of notes and common shares that the selling security holder will hold upon termination of any sales. The information presented assumes that all of the selling security holders will fully exchange the notes for cash and Shares of common stock and that the selling security holders will sell all Shares of common stock that they received pursuant to such exchange. |
|
(2) | | Includes shares of common stock issuable upon exchange of the notes and open short positions in the shares of common stock. Does not include share of our common stock underlying shares of our Series B Preferred Convertible Stock. |
|
(3) | | The number of shares of our common stock issuable upon conversion of the notes is calculated assuming (i) that the notes are worth $350,000,000 at the time of conversion, with the $175,000,000 principal amount paid in cash and the remaining $175,000,000 paid in shares of our common stock and (ii) the conversion of the full amount of notes held by such holder at the initial conversion rate of 15.1653 per $1,000 principal amount of the notes, which equals an initial conversion price of $65.94. This conversion rate is subject to adjustment as described under “Description of Notes — Conversion Rights — Conversion Rate Adjustments.” Accordingly, the number of shares of our common stock to be sold may increase or decrease from time to time. Fractional shares will not be issued upon conversion of the notes. Cash will be paid instead of fractional shares, if any. |
|
(4) | | Representatives of this security holder have advised us that this security holder is an affiliate of a U.S. registered broker-dealer; however, this security holder acquired the notes in the ordinary course of business and, at the time of the acquisition, had no agreements or understandings, directly or indirectly, with any party to distribute the notes or our common stock issuable upon conversion of the notes held by this security holder. Oaktree Capital Management LLC is the portfolio manager of the security holder. Lawrence Keele, Principal of Oaktree Capital Management LLC, holds the voting and dispositive power with respect to the notes or our common stock issuable upon conversion of the notes held by this security holder. |
|
(5) | | Representatives of this security holder have advised us that Ann Houlihan CCO, on behalf of Froley, Revy Investment Co., Inc., holds the voting and dispositive power with respect to the notes or our common stock issuable upon conversion of the notes held by this security holder. |
|
(6) | | Representatives of this security holder have advised us that Kevin Taner, Robert H. Lynch Jr., Anthony Frascella and William R. Techar, joint owners of the investment manager of this security holder, are the natural persons who hold the voting and dispositive power with respect to the notes or our common stock issuable upon conversion of the notes held by this security holder. |
|
(7) | | This security holder has advised us that it is a U.S. registered broker-dealer. As such, the security holder is, under the interpretation of the Securities and Exchange Commission, an “underwriter” within the meaning of the Securities Act of 1933, as amended. Please see “Plan of Distribution” for required disclosure regarding this security holder. Voting and dispositive power with respect to the notes and our common stock issuable upon conversion of the notes held by this security holder is held by Michael Loyd, Senior Managing Director of the security holder. |
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| | |
(8) | | Representatives of this security holder have advised us that CNH Partners, LLC is the Investment Advisor of the security holder and has sole voting and dispositive power over the notes or our common stock issuable upon conversion of the notes held by this security holder. The Investment Principals for the Investment Advisor are Robert Krail, Mark Mitchell and Todd Pulvino. |
|
(9) | | This security holder has advised us that Highbridge Capital Management, LLC is the trading manager of this security holder and consequently has voting control and investment discretion over the notes and our common stock issuable upon conversion of the notes held by this security holder. Glenn Dubin and Henry Swieca control Capital Management, LLC and are the natural persons with voting and dispositive power with respect to the notes or our common stock issuable upon conversion of the notes held by this security holder. Each of Capital Management, LLC, Mr. Dubin and Mr. Swieca disclaims beneficial ownership of securities held by this security holder. |
|
(10) | | This security holder has advised us that voting and dispositive power with respect to the notes or our common stock held by this security holder is held by Jonathan M. Glaser. |
|
(11) | | This security holder has advised us that voting and dispositive power with respect to the notes or our common stock held by this security holder is held by Jonathan M. Glaser and Roger Richter. |
|
(12) | | This security holder has advised us that voting and dispositive power with respect to the notes or our common stock held by this security holder is held by Allan Teh. |
|
(13) | | This security holder has advised us that voting and dispositive power with respect to the notes or our common stock held by this security holder is held by Brian Tayler and Aaron Yeevy. |
|
(14) | | This security holder has advised us that voting and dispositive power with respect to the notes or our common stock held by this security holder is held by Steven A. Cohen. Mr. Cohen disclaims beneficial ownership of securities held by this security holder. |
|
(15) | | This security holder has advised us that voting and dispositive power with respect to the notes or our common stock held by this security holder is held by John Sandelman. |
|
(16) | | This security holder has advised us that voting and dispositive power with respect to the notes or our common stock held by this security holder is held by Satellite Fund Management, LLC. The managing members of Satellite Fund Management, LLC are Lief Rosenblatt, Mark Sonnino and Gabe Nechamkin. Each of Satellite Fund Management, LLC, Lief Rosenblatt, Mark Sonnino and Gabe Nechamkin disclaims beneficial ownership of securities held by this security holder. |
|
(17) | | Representatives of this security holder have advised us that this security holder is an affiliate of a U.S. registered broker-dealer; however, this security holder acquired the notes in the ordinary course of business and, at the time of the acquisition, had no agreements or understandings, directly or indirectly, with any party to distribute the notes or our common stock issuable upon conversion of the notes held by this security holder. Stark Offshore Management, LLC is the investment manager of the security holder. Michael A. Roth is the managing member of Stark Offshore Management, LLC, and holds the voting and dispositive power with respect to the notes or our common stock issuable upon conversion of the notes held by this security holder. |
|
(18) | | Vicis Capital LLC is the investment manager of Vicis Capital Master Fund. John Succo, Shad Stastney and Sky Lucas control Vicis Capital LLC. As such, Messrs. Succo, Stastney and Lucas are the natural persons who have voting and investment control of the securities being offered. Each of Messrs. Succo, Stastney and Lucas disclaims beneficial ownership of securities held by this security holder. |
|
(19) | | Representatives of this security holder have advised us that this security holder is an investment company under the Investment Company Act of 1940, as amended. Michael Li is the Chief Executive Officer of this security holder, and as such is the natural person with voting and investment control of the securities being offered. |
|
(20) | | This security holder has advised us that voting and dispositive power with respect to the notes or our common stock held by this security holder is held by Advent Capital Management, LLC. The President of Advent Capital Management, LLC is Tracy V. Maitland. |
Selling security holders who are registered broker-dealers are “underwriters” within the meaning of the Securities Act of 1933. In addition, selling security holders who are affiliates of registered broker-dealers are “underwriters” within the meaning of the Securities Act of 1933 if such selling security holder (a) did not acquire its notes or underlying Shares of common stock in the ordinary course of business or (b) had an agreement or understanding, directly or indirectly, with any person to distribute the notes or underlying common shares. To our knowledge, no selling security holder who is a registered broker-dealer or an affiliate of a registered broker-dealer received any securities as underwriting compensation.
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DESCRIPTION OF NOTES
We issued the notes under an indenture dated December 6, 2006 (the “indenture”) between us and Wells Fargo, National Association, as trustee (the “trustee”). The terms of the notes include those expressly set forth 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 notes and the shares of common stock issuable upon conversion of the notes are covered by a registration rights agreement.
You may request a copy of the indenture and the registration rights agreement from us as set forth in “Incorporation of Certain Documents by Reference.”
The following description is a summary of the materialsummarized selected provisions of the notes, the indenture and the registration rights agreement and does not purport to be complete. ThisIndentures below. The summary is subject to and is qualified by reference to allnot complete. The form of each Indenture has been filed with the provisions of the notes, the indenture and the registration rights agreement, including the definitions of certain terms used in these documents. We urge you to read the indenture and the registration rights agreement because they, and not this description, define your rightsSEC as a holder of the notes. These documents are filed as exhibitsan exhibit to the registration statement of which this prospectus is a part.
For purposespart, and you should read the Indentures for provisions that may be important to you. Capitalized terms used in the summary have the meanings specified in the Indentures.General
The Indentures provide that Debt Securities in separate series may be issued thereunder from time to time without limitation as to aggregate principal amount. We may specify a maximum aggregate principal amount for the Debt Securities of this description, referencesany series. We will determine the terms and conditions of the Debt Securities, including the maturity, principal and interest, but those terms must be consistent with the Indenture. The Debt Securities will be our unsecured obligations.
The Subordinated Debt Securities will be subordinated in right of payment to “the Company,” “we,” “our”the prior payment in full of all of our Senior Debt (as defined) as described under “— Subordination of Subordinated Debt Securities” and “us” refer onlyin the prospectus supplement applicable to any Subordinated Debt Securities. If the prospectus supplement so indicates, the Debt Securities will be convertible into our common stock.
If specified in the prospectus supplement respecting a particular series of Debt Securities, Goodrich Petroleum CorporationCompany, L.L.C. and notany other of our future subsidiaries specified in the prospectus supplement (each a “Subsidiary Guarantor”) will fully and unconditionally guarantee (the “Subsidiary Guarantee”) that series as described under “— Subsidiary Guarantee” and in the prospectus supplement. Each Subsidiary Guarantee will be an unsecured obligation of the Subsidiary Guarantor. A Subsidiary Guarantee of Subordinated Debt Securities will be subordinated to its subsidiaries.
General
the Senior Debt of the Subsidiary Guarantor on the same basis as the Subordinated Debt Securities are subordinated to our Senior Debt.The notes:
applicable prospectus supplement will set forth the price or prices at which the Debt Securities to be issued will be offered for sale and will describe the following terms of such Debt Securities:| | •(1) | the title of the Debt Securities; |
| | (2) | whether the Debt Securities are initially limited to anSenior Debt Securities or Subordinated Debt Securities and, if Subordinated Debt Securities, the related subordination terms; |
| (3) | whether any Subsidiary Guarantor will provide a Subsidiary Guarantee of the Debt Securities; |
| (4) | any limit on the aggregate principal amount of $175.0 million;the Debt Securities; |
|
| | •(5) | | matureeach date on December 1, 2026 unless earlier converted, redeemed or repurchased;which the principal of the Debt Securities will be payable; |
|
| | •(6) | | were issued in denominations of $1,000the interest rate that the Debt Securities will bear and multiples of $1,000;the interest payment dates for the Debt Securities; |
|
| | •(7) | | are represented by one or more registered notes in global form, but in certain limited circumstances mayeach place where payments on the Debt Securities will be represented by notes in definitive form; andpayable; |
|
| | •(8) | any terms upon which the Debt Securities may be redeemed, in whole or in part, at our option; |
| | with respect(9) | any sinking fund or other provisions that would obligate us to redeem or otherwise repurchase the Debt Securities; |
| (10) | the portion of the principal amount, if less than all, of the Debt Securities that will be payable upon declaration of acceleration of the Maturity of the Debt Securities; |
| (11) | whether the Debt Securities are defeasible; |
| (12) | any addition to or change in the Events of Default; |
| (13) | whether the Debt Securities are convertible into our common stock and, if so, the terms and conditions upon which conversion will be effected, including the initial conversion price or conversion rate and any adjustments thereto and the conversion period; |
| (14) | any addition to or change in the covenants in the Indenture applicable to the notes issued inDebt Securities; and |
| (15) | any other terms of the private placement, are eligible for trading on The PORTAL Market, althoughDebt Securities not inconsistent with the notes sold using this prospectus will no longer be eligible for trading inprovisions of the PORTAL Market.Indenture. |
Debt Securities, including any Debt Securities that provide for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof (“Original Issue Discount Securities”), may be sold at a substantial discount below their principal amount. Special United States federal income tax considerations applicable to Debt Securities sold at an original issue discount may be described in the applicable prospectus supplement. In addition, special United States federal income tax or other considerations applicable to any Debt Securities that are denominated in a currency or currency unit other than United States dollars may be described in the applicable prospectus supplement.
Subordination of Subordinated Debt Securities
The notes are our general unsecured, senior obligations and rank equallyindebtedness evidenced by the Subordinated Debt Securities will, to the extent set forth in the Subordinated Indenture with respect to each series of Subordinated Debt Securities, be subordinated in right of payment withto the prior payment in full of all of our existingSenior Debt, including the Senior Debt Securities, and futureit may also be senior indebtedness, including our indebtedness under our revolving credit facility and term loan. The notes are our effectively subordinatedin right of payment to all of our existing and future secured indebtedness, including indebtedness under our revolving credit facility,Subordinated Debt. The prospectus supplement relating to any Subordinated Debt Securities will summarize the extentsubordination provisions of the valueSubordinated Indenture applicable to that series including:
the applicability and effect of collateral securing such indebtedness. As of December 31, 2006, we had approximately $26.5 million of outstanding senior indebtedness andprovisions upon any payment or distribution respecting that series following any liquidation, dissolution or other liabilities (excluding trade payables, accrued expenses and intercompany liabilities), all of which represented secured indebtedness. The notes are structurally subordinated to all of this indebtedness.
The indenture does not limit the amount of debt which may be issued by the Companywinding-up, or its subsidiaries. Other than restrictions described under “— Fundamental Change Permits Holders to Require Us to Purchase Notes” and “— Consolidation, Merger and Sale of Assets” below and exceptany assignment for the provisions set forth under “— Conversion Rights — Conversion Rate Adjustments — Adjustment to Shares Delivered Upon Conversion Upon Certain Fundamental Changes” and “— Conversion Rights — Conversion Rate Adjustments — Conversion After a Public Acquirer Changebenefit of Control,” the indenture does not contain any covenantscreditors or other provisions designed to afford holdersmarshalling of assets or any bankruptcy, insolvency or similar proceedings;
the notes protectionapplicability and effect of such provisions in the event of specified defaults with respect to any Senior Debt, including the circumstances under which and the periods during which we will be prohibited from making payments on the Subordinated Debt Securities; and
the definition of Senior Debt applicable to the Subordinated Debt Securities of that series and, if the series is issued on a highly leveraged transaction involvingsenior subordinated basis, the Company ordefinition of Subordinated Debt applicable to that series.
The prospectus supplement will also describe as of a recent date the approximate amount of Senior Debt to which the Subordinated Debt Securities of that series will be subordinated.
The failure to make any payment on any of the Subordinated Debt Securities by reason of the subordination provisions of the Subordinated Indenture described in the eventprospectus supplement will not be construed as preventing the occurrence of an Event of Default with respect to the Subordinated Debt Securities arising from any such failure to make payment.
