As filed with the Securities and Exchange Commission on August 4, 2011.November 20, 2015
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FormFORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CONSOL Energy Inc.ENERGY INC.
(Exact name of registrantRegistrant as specified in its charter)
Delaware | 1221 | 51-0337383 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | ( Identification |
See Table Of Additional Registrants Below
P. Jerome Richey
Executive Vice President—Corporate Affairs,
Chief Legal Officer and Secretary
CONSOL Energy Inc.
CNX Center
1000 CONSOL Energy Drive
Canonsburg, PAPennsylvania 15317
724-485-4000(724) 485-4000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Stephen W. Johnson
Executive Vice President and Chief Administrative Officer
CONSOL Energy Inc.
1000 CONSOL Energy Drive
Canonsburg, Pennsylvania 15317
(724) 485-4000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
CopiesCopy to:
Buchanan IngersollDavid J. Miller
Latham & Rooney PCWatkins LLP
Lewis U. Davis, Jr.811 Main Street, Suite 3700
One Oxford Centre, 20th FloorHouston, Texas 77002
301 Grant Street(713) 546-5400
Pittsburgh, PA 15219
(412) 562-8800
Approximate date of commencement of proposed sale of the securities to the publicpublic:: As soon as practicable after the effective date of this registration statement becomes effective.Registration Statement.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | Accelerated filer | ¨ | ||||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ¨
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ¨
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered | Amount to be | Proposed Price per Unit | Proposed Offering Price (1) | Amount of Registration Fee (3) | Amount to be Registered | Proposed Offering Price Per Note(1) | Proposed Maximum Aggregate Offering Price(1) | Amount of Registration Fee | ||||||||
6.375% Senior Notes Due 2021 | $250,000,000 | 100% | $250,000,000 | $29,025 | ||||||||||||
Guarantees of 6.375% Senior Notes Due 2021 (2) | ||||||||||||||||
8.000% Senior Notes due 2023 | $500,000,000 | 100% | $500,000,000 | $50,350 | ||||||||||||
Guarantees of 8.000% Senior Notes due 2023(2) | — | — | — | — | ||||||||||||
Total | $250,000,000 | $250,000,000 | $29,025 | $500,000,000 | — | $500,000,000 | $50,350 | |||||||||
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(1) | Estimated solely for |
(2) |
* | The companies listed in the Table of Additional Registrant Guarantors on the next page are also included in this registration statement as additional registrants. |
The Registrantsregistrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrantsregistrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission,SEC, acting pursuant to said Section 8(a), may determine.
TABLE OF ADDITIONAL REGISTRANTSREGISTRANT GUARANTORS
The following are additional registrants that will guarantee the debt securities registered hereby:
Exact Name of | State or Other Jurisdiction of Incorporation or Organization | Employer Identification Number | ||||
AMVEST Coal & Rail, L.L.C. | Virginia | 54-0696869 | ||||
AMVEST Coal Sales, Inc. | Virginia | 54-1135822 | ||||
AMVEST Corporation | Virginia | 54-0696869 | ||||
AMVEST Gas Resources, Inc. | Virginia | 20-1072935 | ||||
AMVEST Mineral Services, Inc. | Virginia | 54-1560754 | ||||
AMVEST Minerals Company, L.L.C. | Virginia | 54-0696869 | ||||
AMVEST Oil & Gas, Inc. | Virginia | 54-1162979 | ||||
AMVEST West Virginia Coal, L.L.C. | West Virginia | 54-1860378 | ||||
Braxton-Clay Land & Mineral, Inc. | West Virginia | 43-1948819 | ||||
Cardinal States Gathering Company | Virginia | 73-1394037 | ||||
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CNX Gas Company LLC | Virginia | 31-1782401 | ||||
CNX Gas Corporation | Delaware | 20-3170639 | ||||
CNX Land | Delaware | 46-4117542 | ||||
CNX Marine Terminals Inc. | Delaware | 25-1385259 | ||||
CNX | 51-0337383 | * | ||||
Coalfield Pipeline Company | Tennessee | 03-0455546 | ||||
Conrhein Coal Company | Pennsylvania | 25-1406541 | ||||
CONSOL Energy Holdings LLC VI | Delaware | 27-2130445 | ||||
CONSOL Energy Sales Company | Delaware | 25-1670342 | ||||
CONSOL Financial Inc. | Delaware | 51-0395375 | ||||
CONSOL Mining Company LLC | Delaware | 46-4011126 | ||||
CONSOL Mining Holding Company LLC | Delaware | 46-4003532 | ||||
CONSOL of Canada Inc. | Delaware | 98-0013773 | ||||
CONSOL of Central Pennsylvania LLC | Pennsylvania | 20-5105698 | ||||
CONSOL of Kentucky Inc. | Delaware | 94-2524120 | ||||
CONSOL of Ohio LLC | Ohio | 20-8338255 | ||||
| 20-2471235 | |||||
Consol Pennsylvania Coal Company LLC | Delaware | 20-8732852 | ||||
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Fola Coal Company, L.L.C. | West Virginia | 54-1860378 | ||||
Glamorgan Coal Company, L.L.C. | Virginia | 54-0696869 | ||||
Helvetia Coal Company | Pennsylvania | 25-1180531 | ||||
Island Creek Coal Company | Delaware | 55-0479426 | ||||
| 46-4020820 | |||||
CONSOL Amonate Mining Company LLC | Delaware | 46-3990422 | ||||
CONSOL Buchanan Mining Company LLC | Delaware | 46-3984406 | ||||
Knox Energy, LLC | Tennessee | 62-1866097 | ||||
Laurel Run Mining Company | Virginia | 54-0892422 | ||||
Leatherwood, Inc. | Pennsylvania | 25-1604505 | ||||
Little Eagle Coal Company, L.L.C. | West Virginia | 22-3864739 | ||||
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MOB Corporation | Pennsylvania | 25-1211093 | ||||
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MTB Inc. | Delaware | 25-1674211 | ||||
Nicholas-Clay Land & Mineral, Inc. | Virginia | 55-0719265 | ||||
Panda Bamboo Holdings, Inc. | Delaware | 46-3396253 | ||||
Paros Corp. | Delaware | 46-3400629 | ||||
Peters Creek Mineral Services, Inc. | Virginia | 54-1536678 | ||||
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| 46-4003532 | |||||
TEAGLE Company, L.L.C. | Virginia | 54-0696869 |
Exact Name of Registrant Guarantor as Specified in its Charter(1) | State or Other Jurisdiction of Incorporation or Organization | I.R.S. Employer Identification Number | ||||
TECPART Corporation | Delaware | 13-3038238 | ||||
Terra Firma Company | West Virginia |
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Terry Eagle Coal Company, L.L.C. | West Virginia | 54-1860378 | ||||
Terry Eagle Limited Partnership | West Virginia | 31-0995566 | ||||
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Vaughn Railroad Company | West Virginia | 55-0725216 | ||||
Windsor Coal Company | West Virginia | 13-5488703 | ||||
Wolfpen Knob Development Company | Virginia | 25-1391218 |
Each additional registrant is a direct or indirect subsidiary of CONSOL Energy Inc. The address and telephone number of each additional registrant’s principal office is c/o CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, PA 15317, telephone (724) 485-4000. The name, address and telephone number of the agent for service for each additional registrant is P. Jerome Richey, Executive Vice President—Corporate Affairs and Chief Legal Officer and Corporate Secretary, CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, PA 15317, telephone (724) 485-4000.
(1) | Each additional registrant is a direct or indirect subsidiary of CONSOL Energy Inc. The address, including zip code, and telephone number, including area code, of each of the additional registrant guarantor’s principal office is c/o CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, PA 15317, telephone (724) 485-4000. The name, address, including zip code, and telephone number, including area code, of the agent for service for each of the additional registrant guarantors is Stephen W. Johnson, Executive Vice President and Chief Administrative Officer, CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, PA 15317, telephone (724) 485-4000. |
* | Uses its sole member’s EIN (CONSOL Energy Inc.). |
** | Uses its sole member’s EIN (CONSOL Mining Holdings Company LLC). |
The information in this preliminary prospectus is not complete and may be changed. We may not sell thesethe securities described herein until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary prospectus is not an offer to sell thesethe securities described herein and it is not soliciting an offer to buy thesesuch securities in any statejurisdiction where the offer or salesuch declared offering is not permitted.
SUBJECT TO COMPLETION, DATED August 4, 2011NOVEMBER 20, 2015
PRELIMINARY PROSPECTUS
Consol
CONSOL Energy Inc.
Offer to Exchange
$250,000,000Up to $500,000,000 of
8.000% Senior Notes due 2023 (CUSIP Nos. 20854P AM1 and U20892 AF9)
that Have Not Been Registered Under
the Securities Act of 1933, as amended
for
Up to $500,000,000 of
8.000% Senior Notes due 2023
that Have Been Registered Under
the Securities Act of 1933, as amended
The exchange offer and related withdrawal rights will expire at 5:00 p.m., New York City time, on , unless extended.
We are offering to exchange (the “exchange offer”) up to $500 million aggregate principal amount of 6.375%our new 8.000% Senior Notes Due 2021
for
$250,000,000 aggregate principal amount of 6.375% Senior Notes Due 2021
thatdue 2023, which have been registered under the Securities Act of 1933, as amended
The exchange offer will expire at 5:00 p.m.,
New York City time, on (the “Securities Act”), 2011, unless earlier terminated or extended.
CONSOL Energy Inc. hereby offers, upon the terms and subjectwhich we refer to the conditions set forth in this prospectus (which constituteas the “exchange offer”), to exchange up to $250,000,000 aggregate principal amount“new notes,” for any and all of its registered 6.375%our outstanding unregistered 8.000% Senior Notes due 2021, which it refers to as the “exchange notes,” for a like principal amount of its outstanding 6.375% Senior Notes due 2021, which it refers to as the “original notes.” The term “note” or “notes” in this prospectus refers collectively to the original notes and the exchange notes.
The terms of the exchange notes are substantially identical to the terms of the original notes in all material respects, except that the exchange notes are registered under the Securities Act of 1933, as amended, which is2023, referred to in this prospectus as the “old notes.” We issued the old notes on March 30, 2015 in a transaction not requiring registration under the Securities Act,Act. We are offering you new notes in exchange for old notes in order to satisfy our registration obligations agreed to in connection with such transaction. The old notes and the transfer restrictions, registration rights and additional interest provisions applicablenew notes are collectively referred to the original notes do not apply to the exchange notes.
The exchange notes will be fully and unconditionally guaranteed by substantially all of our existing and future wholly-owned domestic subsidiaries.
The principal features of the exchange offer are as follows:
The exchange offer is subject to certain conditions described in this prospectus including that no injunction, order or decree has been issued which would prohibit, prevent or materially impair our ability to proceed withas the “notes,” and they will be treated as a single class under the indenture governing them.
Please read “Risk Factors” beginning on page 8 for a discussion of factors you should consider before participating in the exchange offer.
All originalWe will exchange new notes for all outstanding old notes that are validly tendered and not validly withdrawn will be exchanged.
Tendersbefore expiration of originalthe exchange offer. You may withdraw tenders of old notes may be withdrawn at any time prior to the expiration of the exchange offer. The procedures related to this exchange are more fully described in “Exchange Offer—Procedures for Tendering.” If you fail to tender your old notes, you will continue to hold unregistered notes that you will not be able to transfer freely.
Neither CONSOL Energy norThe terms of the new notes are substantially identical to the terms of the old notes, except that the transfer restrictions, registration rights and provisions for additional interest relating to the old note do not apply to the new notes. Please read “Description of New Notes” for more details on the terms of the new notes. We will not receive any subsidiary guarantor will receive anycash proceeds from the exchange offer.
CONSOL Energy does not intend to apply for listingissuance of the new notes on any securities exchange or for inclusion of the notes in any automated quotation system.
You should consider carefully the “Risk Factors” beginning on page 10 of this prospectus before participating in the exchange offer.
Each broker-dealer that receives exchangenew notes for its own account in the exchange offerpursuant to this offering must acknowledge that it will deliver athis prospectus in connection with any resale of such exchangenew notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchangenew notes received in exchange for originalold notes where such originalold notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. CONSOL Energy and the subsidiary guarantorsWe have agreed that, starting onfor a period of up to 180 days after the expirationexchange date (as defined herein) and ending on the close of business one year after the expiration date, theysuch period may be extended), we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. SeePlease read “Plan of Distribution.”
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracydetermined if this prospectus is truthful or adequacy of this prospectus.complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2011.2015
This prospectus is part of a registration statement we filed with the Securities and Exchange Commission. In making your investment decision, you should rely only on the information contained or incorporated by reference in this prospectus and in the accompanying letter of transmittal. We have not authorized anyone to provide you with any other information. If you receive any unauthorized information, you must not rely on it. We are not making an offer to sell these securities or soliciting an offer to buy these securities in any jurisdiction where an offer or solicitation is not authorized or in which the person making that offer or solicitation is not qualified to do so or to anyone whom it is unlawful to make an offer or solicitation. You should not assume that the information contained in this prospectus, as well as the information we previously filed with the Securities and Exchange Commission that is incorporated by reference herein, is accurate as of any date other than its respective date.
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WHERE YOU CAN FIND MORE | ||||
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The information contained in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies. No person has been authorized to give any information or to make any representations other than those contained in this prospectus in connection with the offer contained herein and, if given or made, such information or representations must not be relied upon as having been authorized by us. Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances create an implication that there has been no change in our affairs or that of our subsidiaries since the date hereof.
This prospectus incorporates important business and financial information about CONSOL Energy and the subsidiary guarantorsus that is not included in or delivered with this prospectus. CONSOL Energy will provideSuch information is available without charge to each person, including any beneficial owner, to whom a copyholders of this prospectus is delivered,the old notes upon the written or oral request of such person, a copy of any or all of the information incorporated by reference in this prospectus, other than exhibits to such information (unless such exhibits are specifically incorporated by reference into the information that this prospectus incorporates). Requests for such copies should be directedmade to CONSOL Energy Inc., CNX Center 1000 CONSOL Energy Drive, Canonsburg, PA 15317-6506, Attn. General Counsel.15317, Attention: Stephen W. Johnson, Telephone: (724) 485-4000. To obtain timely delivery youof any requested information, holders of the old notes must make any request the information no later than five business days before , 2011,prior to the expiration date of the exchange offer.
The notes initially will be represented by permanent global certificates in fully registered form without couponsUnless otherwise indicated, references to “CONSOL Energy,” refer to CONSOL Energy Inc. References to “we,” “us,” “our” and will be deposited withthe “Company” refer to CONSOL Energy Inc. and its consolidated subsidiaries. References to “CNX Gas” refer to CNX Gas Corporation, a custodian for, and registered in the namewholly owned subsidiary of a nominee of The Depository Trust Company, New York, New York, or DTC, as depositary.CONSOL Energy.
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We obtained the market and competitive position data incorporated by reference into this prospectus from our own research, surveys or studies conducted by third parties and industry or general publications. Industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified such data, and we make no representation as to the accuracy of such information. Similarly, we believe our internal research is reliable, but it has not been verified by any independent sources. Market and competitive position data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption “Risk Factors” in this prospectus.
ii
With the exception of historical matters, the matters discussed in this prospectus and the documents incorporated by reference herein are forward-looking statements (as defined in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words “believe,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this prospectus and the documents incorporated by reference herein speak only as of the date of this prospectus; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:
deterioration in economic conditions in any of the industries in which our customers operate, or sustained uncertainty in financial markets cause conditions we cannot predict;
our reliance on major customers;
our inability to collect payments from customers if their creditworthiness declines;
the disruption of rail, barge, gathering, processing and transportation facilities and other systems that deliver our coalgas and gascoal to market;
a loss of our competitive position because of the competitive nature of the coalgas and gascoal industries, or a loss of our competitive position because of overcapacity in these industries impairing our profitability;
our ability to negotiate a new agreement with the United Mine Workers of America and our inability to maintain satisfactory labor relations;
coal users switching to other fuels in order to comply with various environmental standards related to coal combustion emissions;
the impact of potential, as well as any adopted regulations relating to greenhouse gas emissions on the demand for coalgas and natural gas, as well as the impact of any adopted regulations on our coal mining operations due to the venting of coalbed methane which occurs during mining;
foreign currency fluctuations could adversely affect the competitiveness of our coal abroad;
the risks inherent in gas and coal and gas operations, including our reliance upon third party contractors, being subject to unexpected disruptions, including geological conditions, equipment failure, timing of completion of significant construction or repair of equipment, fires, explosions, accidents and weather conditions which could impact financial results;
our focus on new gas development projects and exploration for gas in areas where we have little or no proven gas reserves;
decreases in the availability of, or increases in, the price of commodities and servicesor capital equipment used in our mining and gas operations, as well as our exposure under “take or pay” contracts we entered into with well service providers to obtain services which, if not used, could impact our cost of production;
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obtaining and renewing governmental permits and approvals for our gas and coal and gas operations;
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the effects of government regulation on the discharge into the water or air, and the disposal and clean-up of, hazardous substances and wastes generated during our gas and coal and gas operations;
the potential for liabilities arising from environmental contamination or alleged environmental contamination in connection with our past or current gas and coal and gas operations;
the effects of mine closing, reclamation, gas well closing and certain other liabilities;
uncertainties in estimating our economically recoverable gas, oil and coal and gas reserves;
defects may exist in our chain of title and we may incur additional costs associated with perfecting title for coal or gas rights on some of our properties;
the outcomes of various legal proceedings, which are more fully described in our reports filed under the Securities Exchange Act of 1934;
the impacts of various asbestos litigation claims;
increased exposure to employee relatedemployee-related long-term liabilities;
increased exposure to multi-employer pension plan liabilities;
minimum funding requirements by the Pension Protection Act of 2006 (the Pension Act) coupled with the significant investment and plan asset losses suffered during the recent economic decline has exposed us to making additional required cash contributions to fund the pension benefit plans which we sponsor and the multi-employer pension benefit plans in which we participate;
lump sum payments made to retiring salaried employees pursuant to our defined benefit pension plan exceeding total service and interest cost in a plan year;
acquisitions that we recently have completed or may make in the future including the accuracy of our assessment of the acquired businesses and their risks, achieving any anticipated synergies, integrating the acquisitions and unanticipated changes that could affect assumptions we may have made and asset monetization transactions, including sales of additional interests in our thermal coal or other assets to CNX Coal Resources LP and divestitures to third parties we anticipate may not occur or produce anticipated proceeds;
the anti-takeover effectsterms of our rights planexisting joint ventures restrict our flexibility, actions taken by the other party in our gas joint ventures may impact our financial position and various circumstances could prevent a change of control;
increased exposure onrisks associated with our financial performance due to the degree we are leveraged;
replacing our natural gas and oil reserves, which if not replaced, will cause our gas and oil reserves and gas production to decline;
our ability to acquire water supplies needed for gas drilling, or our ability to dispose of water used or removed from strata in connection with our gas operations at a reasonable cost and within applicable environmental rules;
our hedging activities may prevent us from benefiting from price increases and may expose us to other risks;
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Developments in any of these areas could cause actual results to differ materially from those anticipated or projected or cause a significant reduction in the market price of our common stock or notes.
The foregoing list of risks and uncertainties may not contain all of the risks and uncertainties that could affect us. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements in this prospectus.prospectus may not in fact occur. Accordingly, undue reliance should not be placed on these statements. We undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise, except as otherwise provided by law.
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Except as otherwise indicated, in this prospectus, “CONSOL Energy,” “the company,” “we,” “us” and “our” refer to CONSOL Energy Inc. and its consolidated subsidiaries. This summary highlights selectedprovides a brief overview of information contained elsewhere in this prospectusincluded or incorporated by reference intoin this prospectus. ThisBecause it is abbreviated, this summary maydoes not contain all of the information that you should consider before exchanging any ofinvesting in the notes. You should read the entire prospectus carefully, including the section entitled “Risk Factors” in this prospectus and in our Annual Report on Form 10-K for the fiscal year ended December 31, 20102014 and our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2011 and2015, June 30, 2011,2015 and September 30, 2015, which are incorporated herein by reference, before making a decision to exchange the originalold notes for exchangenew notes.
BusinessUnless otherwise indicated, references to “CONSOL Energy,” refer to CONSOL Energy Inc. References to “we,” “us,” “our” and the “Company” refer to CONSOL Energy Inc. and its consolidated subsidiaries. References to “CNX Gas” refer to CNX Gas Corporation, a wholly owned subsidiary of CONSOL Energy.
Company Overview
We are a multi-fuelan integrated energy producercompany operating through two primary divisions, oil and energy services provider primarily serving the electric power generation industry in the United States. We produce high-Btu thermal coal used in the electric power generation industry, high quality metallurgical coal used in steelmaking, and pipeline-quality natural gas from our coalbed methane (“CBM”), unconventional shale,exploration and conventionalproduction (our “E&P division”) and coal mining (our “coal division”). Our E&P division is focused on Appalachian area natural gas operations.
We operate two principal business units: coal and gas. Our coal operations include the mining, preparation,liquids activities, including production, gathering, processing and marketing of thermal coal and metallurgical coal and are comprised of four reportable segments: steam coal, high volatile metallurgical, low volatile metallurgical and other coal. For 2010, we produced approximately 62 million tons of coal, which accounted for approximately 6% of the total tons produced in the United States and approximately 14% of the total tons produced east of the Mississippi River. We are one of the largest producersacquisition of natural gas properties in the Appalachian Basin. Our coal division is focused on the extraction and preparation of coal, also in the Appalachian Basin.
We were incorporated in Delaware in 1991, but our predecessors have been mining coal, primarily in the Appalachian Basin, since 1864. We entered the natural gas operations, which we operate through a wholly-owned subsidiary called CNX Gas Corporation, are comprisedbusiness in the 1980s initially to increase the safety and efficiency of four reportable segments: CBM, conventional,our coal mines by capturing methane from coal seams prior to mining. Over the past ten years, our natural gas production has grown by approximately 330% to produce 235.7 net billion cubic feet of natural gas equivalent in 2014. Our E&P business has grown from coalbed methane production in Virginia into other unconventional production, such as the Marcellus Shale and other gas. During 2010, we produced 127.9 BcfeUtica Shale, in the Appalachian Basin.
Our E&P division operates, develops and explores for natural gas primarily in Appalachia (Pennsylvania, West Virginia, Virginia, Ohio and Tennessee). Currently, our primary focus is the continued development of our Marcellus Shale acreage and the exploration and development of our Utica Shale acreage. We believe that our concentrated operating area, legacy surface acreage position, regional operating expertise, geological logs from nearly 100 years of shallow oil and natural gas.gas drilling activity in the region, held by production acreage position, and ability to coordinate natural gas drilling with coal mining activity collectively give us a significant operating advantage over our competitors.
For a further discussion of our business, we urge you to read our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.2014 and our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2015, June 30, 2015 and September 30, 2015. See “Where You Can Find More“—Additional Information.”
Additional Information
CONSOL Energy was organized as a Delaware corporation in 1991. The address of ourOur principal executive offices isare located at CNX Center, 1000 CONSOL Energy Drive, Canonsburg, PA 15317-6505, and our telephone number at our principal executive offices is 724-485-4000. Our website is located at www.consolenergy.com. Information on our website or any other website is not incorporated by reference herein and does not constitute a part of this prospectus.
We make available our periodic reports and other information filed with or furnished to the Securities and Exchange Commission (the “SEC”), free of charge through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC.
Summary of theThe Exchange Offer
On March 9, 2011,30, 2015, we completed thea private placementoffering of original notes in the$500 million aggregate principal amount of $250,000,000.our 8.000% Senior Notes due 2023 to qualified institutional buyers under Rule 144A of the Securities Act (“Rule 144A”) and non-U.S. persons outside the United States under Regulation S under the Securities Act (“Regulation S”). We refer to these notes in this prospectus as the “old notes.” As part of that private offering, we entered into a registration rights agreement with the initial purchasers of the originalold notes dated as of March 9, 2011, referred to in this prospectus as the registration rights agreement, in which we agreed, among other things, to deliver this prospectus to you and to use our commercially reasonable efforts to complete anthe exchange offer for the original notes. Belowon or prior to May 3, 2016. The following is a summary of the exchange offer.
Old notes | On March 30, 2015 we issued $500 million aggregate principal amount of 8.000% Senior Notes due 2023. |
New notes | 8.000% Senior Notes due 2023. |
The terms of the new notes are substantially identical to the terms of the old notes, except that the transfer restrictions, registration rights and provisions for additional interest relating to the old notes do not apply to the new notes. The new notes offered hereby, together with any old notes that remain outstanding after the completion of the exchange offer, will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The new notes will have a CUSIP number different from that of any old notes that remain outstanding after the completion of the exchange offer. |
Exchange | We are offering to exchange |
Expiration | The exchange offer will expire at 5:00 p.m., New York City time, on |
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you are neither an “affiliate” (as defined in Rule 405 under the Securities Act) of CONSOL Energy nor a broker-dealer tendering notes acquired directly from us for our own account;
any exchange notes you receive in the exchange offer are being acquired by you in the ordinary course of business;
at the time of commencement of the exchange offer, neither you nor, to your knowledge, anyone receiving exchange notes from you, has any arrangement or understanding with any person to participate in the distribution, as defined in the Securities Act, of the original notes or the exchange notes in violation of the Securities Act;
if you are not a participating broker-dealer, you are not engaged in, and do not intend to engage in, the distribution, as defined in the Securities Act, of the original notes or the exchange notes; and
if you are a broker-dealer, you will receive the exchange notes for your own account in exchange for the original notes that you
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Conditions to the | The registration rights agreement does not require us to accept old notes for exchange if the exchange offer, or the making of any exchange by a holder of the old notes, would violate any applicable law or policy of the SEC. The exchange offer is |
Procedures for | All of the old notes are held in book-entry form through the facilities of The Depository Trust Company (“DTC”). To participate in the exchange offer, you must follow the automatic tender offer program (“ATOP”) procedures established by DTC for tendering |
book-entry form. The ATOP procedures require that (i) the exchange agent receive, prior to the expiration date, |
For more information on tendering your old notes, |
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Guaranteed |
your original notes are not immediately available;
time will not permit your required documents to reach the exchange agent prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer; or
you cannot complete the procedures for delivery by book-entry transfer prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer.
Withdrawal |
Acceptance of |
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Consequences of failure to exchange old notes | If you do not exchange your old notes in the exchange offer, you will no longer be able to require us to register the old notes under the Securities Act, except in limited circumstances provided under the registration rights agreement. In addition, you will not be able to resell, offer to resell or otherwise transfer the old notes unless we have registered the old notes under the Securities Act, or unless you resell, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act. |
In addition, after the consummation of the exchange offer, it is anticipated that the outstanding principal amount of the old notes available for trading will be significantly reduced. This reduced float may adversely affect the liquidity and market price of the old notes. A smaller outstanding principal amount of old notes available for trading may make the prices of old notes more volatile. |
U.S. federal income tax consequences | The exchange of old notes for new notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes. |
Exchange |
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you are acquiring the exchange notes in the ordinary course of your business;
you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in a distribution of the exchange notes; and
you are neither an affiliate (as defined in Rule 405 under the Securities Act) of CONSOL Energy nor a broker-dealer tendering notes acquired directly from us for your own account.
you cannot rely on the applicable interpretations of the staff of the SEC;
you will not be able to tender your original notes in the exchange offer; and
you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the notes unless such sale or transfer is made pursuant to an exemption from such requirements.
may not rely on the applicable interpretation of the staff of the SEC’s position contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter (June 5, 1991), and Shearman & Sterling, SEC no-action letter (July 2, 1993); and
must also be named as a selling holder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction.
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Summary of the Terms of the ExchangeNew Notes
The following is a summaryterms of the new notes will be substantially identical to the terms of the exchange notes. The form and terms of these exchange notes are identical in all material respects to those of the originalold notes, except that the exchangenew notes arewill be registered under the Securities Act and the transfer restrictions, registration rights and provisions for additional interest provisions applicablerelating to the originalold notes do not apply to the exchangenew notes. The exchangenew notes will be governed byevidence the same debt as the old notes, and the same indenture asthat governs the originalold notes will govern the new notes. When weWe sometimes refer to the terms of “note” or “notes”new notes and the old notes collectively in this prospectus we are referring collectively toas “the notes.”
The following summary contains basic information about the originalnew notes and the exchange notes.is not intended to be complete. It does not contain all information that may be important to you. For a more complete descriptionunderstanding of the terms of the exchangenew notes, seeplease read “Description of Exchange Notes” in this prospectus.New Notes.”