The subordination provisions described above will not be applicable to payments in respect of the Subordinated Debt Securities from a defeasance trust established in connection with any legal defeasance or covenant defeasance of the Subordinated Debt Securities as described under “— Legal Defeasance and Covenant Defeasance.”
Subsidiary Guarantee
If specified in the prospectus supplement, one or more of the Subsidiary Guarantors will guarantee the Debt Securities of a declineseries. Unless otherwise indicated in the creditprospectus supplement, the following provisions will apply to the Subsidiary Guarantee of the CompanySubsidiary Guarantor.
Subject to the limitations described below and in the prospectus supplement, one or more of the Subsidiary Guarantors will jointly and severally, fully and unconditionally guarantee the punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all our payment obligations under the Indentures and the Debt Securities of a series, whether for principal of, premium, if any, or interest on the Debt Securities or otherwise (all such obligations guaranteed by a Subsidiary Guarantor being herein called the “Guaranteed Obligations”). The Subsidiary Guarantors will also pay all expenses (including reasonable counsel fees and expenses) incurred by the applicable Trustee in enforcing any rights under a Subsidiary Guarantee with respect to a Subsidiary Guarantor.
In the case of Subordinated Debt Securities, a Subsidiary Guarantor’s Subsidiary Guarantee will be subordinated in right of payment to the Senior Debt of such Subsidiary Guarantor on the same basis as the resultSubordinated Debt Securities are subordinated to our Senior Debt. No payment will be made by any Subsidiary Guarantor under its Subsidiary Guarantee during any period in which payments by us on the Subordinated Debt Securities are suspended by the subordination provisions of a takeover, recapitalization, highly leveraged transactionthe Subordinated Indenture.
Each Subsidiary Guarantee will be limited in amount to an amount not to exceed the maximum amount that can be guaranteed by the relevant Subsidiary Guarantor without rendering such Subsidiary Guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar restructuring involvinglaws affecting the Companyrights of creditors generally.
Each Subsidiary Guarantee will be a continuing guarantee and will:
| (1) | remain in full force and effect until either (a) payment in full of all the applicable Debt Securities (or such Debt Securities are otherwise satisfied and discharged in accordance with the provisions of the applicable Indenture) or (b) released as described in the following paragraph; |
| (2) | be binding upon each Subsidiary Guarantor; and |
| (3) | inure to the benefit of and be enforceable by the applicable Trustee, the Holders and their successors, transferees and assigns. |
In the event that could adversely affect such holders.
We may, without(a) a Subsidiary Guarantor ceases to be a Subsidiary, (b) either legal defeasance or covenant defeasance occurs with respect to the consentseries or (c) all or substantially all of the holders, issue additional notesassets or all of the Capital Stock of such Subsidiary Guarantor is sold, including by way of sale, merger, consolidation or otherwise, such Subsidiary Guarantor will be released and discharged of its obligations under its Subsidiary Guarantee without any further action required on the indenture with the same terms and with the same CUSIP numbers as the notes offered hereby in an unlimited aggregate principal amount, provided that
30
such additional notes must be part of the
same issue asTrustee or any Holder, and no other person acquiring or owning the
notes offered hereby for federal income tax purposes. Weassets or Capital Stock of such Subsidiary Guarantor will be required to enter into a Subsidiary Guarantee. In addition, the prospectus supplement may
alsospecify additional circumstances under which a Subsidiary Guarantor can be released from
time to time repurchase notesits Subsidiary Guarantee.Form, Exchange and Transfer
The Debt Securities of each series will be issuable only in open market purchases or negotiated transactionsfully registered form, without prior notice to holders.
The Company does not intend to listcoupons, and, unless otherwise specified in the notes on a national securities exchange.
Payments onapplicable prospectus supplement, only in denominations of $1,000 and integral multiples thereof.At the Notes; Paying Agent and Registrar; Transfer and Exchange
We will pay principaloption of
and any premium on, certificated notes at the
office or agency designated by the Company for that purpose. We have initially designated the trustee as our paying agent and registrar. We may, however, change the paying agent or registrar without prior noticeHolder, subject to the
holdersterms of the
notes,applicable Indenture and the
Company may act as paying agent or registrar. Interest (including contingent interest and additional interest, if any), on certificated noteslimitations applicable to Global Securities, Debt Securities of each series will be
payable (i) to holders having anexchangeable for other Debt Securities of the same series of any authorized denomination and of a like tenor and aggregate principal
amount of $5.0 million or less, by check mailedamount.Subject to the holdersterms of these notesthe applicable Indenture and (ii)the limitations applicable to holders having an aggregate principal amount of more than $5.0 million either by check mailed to each holder or, upon application by a holder to the registrar not later than the relevant record date, by wire transfer in immediately available funds to that holder’s account within the United States, which application shall remain in effect until the holder notifies, in writing, the registrar to the contrary.
We will pay principal of and interest on (including any contingent interest and additional interest), notes in global form registered in the name of or held by or on behalf of The Depository Trust Company (“DTC”) or its nominee in immediately available funds to DTC or its nominee, as the caseGlobal Securities, Debt Securities may be presented for exchange as provided above or for registration of transfer (duly endorsed or with the registered holderform of such global note.
A holder of notes may transfer
or exchange notesendorsed thereon duly executed) at the office of the
registrar in accordance withSecurity Registrar or at the
indenture. The registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements andoffice of any transfer
documents.agent designated by us for such purpose. No service charge will be
imposed by the Company, the trustee or the registrarmade for any registration of transfer or exchange of
notes,Debt Securities, but
the Companywe may require
a holder to paypayment of a sum sufficient to cover any
transfer tax or other
similar governmental charge
required by law or permitted by the indenture. The Company is not required to register anypayable in that connection. Such transfer or exchange
will be effected upon the Security Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Security Registrar and any other transfer agent initially designated by us for any Debt Securities will be named in the applicable prospectus supplement. We may at any time designate additional transfer agents or rescind the designation of any
note selected for redemptiontransfer agent or
surrendered for conversion. Also,approve a change in the
Company is notoffice through which any transfer agent acts, except that we will be required to
register anymaintain a transfer
or exchangeagent in each Place of Payment for the Debt Securities of each series.If the Debt Securities of any note in certificated form for a periodseries (or of 15 days before the mailing of a notice of redemption.
The registered holder of a note will be treated as the owner of it for all purposes,any series and references to “holders” or “you” in this descriptionspecified tenor) are to holders registered unless the context otherwise indicates.
Interest
The notes bear interest at a rate of 3.25% per annum. Interest on the notes began accruing on December 6, 2006. Interest (including contingent interest and additional interest, if any) will be payable semiannually in arrears on June 1 and December 1 of each year, beginning June 1, 2007, to holders of record on the immediately preceding May 15 and November 15. Interest on the notes will be computed on the basis of a 360 day year comprised of twelve 30-day months.
Contingent Interest
Subject to the accrual and record date provisions described above, we will pay contingent interest to the holders of notes during any six-month period from an interest payment date to, but excluding, the following interest payment date, commencing with the six-month period beginning on December 1, 2011, if the trading price of a note for each of the five trading days ending on the third trading day immediately preceding the first day of the relevant six-month period equals 120% or more of the principal amount of the note.
The amount of contingent interest payable per note with respect to any six-month period will equal 0.50% per annum of the average trading price of such note for the five trading days referred to above.
The “trading price” of a note on any date of determination means the average of the secondary market bid quotations per note obtained by the bid solicitation agent for $5.0 million principal amount of notes at approximately 3:30 p.m., New York City time, on such determination date from two independent nationally-recognized securities
31
dealers we select, but if only one such bid can reasonably be obtained by the bid solicitation agent, this one bid shall be used. If the bid solicitation agent cannot reasonably obtain at least one bid for $5.0 million principal amount of the notes from a nationally-recognized securities dealer or if, in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the notes, then the trading price of a note will be determined by our board of directors based on a good faith estimate of the fair value of the notes.
The bid solicitation agent will initially be the trustee. We may change the bid solicitation agent, but the bid solicitation agent will not be our affiliate. The bid solicitation agent will solicit bids from securities dealers that are believed by us to be willing to bid for the notes.
Upon determination that holders of notes will be entitled to receive contingent interest that will become payable during a relevant six-month period, on or prior to the start of such six-month period, we will provide notice to the trustee setting forth the amount of contingent interest per $1,000 principal amount of notes and disseminate a press release through a public medium that is customary for such press releases.
We may unilaterally increase the amount of contingent interest we may pay or pay interest or other amounts we are not obligated to pay, but we will have no obligation to do so.
Optional Redemption
Prior to December 1, 2011, the notes will not be redeemable. On or after December 1, 2011, we may redeem for cash all or a portion of the notes, upon not less than 30, nor more than 60 calendar days notice before the redemption date to the trustee, the paying agent and each holder of the notes, at a redemption price of 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest (including contingent interest and additional interest, if any) to, but not including, the redemption date (unless the redemption date is between a regular record date and the interest payment date to which it relates, in which case we will pay accrued and unpaid interest to the holder of record on such regular record date).
If we decide to redeem fewer than all of the outstanding notes, the trustee will select the notes to be redeemed (in principal amounts of $1,000 or multiples thereof) by lot, or on a pro rata basis or by another method the trustee considers fair and appropriate, including any method required by DTC or any successor depositary. If the trustee selects a portion of your note for partial redemption and you convert a portion of the same note, the converted portion will be deemed to be from the portion selected for redemption.
In the event of any redemption in part, we will not be required to (1) issue, register the transfer of or exchange any noteDebt Security of that series (or of that series and specified tenor, as the case may be) during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of any such Debt Security that may be selected for redemption and ending at the close of business on the day of such mailing or (2) register the transfer of or exchange any Debt Security so selected for redemption, in whole or in part, except the unredeemed portion of any notesuch Debt Security being redeemed in part.
Conversion Rights
General
Prior to November 1, 2026, the notes will be convertible only upon satisfaction of one or more of the conditions described under the headings ‘‘— Conversion Upon Satisfaction of Sale Price Condition,” “— Conversion Upon Satisfaction of Trading Price Condition,” “ — Conversion Upon Notice of Redemption,” and “ — Conversion Upon Specified Corporate Transactions.” On and after November 1, 2026, the notes will be convertible until the close of business on the second business day immediately preceding the maturity date of the notes regardless of the foregoing conditions. Upon conversion, we will deliver, for each $1,000 principal amount of notes converted, either (i) a number of shares of our common stock equal to the applicable conversion rate, or (ii) a combination of cash and shares of our common stock, in each case as described under “ — Payment Upon Conversion” below. In addition, at any time on or before the 13th scheduled trading day prior to maturity, we may irrevocably waive in our sole discretion without the consent of the holders of the notes, by notice to the trustee and the holders of the notes, our right to satisfy our conversion obligations solely in shares of our common stock as described above.
The applicable conversion rate for any notes to be converted will be determined as follows:
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Global Securities | • | | if the applicable stock price (as defined below) for such notes is less than or equal to the base conversion price (as defined below), the applicable conversion rate for such notes will be equal to the base conversion rate, as may be adjusted as described below, or |
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| • | | if the applicable stock price for such notes is greater than the base conversion price, the applicable conversion rate for such notes will be determined in accordance with the following formula: |
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Base Conversion Rate + (Applicable Stock Price-Base Conversion Price) × Incremental Share Factor
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Applicable Stock Price |
The “base conversion rate” is 15.1653, subject to adjustment as described under “Description of Notes — Conversion Rights — Conversion Rate Adjustments.” The applicable conversion rate may be adjusted in certain corporate transactions that also constitute a fundamental change. See “— Adjustment to Shares Delivered Upon Conversion Upon Certain Fundamental Changes” below.
The “base conversion price” per $1,000 principal amount of notes is a dollar amount (initially $65.94) determined by dividing $1,000 by the base conversion rate.
The “incremental share factor” is 2.6762, subject to the same proportional adjustment as the base conversion rate.
The “applicable stock price” for any note to be converted is equal to the average of the last reported sale prices of our common stock over the ten trading day period starting on, and including, the third trading day following the conversion date for such notes.
The “last reported sale price” of our common stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which our common stock is listed for trading. If our common stock is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “last reported sale price” will be the mid-point of the last quoted bid and ask prices for our common stock in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar organization. If our common stock is not so quoted, the “last reported sale price” will be the average of the mid-point of the last bid and ask prices for our common stock on the relevant date from each of at least three nationally recognized independent investment banking firms (which may include one or more initial purchasers or their affiliates) selected by us for this purpose.
A “trading day” is any day during which (i) trading in our common stock generally occurs, and (ii) there is no market disruption event. For purposes of the definition of “trading day,” “market disruption event” means the occurrence or existence during the one-half hour period ending on the scheduled close of trading on the principal U.S. national or regional securities exchange on which our common stock is listed for trading of any material suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in our common stock or in any options contracts or future contracts relating to our common stock.
If we call notes for redemption, a holder of notes may convert notes only until the close of business on the third scheduled trading day (as defined below) prior to the redemption date unless we fail to pay the redemption price. If a holder of notes has submitted notes for repurchase upon a fundamental change or on a purchase date that is unrelated to a fundamental change, the holder may convert those notes only if that holder withdraws the repurchase notice delivered by that holder in accordance with the terms of the indenture and the holder is otherwise entitled to convert.
Upon conversion, you will not receive any separate cash payment or shares for accrued and unpaid interest (including additional interest and contingent interest, if any) unless such conversion occurs between a regular record date and the interest payment date to which it relates as described below. Our delivery to you of shares of our common stock or a combination of cash and shares of our common stock, if applicable, together with any cash payment for any fractional share, into which a note is convertible, will be deemed to satisfy in full our obligation to pay:
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| • | | the principal amount of the note; and |
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| • | | accrued and unpaid interest (including additional interest and contingent interest, if any) to, but not including, the conversion date. |
As a result, accrued and unpaid interest (including additional interest and contingent interest, if any) to, but not including, the conversion date will be deemed to be paid in full rather than cancelled, extinguished or forfeited.