Issuer | CONSOL Energy Inc. |
| $ |
Maturity |
Interest rate | 8.000% per year (calculated using a 360-day year). |
Interest payment dates | Interest on the |
Denominations | The new notes will be issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. |
Guarantees | The |
Ranking | The new notes and the guarantees will be |
rank equally in right of payment with all of our and the guarantors’ existing and future senior obligations;
rank senior in right of payment to any of the Company’s and the guarantors’ future debtother obligations that isare, by their terms, expressly subordinated in right of payment to the notes and the guarantees;
be effectively subordinated to the Company’sall of our and the guarantors’ secured indebtedness including indebtedness(including obligations under ourthe revolving credit facility and CNX Gas’ revolving credit facility,facility), to the extent of the value of the collateralassets securing such indebtedness; and
be structurally subordinated to all obligations of each of our future subsidiaries that is not a guarantor of the existing and future liabilities, including trade payables, of our subsidiaries that do not guarantee the notes.
As of |
we had $331 million of senior secured indebtedness outstanding on a consolidated basis (excluding $337 million of letters of credit outstanding under our and CNX Gas’ revolving credit facilities) and an additional $1,902 million of unused
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Optional redemption |
Prior to such |
In addition, we may redeem up to 35% of the |
Please read “Description of |
Change of control | If we experience certain kinds of |
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Certain covenants | The indenture governing the notes contains covenants that, |
incur additional debt;
declare or pay dividends redeem stock or make other distributions to stockholders;
make investments;
create liens or use assets as security in other transactions;
enter into sale and leaseback transactions;
mergesell or consolidate, or sell, transfer, lease orotherwise dispose of substantially alla portion of our assets;
enter intoengage in transactions with affiliates; and
sellmake acquisitions or transfer certain assets.
These covenants are subject to a number of important qualifications and |
Transfer restrictions | The new notes generally will be freely transferable, but will also be securities for which the public market may be limited. There can be |
| no assurance as to the development, persistence or liquidity of any market for the new notes. We do not intend to apply for a listing of the new notes |
Form of new notes | The new notes will |
Same-day settlement | The global new notes |
The new notes are expected to trade in DTC’s same day funds settlement system until maturity or redemption. Therefore, secondary market trading activity in the new notes will be settled in immediately available funds. |
Trading | We do not expect to list the new notes for trading on any securities exchange or automated dealer quotation system. |
Trustee, registrar and exchange agent | Wells Fargo Bank, National Association. |
Governing law | The notes |
Risk factors |
Investment in our securities is subject to various risks, including risks and uncertainties inherent in our business. Any of these individual risks described below, or any number of these risks occurring simultaneously, could have a material effect on our consolidated financial statements, business or results of operation. You should carefully consider the following riskthese factors in addition to the other information included in this prospectus before tenderingwhen evaluating your original notes in the exchange offer. In addition, you should carefully consider the matters discussed under “Risk Factors”investment in our Annual Report on Form 10-K forsecurities.
The risks and uncertainties described below are not the fiscal year ended December 31, 2010,only risks and in other documentsuncertainties that are subsequently filed with the SEC, which are incorporated by reference into this prospectus. If any of the risks discussed below or in the documents incorporated by reference actually occur, our business, financial condition, prospects, results of operations or cash flow could be materially and adversely affected.we face. Additional risks orand uncertainties not currentlypresently known to us or that we currently deem to be immaterial may also impair our business operations. We cannot assure you thatIf any of the events discussed in the risk factors below or in the documents incorporated by reference will not occurthose risks actually occurs, our business, financial condition and if such events do occur, you may lose all or partresults of your original investment in the notes.operations could suffer. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See “Forward LookingPlease read “Forward-Looking Statements.” In addition, you should read the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2014 and our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2015, June 30, 2015 and September 30, 2015, which are incorporated herein by reference.
Risks Related to the Exchange Offer
You may have difficulty selling the original notes that you do not exchange.
If you do notfail to exchange your originalold notes, existing transfer restrictions will remain in effect, and the market value of old notes may be adversely affected because they may be more difficult to sell.
If you fail to exchange old notes for exchangenew notes pursuant toin the exchange offer, the original notesthen you hold will continue to be subject to the existing transfer restrictions. The originalrestrictions on the old notes. In general, the old notes may not be offered or sold unless they are registered or otherwise transferred, except in compliance with the registration requirements of the Securities Act, pursuant to an exemptionexempt from registration under the Securities Act or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with applicable state securities laws. WeExcept in connection with this exchange offer or as required by the registration rights agreement, we do not anticipate that we willintend to register resales of the original notes under the Securities Act. After the exchange offer is consummated, the trading market for the remaining untendered original notes may be small and inactive. Consequently, you may find it difficult to sell any original notes you continue to hold because there will be fewer original notesold notes.
The tender of such series outstanding.
If you do not exchange your originalold notes in the exchange offer you will no longer be entitledreduce the principal amount of the currently outstanding old notes. Due to the corresponding reduction in liquidity, this may have an adverse effect upon, and increase in interest payments on originalthe volatility of, the market price of any currently outstanding old notes that you continue to hold following the indenture provides for if we fail to completecompletion of the exchange offer.
OnceRisks Related to Our Indebtedness
We have substantial debt and have the exchange offer has been completed, holdersability to incur additional debt. The principal and interest payment obligations of such debt may restrict our future operations and impair our ability to meet our obligations under the notes.
As of September 30, 2015, we and our subsidiaries had approximately $3.7 billion of outstanding originalindebtedness. In addition, the terms of our revolving credit facility and the indentures governing our existing senior notes permit us to incur additional debt, including up to approximately $774 million that would be available under our revolving credit facility on that date, subject to our ability to meet certain borrowing conditions.
Our substantial debt may have important consequences to you. For instance, it could:
Our ability to satisfy our obligations and to reduce our total debt depends on our future operating performance and on economic, financial, competitive and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow, and future financings may not be entitledavailable to any increase inprovide sufficient net proceeds, to meet these obligations or to successfully execute our business strategy.
The provisions of our debt agreements and the interest rate on their originalrisks associated with our debt could adversely affect our business, financial condition and results of operations.
Our senior secured credit facility, the indentures governing our existing senior notes thatand the indenture governing the notes provides forlimit the incurrence of additional indebtedness unless specified tests or exceptions are met. In addition, our senior secured credit agreement, the indentures governing our existing senior notes and the indenture governing the notes subject us to financial and/or other restrictive covenants. Under our senior secured credit agreement, we must comply with certain financial covenants on a quarterly basis including a minimum interest coverage ratio, and a maximum senior secured leverage ratio, as defined. Our senior secured credit agreement, the indentures governing our existing senior notes and the indenture governing our notes offered hereby impose a number of restrictions upon us, such as restrictions on granting liens on our assets, making investments, paying dividends, selling assets and engaging in acquisitions. Failure by us to comply with these covenants could result in an event of default that, if not cured or waived, could have an adverse effect on us.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we failmay be forced to completesell assets, seek additional capital or seek to restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the exchange offer. Holdersabsence of original notes will not have any further rights to have their original notes registered, except in limited circumstances, once the exchange offer is completed.
Some holders of the exchange notes maysuch operating results and resources, we could face substantial liquidity problems and might be required to comply withsell material assets or operations to attempt to meet our debt service and other obligations. Our senior secured credit agreement, the registrationindentures governing our existing senior notes and prospectus delivery requirementsthe indenture governing the notes restrict our ability to sell assets and use the proceeds from the sales. We may not be able to consummate those sales or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.
To service our indebtedness, we will require a significant amount of cash. However, our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on, and to refinance, our indebtedness, including the Securities Act.
If you exchange your original notes, and to fund planned capital expenditures, will depend on our ability to generate cash in the exchange offerfuture which, in turn, is subject to general economic, financial, competitive, regulatory and other factors, many of which are beyond our control.
Our business may not generate sufficient cash flow from operations and we may not have available to us future borrowings in an amount sufficient to enable us to pay our indebtedness, including the notes, or to fund our other liquidity needs. In these circumstances, we may need to refinance all or a portion of our indebtedness, including the notes, on or before maturity. We may not be able to refinance any of our indebtedness, including our credit facility and the notes, on commercially reasonable terms, or at all. Without this financing, we could be forced to sell assets or secure additional financing to make up for any shortfall in our payment obligations under unfavorable circumstances. However, we may not be able to secure additional financing on terms favorable to us or at all and, in addition, the purposeterms of participating inour revolving credit facility and the Indenture governing the notes limit our
ability to sell assets and also restrict the use of proceeds from such a distributionsale. Moreover, substantially all of the exchange notes, you may be deemedour assets have been pledged to have received restricted securities and, if so, you will be required to comply with the registration and prospectus delivery requirementssecure repayment of the Securities Act in connection with any resale transaction.
our indebtedness under our revolving credit facility. In addition, a broker-dealer that purchased original noteswe may not be able to sell assets quickly enough or for its own account as part of market-making or trading activities must deliver a prospectus when it sellssufficient amounts to enable us to meet our obligations, including our obligations under the exchange notes it received in the exchange offer. Our obligation to make this prospectus available to broker-dealers is limited. We cannot assure you that a proper prospectus will be available to broker-dealers wishing to resell their exchange notes.
Failure to comply with the exchange offer procedures could prevent a holder from exchanging its original notes.
Holders of the original notes are responsible for complying with all exchange offer procedures. The issuance of exchange notes in exchange for original notes will only occur upon completion of the procedures described in this prospectus under “The Exchange Offer.” Therefore, holders of original notes who wish to exchange them for exchange notes should allow sufficient time for timely completion of the exchange procedure. Neither we nor the exchange agent are obligated to extend the offer or notify you of any failure to follow the proper procedure.
Risks Related to the ExchangeNew Notes
Your rightThe new notes and the guarantees will be unsecured obligations and will be effectively subordinated to receive payments onall of our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness and structurally subordinated to the existing and future indebtedness of any non-guarantor subsidiaries.
The new notes isand the guarantees will be general unsecured senior obligations ranking effectively junior to those creditors who have a security interest in our assets.
Our obligations under the notes and our guarantors’ obligations under their guarantees of the notes are unsecured. Our revolving credit facility and CNX Gas’s revolving credit facility are secured by a security interest in substantially all of our existing and the guarantors’ domestic tangible and intangible assets. If we are declared bankrupt or insolvent, or if we defaultfuture secured indebtedness (including all borrowings under our revolving credit facilityfacility) to the extent of the value of the collateral securing such indebtedness. If we or CNX Gas defaults under its revolving credit facility,a guarantor is declared bankrupt, becomes insolvent or is liquidated or reorganized, the lenders could declareholders of our secured indebtedness or the secured indebtedness of such guarantor will be entitled to be paid in full from the proceeds of the assets, if any, securing such indebtedness before any payment may be made with respect to the new notes or the affected guarantees. Holders of the new notes will participate ratably in any remaining proceeds with all holders of our unsecured indebtedness, including unsecured indebtedness incurred after the new notes are issued that does not rank junior to the new notes, including trade payables and all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay suchour other general indebtedness, such secured creditors could foreclosebased on the pledged assetsrespective amounts owed to each holder or creditor. In any of the exclusion offoregoing events, there may not be sufficient funds to pay amounts due on the new notes. As a result, holders of the new notes even if an eventwould likely receive less, ratably, than holders of default exists under the indenture under which the notes will be issued at such time. Furthermore, if such secured creditors foreclose and sell the pledged equity interests in any subsidiary guarantor under the notes, then that guarantor will be released from its guarantee of the notes automatically and immediately upon such sale. In any such event, because the notes will not be secured by any of our assets or the equity interests in subsidiary guarantors, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to satisfy your claims fully. See “Description of Other Indebtedness.”indebtedness.
As of JuneSeptember 30, 2011,2015, we and the guarantors would have had $331total consolidated long-term debt of approximately $3.7 billion, excluding approximately $281 million of senior secured indebtedness, not including $337 million of outstanding letters of credit. In addition,credit, and no subordinated indebtedness and we would have had $1,902been able to incur up to approximately $774 million available to be borrowedof additional indebtedness under our credit facility.
The new notes will also be structurally subordinated to any indebtedness and CNX Gas’ revolving credit facilities and an additional $130 million available under our accounts receivable securitization facility. In addition,other liabilities of any subsidiaries that do not guarantee the new notes. Under certain circumstances, the indenture governing the new notes will permit us to form or acquire additional subsidiaries that are not guarantors of the incurrencenew notes. Holders of substantial additional indebtedness by us and our restricted subsidiaries in the future, including secured indebtedness.
Thenew notes will be structurally junior to indebtedness of our non-guarantor subsidiaries.
You will not have anyno claim as a creditor against any of our non-guarantor subsidiaries,subsidiaries. See “Description of New Notes—Ranking.”
We and indebtedness and other liabilities, including trade payables, of those subsidiaries will effectively be senior to your claims against those subsidiaries. In addition, the indenture under whichguarantors may incur substantial additional indebtedness. This could increase the notes will be issued will, subject to certain limitations, permit these subsidiaries to incur additional indebtedness and will not contain any limitation onrisks associated with the amount of other liabilities, such as trade payables, that may be incurred by these subsidiaries.new notes.
In addition, for the year ended December 31, 2010 (not giving effect to this offering), our non-guarantor subsidiaries generated 4.3% of our total revenues and other income and 2.5% of our EBITDA.
Certain of our subsidiaries are not subjectSubject to the restrictive covenantsrestrictions in the indenture governing the notes.
Certain ofnew notes and in other instruments governing our other outstanding indebtedness (including our revolving credit facility), we and our subsidiaries are not subject tomay incur substantial additional indebtedness (including secured indebtedness) in the restrictive covenants infuture. Although the indenture governing the notes.new notes and our revolving credit facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to waiver and a number of significant qualifications and exceptions, and indebtedness incurred in compliance with these restrictions could be substantial.
If we or a guarantor incurs any additional indebtedness that ranks equally with the new notes (or with the guarantees thereof), including additional unsecured indebtedness or trade payables, the holders of that indebtedness will be entitled to share ratably with holders of the new notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us or a guarantor. This meansmay have the effect of reducing the amount of proceeds paid to holders of the new notes in connection with such a distribution.
Any increase in our level of indebtedness will have several important effects on our future operations, including, without limitation, whether:
We cannot assure you that these entitieswe will be able to maintain or improve our leverage position.