Notwithstanding the preceding paragraph, if notes are converted after 5:00 p.m., New York City time, on a regular record date for the payment of interest, holders of such notes at 5:00 p.m., New York City time, on such record date will receive the interest (including contingent interest and additional interest, if any) payable on such notes on the corresponding interest payment date notwithstanding the conversion. Any notes surrendered for conversion during the period from 5:00 p.m., New York City time, on any regular record date to 9:00 a.m., New York City time, on the immediately following interest payment date, must be accompanied by funds equal to the amount of interest, contingent interest and additional interest, if any, payable on the notes so converted; provided that no such payment need be made:
| • | | if we have specified a redemption date that is after a record date and on or prior to the corresponding interest payment date; |
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| • | | if we have specified a fundamental change purchase date that is after a record date and on or prior to the corresponding interest payment date; or |
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| • | | to the extent of any overdue interest, if any overdue interest exists at the time of conversion with respect to such note. |
If a holder converts notes, we will pay any documentary, stamp or similar issue or transfer tax due on the issue of any shares of our common stock upon the conversion, unless the tax is due because the holder requests any shares to be issued in a name other than the holder’s name, in which case the holder will pay that tax.
Conversion Upon Satisfaction of Sale Price Condition
A holder may surrender all or a portion of its notes for conversion during any fiscal quarter (and only during such fiscal quarter) commencing after March 31, 2007 if the last reported sale price of the common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is greater than or equal to 135% of the base conversion price on such last trading day.
Conversion Upon Satisfaction of Trading Price Condition
Prior to December 1, 2011, a holder of notes may surrender its notes for conversion during the five business day period after any 10 consecutive trading day period (the “measurement period”) in which the “trading price” per $1,000 principal amount of notes, as determined following a request by a holder of notes in accordance with the procedures described below, for each trading day of the measurement period was less than 95% of the product of the last reported sale price of our common stock and the applicable conversion rate for such trading day.
The “trading price” of the notes on any date of determination will be determined as provided above under “— Contingent Interest”; provided however that for purposes of the foregoing provision, if the bid solicitation agent cannot reasonably obtain on any trading day at least one bid for $5.0 million principal amount of the notes from a nationally recognized securities dealer, then the trading price per $1,000 principal amount of notes for such trading day will be deemed to be less than 95% of the product of the last reported sale price of our common stock and the applicable conversion rate.
In connection with any conversion upon satisfaction of the above trading price condition, the bid solicitation agent shall have no obligation to determine the trading price of the notes unless we have requested such determination; and we shall have no obligation to make such request unless a holder of a note provides us with reasonable evidence that the trading price per $1,000 principal amount of notes would be less than 95% of the product of the last reported sale price of our common stock and the applicable conversion rate. At such time, we
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shall instruct the bid solicitation agent to determine the trading price of the notes beginning on the next trading day and on each successive trading day until the trading price per $1,000 principal amount of notes for any trading day is greater than or equal to 95% of the product of the last reported sale price of our common stock and the applicable conversion rate.
Solely for purposes of determining the satisfaction of the trading price condition described above, the applicable conversion rate on any day will be determined as if the applicable stock price were the last reported sale price on such day.
Conversion Upon Notice of Redemption
If we call anySome or all of the
notesDebt Securities of any series may be represented, in whole or in part, by one or more Global Securities that will have an aggregate principal amount equal to that of the Debt Securities they represent. Each Global Security will be registered in the name of a Depositary or its nominee identified in the applicable prospectus supplement, will be deposited with such Depositary or nominee or its custodian and will bear a legend regarding the restrictions on exchanges and registration of transfer thereof referred to below and any such other matters as may be provided for
redemption, holders may convert notes that have been so called for redemption at any time priorpursuant to the
closeapplicable Indenture.Notwithstanding any provision of business on the third scheduled trading day prior to the redemption date, even if the notes are not otherwise convertible at such time, after which time the holder’s right to convert will expire unless we defaultIndentures or any Debt Security described in this prospectus, no Global Security may be exchanged in whole or in part for Debt Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the paymentname of any Person other than the redemption price.
Conversion Upon Specified Corporate Transactions
Certain Distributions
If we elect to:
Depositary for such Global Security or any nominee of such Depositary unless:| | •(1) | | distributethe Depositary has notified us that it is unwilling or unable to all holders of our common stock any rights or warrants entitling them to purchase, for a period expiring within 45 days after the ex-dividend date of the distribution, shares of our common stock at a price per share less than the average of the last reported sale prices of our common stock for the 10 consecutive trading-day period ending on the trading day preceding the ex-dividend datecontinue as Depositary for such distribution;Global Security or |
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| • | | distribute has ceased to all holders of our common stock our assets, debt securities or certain rightsbe qualified to purchase our securities, which distribution hasact as such as required by the applicable Indenture, and in either case we fail to appoint a per share value, as determined by our board of directors, exceeding 15% of the last reported sale price of our common stock on the trading day immediately preceding the ex-dividend date for such distribution,successor Depositary within 90 days; |
we must notify the holders of the notes at least 15 scheduled trading days prior to the ex-dividend date for such distribution. Once we have given such notice, holders may surrender their notes for conversion at any time until the earlier of 5:00 p.m., New York City time, on the business day immediately prior to the ex-dividend date or our announcement that such distribution will not take place, even if the notes are not otherwise convertible at such time.
The “ex-dividend date” is the first date on which the shares of our common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance, dividend or distribution in question.
Certain Corporate Events
If we are party to a transaction described in clause (2) of the definition of fundamental change (without giving effect to the paragraph following that definition set forth under “ — Fundamental Change Permits Holders to Require Us to Purchase Notes”), we must notify holders of the notes at least 15 scheduled trading days prior to the anticipated effective date for such transaction. Once we have given such notice, holders may surrender their notes for conversion at any time until seven scheduled trading days after the actual effective date of such transaction or, if later, the related fundamental change purchase date. In addition, you may surrender all or a portion of your notes for conversion if a fundamental change of the type described in clauses (1) and (3) of the definition of fundamental change occurs. In such event, you may surrender notes for conversion at any time beginning on the actual effective date of such fundamental change until and including the date which is seven scheduled trading days after the actual effective date of such transaction or, if later, until the related fundamental change purchase date corresponding to such fundamental change.
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Conversion During Specified Period Immediately Prior to Maturity
Notwithstanding anything herein to the contrary, a holder may surrender its notes for conversion beginning on November 1, 2026, until the close of business on the second business day immediately preceding December 1, 2026.
Conversion Procedures
If you hold a beneficial interest in a global note, to convert you must comply with DTC’s procedures for converting a beneficial interest in a global note and, if required, pay funds equal to interest payable on the next interest payment date to which you are not entitled and, if required, pay all taxes or duties, if any.
If you hold a certificated note, to convert you must:
| | •(2) | | completean Event of Default with respect to the Debt Securities represented by such Global Security has occurred and manually sign the conversion notice on the back of the note, or a facsimile of the conversion notice; |
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| • | | deliver the conversion notice, which is irrevocable,continuing and the noteTrustee has received a written request from the Depositary to the conversion agent; |
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| • | | if required, furnish appropriate endorsements and transfer documents; |
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| • | | if required, pay all transfer or similar taxes; and |
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| • | | if required, pay funds equal to interest payable on the next interest payment date to which you are not entitled.issue certificated Debt Securities; |
The date you comply with these requirements is the conversion date under the indenture.
If a holder has already delivered a purchase notice as described under either “ — Purchase of Notes by Us at the Option of the Holder” or ‘‘— Fundamental Change Permits Holders to Require Us to Purchase Notes” with respect to a note, the holder may not surrender that note for conversion until the holder has withdrawn the notice in accordance with the indenture.
Delivery of any shares will be accomplished by delivery to the conversion agent of certificates for the relevant number of shares, other than in the case of holders of notes in book-entry form with DTC, which shares shall be delivered in accordance with DTC customary practices. In addition, we will pay cash for any fractional shares, as described above.
Payment Upon Conversion
In the event that we receive a holder’s notice of conversion upon satisfaction of one or more of the conditions to conversion described above, we will notify the relevant holders within two scheduled trading days following the conversion date whether we will satisfy our obligation to convert the notes through delivery of (i) shares of our common stock equal to the applicable conversion rate (plus cash in lieu of any fractional shares) or (ii) a combination of cash and shares of our common stock as described below. In addition, at any time on or before the 13th scheduled trading day prior to maturity, we may irrevocably waive, in our sole discretion without the consent of the holders, by notice to the trustee and the holders of the notes, our right to satisfy our conversion obligation in shares of our common stock (plus cash in lieu of any fractional shares) pursuant to clause (i) above. We will not be permitted to elect the option described in clause (i) above if we have made the election to waive our right to do so. Notwithstanding the foregoing, if we elect to redeem the notes, we will, in our notice of redemption, elect whether we will settle any conversions of notes called for redemption pursuant to clause (i) or (ii) above (unless we have irrevocably elected to waive our right to satisfy our conversion obligation pursuant to clause (i) above), which election shall apply to all notes converted following our notice of redemption.
If we elect to settle our obligation to convert the notes (the “conversion obligation”) solely in shares of our common stock as described above, we will deliver, as soon as practicable following the determination of the applicable stock price, for each $1,000 principal amount of notes, a number of shares of our common stock equal to the applicable conversion rate, plus cash in lieu of any fractional shares determined as described below.
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If we elect to settle our conversion obligation in cash and shares of our common stock pursuant to clause (ii) above, we will deliver, as soon as practicable following the determination of the applicable stock price, for each $1,000 principal amount of notes:
| | •(3) | | cash in an amount equalsubject to the lesserrules of (a) the conversion value and (b) $1,000;Depositary, we shall have elected to terminate the book-entry system through the Depositary; or |
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| | •(4) | | if the conversion value is greater than $1,000, an amountother circumstances exist, in shares equaladdition to the difference between the conversion value and $1,000, divided by the applicable stock price; and |
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| • | | cashor in lieu of any fractional sharesthose described above, as may be described below.in the applicable prospectus supplement. |
The “conversion value”All certificated Debt Securities issued in exchange for each $1,000 principal amounta Global Security or any portion thereof will be registered in such names as the Depositary may direct.
As long as the Depositary, or its nominee, is the registered holder of notes to be converted, is an amount equal toa Global Security, the applicable conversion rate forDepositary or such notes multiplied by the applicable stock price for such notes.
We will deliver cash in lieu of any fractional share of common stock issuable in connection with settlement of the conversion obligation based on the applicable stock price. The delivery of shares of our common stock, if any, will occur through the conversion agent or DTC,nominee, as the case may be.
Conversion Rate Adjustments
The base conversion ratebe, will be adjusted only as described below. Any timeconsidered the base conversion ratesole owner and Holder of such Global Security and the Debt Securities that it represents for all purposes under the Debt Securities and the applicable Indenture. Except in the limited circumstances referred to above, owners of beneficial interests in a Global Security will not be entitled to have such Global Security or any Debt Securities that it represents registered in their names, will not receive or be entitled to receive physical delivery of certificated Debt Securities in exchange for those interests and will not be considered to be the owners or Holders of such Global Security or any Debt Securities that is adjusted as described below,represents for any purpose under the incremental share factorDebt Securities or the applicable Indenture. All payments on a Global Security will be proportionately adjusted on the same basis.
(1) | | If we issue shares of our common stock as a dividend or distribution on shares of our common stock, or if we effect a share split or share combination, the base conversion rate will be adjusted based on the following formula: |
where,
CR0 = the base conversion rate in effect immediately priormade to the ex-dividend date for such dividendDepositary or distribution, or the effective date of such share split or share combination,its nominee, as the case may be;
CR’ =be, as the
new base conversion rateHolder of the security. The laws of some jurisdictions may require that some purchasers of Debt Securities take physical delivery of such Debt Securities in
effect immediately aftercertificated form. These laws may impair the
ex-dividend date forability to transfer beneficial interests in a Global Security.Ownership of beneficial interests in a Global Security will be limited to institutions that have accounts with the Depositary or its nominee (“participants”) and to persons that may hold beneficial interests through participants. In connection with the issuance of any Global Security, the Depositary will credit, on its book-entry registration and transfer system, the respective principal amounts of Debt Securities represented by the Global Security to the accounts of its participants. Ownership of beneficial interests in a Global Security will be shown only on, and the transfer of those ownership interests will be effected only through, records maintained by the Depositary (with respect to participants’ interests) or any such dividend or distribution,participant (with respect to interests of Persons held by such participants on their behalf). Payments, transfers, exchanges and other matters relating to beneficial interests in a Global Security may be subject to various policies and procedures adopted by the Depositary from time to time. None of us, the Subsidiary Guarantors, the Trustees or the effective dateagents of us, the Subsidiary Guarantors or the Trustees will have any responsibility or liability for any aspect of the Depositary’s or any participant’s records relating to, or for payments made on account of, beneficial interests in a Global Security, or for maintaining, supervising or reviewing any records relating to such share split or share combination, asbeneficial interests.
Payment and Paying Agents
Unless otherwise indicated in the case may be;
OS0 = the numberapplicable prospectus supplement, payment of shares of our common stock outstanding immediately priorinterest on a Debt Security on any Interest Payment Date will be made to the ex-dividend date forPerson in whose name such dividendDebt Security (or one or distribution, or the effective date of such share split or share combination, as the case may be; and
OS’ = the number of shares of our common stock outstanding immediately after such dividend or distribution, or the effective date of such share split or share combination, as the case may be.
Any adjustment made pursuant to this clause (1) shall become effective immediately after (x) the ex-dividend date for such dividend or distribution or (y) the date on which such split or combination becomes effective, as applicable. If any dividend or distribution described in this clause (1)more Predecessor Securities) is declared but not so paid or made, the new base conversion rate shall be readjusted to the base conversion that would then be in effect if such dividend or distribution had not been declared.
(2) | | If we distribute to all holders of our common stock any rights or warrants entitling them to purchase, for a period of not more than 45 days after the ex-dividend date for the distribution, shares of our common stock at a price per share less than the average of the last reported sale prices of our common stock for the 10 consecutive trading-day period ending on the trading day preceding the ex-dividend date for such distribution, the base conversion rate will be adjusted based on the following formula: |
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where,
CR0 = the base conversion rate in effect immediately prior to the ex-dividend date for such distribution;
CR’ = the new base conversion rate in effect immediately after the ex-dividend date for such distribution;
OS0 = the number of shares of our common stock outstanding immediately prior to the ex-dividend date for such distribution;
X = the total number of shares of our common stock issuable pursuant to such rights or warrants; and
Y = the number of shares of our common stock equal to the aggregate price payable to exercise such rights or warrants divided by the average of the last reported sale prices of our common stock over the 10 consecutive trading-day period ending on the trading day immediately preceding the ex-dividend date for such distribution.