An element of our business strategy involves maintaining a disciplined approach to financial management. However, we are also seeking to acquire, exploit and develop additional reserves which may require the incurrence of additional indebtedness. Although we will seek to maintain or improve our leverage position, our ability to maintain or reduce our level of indebtedness depends on a variety of factors, including future performance and our future debt financing needs. General economic conditions, coal, NGL and natural gas prices and financial, business and other factors will also affect our ability to maintain or improve our leverage position. Many of these factors are beyond our control.
Our revolving credit facility and the indentures governing our existing senior notes, including the indenture that will govern notes, have restrictive covenants that could limit our financial flexibility. These restrictive covenants limit our ability to engage in many of the activities that wemay be in our long-term best interests. Our ability to borrow under our revolving credit facility is subject to compliance with certain financial covenants, including the maintenance of certain financial ratios, including a minimum current ratio, a maximum leverage ratio and a minimum interest coverage ratio. Our revolving credit facility and the indentures governing our existing senior notes contain covenants, that, among other things, limit our ability and the ability of our restricted subsidiaries to:
See “Description of New Notes—Certain Covenants.” Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all of our indebtedness. We would not have sufficient working capital to satisfy our debt obligations in the event of an acceleration of all or a significant portion of our outstanding indebtedness.
We may not be able to generate sufficient cash to service all of our indebtedness, including the new notes, and may be forced to take other actions to satisfy the obligations under our indebtedness, which may not be successful.
We expect our earnings and cash flow to vary significantly from year to year due to the nature of our industry. As a result, the amount of debt that we can manage in some periods may not be appropriate for us in other periods. Additionally, our future cash flow may be insufficient to meet our debt obligations and other commitments. Any insufficiency could negatively impact our business. A range of economic, competitive,
business and industry factors will affect our future financial performance, and, as a result, our ability to generate cash flow from operations and to pay our debt obligations. Many of these factors, such as coal, natural gas and NGL prices, economic and financial conditions in our industry and the global economy and initiatives of our competitors, are prohibitedbeyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the new notes.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or limiteddelay planned investments and capital expenditures, or to sell assets, seek additional financing in the debt or equity markets or restructure or refinance our indebtedness, including the new notes. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of our existing or future debt instruments and the indenture governing the new notes may restrict us from doingadopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our revolving credit facility and the indenture that will govern the new notes restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could have realized from them and any proceeds may not be adequate to meet any debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our debt service obligations.
If we are unable to comply with the restrictions and covenants in the agreements governing the new notes and our other indebtedness, there could be a default under the terms of these agreements, which could result in an acceleration of payment of funds that we have borrowed and would affect our ability to make principal and interest payments on the new notes.
Any default under the agreements governing our indebtedness that is not cured or waived by the required lenders, and the remedies sought by the holders of any such indebtedness, could make us unable to pay principal, and interest, or special interest, if any, on the new notes and substantially decrease the market value of the new notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest, or special interest, if any, on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the agreements governing our indebtedness (including covenants in our revolving credit facility and the indenture governing the new notes), we could be in default under the terms of the indentureagreements governing such indebtedness. In the notes,event of such as incurring additional debt, securing assets in priority to the claims of default:
If our operating performance declines, we may in the future need to obtain waivers under our revolving credit facility to avoid being in default. If we breach our covenants under our revolving credit facility and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under the facilities, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.
making investments, selling assetsWe may not be able to repurchase the new notes upon a change of control.
If we experience certain kinds of changes of control, we may be required to offer to repurchase all outstanding new notes at 101% of their principal amount plus accrued and entering into mergersunpaid interest, if any. The indentures governing our existing senior notes have substantially the same requirement. We may not be able to repurchase the new notes upon a change of control because we may not have sufficient financial resources to purchase all of the existing senior notes that are tendered following a change of control. In addition, the terms of our revolving credit facility or other business combinations. These actionsoutstanding indebtedness may prohibit us from repurchasing any series of notes upon a change of control. Our failure to repurchase our existing senior notes upon a change of control could be detrimentalcause a default under the relevant indentures governing such notes and could lead to a cross default under our revolving credit facility. Additionally, using cash to fund the potential consequences of a change of control may impair our ability to makeobtain additional financing in the future, which could negatively impact our ability to conduct our business operations. See “Description of New Notes—Change of Control.”
Federal and state statutes allow courts, under specific circumstances, to void guarantees and require noteholders to return payments received from guarantors.
Federal bankruptcy and state fraudulent transfer laws permit a court to avoid all or a portion of principal and interest when due andthe obligations of a guarantor pursuant to comply with our other obligations under the notes, and could reduce the amount of our assets that would be available to satisfy your claims should we default on the notes.
A court could void our subsidiaries’ guaranteesits guarantee of the notes, or to subordinate any guarantor’s obligations under such guarantee to claims of its other creditors, reducing or eliminating the noteholders’ ability to recover under such guarantee. Although laws differ among these jurisdictions, in general, under applicable fraudulent transfer laws.
Although the guarantees provide you with a direct claim against the assets of the subsidiary guarantors, under the federal bankruptcy laws and comparable provisions of state fraudulent transferor conveyance laws, a guarantee could be voided as a fraudulent transfer or claimsconveyance if (i) the guarantee was incurred with respect to a guarantee could be subordinated to all other debtsthe intent of that guarantor. In addition, a bankruptcy court could void (i.e., cancel) any payments by that guarantor pursuant to its guarantee and require those payments to be returned tohindering, delaying or defrauding creditors; or (ii) the guarantor or to a fund for the benefit of the other creditors of the guarantor.
The bankruptcy court might take these actions if it found, among other things, that when a subsidiary guarantor executed its guarantee (or, in some jurisdictions, when it became obligated to make payments under its guarantee):
such subsidiary guarantor received less than reasonably equivalent value or fair consideration in return for incurring the incurrence of its guarantee;guarantee and any of:
such subsidiary guarantor:
the guarantor was (or was rendered)insolvent or rendered insolvent by reason of the incurrence of the guarantee;
was engaged or about to engage in a business or transaction for which its assets constitutedthe incurrence of the guarantee left the guarantor with an unreasonably small amount of capital to carry on itsthe business;
the guarantor intended to, incur, or believed that it would, incur obligationsdebts beyond its ability to pay such debts as those obligations matured; or
was a defendant in an action for money damages, or had a judgment for money damages docketed against it and, in either case, after final judgment, the judgment was unsatisfied.
A bankruptcy court would likely find that a subsidiary guarantor received less than fair consideration ordid not receive reasonably equivalent value or fair consideration for its guarantee toif the extent that itguarantor did not receive directsubstantially benefit directly or indirect benefitindirectly from the issuance of the notes. A bankruptcyIf a court could alsowere to void a guarantee, you would no longer have a claim against the guarantor. Sufficient funds to repay the notes may not be available from other sources, including the remaining guarantors, if it foundany. In addition, the court might direct you to repay any amounts that you already received from the subsidiary issued its guarantee with actual intent to hinder, delay, or defraud creditors. Although courts in different jurisdictions measure solvency differently, in general, an entityguarantor. The measures of insolvency for purposes of fraudulent transfer laws vary depending upon the governing law of the applicable jurisdiction. Generally, a guarantor would be deemedconsidered insolvent if if:
We cannot predict what standardEach guarantee will contain a court would apply in orderprovision intended to determine whether a subsidiary guarantor was insolvent as oflimit the date it issued the guarantee or whether, regardless of the method of valuation, a court would determine that the subsidiary guarantor was insolvent on that date, or whether a court would determine that the paymentsguarantor’s liability under the guarantee constituted fraudulent transfers or conveyances on other grounds.
If ato the maximum amount that the guarantor could incur without causing the incurrence of obligations under its guarantee is deemed to be deemed a fraudulent transfer. This provision may not be effective to protect the guarantees from being voided under fraudulent transfer it could be voided altogether, or it could be subordinated to all other debts of the subsidiary guarantor. In such case, any payment by the subsidiary guarantor pursuant to its guarantee could be required to be returned to the subsidiary guarantor or to a fund for the benefit of the creditors of the subsidiary guarantor. If a guarantee is voided or held unenforceable for any other reason, holders of the notes would cease to have a claim against the subsidiary guarantor based on the guarantee and would be creditors only of the Company and any subsidiary guarantor whose guarantee was not similarly voided or otherwise held unenforceable.law.
We may be unable to purchase the notes upon a change of control.
Upon the occurrence of a change of control, as defined in the Indenture governing the notes, we will be required to offer to purchase the notes in cash at a price equal to 101% of the principal amount of the notes, plus accrued interest and additional interest, if any. A change of control will constitute an event of default under our revolving credit facility that permits the lenders to accelerate the maturity of the borrowings thereunder and may trigger similar rights under our other indebtedness then outstanding. Our revolving credit facility will prohibit us from repurchasing any notes. The failure to repurchase the notes would result in an event of default under the notes. In the event of a change of control, we may not have sufficient funds to purchase all of the notes and to repay the amounts outstanding under our revolving credit facility or other indebtedness.
An active trading market may not develop for the new notes.
The new notes are a new issuesissue of securities. There is no active public trading market for the new notes. We do not intend to apply for listing of the notes on a security exchange. The liquidity of the trading market in the notes and the market prices quoted for the notes may be adversely affected by changes in the overall market for this type of securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a consequence, an active trading market may not develop for the notes, you may not be able to sell the notes, or, even if you can sell the notes, you may not be able to sell them at an acceptable price.
We are a holding company and will rely on our subsidiaries for funds necessary to meet our financial obligations, including the notes.
We conduct all of our activities through our subsidiaries. We depend on those subsidiaries for dividends and other payments to generate the funds necessary to meet our financial obligations, including the payment of principal and interest on the notes. The ability of our subsidiaries to make payments to us may be restricted by, among other things, their credit facilities and applicable state corporation or similar statutes and other laws and regulations. Currently, there are no significant restrictions on our ability or the ability of any guarantor subsidiary to obtain funds from its subsidiaries by such means as a dividend or loan. We cannot assure you that the earnings from, or other available assets of, our subsidiaries will be sufficient to enable us to pay principal or interest on the notes when due.
The indenture for the notes permits us to distribute our oil and natural gas or our coal business to our shareholders. If we choose to effect a spinoff of our oil and natural gas business, we will be replaced as obligor on the notes by the subsidiary that holds our oil and natural gas assets and is distributed to our shareholders. In either event, a spinoff will leave the holders of the notes would have a smaller amount of consolidated assets and reduced cash flow supporting the repayment of the notes.
The indenture for the notes permits us to spinoff, by way of a stock dividend, a majority of the voting securities of a subsidiary that holds all or substantially all of our oil and natural gas properties or our coal reserves and related assets, subject only to compliance with a leverage test and provided that no default or event of default has occurred or would result from such dividend. If we elect to distribute to our shareholders the voting stock of our subsidiary that holds our oil and natural gas properties as opposed to our coal properties, then that subsidiary will replace us as obligor on the notes and we will have no further liability with respect to the notes or the guarantees. See “Description of New Notes—Certain Definitions—Qualified Spin Transaction.” As a result of any such spinoff transaction, the holders of the notes would have a smaller amount of consolidated assets and reduced cash flow supporting repayment of their notes.
Many of the covenants contained in the indenture will be terminated if the notes are rated investment grade by either of Standard & Poor’s or Moody’s and no default has occurred and is continuing, but there are no assurances that the notes will ever be rated investment grade.
Many of the covenants in the indenture governing the notes will be terminated if the notes are rated investment grade by Standard & Poor’s or Moody’s, provided at such time no default or event of default has occurred and is continuing. These covenants include restrictions on our ability to pay dividends, to incur debt and to enter into certain transactions. There can be no assurance that the notes will ever be rated investment grade. See “Description of New Notes—Certain covenants—Changes in Covenants When Notes Rated Investment Grade.”
We face risks related to rating agency downgrades.
We expect one or more rating agencies to rate the notes. If such rating agencies either assign the notes a rating lower than the rating expected by the investors, or reduce the rating in the future, the market price of the notes may be adversely affected, raising capital may become more difficult and borrowing costs under our revolving credit facility and other future borrowings may increase.
This exchange offer is intended to satisfy our obligations under the registration rights agreement.agreement we entered into with the initial purchasers of our old notes in connection with the initial offer and sale thereof. We will not receive any cash proceeds from the issuance of the new notes in the exchange notes.offer. In consideration for issuing the exchangenew notes as contemplated in this prospectus, we will receive the originalold notes in a like principal amount, the form and terms of which are the same as the form andamount. The terms of the exchangenew notes are substantially identical to the terms of the old notes, except as otherwise described in this prospectus. The originalthat the new notes will be registered under the Securities Act and the transfer restrictions, registration rights and provisions for additional interest relating to the old notes do not apply to the new notes. Old notes surrendered in exchange for exchangethe new notes will be retired and canceled upon consummation of the exchange offercancelled and cannotwill not be reissued. Accordingly, no additional debt will result from the exchange. We have agreed to pay all expenses incidental to the exchange offer other than commissions and concessions of any broker or dealer and certain transfer taxes and will indemnify holdersissuance of the new notes includingwill not result in any broker-dealers, against certain liabilities, including liabilities under the Securities Act.
We received approximately $245 million of net proceeds from the sale of the original notes. We used the net proceeds from the notes offering to repaychange in our outstanding 7.875% senior secured notes due March 1, 2012. Pending such use, the proceeds were used to reduce outstanding indebtedness under our short-term credit facilities and our accounts receivable securitization facility and for general corporate purposes.indebtedness.
The following table below sets forth our ratio of earnings to combined fixed charges for the periods indicated on a consolidated basis for eachhistorical basis. For purposes of computing the time periods indicated.
(In Thousands)ratio of earnings to fixed charges, “earnings” are defined as income before taxes plus fixed charges less capitalized interest. “Fixed charges” consist of interest expensed and capitalized and an estimate of interest within rent expense.
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Nine Months Ended September 30, | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||||||||||||||||||||||||||||||
Earnings: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Income from continuing operations before income taxes | $ | 467,913 | $ | 788,345 | $ | 725,595 | $ | 428,957 | $ | 550,920 | $ | 349,861 | $ | 238,316 | $ | (658,190 | ) | $ | 183,124 | $ | 46,075 | $ | 406,687 | $ | 872,926 | $ | 430,958 | |||||||||||||||||||||||||
Fixed charges, as shown below | 249,804 | 69,277 | 69,402 | 61,336 | 50,227 | 155,696 | 94,099 | 178,229 | 279,163 | 292,958 | 285,784 | 289,123 | 240,177 | |||||||||||||||||||||||||||||||||||||||
Equity in income of investees | (21,428 | ) | (15,707 | ) | (11,140 | ) | (6,551 | ) | (1,201 | ) | (11,312 | ) | (8,692 | ) | ||||||||||||||||||||||||||||||||||||||
Noncontrolling interest—gas | (11,845 | ) | (27,425 | ) | (43,191 | ) | (25,038 | ) | (29,608 | ) | — | (11,845 | ) | |||||||||||||||||||||||||||||||||||||||
Amortization of capitalized interest | 6,770 | 8,278 | 6,520 | 4,978 | 6,595 | 5,836 | ||||||||||||||||||||||||||||||||||||||||||||||
Equity in income of investees, net of distributions | (13,094 | ) | (39,821 | ) | (20,095 | ) | (11,548 | ) | (17,463 | ) | (7,996 | ) | ||||||||||||||||||||||||||||||||||||||||
Interest capitalized | (1,767 | ) | (13,573 | ) | (43,717 | ) | (38,054 | ) | (15,547 | ) | (13,393 | ) | ||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest | — | — | 1,386 | 397 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
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Adjusted Earnings (Loss) | $ | 684,444 | $ | 814,490 | $ | 740,666 | $ | 458,704 | $ | 570,338 | $ | 494,245 | $ | 311,878 | ||||||||||||||||||||||||||||||||||||||
Adjusted Earnings | $ | (488,052 | ) | $ | 417,171 | $ | 283,127 | $ | 648,244 | $ | 1,135,634 | $ | 655,582 | |||||||||||||||||||||||||||||||||||||||
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Fixed Charges: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed charges: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest on indebtedness, expensed or capitalized | $ | 218,425 | $ | 43,290 | $ | 48,345 | $ | 45,414 | $ | 35,818 | $ | 137,299 | $ | 79,521 | $ | 151,954 | $ | 237,137 | $ | 262,915 | $ | 258,096 | $ | 263,891 | $ | 218,425 | ||||||||||||||||||||||||||
Interest within rent expense | 31,379 | 25,987 | 21,057 | 15,922 | 14,409 | 18,397 | 14,578 | 26,275 | 42,026 | 30,043 | 27,688 | 25,232 | 21,752 | |||||||||||||||||||||||||||||||||||||||
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Total Fixed Charges | $ | 249,804 | $ | 69,277 | $ | 69,402 | $ | 61,336 | $ | 50,227 | $ | 155,696 | $ | 94,099 | $ | 178,229 | $ | 279,163 | $ | 292,958 | $ | 285,784 | $ | 289,123 | $ | 240,177 | ||||||||||||||||||||||||||
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Ratio of Earnings to Fixed Charges | 2.74 | 11.76 | 10.67 | 7.48 | 11.36 | 3.17 | 3.31 | |||||||||||||||||||||||||||||||||||||||||||||
Ratio of Earnings to Fixed Charges(1) | (2.74 | ) | 1.49 | 0.97 | 2.27 | 3.93 | 2.73 | |||||||||||||||||||||||||||||||||||||||||||||
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(1) | For the nine months ended September 30, 2015, our earnings would have needed to have been higher by $667 million for our ratio of earnings to fixed charges to be 1.00. |
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table presents our selected historical consolidated financial data for, and as of the end of, each of the periods indicated. The selectedsummary historical consolidated financial data for, andset forth below as of the end of,December 31, 2014 and 2013 and for each of the years ended December 31, 2010, 2009, 2008, 20072014, 2013 and 2006 are2012 have been derived from our audited Consolidated Financial Statements.consolidated financial statements, which are incorporated by reference in this prospectus.
In December 2013, we completed the sale of our Consolidation Coal Company (CCC) subsidiary, which includes all five of its longwall coal mines in West Virginia, to a subsidiary of Murray Energy. For all periods presented in the following summary historical consolidated financial data, the sale of CCC was classified as discontinued operations. There were no other active businesses classified as discontinued operations in the three-year period ended December 31, 2013. Certain reclassifications of prior year data, including reclassifications to report discontinued operations for each relevant period, have been made to conform to the year ended December 31, 2010 as required by the Noncontrolling Interest Topic of the Financial Accounting Standards Board Accounting Standards Codification.
The historical statement of operations data, the cash flow data and the other data for the six months ended June 30, 2011 and 2010, and the historical balance sheet data as of June 30, 2011, have been derived from our unaudited condensed consolidated financial statements incorporated by reference into this prospectus. In the opinion of management, the interim financial information provided herein reflects all adjustments consisting of normal and recurring adjustments necessary for a fair statement of the data for the periods presented. Interim results are not necessarily indicative of the results to be expected for the entire fiscal year.2013 presentation.
The selected historical consolidated financial data are not necessarily indicative of the results that may be expected for any future period. You should read the summary historical financial data together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference into this prospectus from our Annual Report on Form 10-K for the year ended December 31, 20102014 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011 and2015, June 30, 2011.2015 and September 30, 2015.
(Unaudited) | ||||||||||||||||||||||||||||
(Dollars in thousands, Except per share data) | For the Nine Months Ended September 30, | For the Years Ended December 31, | ||||||||||||||||||||||||||
2015 | 2014 | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||
Operating revenues from Continuing Operations | $ | 2,185,465 | $ | 2,612,709 | $ | 3,476,100 | $ | 3,120,722 | $ | 3,282,350 | $ | 4,237,913 | $ | 3,559,511 | ||||||||||||||
Income (Loss) from Continuing Operations | $ | (398,801 | ) | $ | 95,111 | $ | 168,777 | $ | 79,264 | $ | 317,959 | $ | 681,675 | $ | 315,240 | |||||||||||||
Net Income Attributable to CONSOL Energy Inc. Shareholders | $ | (405,291 | ) | $ | 89,424 | $ | 163,090 | $ | 660,442 | $ | 388,470 | $ | 632,497 | $ | 346,781 | |||||||||||||
Earnings (Loss) per share: | ||||||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||||||
Income from Continuing Operations | $ | (1.77 | ) | $ | 0.41 | $ | 0.73 | $ | 0.35 | $ | 1.40 | $ | 3.01 | $ | 1.41 | |||||||||||||
Income from Discontinued Operations | — | (0.02 | ) | (0.02 | ) | 2.54 | 0.31 | (0.22 | ) | 0.20 | ||||||||||||||||||
Net Income | $ | (1.77 | ) | $ | 0.39 | $ | 0.71 | $ | 2.89 | $ | 1.71 | $ | 2.79 | $ | 1.61 | |||||||||||||
Dilutive: | ||||||||||||||||||||||||||||
Income from Continuing Operations | $ | (1.77 | ) | $ | 0.41 | $ | 0.73 | $ | 0.35 | $ | 1.39 | $ | 2.98 | $ | 1.40 | |||||||||||||
Income from Discontinued Operations | — | (0.02 | ) | (0.03 | ) | 2.52 | 0.31 | (0.22 | ) | 0.20 | ||||||||||||||||||
Net Income | $ | (1.77 | ) | $ | 0.39 | $ | 0.70 | $ | 2.87 | $ | 1.70 | $ | 2.76 | $ | 1.60 | |||||||||||||
Assets from Continuing Operations | $ | 11,185,366 | $ | 11,718,935 | $ | 11,759,530 | $ | 11,393,667 | $ | 10,383,343 | $ | 9,952,077 | $ | 9,543,457 | ||||||||||||||
Assets from Discontinued Operations | — | — | — | — | 2,614,251 | 2,573,623 | 2,527,153 | |||||||||||||||||||||
Total assets | $ | 11,185,366 | $ | 11,718,935 | $ | 11,759,530 | $ | 11,393,667 | $ | 12,997,594 | $ | 12,525,700 | $ | 12,070,610 | ||||||||||||||
Long-term debt from Continuing Operations (including current portion) | $ | 2,789,091 | $ | 3,291,547 | $ | 3,288,894 | $ | 3,175,014 | $ | 3,185,497 | $ | 3,196,455 | $ | 3,209,101 | ||||||||||||||
Long-term debt from Discontinued Operations (including current portion) | $ | — | — | — | — | 2,574 | 1,659 | 1,820 | ||||||||||||||||||||
Total Long-term debt (including current portion) | $ | 2,789,091 | $ | 3,291,547 | $ | 3,288,894 | $ | 3,175,014 | $ | 3,188,071 | $ | 3,198,114 | $ | 3,210,921 | ||||||||||||||
Cash dividends declared per share of common stock | $ | 0.1350 | $ | 0.1875 | $ | 0.250 | $ | 0.375 | $ | 0.625 | $ | 0.425 | $ | 0.400 |
See “Risk Factors” beginning on page 8 for a discussion of an adjustment to operating revenues for all periods and other matters that affect the comparability of the selected financial data as well as uncertainties that might affect the Company’s future financial condition.
STATEMENT OF INCOME DATA
(In thousands except per share data)
For the Years Ended December 31, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 2011 | 2010 | ||||||||||||||||||||||
Sales—Outside | $ | 4,938,703 | $ | 4,311,791 | $ | 4,181,569 | $ | 3,324,346 | $ | 3,286,522 | $ | 2,871,478 | $ | 2,389,630 | ||||||||||||||
Sales—Purchased Gas | 11,227 | 7,040 | 8,464 | 7,628 | 43,973 | 2,142 | 4,756 | |||||||||||||||||||||
Sales—Gas Royalty Interests | 62,869 | 40,951 | 79,302 | 46,586 | 51,054 | 35,108 | 28,490 | |||||||||||||||||||||
Freight—Outside | 125,715 | 148,907 | 216,968 | 186,909 | 162,761 | 96,440 | 59,275 | |||||||||||||||||||||
Other Income | 97,507 | 113,186 | 166,142 | 196,728 | 170,861 | 48,137 | 47,256 | |||||||||||||||||||||
Total Revenue and Other Income | 5,236,021 | 4,621,875 | 4,652,445 | 3,762,197 | 3,715,171 | 3,053,305 | 2,529,407 | |||||||||||||||||||||
Cost of Goods Sold and Other Operating Charges (exclusive of depreciation, depletion and amortization shown below) | 3,262,327 | 2,757,052 | 2,843,203 | 2,352,000 | 2,249,776 | 1,741,108 | 1,585,633 | |||||||||||||||||||||
Acquisition and Financing Fees | 65,363 | — | — | — | — | — | 64,078 | |||||||||||||||||||||
Loss on Debt Extinguishment | — | — | — | — | — | 16,090 | — | |||||||||||||||||||||
Purchased Gas Costs | 9,736 | 6,442 | 8,175 | 7,162 | 44,843 | 2,452 | 3,647 | |||||||||||||||||||||
Gas Royalty Interests Costs | 53,775 | 32,376 | 73,962 | 39,921 | 41,879 | 31,173 | 23,725 | |||||||||||||||||||||
Freight Expense | 125,544 | 148,907 | 216,968 | 186,909 | 162,761 | 96,251 | 59,275 | |||||||||||||||||||||
Selling, General and Administrative Expenses | 150,210 | 130,704 | 124,543 | 108,664 | 91,150 | 83,619 | 69,175 | |||||||||||||||||||||
Depreciation, Depletion and Amortization | 567,663 | 437,417 | 389,621 | 324,715 | 296,237 | 306,862 | 251,950 | |||||||||||||||||||||
Abandonment of Long-Lived Assets | — | — | — | — | — | 115,479 | — | |||||||||||||||||||||
Interest Expense | 205,032 | 31,419 | 36,183 | 30,851 | 25,066 | 131,079 | 73,183 | |||||||||||||||||||||
Taxes Other Than Income | 328,458 | 289,941 | 289,990 | 258,926 | 252,539 | 179,331 | 160,425 | |||||||||||||||||||||
Black Lung Excise Tax Refund | — | (728 | ) | (55,795 | ) | 24,092 | — | — | — | |||||||||||||||||||
Total Costs | 4,768,108 | 3,833,530 | 3,926,850 | 3,333,240 | 3,164,251 | 2,703,444 | 2,291,091 | |||||||||||||||||||||
Earnings Before Income Taxes | 467,913 | 788,345 | 725,595 | 428,957 | 550,920 | 349,861 | 238,316 | |||||||||||||||||||||
Income Taxes | 109,287 | 221,203 | 239,934 | 136,137 | 112,430 | 80,328 | 59,534 | |||||||||||||||||||||
Net Income | 358,626 | 567,142 | 485,661 | 292,820 | 438,490 | 269,533 | 178,782 | |||||||||||||||||||||
Less: Net Income Attributable to Noncontrolling Interest | (11,845 | ) | (27,425 | ) | (43,191 | ) | (25,038 | ) | (29,608 | ) | — | (11,845 | ) | |||||||||||||||
Net Income Attributable to CONSOL Energy Inc. Shareholders | $ | 346,781 | $ | 539,717 | $ | 442,470 | $ | 267,782 | $ | 408,882 | $ | 269,533 | $ | 166,937 | ||||||||||||||
Earnings Per Share: | ||||||||||||||||||||||||||||
Basic | $ | 1.61 | $ | 2.99 | $ | 2.43 | $ | 1.47 | $ | 2.23 | $ | 1.19 | $ | 0.82 | ||||||||||||||
Dilutive | $ | 1.60 | $ | 2.95 | $ | 2.40 | $ | 1.45 | $ | 2.20 | $ | 1.18 | $ | 0.81 | ||||||||||||||
Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||||||||||||||
Basic | 214,920,561 | 180,693,243 | 182,386,011 | 182,050,627 | 183,354,732 | 226,499,994 | 203,842,526 | |||||||||||||||||||||
Dilutive | 217,037,804 | 182,821,136 | 184,679,592 | 184,149,751 | 185,638,106 | 228,917,335 | 206,311,383 | |||||||||||||||||||||
Dividends Paid Per Share | $ | 0.40 | $ | 0.40 | $ | 0.40 | $ | 0.31 | $ | 0.28 | $ | 0.20 | $ | 0.20 | ||||||||||||||
BALANCE SHEET DATA
(In thousands)
As of December 31, | As of June 30, | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 2011 | |||||||||||||||||||
Working (deficiency) capital | $ | (549,779 | ) | $ | (487,550 | ) | $ | (527,926 | ) | $ | (333,242 | ) | $ | 174,372 | $ | (393,401 | ) | |||||||
Total assets | 12,070,610 | 7,775,401 | 7,535,458 | 6,333,490 | 5,663,332 | 12,201,118 | ||||||||||||||||||
Short-term debt | 484,000 | 522,850 | 722,700 | 372,900 | — | 330,750 | ||||||||||||||||||
Long-term debt (including current portion) | 3,210,921 | 468,302 | 490,752 | 507,208 | 552,263 | 3,207,530 | ||||||||||||||||||
Total deferred credits and other liabilities | 4,283,674 | 3,849,428 | 3,716,021 | 3,325,231 | 3,228,653 | 4,260,571 | ||||||||||||||||||
CONSOL Energy Inc. Stockholders’ equity | 2,944,477 | 1,785,548 | 1,462,187 | 1,214,419 | 1,066,151 | 3,219,178 |
DESCRIPTION OF CERTAIN INDEBTEDNESSEXCHANGE OFFER
The following are summaries of certain indebtedness of CONSOL Energy, and certain of its subsidiaries, and do not purport to be complete and are subject to, and qualified in their entirety by reference to, the provisions of those agreements, each of which has been previously filed with the SEC and are incorporated by reference in this prospectus.