For purposes of this clause (2), in determining whether any rights or warrants entitle the holders to subscribe for or purchase common stock at less than the applicable last reported sale prices of our common stock, and in determining the aggregate exercise or conversion price payable for such common stock, there shall be taken into account any consideration received by the Company for such rights or warrants and any amount payable on exercise or conversion thereof, with the value of such consideration, if other than cash, to be determined by our board of directors. If any right or warrant described in this clause (2) is not exercised or converted prior to the expiration of the exercisability or convertibility thereof, the new base conversion rate shall be readjusted to the base conversion rate that would then be in effect if such right or warrant had not been so issued. Any adjustment made pursuant to this clause (2) shall become effective immediately after the ex-dividend date for the applicable distribution.
(3) | | If we distribute shares of our capital stock, evidences of our indebtedness or other assets or property of ours to all holders of our common stock, excluding: |
| • | | dividends or distributions referred to in clause (1) or (2) above; |
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| • | | dividends or distributions paid exclusively in cash; and |
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| • | | spin-offs to which the provisions set forth below in this clause (3) shall apply; then the base conversion rate will be adjusted based on the following formula: |
where,
CR0 = the base conversion rate in effect immediately prior to the ex-dividend date for such distribution;
CR’ = the new base conversion rate in effect immediately after the ex-dividend date for such distribution;
SP0 = the average of the last reported sale prices of our common stock over the 10 consecutive trading-day period ending on the trading day immediately preceding the ex-dividend date for such distribution; and
FMV = the fair market value (as determined by our board of directors) of the shares of capital stock, evidences of indebtedness, assets or property distributed with respect to each outstanding share of our common stock on the ex-dividend date for such distribution.
An adjustment to the base conversion made pursuant to the foregoing provisions of this clause (3) shall become effective immediately after the ex-dividend date for the applicable distribution.
With respect to an adjustment pursuant to this clause (3) where there has been a payment of a dividend or other distribution on our common stock or shares of capital stock of any class or series, or similar equity interest, of or relating to a subsidiary or other business unit, which we refer to as a “spin-off,” the base conversion rate in effect
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immediately before 5:00 p.m., New York City time, on the tenth trading day immediately following, and including, the effective date of the spin-off will be increased based on the following formula:
where,
CR0 = the base conversion rate in effect immediately prior to the tenth trading day immediately following, and including, the effective date of the spin-off;
CR’ = the new base conversion rate in effect immediately after the tenth trading day immediately following, and including, the effective date of the spin-off;
FMV0 = the average of the last reported sale prices of the capital stock or similar equity interest distributed to holders of our common stock applicable to one share of our common stock over the first 10 consecutive trading-day period immediately following, and including, the effective date of the spin-off; and
MP0 = the average of the last reported sale prices of our common stock over the first 10 consecutive trading-day period immediately following, and including, the effective date of the spin-off.
The adjustment to the base conversion rate under the foregoing provisions of this clause (3) will occur immediately after the tenth trading day immediately following, and including, the effective date of the spin-offprovidedthat, for purposes of determining the base conversion rate, in respect of any conversion date occurring during the ten trading days following the effective date of any spin-off, references within the portion of this clause (3) related to “spin-offs” to 10 trading days shall be deemed replaced with such lesser number of trading days as have elapsed between the effective date of such spin-off and the relevant conversion date.
If any such dividend or distribution described in this clause (3) is declared but not paid or made, the new base conversion rate shall be readjusted to be the base conversion rate that would then be in effect if such dividend or distribution had not been declared.
(4) | | If any cash dividend or distribution is made to all holders of our common stock, the base conversion rate will be adjusted based on the following formula: |
where,
CR0 = the base conversion rate in effect immediately prior to the ex-dividend date for such distribution;
CR’= the new base conversion rate in effect immediately after the ex-dividend date for such distribution;
SP0 = the last reported sale price of our common stock on the trading day immediately preceding the ex-dividend date for such distribution; and
C = the amount in cash per share we distribute to holders of our common stock.
An adjustment to the base conversion made pursuant to this clause (4) shall become effective immediately after the ex-dividend date for the applicable dividend or distribution. If any dividend or distribution described in this clause (4) is declared but not so paid or made, the new base conversion rate shall be readjusted to the base conversion that would then be in effect if such dividend or distribution had not been declared.
(5) | | If we or any of our subsidiaries make a payment in respect of a tender offer or exchange offer for our common stock, to the extent that the cash and value of any other consideration included in the payment per share of common stock exceeds the last reported sale price of our common stock on the trading day next succeeding the |
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| | last date on which tenders or exchanges may be made pursuant to such tender or exchange offer, the base conversion rate will be increased based on the following formula: |
where,
CR0 = the base conversion rate in effectregistered at the close of business on the
last trading dayRegular Record Date for such interest.Unless otherwise indicated in the applicable prospectus supplement, principal of the 10 consecutive trading-day period commencingand any premium and interest on the trading day next succeedingDebt Securities of a particular series will be payable at the date such tender or exchange offer expires;
CR’ = the new base conversion rate in effect immediately following the last trading day of the 10 consecutive trading-day period commencing on the trading day next succeeding the date such tender or exchange offer expires;
AC = the aggregate value of all cash and any other consideration (as determined by our board of directors) paid or payable for shares purchased in such tender or exchange offer;
OS0 = the number of shares of our common stock outstanding immediately prior to the expirationoffice of such tenderPaying Agent or exchange offer;
OS’ = the number of shares of our common stock outstanding immediately after the expiration ofPaying Agents as we may designate for such tender on exchange offer (after giving effectpurpose from time to the purchase or exchange of shares pursuant to such tender or exchange offer); and
SP’ = the average of the last reported sale prices of our common stock over the 10 consecutive trading-day period commencing on the trading day next succeeding the date such tender or exchange offer expires.
The adjustment to the base conversion rate under this clause (5) shall become effective immediately following the tenth trading day next succeeding the date such tender or exchange offer expires; providedtime, except that for purposes of determining the base conversion rate, in respect of any conversion during the ten trading days following the date that any tender or exchange offer expires, references within this clause (5) to 10 trading days shall be deemed replaced with such lesser number of trading days as have elapsed between the date such tender or exchange offer expires and the relevant conversion date. If we or one of our subsidiaries is obligated to purchase our common stock pursuant to any such tender or exchange offer but are permanently prevented by applicable law from effecting any such purchase or all such purchases are rescinded, the new base conversion rate shall be readjusted to be the base conversion rate that would be in effect if such tender or exchange offer had not been made.
Except as stated herein, we will not adjust the base conversion rate for the issuance of shares of our common stock or any securities convertible into or exchangeable for shares of our common stock or the right to purchase shares of our common stock or such convertible or exchangeable securities. If, however, the application of the foregoing formulas would result in a decrease in the base conversion rate, no adjustment to the base conversion rate will be made (except on account of share combinations).
A holder may, in some circumstances, including the distribution of cash dividends to holders of our shares of common stock, be deemed to have received a distribution or dividend subject to U.S. federal income tax as a result of an adjustment or the nonoccurrence of an adjustment to the base conversion rate, and such adjustment or nonoccurrence of an adjustment may result in withholding taxes for holders (including backup withholding taxes or withholding taxes on payments to foreign persons). Because this deemed income would not give rise to any cash from which any applicable withholding tax could be satisfied, if we pay withholding taxes on behalf of a holder, we may, at our option set-off such payments against paymentspayment of cash and common stockany interest on Debt Securities in certificated form may be made by check mailed to the notes. See “Certain United States Federal Income Tax Considerations — U.S. Holders — Constructive Dividends” and “Certain United States Federal Income Tax Considerations — Treatment of Non-U.S. Holders — Payments on Common Stock and Constructive Dividends.”
To the extent that we have a rights plan in effect upon conversionaddress of the notes into common stock, you will receive, upon conversionPerson entitled thereto as such address appears in the Security Register. Unless otherwise indicated in the applicable prospectus supplement, the corporate trust office of notes in respect of which we have elected to deliver common stock, if applicable, the
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rights Trustee under the rights plan, unless prior to any conversion, the rights have separated from the common stock,Senior Indenture in which case, and only in such case, the base conversion rateThe City of New York will be adjusted atdesignated as sole Paying Agent for payments with respect to Senior Debt Securities of each series, and the timecorporate trust office of separationthe Trustee under the Subordinated Indenture in The City of New York will be designated as if we distributedthe sole Paying Agent for payment with respect to all holdersSubordinated Debt Securities of our common stock, shareseach series. Any other Paying Agents initially designated by us for the Debt Securities of our capital stock, evidences of indebtedness or assets as described in clause (3) above, subject to readjustmenta particular series will be named in the eventapplicable prospectus supplement. We may at any time designate additional Paying Agents or rescind the designation of the expiration, terminationany Paying Agent or redemption of such rights.
We will not make any adjustment to the base conversion rate except as specifically set forth in this “—Conversion Rate Adjustments” and in “— Adjustment to Shares Delivered Upon Conversion Upon Certain Fundamental Changes.” Further,approve a change in the event of an adjustment to the base conversion rate pursuant to clauses (4) and (5) above, in no event will the base conversion rate exceed 40.00 shares of our common stock per $1,000 principal amount of notes, subject to adjustment pursuant to clauses (1), (2) and (3) above.
Without limiting the foregoing, the base conversion rate will not be adjusted:
| • | | upon the issuance of any shares of our common stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on our securities and the investment of additional optional amounts in shares of our common stock under any plan; |
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| • | | upon the issuance of any shares of our common stock or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program or employee stock purchase plan of or assumed by us or any of our subsidiaries; |
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| • | | upon the issuance of any shares of our common stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security not described in the preceding bullet and outstanding as of the date the notes were first issued; |
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| • | | for a change in the par value of the common stock; or |
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| • | | for accrued and unpaid interest (including contingent interest and additional interest, if any). |
No adjustment to the base conversion rateoffice through which any Paying Agent acts, except that we will be required
unlessto maintain a Paying Agent in each Place of Payment for the
adjustment would require an increase or decreaseDebt Securities of
at least 1%a particular series.All money paid by us to a Paying Agent for the payment of the base conversion rate. Ifprincipal of or any premium or interest on any Debt Security which remains unclaimed at the adjustment is not made because the adjustment does not change the base conversion rate by at least 1%, then the adjustment that is not madeend of two years after such principal, premium or interest has become due and payable will be carried forwardrepaid to us, and takenthe Holder of such Debt Security thereafter may look only to us for payment.
Consolidation, Merger and Sale of Assets
Unless otherwise specified in the prospectus supplement, we may not consolidate with or merge into, account in any future adjustment. All required calculations will be made to the nearest cent or 1/1000th of a share, as the case may be. Notwithstanding the foregoing, if the notes are called for redemption, all adjustments not previously made will be made for all notes to be converted after our notice of redemption to the applicable redemption date.
Recapitalizations, Reclassifications and Changes of Our Common Stock
In the case of any recapitalization, reclassificationtransfer, lease or change of our common stock (other than changes resulting from a subdivision or combination), a consolidation, merger or combination involving us, a sale or conveyance to another personotherwise dispose of all or substantially all of our property and assets or any statutory share exchange, in each case as a result of which our common stock would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof), then, following the effective time of the transaction, the right to receive shares of our common stock upon conversion of a note, if any, will be changed into the right to receive the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder would have been entitled to receive (the “reference property”) upon such transaction in respect of such common stock.
From and after the effective time of such transaction:
the applicable conversion rate will relate to units of such reference property (a “unit” of reference property being the kind and amount of reference property that a holder of one share of our common stock would receive in such transaction); and
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the applicable stock price will be determined based on last reported sale prices of one unit of reference property.
If the transaction causes our common stock to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), the reference property will be deemed to be the weighted average of the types and amounts of consideration received by the holders of our common stock that affirmatively make such an election. We will notify holders of the weighted average as soon as practicable after such determination is made. We will agree in the indenture not to become a party to, any such transaction unless its terms are consistent with the foregoing.
However, if the transaction described above also constitutes a “public acquirer change of control,” then we may in certain circumstances elect to change the conversion right in the manner described under “ — Conversion After a Public Acquirer Change of Control” in lieu of changing the conversion right in the manner described in the foregoing paragraph.
Adjustment to Shares Delivered Upon Conversion Upon Certain Fundamental Changes
If you elect to convert your notes as described above under “Conversion Upon Specified Corporate Transactions — Certain Corporate Events,” in connection with a corporate transaction that also constitutes a fundamental change (as defined under “ — Fundamental Change Permits Holders to Require Us to Purchase Notes”Person (a “successor Person”) on or following the effective date of such transaction and the effective date of which occurs on or prior to December 1, 2011, the applicable conversion rate will be increased by an additional number of shares of common stock (the “additional shares”) as described below. Any conversion will be deemed to have occurred in connection with such fundamental change if such notes are surrendered for conversion on or following the effective date of a fundamental change and notwithstanding the fact that a note may then be convertible because another condition to conversion also has been satisfied.
The number of additional shares by which the applicable conversion rate will be increased will be determined by reference to the table below, based on the date on which the fundamental change occurs or becomes effective (the “effective date”) and the price (the “stock price”) paid per share of our common stock in the fundamental change. If the fundamental change is a transaction described in clause (2) of the definition thereof and holders of our common stock receive only cash in that fundamental change, the stock price shall be the cash amount paid per share. Otherwise, the stock price shall be the average of the last reported sale prices of our common stock over the five trading-day period ending on the trading day preceding the effective date of the fundamental change.
The stock prices set forth in the first row of the table below (i.e., column headers) will be adjusted as of any date on which the base conversion rate of the notes is otherwise adjusted. The adjusted stock prices will equal the stock prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the base conversion rate immediately prior to the adjustment giving rise to the stock price adjustment and the denominator of which is the base conversion rate as so adjusted. The number of additional shares will be adjusted in the same manner as the base conversion rate as set forth under “ — Conversion Rate Adjustments.”
The following table sets forth the hypothetical stock price and the number of additional shares to be received per $1,000 principal amount of notes:
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| | | Stock Price |
| Effective Date | | $43.96 | | $50.00 | | $55.00 | | $60.00 | | $65.00 | | $70.00 | | $80.00 | | $90.00 | | $100.00 | | $120.00 | | $140.00 | | $160.00 | | $180.00 | | $200.00 |
| December 6, 2006 | | | 7.5827 | | | | 6.8099 | | | | 5.9698 | | | | 5.3228 | | | | 4.8167 | | | | 4.2605 | | | | 3.3635 | | | | 2.7301 | | | | 2.2664 | | | | 1.6456 | | | | 1.2581 | | | | 0.9978 | | | | 0.8126 | | | | 0.6749 | |
| December 1, 2007 | | | 7.5827 | | | | 6.5481 | | | | 5.6634 | | | | 4.9904 | | | | 4.4713 | | | | 3.9110 | | | | 3.0228 | | | | 2.4097 | | | | 1.9709 | | | | 1.4004 | | | | 1.0567 | | | | 0.8319 | | | | 0.6750 | | | | 0.5599 | |
| December 1, 2008 | | | 7.5827 | | | | 6.1741 | | | | 5.2364 | | | | 4.5345 | | | | 4.0037 | | | | 3.4434 | | | | 2.5765 | | | | 1.9986 | | | | 1.5989 | | | | 1.1026 | | | | 0.8192 | | | | 0.6411 | | | | 0.5200 | | | | 0.4323 | |
| December 1, 2009 | | | 7.5827 | | | | 5.7034 | | | | 4.6829 | | | | 3.9359 | | | | 3.3871 | | | | 2.8279 | | | | 1.9969 | | | | 1.4756 | | | | 1.1367 | | | | 0.7493 | | | | 0.5482 | | | | 0.4292 | | | | 0.3507 | | | | 0.2943 | |
| December 1, 2010 | | | 7.5827 | | | | 5.1217 | | | | 3.9339 | | | | 3.0926 | | | | 2.5060 | | | | 1.9498 | | | | 1.1959 | | | | 0.7883 | | | | 0.5622 | | | | 0.3511 | | | | 0.2612 | | | | 0.2111 | | | | 0.1771 | | | | 0.1515 | |
| December 1, 2011 | | | 7.5827 | | | | 4.8347 | | | | 3.0165 | | | | 1.5014 | | | | 0.2193 | | | | 0.0000 | | | | 0.0000 | | | | 0.0000 | | | | 0.0000 | | | | 0.0000 | | | | 0.0000 | | | | 0.0000 | | | | 0.0000 | | | | 0.0000 | |
The exact stock prices and effective dates may not be set forth in the table above, in which case
If the stock price is between two stock price amounts in the tablepermit any Person to consolidate with or the effective date is between two effective dates in the table, the number of additional shares will be determined by a straight-line
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| | (1) | | interpolation between the numbersuccessor Person (if not us) is a corporation, partnership, trust or other entity organized and validly existing under the laws of additional shares set forth forany domestic jurisdiction and assumes our obligations on the higherDebt Securities and lower stock price amounts andunder the two dates, as applicable, based on a 365-day year.Indentures; |
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| | •(2) | | If the stock price is greater than $200.00 per share (subject to adjustment), no additional shares will be addedimmediately before and after giving pro forma effect to the applicable conversion rate.transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, has occurred and is continuing; and |
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| | •(3) | | If the stock price is less than $43.96 per share (subjectseveral other conditions, including any additional conditions with respect to adjustment), no additional shares will be added toany particular Debt Securities specified in the applicable conversion rate.prospectus supplement, are met. |
Notwithstanding the foregoing,The successor Person (if not us) will be substituted for us under the applicable conversion rate shall not exceed 22.7480 per $1,000 principal amount of notes on account of adjustments described in this section, subjectIndenture with the same effect as if it had been an original party to the adjustments set forth in clauses (1) through (5) of “— Conversion Rate Adjustments.”
Our obligation to increase the applicable conversion rate as described above could be considered a penalty, in which case the enforceability thereof would be subject to general principles of economic remedies.
An increase in the applicable conversion rate upon a fundamental change may be treated as a deemed distribution to holders of the notes, possibly subject to U.S. federal withholding tax. See “Certain United States Federal Income Tax Considerations.”
As described above under “ — Recapitalizations, Reclassifications,such Indenture, and, Changes of our Common Stock,” upon effectiveness of any fundamental change and a related conversion, the applicable conversion rate with respect to the notes submitted for conversion will be determined based upon by the reference property, which will likely consist of cash, securities or other property not listed on a national securities exchange.
Conversion After a Public Acquirer Change of Control
Notwithstanding the foregoing,except in the case of a
fundamental change constituting a public acquirer changelease, we will be relieved from any further obligations under such Indenture and the Debt Securities.Events of control (as defined below), we may,Default
Unless otherwise specified in lieuthe prospectus supplement, each of increasingthe following will constitute an Event of Default under the applicable conversion rate by a numberIndenture with respect to Debt Securities of additional shares as described in “— Adjustment to Shares Delivered Upon Conversion Upon Certain Fundamental Changes” above, elect to adjust the related conversion obligation such that from and after the effective date of such public acquirer change of control, holders of the notes will be entitled to convert their notes (subject to the satisfaction of the conditions to conversion described under “— Conversion Rights”) into a number of shares of public acquirer common stock (as defined below), still subject to our right to elect to deliver cash and shares of our common stock and the arrangements for payment upon conversion as set forth above under “— Payment Upon Conversion.” If we make such an election in the manner described below, from and after the effect time of such public acquirer change of control:
any series:| | •(1) | | failure to pay principal of or any premium on any Debt Security of that series when due, whether or not, in the base conversion rate will be adjustedcase of Subordinated Debt Securities, such payment is prohibited by multiplying the base conversion in effect immediately prior to such transaction by a fraction (1) the numerator of which will be the averagesubordination provisions of the last reported sale prices of our common stock for the five consecutive trading days prior to but excluding the effective date of such public acquirer change of control; and (2) the denominator of which will be the average of the last reported sale prices of the public acquirer common stock for the five consecutive trading days commencing on the trading day next succeeding the effective date of such public acquirer change of control; |
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| • | | the incremental share factor will be adjusted by proportionately adjusting the incremental share factor immediately prior to such transaction on the same basis as the base conversion rate; and |
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| • | | the applicable stock price will be based upon the last reported sale prices of the public acquirer common stock.Subordinated Indenture; |
A “public acquirer change of control” means a fundamental change as defined in clause (2) in the definition thereof (after giving effect to the paragraph following that definition) in which the acquirer has a class of common stock (or depositary receipts or shares in respect thereof) traded on a U.S. national securities exchange or which will be so traded when issued or exchanged in connection with such fundamental change (the “public acquirer common stock”). If an acquirer does not itself have a class of common stock satisfying the foregoing requirement, it will be deemed to have “public acquirer common stock” if a corporation that directly or indirectly owns at least a majority
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of the acquirer has a class of common stock (or depositary receipts or shares in respect thereof) satisfying the foregoing requirement, in such case, all references to public acquirer common stock shall refer to such class of common stock (or depositary receipts or shares in respect thereof). Majority owned for these purposes means having “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all shares of the respective entity’s capital stock that are entitled to vote generally in the election of directors.
At least 15 scheduled trading days prior to the expected effective date of a fundamental change that is also a public acquirer change of control, we will provide to all holders of the notes and the trustee and paying agent a notification stating whether we will:
| | •(2) | failure to pay any interest on any Debt Securities of that series when due, continued for 30 days, whether or not, in the case of Subordinated Debt Securities, such payment is prohibited by the subordination provisions of the Subordinated Indenture; |
| | elect(3) | failure to adjust the conversion obligation describeddeposit any sinking fund payment, when due, in respect of any Debt Security of that series, whether or not, in the second preceding paragraph, in which case of Subordinated Debt Securities, such deposit is prohibited by the holders will not havesubordination provisions of the rightSubordinated Indenture; |
| (4) | failure to receive additional shares upon conversion, asperform or comply with the provisions described under “—Adjustments to Shares Delivered Upon Conversion Upon Certain Fundamental Changes;” or |
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| • | | not elect to adjust the conversion obligation, in which case the holders will have the right to convert notes Consolidation, Merger and if applicable, receive additional shares upon conversion as described above under “— Adjustments to Shares Delivered Upon Conversion Upon Certain Fundamental Changes.”Sale of Assets”; |
In addition, upon a public acquirer change of control, in lieu of converting notes, the holder can, subject to certain conditions, require us to repurchase all or a portion of its notes as described below.
Purchase of Notes by Us at the Option of the Holder
Holders have the right to require us to purchase the notes on December 1, 2011, December 1, 2016 and December 1, 2021 (each, a “purchase date”). We will be required to purchase any outstanding notes for which a holder delivers a written purchase notice to the paying agent. This notice must be delivered during the period beginning at any time from the opening of business on the date that is 20 business days prior to the relevant purchase date until the close of business on the second business day prior to the purchase date. If the purchase notice is given and withdrawn during such period, we will not be obligated to purchase the related notes. Also, our ability to satisfy our purchase obligations may be affected by the factors described in “Risk Factors” under the caption “We may not have the ability to raise the funds necessary to settle conversion of the notes or to purchase the notes upon a fundamental change or on other purchase dates, and our senior credit facility currently contains, and our future debt may contain, limitations on our ability to pay cash upon conversion or repurchase of the notes.”
The purchase price payable will be equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest (including any contingent interest and additional interest) to such purchase date. All notes purchased by us will be paid for in cash.
On or before the 20th business day prior to each purchase date, we will provide to the trustee, the paying agent and to all holders of the notes, and to beneficial owners as required by applicable law, a notice (delivered in any manner permitted by the indenture, including through DTC) stating, among other things:
| | •(5) | | failure to perform any of our other covenants in such Indenture (other than a covenant included in such Indenture solely for the last date on whichbenefit of a holder may exercise the repurchase right; |
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| • | | the repurchase price; |
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| • | | the name and address of the paying agent; and |
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| • | | the proceduresseries other than that holders must follow to require us to repurchase their notes. |
Simultaneously with providing such notice, we will publish a notice containing this information in a newspaper of general circulation in The City of New York or publish the information on our website or through such other public medium as we may use at that time.
A notice electing to require us to purchase your notes must state:
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| • | | if certificated notes haveseries), continued for 60 days after written notice has been issued, the certificate numbers of the notes, or if not certificated, your notice must comply with appropriate DTC procedures; |
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| • | | the portion of the principal amount of notes to be purchased, in multiples of $1,000; and |
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| • | | that the notes are to be purchasedgiven by us pursuant to the applicable provisionsTrustee, or the Holders of the notes and the indenture. |
No notes may be purchased at the option of holders if there has occurred and is continuing an event of default other than an event of default that is cured by the payment of the purchase price of the notes.
You may withdraw any purchase noticeat least 25% in whole or in part by a written notice of withdrawal delivered to the paying agent prior to the close of business on the business day prior to the purchase date. The notice of withdrawal must state:
| • | | the principal amount of the withdrawn notes; |
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| • | | if certificated notes have been issued, the certificate numbersOutstanding Debt Securities of the withdrawn notes, or if not certificated, your notice must comply with appropriate DTC procedures; and |
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| • | | the principal amount, if any, which remains subject to the purchase notice.that series, as provided in such Indenture; |
You must either effect book-entry transfer or deliver the notes, together with necessary endorsements, to the office of the paying agent after delivery of the purchase notice to receive payment of the purchase price. You will receive payment promptly following the later of the purchase date or the time of book-entry transfer or the delivery of the notes. If the paying agent holds money sufficient to pay the purchase price of the notes on the business day following the purchase date, then:
| | •(6) | | any Debt of ourself, any Significant Subsidiary or, if a Subsidiary Guarantor has guaranteed the notes will cease to be outstandingseries, such Subsidiary Guarantor, is not paid within any applicable grace period after final maturity or is accelerated by its holders because of a default and interest, including any additional interest, will cease to accrue (whetherthe total amount of such Debt unpaid or not book-entry transfer of the notes is made or whether or not the note is delivered to the paying agent); and |
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| • | | all other rights of the holder will terminate (other than the right to receive the purchase price and previously accrued and unpaid interest and additional interest upon delivery on transfer of the notes).accelerated exceeds $25.0 million; |
We will be responsible for making all determinations with respect to the adequacy of all notices electing to require us to purchase notes and all notices withdrawing such elections and any such determination shall be binding on the applicable holder,
We will comply with the provisions of Rule 13e-4 and any other rules under the Exchange Act that may be applicable.
Fundamental Change Permits Holders to Require Us to Purchase Notes
If a fundamental change (as defined below in this section) occurs at any time, you will have the right, at your option, to require us to purchase any or all of your notes, or any portion of the principal amount thereof, at a purchase price equal to 100% of the principal amount of the notes to be purchased plus accrued and unpaid interest, including additional interest and contingent interest, to but excluding the fundamental change purchase date (unless the fundamental change purchase date is between a regular record date and the interest payment date to which it relates, in which case we will pay accrued and unpaid interest to the holder of record on such regular record date). The fundamental change purchase date will be a date specified by us no later than the 35th day following the date of our fundamental change notice as described below. Any notes purchased by us will be paid for in cash.
A “fundamental change” will be deemed to have occurred if any of the following occurs:
(1) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than us, our subsidiaries or our or their employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the “beneficial owner,” as defined in Rule 13d-3
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under the Exchange Act, of our common equity representing more than 50% of the ordinary voting power of our common equity;
(2) consummation of any share exchange, consolidation or merger of us pursuant to which our common stock will be converted into cash, securities or other property or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of our and our subsidiaries’ assets, taken as a whole, to any person other than one of our subsidiaries;provided, however, that a transaction where the holders of more than 50% of all classes of our common equity immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of common equity of the continuing or surviving entity or transferee or the parent thereof immediately after such event shall not be a fundamental change; or
(3) our common stock (or other common stock into which the notes are then convertible) ceases to be listed on a U.S. national or regional securities exchange or quoted on an established automated over-the-counter trading market in the United States for a period of 30 consecutive scheduled trading days.