Revolving Credit Facility
We andsold the old notes on March 30, 2015 pursuant to that certain of our subsidiaries as guarantor loan parties (other than CNX Gas and its subsidiaries) entered into a new Amended and Restated Credit Agreementpurchase agreement, dated as of April 12, 2011, which we refer to as the “Credit Agreement”, for a $1.5 billion senior secured revolving credit facility with certain lenders, PNC Bank, National Association as administrative agent, Bank of America, N.A. as syndication agent, The Bank of Nova Scotia, The Royal Bank of Scotland PLCMarch 25, 2015, by and Sovereign Bank as co-documentation agents and PNC Capital Markets LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers. CNX Gas and its subsidiaries separately guaranteed the obligations under the Credit Agreement pursuant to an Amended and Restated CNX Gas Continuing Agreement of Guaranty and Suretyship dated as of April 12, 2011, which we refer to as the “CNX Gas Guaranty Agreement”. The new senior secured revolving credit facility replaced the Company’s existing $1.5 billion senior secured revolving credit facility which had been entered into as of May 7, 2010, which we refer to as the “Old Facility”.
The Credit Agreement provides for a secured revolving credit facility, which we refer to as the “Credit Facility”, in an aggregate outstanding principal amount of up to $1.5 billion, including borrowings and letters of credit. In addition to refinancing all outstanding amounts under the Old Facility, borrowings under the Credit Facility may be used by CONSOL Energy for general corporate purposes.
Interest on outstanding indebtedness under the Credit Facility currently accrues, at our option, at a rate based on either:
the greater of (i) the federal funds open rateplus 0.5%, (ii) PNC Bank, National Association’s prime rate,
and (iii) the daily LIBOR rateplus 1.0%,
in each case,plus a margin ranging from 0.75% to 1.75%
or
the LIBOR rateplus a margin ranging from 1.75% to 2.75%.
The applicable margin added to the underlying interest rate fluctuates based on the leverage ratio.
The Credit Facility matures on April 12, 2016, and requires compliance with conditions precedent that must be satisfied prior to any borrowing as well as ongoing compliance with certain affirmative and negative covenants to which CONSOL Energy and most of its wholly-owned subsidiaries must adhere.
The affirmative covenants include, among others: (i) preservation of existence; (ii) payment of obligations, including taxes; (iii) maintenance of properties, insurance, leases, books and records, coal supply agreements and material contracts; (iv) compliance with laws; (v) use of proceeds; (vi) subordination of intercompany loans; (vii) anti-terrorism laws; and (viii) collateral.
The negative covenants of the Credit Facility include restrictions on the ability of CONSOL Energy and its subsidiary guarantors (excluding CNX Gas and its subsidiaries) except in certain circumstances: (i) to create, incur, assume or suffer to exist indebtedness; (ii) to create or permit to exist liens on properties; (iii) to guaranty the debt of another party; (iv) to make loans or investments in excess of certain amounts except for permitted investments; (v) to make or pay dividends or distributions on CONSOL Energy common stock in excess of an annual rate of $0.40 per share unless certain conditions are met; (vi) to merge, liquidate, and dissolve and to make
acquisitions; (vii) to dispose of assets in excess of certain amounts subject to certain ordinary course and other exceptions; (viii) to deal with any affiliate except on fair and reasonably arm’s length terms; (ix) to create certain subsidiaries and joint ventures; (x) to engage in other businesses; (xi) to change fiscal year; (xii) other than CONSOL Energy, to issue additional equity to any person other than to CONSOL Energy or the other loan parties; (xiii) to amend certificates of incorporation, bylaws, or other organizational documents; (xiv) to make prepayments on or amendments to our senior notes; (xv) to permit restrictions on upstream dividends and payments to loan parties; or (xvi) to enter into agreements inconsistent with the Credit Agreement and loan documents. In addition, we are obligated to maintain at the end of each fiscal quarter (x) a leverage ratio not greater than 4.75 to 1.0 through March 31, 2013 and from June 30, 2013 and thereafter 4.50 to 1.0, subject to adjustment for certain dispositions; (y) an interest coverage ratio equal to or greater than 2.5 to 1.0; and (z) a senior secured leverage ratio not greater than 2.0 to 1.0; all as calculated in accordance with the terms and definitions determining such ratios contained in Credit Agreement. The Credit Agreement also contains various reporting requirements.
The Credit Facility also contains customary events of default, including, but not limited to, a cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants.
The obligations under the Credit Agreement are secured by substantially all of the assets of CONSOL Energy and its subsidiaries (excluding CNX Gas and its subsidiaries and certain other subsidiaries) pursuant to the existing Amended and Restated Collateral Trust Agreement, as amended by a CONSOL Successor Agent Agreement, an Amended and Restated Pledge Agreement, an Amended and Restated Security Agreement, an Amended and Restated Patent, Trademark and Copyright Security Agreement, as well as various mortgages.
CNX Gas Credit Facility
CNX Gas and its wholly-owned subsidiaries entered into an Amended and Restated Credit Agreement dated as of April 12, 2011, which we refer to as the “CNX Gas Credit Agreement” for a $1.0 billion senior secured revolving credit facility with certain lenders, PNC Bank, National Association as administrative agent, Bank of America, N.A. as syndication agent, The Bank of Nova Scotia, The Royal Bank of Scotland PLC and Wells Fargo Bank, N.A. as co-documentation agents and PNC Capital Markets LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers. CONSOL Energy and its subsidiaries that are loan parties under the Credit Agreement separately guaranteed the obligations under the CNX Gas Credit Agreement pursuant to a CONSOL Amended and Restated Continuing Agreement of Guaranty and Suretyship dated as of April 12, 2011. The new CNX Gas senior secured revolving credit facility replaced CNX Gas’ existing $700 million revolving credit facility which had been entered into as of May 7, 2010, which we refer to as the “CNX Gas Old Facility”.
The CNX Gas Credit Agreement provides for a secured revolving credit facility, which we refer to as the “CNX Gas Credit Facility”, in an aggregate outstanding principal amount of up to $1.0 billion, including borrowings and letters of credit. In addition to refinancing all outstanding amounts under the CNX Gas Old Facility, borrowings under the CNX Gas Credit Facility may be used by CNX Gas for general corporate purposes.
The availability under the CNX Gas Credit Facility, including availability for letters of credit, is generally limited to a borrowing base, which is determined by the required number of lenders in good faith by calculating a loan value of CNX Gas’ proved reserves and reducing that number by an equity cushion determined by the lenders required to approve the borrowing base.
Interest on outstanding indebtedness under the CNX Gas Credit Facility currently accrues, at CNX Gas’ option, at a rate based on either:
the greater of (i) the federal funds open rateplus0.5%, (ii) PNC Bank, National Association’s prime rate,
and (iii) the daily LIBOR rateplus 1.0%,
in each case,plus a margin ranging from 0.5% to 1.5%
or
the LIBOR rateplus a margin ranging from 1.5% to 2.5%.
The applicable margin added to the underlying interest rate fluctuates based on the facility utilization percentage.
The CNX Gas Credit Facility matures on April 12, 2016, and requires compliance with conditions precedent that must be satisfied prior to any borrowing as well as ongoing compliance with certain affirmative and negative covenants to which CNX Gas and its wholly-owned subsidiaries must adhere.
The affirmative covenants include, among others: (i) preservation of existence; (ii) payment of liabilities, including taxes; (iii) maintenance of properties, insurance, intellectual property and books and records; (iv) compliance with laws, leases, pipeline arrangements and other material contractual obligations; (v) use of proceeds; (vi) subordination of intercompany loans; (vii) anti-terrorism laws; and (viii) collateral and access to title information.
The negative covenants of the CNX Gas Credit Facility include restrictions on the ability of CNX Gas and its subsidiary guarantors except in certain circumstances: (i) to create, incur, assume or suffer to exist indebtedness; (ii) to create or permit to exist liens on properties; (iii) to guaranty the debt of another party; (iv) to make loans or investments in excess of certain amounts except for permitted investments; (v) to make or pay any dividends or distributions to third parties in excess of certain amounts subject to certain conditions; (vi) to merge, liquidate, or dissolve; (vii) to dispose of assets in excess of certain amounts subject to certain ordinary course and other exceptions; (viii) to deal with any affiliate except on fair and reasonably arm’s length terms; (ix) creation of certain subsidiaries and joint ventures; (x) to engage in other businesses; (xi) to change fiscal year; (xii) other than CNX Gas, to issue additional equity to any person other than CNX Gas or its wholly-owned subsidiaries; (xiii) to amend certificates of incorporation, bylaws, or other organizational documents; (xiv) to enter into any hedging agreement other than those permitted by the CNX Gas Credit Agreement in the ordinary course of CNX Gas’ business; (xv) to sell, transfer or convey or voluntarily pool or unitize its proved reserves; (xvi) to permit restrictions on upstream dividends and payments to loan parties; or (xvii) to enter into agreements inconsistent with the CNX Gas Credit Agreement and loan documents. In addition, CNX Gas is obligated to maintain as of the end of each fiscal quarter a leverage ratio of not greater than 3.5 to 1.0 and an interest coverage ratio equal to or greater than 3.0 to 1.0, as calculated in accordance with the terms and definitions determining such ratios contained in CNX Gas Credit Agreement. The CNX Gas Credit Agreement also contains various reporting requirements.
The CNX Gas Credit Facility also contains customary events of default, including, but not limited to, a cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants.
The obligations under the CNX Gas Credit Agreement are secured by substantially all of the assets of CNX Gas and its subsidiaries pursuant to an existing Amended and Restated Collateral Trust Agreement, as amended by a CNX Gas Successor Agent Agreement, a CNX Gas Pledge Agreement and a CNX Gas Security Agreement, as well as various mortgages.
Accounts Receivable Securitization
In 2007, CONSOL Energy and certain of its U.S. subsidiaries amended their existing trade accounts receivable facility with financial institutions for the sale on a continuous basis of eligible trade accounts receivable. The amended facility allows CONSOL Energy to receive, on a revolving basis, up to $200 million. The amended facility also allows for the issuance of letters of credit against the $200 million capacity. The amended facility expires in April 2012. In accordance with the facility agreement, CONSOL Energy is able to receive proceeds based upon total eligible accounts receivable at the previous month-end. The cost of funds is based on commercial paper rates plus a charge for administrative services paid to financial institutions. CONSOL Energy formed CNX Funding Corporation, a wholly owned, special purpose, bankruptcy-remote subsidiary for the sole purpose of buying and selling eligible trade receivables generated by certain subsidiaries of CONSOL Energy. Under the receivables facility, CONSOL Energy and certain subsidiaries, irrevocably and without recourse, sell all of their eligible trade accounts receivable to CNX Funding Corporation. CNX Funding Corporation then sells, on a revolving basis, an undivided percentage interest in the pool of eligible trade accounts receivable to financial institutions and their affiliates, while maintaining a subordinated interest in a portion of the trade receivables. CONSOL Energy has agreed to continue servicing the sold receivables for the financial institutions for a fee based upon market rates for similar services.
Senior Notes due 2017 and 2020
On April 1, 2010 the following agreements were entered into: (i) an Indenture dated as of April 1, 2010 among CONSOL Energy, the Company’s subsidiaries named therein and The Bank of Nova Scotia Trust Company of New York, as trustee, regarding the issuance of 8.00% Senior Notes due 2017 (the “2017 Indenture”); (ii) an Indenture dated as of April 1, 2010 among the Company, the Company’s subsidiaries named therein and The Bank of Nova Scotia Trust Company of New York, as trustee, regarding the issuance of 8.25% Senior Notes due 2020 (the “2020 Indenture” and together with the 2017 Indenture, the “Indentures”), and (iii) a Registration Rights Agreement (the “Registration Rights Agreement”) dated as of April 1, 2010 among CONSOL Energy Inc., the Company’s subsidiaries named thereinsubsidiary guarantors party thereto, and Merrill Lynch, Pierce, FennerGoldman, Sachs & Smith Incorporated (formerly known as Bank of America Securities LLC)Co., as representative of the several initial purchasers.purchasers named therein. The old notes initially issuedwere subsequently offered by the initial purchasers to qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons pursuant to Regulation S.
Purpose of the Exchange Offer
We sold the old notes in transactions that were exempt from or not subject to the registration requirements under these indentures werethe Securities Act. Accordingly, the old notes are subject to transfer restrictions. In general, you may not offer or sell the old notes unless either they are registered under the Securities Act.
The $1.5 billion of 8.00% Senior Notes due 2017 issuedAct or such offer or sale is exempt from, or not subject to, registration under the 2017 Indenture (includingSecurities Act and applicable state securities laws.
In connection with the sale of the old notes, offered inwe entered into a registration rights agreement with the initial purchasers of the old notes. In that agreement, we agreed to use our commercially reasonable efforts to file a registration statement and effect an exchange therefore are referred to asoffer thereunder after the “2017 Notes”). The $1.25 billionclosing date following the offering of 8.25% senior notes due 2020 issuedthe old notes. To satisfy our obligations under the 2020 Indenture (includingregistration rights agreement, we are offering certain holders of the old notes offered(those who are able to make certain representations described below under “—Procedures for Tendering—Your Representations to Us”), the opportunity to exchange their old notes for the new notes in the exchange therefore) are referredoffer. The exchange offer will be open for a period of at least 20 full business days. During the exchange offer period, we will exchange the new notes for all old notes properly surrendered and not withdrawn before the expiration date. The new notes will be registered under the Securities Act, and the transfer restrictions, registration rights and provisions for additional interest relating to as the “2020 Notes” and, collectively withold notes will not apply to the 2017 Notes, the “Notes.” The 2017 Notes will mature on April 1, 2017 and bear interest at the rate of 8.00% per annum. The 2020 Notes will mature on April 1, 2020 and bear interest at the rate of 8.25% per annum. Interest on the Notes is payable on April 1 and October 1 of each year.new notes.