A fundamental change described in clause (2) of the definition will not be deemed to have occurred, however, if at least 90% of the consideration received or to be received by our common stockholders, excluding cash payments for fractional shares and cash payments in respect of statutory dissenters’ rights, in connection with the transaction or transactions constituting the fundamental change described in clause (2) of the definition consists of shares of common stock (or depositary receipts or shares evidencing common stock) traded on a U.S. national or regional securities exchange, or which will be so traded when issued or exchanged in connection with a fundamental change described in clause (2) of the definition (these securities being referred to as “publicly traded securities”) and as a result of this transaction or transactions the notes become convertible into such consideration.
On or before the 20th day after the occurrence of a fundamental change, we will provide to all holders of the notes and the trustee and paying agent a notice (delivered in any manner permitted by the indenture, including through DTC) of the occurrence of the fundamental change and of the resulting purchase right. Such notice shall state, among other things:
| | •(7) | | any judgment or decree for the events causingpayment of money in excess of $25.0 million is entered against us, any Significant Subsidiary or, if a fundamental change;Subsidiary Guarantor has guaranteed the series, such Subsidiary Guarantor, remains outstanding for a period of 60 consecutive days following entry of such judgment and is not discharged, waived or stayed; |
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| | •(8) | | certain events of bankruptcy, insolvency or reorganization affecting us, any Significant Subsidiary or, if a Subsidiary Guarantor has guaranteed the date of the fundamental change;series, such Subsidiary Guarantor; and |
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| | • | | the last date on which a holder may exercise the purchase right; |
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| • | | the fundamental change purchase price; |
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| • | | the fundamental change purchase date; |
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| • | | the name and address of the paying agent and the conversion agent, if applicable; |
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| • | (9) | if conversionany Subsidiary Guarantor has guaranteed such series, the Subsidiary Guarantee of the notesany such Subsidiary Guarantor is permitted in connection with such fundamental change as described in “—Conversion Rights — Conversion Upon Specified Corporate Transactions — Certain Corporate Events,” the base conversion rate and any adjustments to the base conversion rate and the incremental share factor; |
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| • | | that the notes with respect to which a fundamental change purchase notice has been deliveredheld by a holder mayfinal non-appealable order or judgment of a court of competent jurisdiction to be converted only if the holder withdraws the fundamental change purchase noticeunenforceable or invalid or ceases for any reason to be in full force and effect (other than in accordance with the terms of the indenture; and |
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| • | | applicable Indenture) or any Subsidiary Guarantor or any Person acting on behalf of any Subsidiary Guarantor denies or disaffirms such Subsidiary Guarantor’s obligations under its Subsidiary Guarantee (other than by reason of a release of such Subsidiary Guarantor from its Subsidiary Guarantee in accordance with the procedures that holders must follow to require us to purchase their notes. |
Simultaneously with providing such notice, we will publish a notice containing this information in a newspaper of general circulation in The City of New York or publish the information on our website or through such other public medium as we may use at that time.
To exercise the purchase right, you must deliver, on or before the business day immediately preceding the fundamental change purchase date, subject to extension to comply with applicable law, the notes to be purchased,
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duly endorsed for transfer, together with a written purchase notice and the form entitled “Form of Fundamental Change Purchase Notice” on the reverse side of the notes duly completed, to the paying agent. Your purchase notice must state:
| • | | if certificated, the certificate numbers of your notes to be delivered for purchase, or if not certificated, your notice must comply with appropriate DTC procedures; |
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| • | | the portionterms of the principal amount of notes to be purchased, which must be $1,000 or a multiple thereof; and |
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| • | | that the notes are to be purchased by us pursuant to the applicable provisions of the notes and the indenture. |
You may withdraw any purchase notice in whole or in part by a written notice of withdrawal delivered to the paying agent prior to the close of business on the business day prior to the fundamental change purchase date. The notice of withdrawal must state:
| • | | the principal amount of the withdrawn notes; |
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| • | | if certificated notes have been issued, the certificate numbers of the withdrawn notes, or if not certificated, your notice must comply with appropriate DTC procedures; and |
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| • | | the principal amount, if any, which remains subject to the purchase notice. |
We will be required to purchase the notes on the fundamental change purchase date, subject to extension to comply with applicable law. You will receive payment of the fundamental change purchase price promptly following the later of the fundamental change purchase date or the time of book-entry transfer or the delivery of the notes. If the paying agent holds money or securities sufficient to pay the fundamental change purchase price of the notes on the business day following the fundamental change purchase date, then:
| • | | the notes will cease to be outstanding and interest, including any additional interest, if any, will cease to accrue (whether or not book-entry transfer of the notes is made or whether or not the note is delivered to the paying agent); and |
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| • | | all other rights of the holder will terminate (other than the right to receive the fundamental change purchase price and previously accrued and unpaid interest (including any additional interest) upon delivery or transfer of the notes)Indenture). |
The purchase rightsIf an Event of the holders could discourage a potential acquirer of us. The fundamental change purchase feature, however, is not the result of management’s knowledge of any specific effort to obtain control of us by any means or part of a plan by management to adopt a series of anti-takeover provisions.
The term fundamental change is limited to specified transactions and may not include other events that might adversely affect our financial condition. In addition, the requirement that we offer to purchase the notes upon a fundamental change may not protect holders in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving us that is not a fundamental change (as defined).
No notes may be purchased at the option of holders upon a fundamental change if there has occurred and is continuing an event of default otherDefault (other than an eventEvent of default that is cured by the payment of the fundamental change purchase price of the notes.
We will be responsible for making all determinationsDefault with respect to Goodrich Petroleum Corporation described in clause (8) above) with respect to the adequacyDebt Securities of all notices electing to require us to purchase notes and all notices withdrawing such elections and any such determination shall be binding onseries at the applicable holder.
The definition of fundamental change includes a phrase relating to the sale, lease or other transfer of “all or substantially all” of our and our subsidiaries’ assets. There is no precise, established definition of the phrase “substantially all” under applicable law. Accordingly, the ability of a holder of the notes to require us to purchase its
47
notes as a result of the sale, lease or other transfer of less than all of our and our subsidiaries’ assets may be uncertain.
If a fundamental change were to occur, we may not have enough funds to pay the fundamental change purchase price. See “Risk Factors” under the caption “We may not have the ability to raise the funds necessary to settle conversion of the notes or to purchase the notes upon a fundamental change or on other purchase dates, and our senior credit facility currently contains, and our future debt may contain, limitations on our ability to pay cash upon conversion or repurchase of the notes.” If we fail to purchase the notes when required following a fundamental change, we will be in default under the indenture. In addition, we have, and may in the future incur, other indebtedness with similar change in control provisions permitting our holders to accelerate or to require us to purchase our indebtedness upon the occurrence of similar events or on some specific dates.
Consolidation, Merger and Sale of Assets
The indenture provides that the Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its properties and assets to, another person, unless (i) the resulting, surviving or transferee entity (if not the Company) expressly assumes by supplemental indenture all the obligations of the Company under the notes, the indenture and, to the extent then still operative, the registration rights agreement; and (ii) immediately after giving effect to such transaction, no default has occurredtime Outstanding occurs and is continuing, undereither the indenture. Upon any such consolidation, merger or transfer, the resulting, surviving or transferee entity shall succeed to, and may exercise every right and power of, the Company under the indenture.
Although these types of transactions are permitted under the indenture, certain of the foregoing transactions could constitute a fundamental change (as defined above) permitting each holder to require us to purchase the notes of such holder as described above.
Future Guarantees
The indenture will provide that if we issue any unsecured debt securities that are publicly traded or eligible for trading in the Portal Market (“public debt securities”), and any of our subsidiaries provides a guarantee with respect to such public debt securities, then we will, within 30 days following the issuance of any such guarantee, cause each such subsidiary to execute a supplement to the indenture under which such subsidiary will guarantee our obligations under the notes on terms substantially similar (in our good faith determination) to the guarantee provided with respect to the public debt securities. The guarantee of any such subsidiary may be released if the subsidiary no longer guarantees such public debt securities, if such subsidiary is dissolved or liquidated, if such subsidiary is no longer our subsidiary or upon satisfaction and discharge of the notes.
Events of Default
Each of the following is an event of default:
(1) default in any payment of interest, including any contingent interest and additional interest on any note when due and payable and the default continues for a period of 30 days;
(2) default in the payment of principal of any note when due and payable at its stated maturity, upon optional redemption, upon required repurchase, upon declaration of acceleration on otherwise;
(3) failure by the Company to comply with its obligation to convert the notes in accordance with the indenture upon exercise of a holder’s conversion right and such failure continues for a period of 10 days;
(4) failure by the Company to give a fundamental change notice or notice of a specified corporate transaction as described under “— Conversion Upon Specified Corporate Transactions” or a public acquirer change of control notice as described under “— Conversion After a Public Acquirer Change of Control,” in each case when due;
(5) failure by the Company to comply with its obligations under “— Consolidation, Merger and Sale of Assets;”
48
(6) failure by the Company for 60 days after written notice from the trusteeapplicable Trustee or the holdersHolders of at least 25% in principal amount of the notes then outstanding has been received to comply with anyOutstanding Debt Securities of its other agreements containedthat series by notice as provided in the notes or indenture (or 180 days with respect to any failure to comply withIndenture may declare the covenant described under “— Reports”);
(7) default by the Company or any subsidiary in the payment of the principal or interest on any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced any indebtedness for money borrowed in excess of $25 million in the aggregate of the Company and/or any subsidiary, whether such indebtedness now exists or shall hereafter be created, resulting in such indebtedness becoming or being declared due and payable, and such acceleration shall not have been rescinded or annulled within 30 days after written notice of such acceleration has been received by the Company or such subsidiary from the trustee (or to us and the trustee from the holders of at least 25% in principal amount of the outstanding notes); or
(8) certain eventsDebt Securities of bankruptcy, insolvency, or reorganization ofthat series (or, in the Company or any significant subsidiary (as defined in Regulation S-X under the Exchange Act) (the “bankruptcy provisions”).
If an event of default occurs and is continuing, the trustee by notice to the Company, on the holders of at least 25% in principal amount of the outstanding notes by notice to the Company and the trustee, may, and the trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest, including additional interest or premium, if any, on all the notes to be due and payable. In case of certain events of bankruptcy, insolvency on reorganization, involving us or a significant subsidiary, 100% of the principal, premium, if any and accrued and unpaid interest on the notes will automatically become due and payable. UponDebt Security that is an Original Issue Discount Debt Security, such a declaration, such principal, premium (if any) and accrued and unpaid interest, including any additional interest will be due and payable immediately.
Notwithstanding the foregoing, the indenture will provide that the sole remedy for an event of default relating to the failure to comply with the reporting obligations in the indenture, which are described below under the caption “— Reports,” and for any failure to comply with the requirements of Section 314(a)(1) of the Trust Indenture Act, will for the 365 days after the occurrence of such an event of default consist exclusively of the right to receive additional interest on the notes at an annual rate equal to 0.25%portion of the principal amount of the notes. This additional interest willsuch Debt Security as may be in addition to any contingent interest described under “— Contingent Interest” above and any additional interest that may accrue as a result of a registration default as described below under the caption “Registration Rights” and will be payablespecified in the same manner as additionalterms of such Debt Security) to be due and payable immediately, together with any accrued and unpaid interest accruing as a resultthereon. If an Event of a registration default. The additional interest will accrue onDefault with respect to Goodrich Petroleum Corporation described in clause (8) above with respect to the Debt Securities of any series at the time Outstanding occurs, the principal amount of all outstanding notes from and including the date on which an eventDebt Securities of default relating to a failure to comply with the reporting obligationsthat series (or, in the indenture first occurs to but not including the 365th day thereafter (or such earlier date on which the event of default relating to the reporting obligations shall have been cured or waived). On such 365th day (or earlier, if the event of default relating to the reporting obligations is cured or waived prior to such 365th day), such additional interest will cease to accrue and the notes will be subject to acceleration as provided above if the event of default is continuing. The provisions of the indenture described in this paragraph will not affect the rights of holders of notes in the event of the occurrencecase of any other event of defaultsuch Original Issue Discount Security, such specified amount) will automatically, and will have no effectwithout any action by the applicable Trustee or any Holder, become immediately due and payable, together with any accrued and unpaid interest thereon. After any such acceleration and its consequences, but before a judgment or decree based on acceleration, the rights of holders of notes under the registration rights agreement.
The holdersHolders of a majority in principal amount of the outstanding notesOutstanding Debt Securities of that series may, waiveunder certain circumstances, rescind and annul such acceleration if all past defaults (exceptEvents of Default with respect to nonpayment of principal or interest, including any contingent interest and, additional interest or failure to deliver, upon conversion, cash and shares of our common stock, if applicable) and rescind any such acceleration with respect to the notes and its consequences if (1) rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (2) all existing events of default,that series, other than the nonpaymentnon-payment of theaccelerated principal of and interest, including contingent interest and, additional interest, on the notes that have become due solely by such declaration of acceleration,(or other specified amount), have been cured or waived.
waived as provided in the applicable Indenture. For information as to waiver of defaults, see “— Modification and Waiver” below.Subject to the provisions of the indentureIndentures relating to the duties of the trustee, ifTrustees in case an eventEvent of default occursDefault has occurred and is continuing, the trusteeno Trustee will be under noany obligation to exercise any of theits rights or powers under the indentureapplicable Indenture at the request or direction of any of the holdersHolders, unless such holdersHolders have offered to such Trustee reasonable security or indemnity. Subject to such provisions for 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 or interest, including any additional interest when due, no holder may pursue any remedy with respect to the indenture or the notes unless:
49
(1) such holder has previously given the trustee notice that an event of default is continuing;
(2) holders of at least 25% in principal amountindemnification of the outstanding notes have requestedTrustees, the trustee to pursue the remedy;
(3) such holders have offered the trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense;
(4) the trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and
(5) the holdersHolders of a majority in principal amount of the outstanding notesOutstanding Debt Securities of any series will have not given the trustee a direction that, in the opinion of the trustee, is inconsistent with such request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount of the outstanding notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to
the trusteesuch Trustee or
of exercising any trust or power conferred on the
trustee. The indenture providesTrustee with respect to the Debt Securities of that
series.No Holder of a Debt Security of any series will have any right to institute any proceeding with respect to the applicable Indenture, or for the appointment of a receiver or a trustee, or for any other remedy thereunder, unless:
| (1) | such Holder has previously given to the Trustee under the applicable Indenture written notice of a continuing Event of Default with respect to the Debt Securities of that series; |
| (2) | the Holders of at least 25% in principal amount of the Outstanding Debt Securities of that series have made written request, and such Holder or Holders have offered reasonable security or indemnity, to the Trustee to institute such proceeding as trustee; and |
| (3) | the Trustee has failed to institute such proceeding, and has not received from the Holders of a majority in principal amount of the Outstanding Debt Securities of that series a direction inconsistent with such request, within 60 days after such notice, request and offer. |
However, such limitations do not apply to a suit instituted by a Holder of a Debt Security for the enforcement of payment of the principal of or any premium or interest on such Debt Security on or after the applicable due date specified in the event an event of default has occurred and is continuing, the trusteesuch Debt Security or, if applicable, to convert such Debt Security.