If the Company experiences specified kinds of changes of control, the Company must offer to repurchase the Notes at 101% of theOn March 30, 2015, we issued $500 million aggregate principal amount of the Notes repurchased, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase.
The Notes are general unsecured obligations of the Company. The Notes rank equal in right of payment with all of the Company’s existing and future senior unsecured indebtedness.
The Notes are jointly and severally guaranteed by substantially all of the Company’s wholly owned domestic restricted subsidiaries as well as by CNX Gas Corporation and its wholly-owned subsidiaries.
At any time prior to April 1, 2013, the Company may on any one or more occasions redeem with the net cash proceeds of certain common stock offerings by the Company (i) up to 35% of the aggregate principal amount of 2017 Notes at a redemption price of 108.00% and/or (ii) up to 35% of the aggregate principal amount of the 2020 Notes at a redemption price of 108.25% of the principal amount, plus in each case accrued and unpaid interest and additional interest, if any, to the redemption date.
At any time prior to April 1, 2014, the Company may redeem in whole, but not in part, the 2017 Notes at a redemption price equal to the sum of 100% of the principal amount and an applicable make whole premium plus accrued and unpaid interest and additional interest, if any, to the redemption date. At any time prior to April 1, 2015, the Company may redeem in whole, but not in part, the 2020 Notes at a redemption price equal to the sum of 100% of the principal amount and an applicable make whole premium plus accrued and unpaid interest and additional interest, if any, to the redemption date.
On and after April 1, 2014, the Company may redeem all or a part of the 2017 Notes upon not less than 30 nor more than 60 days’ notice, at redemption prices (expressed as percentages of principal amount) equal to 104.000% for the twelve-month period beginning on April 1, 2014, 102.000% for the twelve-month period beginning on April 1, 2015 and 100.000% beginning on April 1, 2016, plus accrued and unpaid interest and additional interest, if any. On and after April 1, 2015, the Company may redeem all or a part of the 2020 Notes at redemption prices (expressed as percentages of principal amount) equal to 104.125% for the twelve-month period beginning on April 1, 2015, 102.750% for the twelve-month period beginning on April 1, 2016, 101.375% for the twelve-month period beginning on April 1, 2017 and 100.000% beginning on April 1, 2018, plus accrued and unpaid interest and additional interest, if any.
The Indentures restrict the Company’s ability and the ability of certain of its subsidiaries which are restricted subsidiaries to: (i) incur or guarantee additional indebtedness; (ii) declare or pay dividends or make other distributions on capital stock or redeem or repurchase capital stock or subordinated indebtedness; (iii) make certain investments; (iv) create or incur liens or use assets as security in other transactions; (v) enter into sale and leaseback transactions; (vi) merge or consolidate with other entities; (vii) enter into transactions with affiliates; (viii) sell or transfer certain assets; and (ix) incur dividend or other payment restrictions affecting restricted subsidiaries. These covenants are subject to a number of important exceptions and qualifications.
The Indentures provide that each of the following is an Event of Default: (i) default for 30 days in the payment when due of interest on, or additional interest with respect to, the Notes; (ii) default in payment when due of the principal of, or premium, if any, on any Note; (iii) failure to comply with the obligations regarding mergers and consolidations; (iv) failure to comply for 30 days after notice with the obligations regarding change in control (other than a failure to purchase the respective Notes), incurrence or guarantee of additional indebtedness, restricted payments, restrictions on distributions from restricted subsidiaries, sale or transfer of assets (other than a failure to purchase the respective Notes), transactions with affiliates, creating or incurring liens, sale and leaseback transactions and joining future domestic subsidiaries; (v) failure to comply for 60 days after notice with any of the other agreements in the Indenture; (vi) indebtedness of the Company or any restricted subsidiary is not paid within any applicable grace period after final maturity or the maturity of such indebtedness is accelerated by the holders thereof because of a default (and such acceleration is not rescinded or annulled) and the total amount of all such indebtedness unpaid or accelerated exceeds $75.0 million; (vii) failure by the Company or any of its significant subsidiaries to pay final judgments aggregating in excess of $75.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (viii) any subsidiary guarantee of a significant subsidiary ceases to be in full force and effect (other than in accordance with the terms of that guarantee and the Indentures) or is declared null and void and unenforceable or found to be invalid or any subsidiary guarantor denies its liability under its subsidiary guarantee (other than by reason of release from its subsidiary guarantee); and (ix) certain events of bankruptcy or insolvency described in the Indentures with respect to the Company or any of its significant subsidiaries. In the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately.
Purpose of the Exchange Offer
On March 9, 2011, we issued an aggregate principal amount of $250,000,000 of originalold notes under the indenture in an offering underpursuant to Rule 144A144 and Regulation S of the Securities Actin an offering that was not registered under the Securities Act. In connection with the issuance and sale of the originalold notes, we entered into a registration rights agreement with the initial purchasers of the originalold notes. Under the registration rights agreement, we agreed to file a registration statement regarding the exchange of the originalold notes for exchangenew notes which are registered under the Securities Act. We also agreed to use our commercially reasonable best efforts to cause the registration statement to become effective with the SEC and to conduct this exchange offer after the registration statement is declared effective. The form and terms of the exchangenew notes are substantially identical to the originalold notes except that the issuance of the exchangenew notes has been registered under the Securities Act and the transfer restrictions, registration rights and certain additional interest provisions relating to the originalold notes do not apply to the exchangenew notes. Under the registration rights agreement, we may be required to make additional payments in the form of additional interest to the holders of the originalold notes under circumstances relating to the timing of the exchange offer. The registration rights agreement provides that we will be required to pay additional interest to the holders of the originalold notes if the exchange offer is not consummated as of the 366th day after March 9, 2011by May 3, 2016 or a shelf registration statement is required to be filed under the registration rights agreement but has not been declared effective on or prior to date required by the registration rights agreement.
The registration rights agreement is filed as an exhibit to the registration statement of which this prospectus forms a part. This summary of certain provisions of the registration rights agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the registration rights agreement, a copy of which may be obtained as described under “Where You Can Find More Information.”
Resale of New Notes
Based on no-action letters of the staff of the SEC issued to third parties, we believe that new notes may be offered for resale, resold and otherwise transferred by you without further compliance with the registration and prospectus delivery provisions of the Securities Act if:
The staff of the SEC, however, has not considered the exchange offer for the new notes in the context of a no-action letter, and the staff of the SEC may not make a similar determination as in the no-action letters issued to these third parties.
If you tender in the exchange offer with the intention of participating in any manner in a distribution of the new notes, you:
Unless an exemption from registration is otherwise available, any securityholder intending to distribute new notes should be covered by an effective registration statement under the Securities Act. The registration statement should contain the selling securityholder’s information required by Item 507 or 508, as applicable, of Regulation S-K under the Securities Act.
This prospectus may be used for an offer to resell, resale or other transfer of new notes only as specifically described in this prospectus. If you are a broker-dealer, you may participate in the exchange offer only if you acquired the old notes as a result of market-making activities or other trading activities. Each broker-dealer that receives new notes for its own account in exchange for old notes, where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge by way of the letter of transmittal that it will deliver this prospectus in connection with any resale of the new notes. Please read the section captioned “Plan of Distribution” for more details regarding the transfer of new notes.
Terms of the Exchange Offer
UponSubject to the terms and conditions described in this prospectus and in the letter of transmittal, we will accept for exchange originalany old notes that are properly tendered on or before the expiration date and not withdrawn as permitted below. As used in this prospectus, the term “expiration date” meansprior to 5:00 p.m., New York City time, on , 2010. However, if we,the expiration date. We will issue new notes in our sole discretion, have extendedprincipal amount equal to the periodprincipal amount of timeold notes surrendered in the exchange offer. Old notes may be tendered only for whichnew notes and only in denominations of $2,000 and integral multiples of $1,000 in excess thereof. We will deliver the new notes promptly after the expiration date.
The exchange offer is open, the term “expiration date” means the latest time and date to which we extendednot conditioned upon any minimum aggregate principal amount of old notes being tendered in the exchange offer.
As of the date of this prospectus, $250,000,000$500 million aggregate principal amount of the original8.000% Senior Notes due 2023 representing old notes is outstanding. The original notes were offered under the indenture dated as of March 9, 2011. This prospectus and letter of transmittal is first being sent on or about , 2011to DTC, the sole registered holder of the old notes, and to all persons that we can identify as beneficial owners of the old notes. There will be no fixed record date for determining registered holders of originalold notes knownentitled to us. Our obligationparticipate in the exchange offer.
We intend to accept originalconduct the exchange offer in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act and the Exchange Act, and the rules and regulations of the SEC. Old notes whose holders do not tender for exchange in the exchange offer iswill remain outstanding and continue to accrue interest. These old notes will be entitled to the rights and benefits such holders have under the indenture relating to the notes and the registration rights agreement.
We will be deemed to have accepted for exchange properly tendered old notes when we have given oral or written notice of the acceptance to the exchange agent and complied with the applicable provisions of the registration rights agreement. The exchange agent will act as agent for the tendering holders for the purposes of receiving the new notes from us.
If you tender old notes in the exchange offer, you will not be required to pay brokerage commissions or fees or, subject to the conditions described under “—Conditionsletter of transmittal, transfer taxes with respect to the Exchange Offer.”exchange of old notes. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. Please read “—Fees and Expenses” for more details regarding fees and expenses incurred in connection with the exchange offer.
We will return any old notes that we do not accept for exchange for any reason without expense to their tendering holders promptly after the expiration or termination of the exchange offer.
Expiration Date
The exchange offer will expire at 5:00 p.m., New York City time, on , unless, in our sole discretion, we extend such deadline.
Extensions, Delays in Acceptance, Termination or Amendment
We expressly reserve the right, at any time or various times, to extend the period of time during which the exchange offer is open. We would thenmay delay acceptance for exchange of any originalold notes by giving oral (promptly followed in writing) or written notice of ansuch extension and delay to their holders at any time until the holders of original notes as described below.exchange offer expires or terminates. During any extension period,such extensions, all originalold notes previously tendered will remain subject to the exchange offer, and we may be acceptedaccept them for exchange.
To extend the exchange offer, we will notify the exchange agent orally or in writing of any extension. We will notify the holders of old notes of the extension via a press release issued no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date.
If any of the conditions described below under “—Conditions to the Exchange Offer” have not been satisfied, we reserve the right, in our sole discretion
by us. Any original notes not accepted for exchange will be returnedgiving oral (promptly followed in writing) or written notice of such delay, extension or termination to the tendering holder afterexchange agent. Subject to the expiration or terminationterms of the registration rights agreement, we also reserve the right to amend the terms of the exchange offer. Holdersoffer in any manner.
Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral (promptly followed in writing) or written notice thereof to holders of original notes do not have dissenters’ rightsthe old notes. Any notice relating to the extension of appraisal in connection with the exchange offer.offer will disclose the number of securities tendered as of the date of the notice, as required by Rule 14e-1(d) under the Exchange Act. If we amend the exchange offer in a manner that we determine to constitute a material change, we will promptly disclose such amendment by means of a prospectus supplement. The prospectus supplement will be distributed to holders of the old notes. Depending upon the significance of the amendment and the manner of disclosure to holders, we may extend the exchange offer if it would otherwise expire during such period. If an amendment constitutes a material change to the exchange offer, including the waiver of a material condition, we will extend the exchange offer, if necessary, to remain open for at least five business days after the date of the amendment. In the event of any increase or decrease in the consideration we are offering for the old notes or in the percentage of old notes being sought by us, we will extend the exchange offer to remain open for at least 10 business days after the date we provide notice of such increase or decrease to the registered holders of old notes.
YouIf we delay accepting any old notes or terminate the exchange offer, we will promptly pay the consideration offered, or return any old notes deposited, pursuant to the exchange offer as required by Rule 14e-1(c) under the Exchange Act.
Conditions to the Exchange Offer
We will not be required to accept for exchange, or exchange any new notes for, any old notes if the exchange offer, or the making of any exchange by a holder of old notes, would violate applicable law or policy of the staff of the SEC. Similarly, we may onlyterminate the exchange outstandingoffer as provided in this prospectus before expiration of the offer in the event of such a potential violation.
We will not be obligated to accept for exchange the old notes of any holder that has not made to us the representations described under “—Procedures for Tendering” and “Plan of Distribution” and such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to allow us to use an appropriate form to register the new notes under the Securities Act.
Additionally, we will not accept for exchange any old notes tendered, and will not issue new notes in denominationsexchange for any such old notes, if at such time any stop order has been threatened or is in effect with respect to the exchange offer registration statement of $2,000 and higher integral multipleswhich this prospectus constitutes a part or the qualification of $1,000.the indenture under the Trust Indenture Act of 1939, as amended.
We expressly reserve the right to amend or terminate the exchange offer, and not to acceptreject for exchange any originalold notes not previously accepted for exchange, upon the occurrence of any of the conditions ofto the exchange offer specified under “—Conditions to the Exchange Offer.” In the event of a material change in the
terms of the offer, we will extend the expiration date, if necessary, so that at least five business days remain in the offer period following notice of the material change.above. We will give to the exchange agent oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the originalold notes as promptly as practicable.
These conditions are for our sole benefit, and we may assert them or waive them in whole or in part at any time or at various times prior to the expiration of the exchange offer in our sole discretion. If we fail at any time to exercise any of these rights, this failure will not mean that we have waived our rights. Each such right will be deemed an ongoing right that we may assert at any time or at various times prior to the expiration of the exchange offer.
Procedures for Tendering
To participate in the exchange offer, you must properly tender your old notes to the exchange agent as described below. We will only issue new notes in exchange for old notes that you timely and properly tender. Therefore, you should allow sufficient time to ensure timely delivery of the old notes, and you should follow carefully the instructions on how to tender your old notes. It is your responsibility to properly tender your old notes. We have the right to waive any defects. However, we are not required to waive defects, and neither we nor the exchange agent is required to notify you of any extension by means of a press releasedefects in your tender.