We will be required in the exerciseto furnish to each Trustee annually a statement by certain of its powersour officers, to use the degree of care that a prudent person would use in the conduct of its own affairs. The trustee, however, may refusetheir knowledge, as to follow any direction that conflicts with law or the indenture or that the trustee determines is unduly prejudicial to the rights of any other holder or that would involve the trustee in personal liability. Prior to taking any action under the indenture, the trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by takingwhether or not taking such action.
The indenture provides that if a default occurs and is continuing and is known to the trustee, the trustee must provide to each holder notice of the default within 90 days after it occurs. Exceptwe are in
the case of a default in the
paymentperformance or observance of
principal of or interest on any
note, the trustee may withhold notice if and so long as the trustee determines in good faith that withholding notice is in the interests of the
holders. In addition,terms, provisions and conditions of the
Company is required to deliver toapplicable Indenture and, if so, specifying all such known defaults.Modification and Waiver
We may modify or amend an Indenture without the trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof knowconsent of any default that occurred duringholders of the previous year. The Company also is required to deliver to the trustee, within 30 days after the occurrence thereof, written noticeDebt Securities in certain circumstances, including:
| (1) | to evidence the succession under the Indenture of another Person to us or any Subsidiary Guarantor and to provide for its assumption of our or such Subsidiary Guarantor’s obligations to holders of Debt Securities; |
| (2) | to make any changes that would add any additional covenants of us or the Subsidiary Guarantors for the benefit of the holders of Debt Securities or that do not adversely affect the rights under the Indenture of the Holders of Debt Securities in any material respect; |
| (3) | to add any additional Events of Default; |
| (4) | to provide for uncertificated notes in addition to or in place of certificated notes; |
| (5) | to secure the Debt Securities; |
| (6) | to establish the form or terms of any series of Debt Securities; |
| (7) | to evidence and provide for the acceptance of appointment under the Indenture of a successor Trustee; |
| (8) | to cure any ambiguity, defect or inconsistency; |
| (9) | to add Subsidiary Guarantors; or |
| (10) | in the case of any Subordinated Debt Security, to make any change in the subordination provisions that limits or terminates the benefits applicable to any Holder of Senior Debt. |
Other modifications and amendments of any events which would constitute certain defaults, their status and what action the Company is taking or proposes to take in respect thereof.
Modification and Amendment
Subject to certain exceptions, the indenture or the notesan Indenture may be
amendedmade by us, the Subsidiary Guarantors, if applicable, and the applicable Trustee with the consent of the
holders of at least a majority in principal amount of the notes then outstanding (including without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes) and, subject to certain exceptions, any past default or compliance with any provisions may be waived with the consent of the holdersHolders of a majority in principal amount of the
notes then outstanding (including, without limitation, consents obtained in connection with a purchaseOutstanding Debt Securities of
each series affected by such modification or
tender offeramendment; provided, however, that no such modification or
exchange offer for, notes). However,amendment may, without the consent of
the Holder of each
holderOutstanding Debt Security affected thereby: | (1) | change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Debt Security; |
| (2) | reduce the principal amount of, or any premium or interest on, any Debt Security; |
| (3) | reduce the amount of principal of an Original Issue Discount Security or any other Debt Security payable upon acceleration of the Maturity thereof; |
| (4) | change the place or currency of payment of principal of, or any premium or interest on, any Debt Security; |
| (5) | impair the right to institute suit for the enforcement of any payment due on or any conversion right with respect to any Debt Security; |
| (6) | modify the subordination provisions in the case of Subordinated Debt Securities, or modify any conversion provisions, in either case in a manner adverse to the Holders of the Subordinated Debt Securities; |
| (7) | except as provided in the applicable Indenture, release the Subsidiary Guarantee of a Subsidiary Guarantor; |
| (8) | reduce the percentage in principal amount of Outstanding Debt Securities of any series, the consent of whose Holders is required for modification or amendment of the Indenture; |
| (9) | reduce the percentage in principal amount of Outstanding Debt Securities of any series necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults; |
| (10) | modify such provisions with respect to modification, amendment or waiver; or |
| (11) | following the making of an offer to purchase Debt Securities from any Holder that has been made pursuant to a covenant in such Indenture, modify such covenant in a manner adverse to such Holder. |
The Holders of an outstanding note affected, no amendment may, among other things:
(1) reduce the percentagea majority in aggregate principal amount of notes whose holders must consent to an amendment orthe Outstanding Debt Securities of any series may waive compliance by us with certain restrictive provisions of the applicable Indenture. The Holders of a majority in principal amount of the Outstanding Debt Securities of any series may waive any past default;
(2) reducedefault under the
rate of or extendapplicable Indenture, except a default in the
stated time for payment of
principal, premium or interest
including additional interest, onand certain covenants and provisions of the Indenture which cannot be amended without the consent of the Holder of each Outstanding Debt Security of such series.Each of the Indentures provides that in determining whether the Holders of the requisite principal amount of the Outstanding Debt Securities have given or taken any note;
(3) reduce the principal ofdirection, notice, consent, waiver or extend the stated maturityother action under such Indenture as of any note;
(4) otherwise impairdate: | (1) | the principal amount of an Original Issue Discount Security that will be deemed to be Outstanding will be the amount of the principal that would be due and payable as of such date upon acceleration of maturity to such date; |
| (2) | if, as of such date, the principal amount payable at the Stated Maturity of a Debt Security is not determinable (for example, because it is based on an index), the principal amount of such Debt Security deemed to be Outstanding as of such date will be an amount determined in the manner prescribed for such Debt Security; |
| (3) | the principal amount of a Debt Security denominated in one or more foreign currencies or currency units that will be deemed to be Outstanding will be the United States-dollar equivalent, determined as of such date in the manner prescribed for such Debt Security, of the principal amount of such Debt Security (or, in the case of a Debt Security described in clause (1) or (2) above, of the amount described in such clause); and |
| (4) | certain Debt Securities, including those owned by us, any Subsidiary Guarantor or any of our other Affiliates, will not be deemed to be Outstanding. |
Except in certain limited circumstances, we will be entitled to set any day as a record date for the rightpurpose of determining the Holders of Outstanding Debt Securities of any holderseries entitled to receivegive or take any direction, notice, consent, waiver or other action under the applicable Indenture, in the manner and subject to the limitations provided in the Indenture. In certain limited circumstances, the Trustee will be entitled to set a record date for action by Holders. If a record date is set for any action to be taken by Holders of a particular series, only persons who are Holders of Outstanding Debt Securities of that series on the record date may take such action. To be effective, such action must be taken by Holders of the requisite principal amount of such Debt Securities within a specified period following the record date. For any particular record date, this period will be 180 days or such other period as may be specified by us (or the Trustee, if it set the record date), and may be shortened or lengthened (but not beyond 180 days) from time to time.
Satisfaction and Discharge
Each Indenture will be discharged and will cease to be of further effect as to all outstanding Debt Securities of any series issued thereunder, when:
(a) all outstanding Debt Securities of that series that have been authenticated (except lost, stolen or destroyed Debt Securities that have been replaced or paid and Debt Securities for whose payment money has theretofore been deposited in trust and thereafter repaid to us) have been delivered to the Trustee for cancellation; or
(b) all outstanding Debt Securities of that series that have been not delivered to the Trustee for cancellation have become due and payable or will become due and payable at their Stated Maturity within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee and in any case we have irrevocably deposited with the Trustee as trust funds money in an amount sufficient, without consideration of any reinvestment of interest, to pay the entire indebtedness of such Debt Securities not delivered to the Trustee for cancellation, for principal, premium, if any, and accrued interest including additional interest, on such holder’s notes onto the Stated Maturity or afterredemption date;
| (2) | we have paid or caused to be paid all other sums payable by us under the Indenture with respect to the Debt Securities of that series; and |
| (3) | we have delivered an Officers’ Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge of the Indenture with respect to the Debt Securities of that series have been satisfied. |
Legal Defeasance and Covenant Defeasance
To the due dates thereforextent indicated in the applicable prospectus supplement, we may elect, at our option at any time, to have our obligations discharged under provisions relating to defeasance and discharge of indebtedness, which we call “legal defeasance,” or relating to defeasance of certain restrictive covenants applied to the Debt Securities of any series, or to institute suit forany specified part of a series, which we call “covenant defeasance”.
Legal Defeasance. The Indentures provide that, upon our exercise of our option (if any) to have the enforcementlegal defeasance provisions applied to any series of any payment on orDebt Securities, we and, if applicable, each Subsidiary Guarantor will be discharged from all our obligations, and, if such Debt Securities are Subordinated Debt Securities, the provisions of the Subordinated Indenture relating to subordination will cease to be effective, with respect to such holder’s notes;
(5) make any change that impairsDebt Securities (except for certain obligations to convert, exchange or adversely affectsregister the conversion rightstransfer of any notes;
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(6) reduceDebt Securities, to replace stolen, lost or mutilated Debt Securities, to maintain paying agencies and to hold moneys for payment in trust) upon the redemption price, the purchase price or fundamental change purchase price of any note or amend or modifydeposit in any manner adverse to the holders of notes the Company’s obligation to make such payments;
(7) make any note payable in currency other than that stated in the note; or
(8) make any change in the amendment provisions which require each holder’s consent or in the waiver provisions.
Without the consent of any holder, the Company and the trustee may amend the indenture to:
(1) cure any ambiguity, omission, defect or inconsistency in the indenture in a manner that does not individually or in the aggregate adversely affect the rights of any holder of notes in any material respect;
(2) provide for the assumption by a successor entity of the obligations of the Company under the indenture as described under “— Consolidation, Merger and Sale of Assets”;
(3) add guarantees with respect to the notes;
(4) secure the notes;
(5) add to the covenants of the Companytrust for the benefit of the
holdersHolders of such Debt Securities of money or
surrenderU.S. Government Obligations, or both, which, through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient (in the opinion of a nationally recognized firm of independent public accountants) to pay the principal of and any
rightpremium and interest on such Debt Securities on the respective Stated Maturities in accordance with the terms of the applicable Indenture and such Debt Securities. Such defeasance or
power conferreddischarge may occur only if, among other things: | (1) | we have delivered to the applicable Trustee an Opinion of Counsel to the effect that we have received from, or there has been published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law, in either case to the effect that Holders of such Debt Securities will not recognize gain or loss for federal income tax purposes as a result of such deposit and legal defeasance and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and legal defeasance were not to occur; |
| (2) | no Event of Default or event that with the passing of time or the giving of notice, or both, shall constitute an Event of Default shall have occurred and be continuing at the time of such deposit or, with respect to any Event of Default described in clause (8) under “— Events of Default,” at any time until 121 days after such deposit; |
| (3) | such deposit and legal defeasance will not result in a breach or violation of, or constitute a default under, any agreement or instrument (other than the applicable Indenture) to which we are a party or by which we are bound; |
| (4) | in the case of Subordinated Debt Securities, at the time of such deposit, no default in the payment of all or a portion of principal of (or premium, if any) or interest on any Senior Debt shall have occurred and be continuing, no event of default shall have resulted in the acceleration of any Senior Debt and no other event of default with respect to any Senior Debt shall have occurred and be continuing permitting after notice or the lapse of time, or both, the acceleration thereof; and |
| (5) | we have delivered to the Trustee an Opinion of Counsel to the effect that such deposit shall not cause the Trustee or the trust so created to be subject to the Investment Company Act of 1940. |
Covenant Defeasance. The Indentures provide that, upon our exercise of our option (if any) to have the Company;
(6) makecovenant defeasance provisions applied to any change that does not materially adversely affect the rights of any holder;
(7)Debt Securities, we may fail to comply with certain restrictive covenants (but not with respect to conversion, if applicable), including those that may be described in the applicable prospectus supplement, and the occurrence of certain Events of Default, which are described above in clause (5) (with respect to such restrictive covenants) and clauses (6), (7) and (9) under “Events of Default” and any requirementthat may be described in the applicable prospectus supplement, will not be deemed to either be or result in an Event of Default and, if such Debt Securities are Subordinated Debt Securities, the provisions of the CommissionSubordinated Indenture relating to subordination will cease to be effective, in connectioneach case with the qualification of the indenture under the Trust Indenture Act;
(8) provide for the acceptance of appointment by a successor trustee or paying agent or facilitate the administration of the trusts under the indenture by more than the trustee or paying agent;
(9) addrespect to events of defaultsuch Debt Securities. In order to exercise such option, we must deposit, in trust for the benefit of the holdersHolders of such Debt Securities, money or U.S. Government Obligations, or both, which, through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient (in the opinion of a nationally recognized firm of independent public accountants) to pay the principal of and any premium and interest on such Debt Securities on the respective Stated Maturities in accordance with the terms of the notes;applicable Indenture and such Debt Securities. Such covenant defeasance may occur only if we have delivered to the applicable Trustee an Opinion of Counsel to the effect that Holders of such Debt Securities will not recognize gain or
(10) conform loss for federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to federal income tax on the text ofsame amount, in the indenture orsame manner and at the notessame times as would have been the case if such deposit and covenant defeasance were not to occur, and the requirements set forth in clauses (2), (3), (4) and (5) above are satisfied. If we exercise this option with respect to any provisionseries of this “Description of Notes.”
The consent of the holders is not necessary under the indenture to approve the particular form of any proposed amendment. It is sufficient ifDebt Securities and such consent approves the substance of the proposed amendment. After an amendment under the indenture becomes effective, the Company is required to mail to the holders a notice briefly describing such amendment. However, the failure to give such notice to all the holders, or any defect in the notice, will not impair or affect the validity of the amendment.
Discharge
We may satisfy and discharge our obligations under the indenture by delivering to the registrar for cancellation all outstanding notes or by depositing with the trustee or delivering to the holders, as applicable, after the notes have becomeDebt Securities were declared due and payable whether at stated maturity, onbecause of the occurrence of any redemption date, on any purchase date, or upon conversion or otherwise, cash or sharesEvent of common stock (in respectDefault, the amount of conversions)money and U.S. Government Obligations so deposited in trust would be sufficient to pay allamounts due on such Debt Securities at the time of the outstanding notes and paying all other sums payable under the indenture by us. Such discharge is subjecttheir respective Stated Maturities but may not be sufficient to terms contained in the indenture.
No Stockholder Rightspay amounts due on such Debt Securities upon any acceleration resulting from such Event of Default. In such case, we would remain liable for Holders of Notes
Holders of notes, as such
payments.If we exercise either our legal defeasance or covenant defeasance option, any Subsidiary Guarantee will not have any rights as stockholders of the Company (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock).
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Reports
The Company shall deliver to the trustee, within 15 days after filing with the Commission, copies (of its annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. For the avoidance of doubt, the foregoing is not intended to create any obligation to timely file reports with the Commission.
Notices
Except as otherwise provided in the indenture, notices to holders of the notes will be given by mail to the addresses of holders of the notes as they appear in the notes register.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator, stockholder, member, partner or partnertrustee of the Company or any Subsidiary Guarantor, as such, willshall have any liability for any obligations of the Company or any Subsidiary Guarantor under the notes,Debt Securities, the indentureIndentures or any Subsidiary Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes byBy accepting a note waivesDebt Security, each Holder shall be deemed to have waived and releasesreleased all such liability. The waiver and release areshall be a part of the consideration for issuancethe issue of the notes.
Calculations in RespectDebt Securities. The waiver may not be effective to waive liabilities under the federal securities laws, and it is the view of Notes
Except as otherwise provided above, wethe SEC that such a waiver is against public policy.Notices
Notices to Holders of Debt Securities will be responsible for making all calculations called for undergiven by mail to the notes. These calculations include, but are not limited to, determinationsaddresses of such Holders as they may appear in the Security Register.
Title
We, the Subsidiary Guarantors, the Trustees and any agent of us, the Subsidiary Guarantors or a Trustee may treat the Person in whose name a Debt Security is registered as the absolute owner of the last reported sale pricesDebt Security (whether or not such Debt Security may be overdue) for the purpose of our common stock, accrued interest payable on the notes,making payment and for all other purposes.
Governing Law
The Indentures and the applicable conversion rate of the notes and any adjustments thereto. WeDebt Securities will make all these calculations in good faith and, absent manifest error, our calculations will be final and binding on holders of notes. We will provide a schedule of our calculations to each of the trustee and the conversion agent, and each of the trustee and conversion agent is entitled to rely conclusively upon the accuracy of our calculations without independent verification. The trustee will forward our calculations to any holder of notes upon the request of that holder.
Trustee
Wells Fargo Bank, National Association, is the trustee, registrar, paying agent and conversion agent for the notes. In each of its capacities, including without limitation as trustee, security registrar, paying agent and conversion agent, it assumes no responsibility for the accuracy or completeness of the information concerning us or our affiliates or any other party contained in this document or the related documents or for any failure by us or any other party to disclose events that may have occurred and may affect the significance or accuracy of such information.
Governing Law
The indenture provides that it and the notes are governed by, and construed in accordance with, the lawslaw of the State of New York.
Registration Rights
In connectionThe Trustee
We will enter into the Indentures with a Trustee that is qualified to act under the initial private placementTrust Indenture Act of 1939, as amended, and with any other Trustees chosen by us and appointed in a supplemental indenture for a particular series of Debt Securities. We may maintain a banking relationship in the ordinary course of business with our Trustee and one or more of its affiliates.
Resignation or Removal of Trustee. If the Trustee has or acquires a conflicting interest within the meaning of the notes, we andTrust Indenture Act, the initial purchasers entered into a registration rights agreement.
PursuantTrustee must either eliminate its conflicting interest or resign, to the registration rights agreement, we agreed for the benefit of the holders of the notesextent and the common stock issuable upon conversion of the notes that we would, at our cost:
within 120 days after the closing date of the private placement, file a shelf registration statement covering resales of the notes and the common stock issuable upon conversion of the notes pursuant to Rule 415 under the Securities Act;
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| • | | use reasonable best efforts to cause such shelf registration statement to become effective under the Securities Act no later than 240 days after the original date of issuance of the notes; and |
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| • | | subject to certain rights to suspend use of the shelf registration statement, use reasonable best efforts to keep the shelf registration statement effective until the securities covered by the registration statement (i) have been sold pursuant to the registration statement or (ii) are eligible to be sold under Rule 144(k) under the Securities Act (or any successor rule), assuming for this purpose that the holders of such securities are not our affiliates. |
We are permitted to suspend the effectiveness of the shelf registration statement or the use of the prospectus that is part of the shelf registration statement during specified periods (not to exceed 120 days in the aggregate in any 12 month period) in specified circumstances, including circumstances relating to pending corporate developments. We need not specify the nature of the event giving rise to a suspension in any notice to holders of the notes of the existence of a suspension.
The following requirementsmanner provided by, and restrictions will generally apply to a holder selling the securities pursuant to the shelf registration statement:
| • | | the holder will be required to be named as a selling security holder in the related prospectus; |
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| • | | the holder will be required to deliver a prospectus to purchasers; |
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| • | | the holder will be subject to some of the civil liability provisions under the Securities Act in connection with any sales; and |
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| • | | the holder will be bound by the provisions of the registration rights agreement which are applicable to the holder (including indemnification obligations). |
We refer to the notes and the common shares issuable on exchange, or purchase of the notes as “registrable securities.” Promptly upon request from any holder of registrable securities, we will provide a form of notice and questionnaire to be completed and delivered by that holder to us at least three business days before any intended distribution of registrable securities under the shelf registration statement. If we receive from a holder of registrable securities a completed questionnaire, together with such other information as may be reasonably requested by us, after the effectiveness of, this shelf registration statement, we will file an amendment to the shelf registration statement or supplement to the related prospectus to permit the holder to deliver a prospectus to purchasers of registrable securities. Any holder that does not complete and deliver a questionnaire or provide such other information will not be named as a selling security holder in this prospectus and therefore will not be permitted to sell any registrable securities under the shelf registration statement.
This summary of the registration rights agreement is not complete. This summary is subject to, and is qualified in its entirety by reference to, all the provisions of, the
registration rights agreement. See “IncorporationTrust Indenture Act and the applicable Indenture. Any resignation will require the appointment of
Certain Documentsa successor Trustee under the applicable Indenture in accordance with the terms and conditions of such Indenture.The Trustee may resign or be removed by Reference” for information on obtainingus with respect to one or more series of Debt Securities and a copysuccessor Trustee may be appointed to act with respect to any such series. The holders of a majority in aggregate principal amount of the registration rights agreement.
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Limitations on Trustee if It Is Our Creditor. Each Indenture will contain certain limitations on the right of the Trustee, in the event that it becomes our creditor, 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.Certificates and Opinions to Be Furnished to Trustee. Each Indenture will provide that, in addition to other certificates or opinions that may be specifically required by other provisions of an Indenture, every application by us for action by the Trustee must be accompanied by an Officers’ Certificate and an Opinion of Counsel stating that, in the opinion of the signers, all conditions precedent to such action have been complied with by us.
DESCRIPTION OF CAPITAL STOCK
OurThe following descriptions are summaries of material terms of our common stock, preferred stock, certificate of incorporation and bylaws. This summary is qualified by reference to our certificate of incorporation, bylaws and the designation of our preferred stock, which are filed as exhibits to the registration statement of which this prospectus forms a part, and by the provisions of applicable law.
As of January 1, 2013, our authorized capital stock is 60,000,000was 110,000,000 shares. Those shares consistconsisted of (a) 10,000,000 shares of preferred stock, $1.00 par value, 2,250,000 of which are outstanding,were outstanding; and (b) 50,000,000100,000,000 shares of common stock, $0.20 par value, of which 28,300,81336,721,766 shares were issued and outstandingoutstanding. In addition, as of April 3, 2007. We have reservedJanuary 1, 2013, (a) 3,587,850 shares of our common stock were reserved for issuance uponpursuant to the conversion of our Series B Preferred Stock. In addition, asconvertible preferred stock, (b) 6,506 shares of April 3, 2007 approximately 1,900,000common stock were reserved for issuance pursuant to the conversion of our 3.25% convertible senior notes due 2026, (c) 6,304,468 shares of common stock were reserved for issuance pursuant to the conversion of our 5.00% convertible senior notes due 2029, (d) 3,299,776 shares of common stock were reserved for issuance pursuant to our stock option plans, in addition to 983,300 outstandingof which options to purchase 900,984 shares at a weighted average exercise price of $20.67$21.57 per share.
The following summaryshare had been issued, and (e) 1,543,650 shares of certain provisions of our capitalrestricted stock doesawards had not purport to be complete and is subject to and is qualified in its entirety by our certificate of incorporation and bylaws, which are incorporated in this prospectus by reference to our annual report on Form 10-K for the year ended December 31, 2006, and by the provisions of applicable law.
Subject to any special voting rights of any series of preferred stock that we may issue in the future, each share held of record of common stock has one vote on all matters voted on by our shareholders,stockholders, including the election of our directors. Because holders of common stock do not have cumulative voting rights, the holders of a majority of the shares of common stock can elect all of the members of the board of directors standing for election, subject to the rights, powers and preferences of any outstanding series of preferred stock.
No share of common stock affords any preemptive rights or is convertible, redeemable, assessable or entitled to the benefits of any sinking or repurchase fund. Holders of common stock will be entitled to dividends in the amounts and at the times declared by our board of directors in its discretion out of funds legally available for the payment of dividends.
Holders of common stock are entitled to receive dividends when, as and if declared by the board of directors out of funds legally available therefor, subject to any dividend preferences of any outstanding shares of preferred stock. Holders of common stock will share equally in our assets on liquidation after payment or provision for all liabilities and any preferential liquidation rights of any preferred stock then outstanding. All outstanding shares of common stock are fully paid and non-assessable. Our common stock is traded on the New York Stock Exchange under the symbol “GDP.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ComputerShare Investor Services, LLC.
American Stock Transfer & Trust Company.Preferred Stock
Authorized but Unissued Preferred Stock
As of the date of this prospectus, we have 7,750,000 shares of authorized but unissued preferred stock whichthat are undesignated.
At the direction of our board of directors, we may issue shares of preferred stock from time to time. Our board of directors may, without any action by holders of our common stock:
adopt resolutions to issue preferred stock in one or more classes or series;
| • | | adopt resolutions to issue preferred stock in one or more classes or series; |
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| • | | fix the number of shares constituting any class or series of preferred stock; and |
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| • | | fix the number of shares constituting any class or series of preferred stock; and establish the rights of the holders of any class or series of preferred stock. The rights of any class or series of preferred stock may include, among others: |
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| • | | general or special voting rights; |
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The rights of any class or series of preferred stock may include, among others:
general or special voting rights;
preferential liquidation or preemptive rights;
| • | | preferential liquidation or preemptive rights; |
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| • | | preferential cumulative or noncumulative dividend rights; |
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| • | | redemption or put rights; and |
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| • | | conversion or exchange rights. |
preferential cumulative or noncumulative dividend rights;
redemption or put rights; and
conversion or exchange rights.
We may issue shares of, or rights to purchase, preferred stock, the terms of which might:
adversely affect voting or other rights evidenced by, or amounts otherwise payable with respect to, the common stock;
| • | | adversely affect voting or other rights evidenced by, or amounts otherwise payable with respect to, the common stock; |
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| • | | discourage an unsolicited proposal to acquire us; or |
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| • | | facilitate a particular business combination involving us. |
discourage an unsolicited proposal to acquire us; or
facilitate a particular business combination involving us.
Any of these actions could discourage a transaction that some or a majority of our shareholdersstockholders might believe to be in their best interests or in which our shareholdersstockholders might receive a premium for their stock over its then market price.
Series B Convertible Preferred Stock
As of April 3, 2007,the date of this prospectus, we had 2,250,000 shares issued and outstanding of our Series B Convertible Preferred Stock. The Liquidation Preference is $50 per share of Series B Preferred Stock, plus accumulated and unpaid dividends.
Conversion Rights.Rights. Each share is convertible at the option of the holder into our common stock at any time at an initial conversion rate of 1.5946 shares of common stock per share, which is equivalent to an initial conversion price of approximately $31.36 per share of common stock. Upon conversion of the Series B Convertible Preferred Stock (pursuant to a voluntary conversion or the Company Conversion Option (as defined in the Certificate of Designation of the Series B Convertible Preferred Stock (the “Certificate of Designation”)), we may choose to deliver the conversion value to holders in cash, shares of common stock, or a combination of cash and shares of common stock.
On or after December 21, 2010, we may, at our option, cause the Series B Convertible Preferred Stock to be automatically converted into that number of shares of common stock that are issuable at the then-prevailing conversion rate. We may exercise our conversion right only if, for 20 trading days within any period of 30 consecutive trading days ending on the trading day prior to the announcement of our exercise of the option, the closing price of our common stock equals or exceeds 130% of the then-prevailing conversion price of the Series B Convertible Preferred Stock.
Redemption.Redemption. The Series B Convertible Preferred Stock is non-redeemable by us.
Fundamental Change.Change. If a Fundamental Change (as defined in the Certificate of Designation) occurs, holders may require us in specified circumstances to repurchase all or part of the Series B Convertible Preferred Stock. In addition, upon the occurrence of a Fundamental Change or Specified Corporate Events (as defined in the Certificate of Designation), we will under certain circumstances increase the conversion rate by a number of additional shares of common stock.
Dividends.Dividends. Holders of our Series B Preferred Stock are entitled to receive, when and if declared by our board of directors, cumulative cash dividends on the Series B Preferred Stock at a rate of 5.375% of the $50
liquidation preference per year (equivalent to $2.6875 per year per share). Dividends on the Series B Preferred Stock will be payable quarterly in arrears on each March 15, June 15, September 15, and December 15 of each year or, if not a business day, the next succeeding business day. Dividends may be increased under certain circumstances as described below.
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