If you have any questions or other public announcement no later than 9:00 a.m., New York City time, on the business day following the previously scheduled expiration date.
Our acceptance of the tender of originalneed help in exchanging your old notes, by a tendering holder will form a binding agreement upon the terms and subject to the conditions provided in this prospectus. The exchange offer is not being made to holders of original notes in any jurisdiction where the exchange would not comply with the securities or blue sky laws of such jurisdiction.
Procedures for Tendering
The tender to us of original notes by you, as set forth below, and our acceptance of the original notes will constitute a binding agreement between us and you, upon the terms and subject to the conditions set forth in this prospectus.
A tendering holder who holds notes in the form of book-entry interests must, on or prior to the expiration date, transmit an agent’s message toplease call the exchange agent at thewhose address listed below under “—Exchange Agent.” In addition, the exchange agent must receive timely confirmation of book-entry transfer of the original notes into the exchange agent’s account at the Depository Trust Company, or DTC, the book-entry transfer facility, along with the agent’s message. The term “agent’s message” means a message transmitted to DTC and received by the exchange agent and forming a part of a book-entry transfer.
Only registered holders of certificated original notes may tender certificated notesphone number are described in the exchange offer. A tendering holder of certificated notes must, on or prior to the expiration date, transmit a written or facsimile copy of a properly completed and duly executed letter of transmittal including all other required documents,included as Annex A to the address listed belowthis prospectus and under “—“Prospectus Summary—The Exchange Offer—Exchange Agent.” In addition,
All of the exchange agent must receiveold notes were issued in book-entry form, and all of the certificates representing the originalold notes prior to the expiration date.
If you are a beneficial owner whose original notes arecurrently represented by global certificates registered in the name of a broker, dealer, commercial bank, trust company or otherCede & Co., the nominee and wish to tender, you should promptly instructof DTC. We have confirmed with DTC that the registered holder to tender on your behalf. Any registered holder that is a participant in DTC’s book-entry transfer facility systemold notes may make book-entry deliverybe tendered using ATOP. The exchange agent will establish an account with DTC for purposes of the original notesexchange offer promptly after the commencement of the exchange offer, and DTC participants may electronically transmit their acceptance of the exchange offer by causing DTC to transfer the originaltheir old notes into the exchange agent’s account.
We will determine in our sole discretion all questions as to the validity, form and eligibility of original notes tendered for exchange. This discretion extends to the determination of all questions concerning the timing of receipts and acceptance of tenders. These determinations will be final and binding.
We reserve the right to reject any particular original note not properly tendered, or any acceptance that might, in our judgment or our counsel’s judgment, be unlawful. We also reserve the right to waive any conditions of the exchange offer as applicable to all original notes prior to the expiration date. We also reserve the right to waive any defects or irregularities or conditions of the exchange offer as to any particular original note prior to the expiration date. Our interpretation of the terms and conditions of the exchange offer as to any particular original note either before or after the expiration date shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of original notes must be cured within a reasonable period of time. None of us, the exchange agent or any other personusing the ATOP procedures. In connection with the transfer, DTC will be under any dutysend an “agent’s message” to give notification of any defect or irregularity in any tender of original notes. Nor will we, the exchange agent or any other person incur any liability for failingagent. The agent’s message will state that DTC has received instructions from the participant to give notification of any defect or irregularity.
By tendering, each holder representstender old notes and that the participant agrees to us that:
be bound by the holder is not an affiliate of CONSOL Energy (as defined in Rule 405 under the Securities Act) or a broker-dealer tendering notes acquired directly from us for its own account;
the exchange notes are being acquired in the ordinary course of businessterms of the person receivingletter of transmittal.
By using the ATOP procedures to exchange old notes, whether or not that person is the holder; and
neither the holder nor the other person has any arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes.
In the case of a holder that is not a broker-dealer, that holder, by tendering, will also represent to us that the holder is not engaged in, and does not intend to engage in, a distribution of the exchange notes.
However, each holder who is our “affiliate” (within the meaning of the Securities Act) who intends to participate in the exchange offer for the purpose of distributing the exchange notes or a broker-dealer (within the meaning of the Securities Act) that acquired original notes in a transaction other than as part of its trading or market-making activities and who has arranged or has an understanding with any person to participate in the distribution of the exchange notes:
you will not be ablerequired to rely ondeliver a letter of transmittal to the applicable interpretationexchange agent. However, you will be bound by the staffits terms just as if you had signed it.
There is no procedure for guaranteed late delivery of the SEC set forth in the applicable no-action letters;old notes.
will not be able to tender its original notes in the exchange offer; and
must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the notes unless such sale or transfer is made pursuant to an exemption from such requirements.
Each broker or dealerbroker-dealer that receives exchangenew notes for its own account in exchange for originalold notes, where the originalsuch old notes were acquired by itsuch broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in connection with any resale of the exchangesuch new notes. By so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. However, a broker-dealer may be a statutory underwriter. SeePlease read “Plan of Distribution.”
Furthermore, any broker-dealer that acquired any of its original notes directly from us:
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must also be named as a selling holder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction.
By delivering an agent’s message, a beneficial owner (whose original notes are registeredDeterminations in the nameExchange Offer
We will determine in our sole discretion all questions as to the validity, form, eligibility, time of a broker, dealer, commercial bank, trust company or other nominee) or holderreceipt, acceptance of tendered old notes and withdrawal of tendered old notes. Our determination will be deemedfinal and binding on all parties. We reserve the absolute right to have irrevocably appointedreject any old notes not properly tendered or any old notes our acceptance of which would, in the exchange agent as its agent and attorney-in-fact (with full knowledge that the exchange agent isopinion of our counsel, be unlawful. We also acting as an agent for us in connection with the exchange offer) with respect to the original notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest subject only toreserve the right to waive any defect, irregularities or conditions of withdrawal described in this prospectus),tender as to receive for our account all benefits and otherwise exercise all rightsparticular old notes. Our interpretation of beneficial ownership of such original notes, in accordance with the terms and conditions of the exchange offer.
Each beneficial owner or holder will also be deemed to have represented and warranted to us that it has authority to tender, exchange, sell, assign and transferoffer, including the original notes it tenders and that, when the same are
accepted for exchange, we will acquire good, marketable and unencumbered title to such original notes, free and clear of all liens, restrictions, charges and encumbrances, and that the original notes tendered are not subject to any adverse claims or proxies. Each beneficial owner and holder, by tendering its original notes, also agrees that it will comply with its obligations under the registration rights agreement.
Guaranteed Delivery Procedures
Holders who wish to tender their original notes and
whose original notes are not immediately available;
who cannot deliver their original notes,instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, all defects or irregularities in connection with tenders of old notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to tenders of old notes, neither we, the exchange agent nor any other required documentsperson will incur any liability for failure to give such notification. Tenders of old notes will not be deemed made until such defects or irregularities have been cured or waived. Any old notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the tendering holder promptly upon expiration or termination of the exchange offer.
When We Will Issue New Notes
In all cases, we will issue new notes for old notes that we have accepted for exchange in the exchange offer only after the exchange agent receives, prior to 5:00 p.m., New York City time, on the expiration datedate:
Return of Old Notes Not Accepted or Exchanged
If we do not accept any tendered old notes for exchange or if old notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged old notes will be returned without expense to their tendering holder. Such non-exchanged old notes will be credited to an account maintained with DTC. These actions will occur promptly upon the expiration or termination of the exchange offer; oroffer.
Your Representations to Us
By agreeing to be bound by the letter of transmittal, you will represent to us that, among other things:
who cannot completeyou have not engaged in and have no intent to engage in (nor have you entered into any arrangement or understanding with any person or entity to participate in) a distribution of the proceduresnew notes in violation of the provisions of the Securities Act;
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw your tender at any time prior to 5:00 p.m., New York City time, on the expiration datedate. For a withdrawal to be effective you must comply with the
appropriate ATOP procedures. Any notice of the exchange offer,
may effect a tender if:
the tender is made by or through an “eligible guarantor institution;”
prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer, the exchange agent receives from such “eligible guarantor institution” a properly completed and duly executed Notice of Guaranteed Delivery, by facsimile transmission, mail or hand delivery, setting forthwithdrawal must specify the name and addressnumber of the holder of the original notes, the certificate number or numbers of such original notes and the principal amount of original notes tendered, stating that the tender is being made thereby, and guaranteeing that, within three business days after the expiration date, a letter of transmittal, or facsimile thereof or agent’s message in lieu of such letter of transmittal, together with the certificate(s) representing the original notes to be tendered in proper form for transfer and any other documents required by the letter of transmittal will be deposited by the eligible guarantor institution with the exchange agent; and
a properly completed and duly executed letter of transmittal (or facsimile thereof) together with the certificate(s) representing all tendered original notes in proper form for transfer, or an agent’s message in the case of delivery by book-entry transfer, and all other documents required by the letter of transmittal are received by the exchange agent within three business days after the expiration date.
Acceptance of Original Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all original notes properly tendered, unless we terminate the exchange offer because of the non-satisfaction of conditions. We will issue the exchange notes promptly after acceptance of the original notes. For purposes of the exchange offer, we will be deemed to have accepted properly tendered original notes for exchange when, as and if we have given oral or written notice to the exchange agent, with prompt written confirmation of any oral notice. See “—Conditions to the Exchange Offer” below for a discussion of the conditions that must be satisfied before we accept any original notes for exchange.
For each original note accepted for exchange, the holder of the original note will receive an exchange note having a principal amount equal to that of the surrendered original note. The exchange notes will bear interest from the most recent date to which interest has been paid on the original notes. Accordingly, registered holders of exchange notes on the relevant record date for the first interest payment date following the completion of the exchange offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid on the original notes, from March, 9, 2011. Original notes accepted for exchange will cease to accrue interest from and after the date of completion of the exchange offer. Holders of original notes whose
original notes are accepted for exchange will not receive any payment for accrued interest on the original notes otherwise payable on any interest payment date, the record date for which occurs on or after completion of the exchange offer and will be deemed to have waived their rights to receive the accrued interest on the original notes.
In all cases, issuance of exchange notes for original notes will be made only after timely receipt by the exchange agent of an agent’s message and a timely confirmation of the book-entry transfer of the original notes into the exchange agent’s account at DTC.
Unaccepted or non-exchanged original notes will be returned without expense to the tendering holder of the original notes. The non-exchanged original notes will be credited to an account maintained with DTC promptly after the expiration of the exchange offer.
Book-Entry Transfer
The exchange agent will make a request to establish an account for the original notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in DTC’s systems must make book-entry delivery of original notes by causing DTC to transfer those original notes into the exchange agent’s account at DTC in accordanceto be credited with DTC’s procedure for transfer. This participant should transmit its acceptance to DTC on or prior to the expiration date. DTC will verify this acceptance, execute a book-entry transfer of the tendered original notes into the exchange agent’s account at DTC and then send to the exchange agent confirmation of this book-entry transfer. The transmission of the originalwithdrawn old notes and agent’s message to DTC and delivery by DTC to and receipt by the exchange agent of the related agent’s message will be deemed to be a valid tender.
Exchanging Book-Entry Notes
The exchange agent and the book-entry transfer facility have confirmed that any financial institution that is a participant in the book-entry transfer facility may utilize the book-entry transfer facility’s Automated Tender Offer Program, or ATOP, procedures to tender original notes. Any participant in the book-entry transfer facility may make book-entry delivery of original notes by causing the book-entry transfer facility to transfer such original notes into the exchange agent’s account in accordanceotherwise comply with the book-entry transfer facility’s ATOP procedures for transfer. However, the exchange for the original notes so tendered will only be made after a book-entry confirmation of the book-entry transfer of original notes into the exchange agent’s account, and timely receipt by the exchange agent of an agent’s message and any other documents required by the letter of transmittal. Delivery of documents to DTC in accordance with DTC’s procedures does not constitute delivery to the exchange agent. The term “agent’s message” means a message, transmitted by the book-entry transfer facility and received by the exchange agent and forming part of a book-entry confirmation, which states that the book-entry transfer facility has received an express acknowledgment from a participant tendering original notes that are the subject of such book-entry confirmation that such participant has received and agrees to be bound by the terms of the exchange offer as described in this prospectus, and that we may enforce such terms against such participant.procedures.
Withdrawal Rights
Tenders of original notes may be withdrawn at any time before 5:00 p.m., New York City time, on the expiration date.
For a withdrawal of a tender of original notes to be effective, the exchange agent must receive a valid withdrawal request through ATOP from the tendering DTC participant before the expiration date. Any such request for withdrawal must include the VOI number of the tender to be withdrawn and the name of the ultimate beneficial owner of the related original notes in order that such bonds may be withdrawn.
We will determine all questions as to the validity, form, and eligibility includingand time of receipt of noticesa notice of withdrawal. Any originalOur determination shall be final and binding on all parties. We will deem any old notes so withdrawn will be deemed not to have been validly tendered for exchange. No exchange notes will be issued unlessfor purposes of the original notes so withdrawn are validly re-tendered. exchange offer.
Any originalold notes that have been tendered for exchange but whichthat are not exchanged for any reason will be returned to the tendering holder without cost to the holder. The original notes will be credited to an account maintained with DTC for the originalold notes. The original notesThis return or crediting will be credited to the DTC accounttake place promptly afterupon withdrawal, rejection of tender, expiration or termination of the exchange offer. ProperlyYou may retender properly withdrawn originalold notes may be re-tendered by following the procedures described under the heading “—Procedures for Tendering” above at any time on or before 5:00 p.m., New York City time, on the expiration date.
Conditions to the Exchange Offer
Notwithstanding any other provision of the exchange offer, we will not be required to accept for exchange, or to issue exchange notes in exchange for, any original notes, and may terminate or amend the exchange offer, if at any time prior to the expiration date any of the following events occurs:
there is threatened, instituted or pending any action or proceeding before, or any injunction, order or decree issued by, any court or governmental agency or other governmental regulatory or administrative agency or commission which, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer;
a change in applicable law prohibits the consummation of such exchange offer; or
any change, or any development involving a prospective change, has occurred or been threatened in our business, financial condition, operations or prospects and those of our subsidiaries taken as a whole that is or may be adverse to us, or we have become aware of facts that have or may have an adverse impact on the value of the original notes or the exchange notes, which in our reasonable judgment in any case makes it inadvisable to proceed with the exchange offer and about which change or development it makes a public announcement.
All conditions will be deemed satisfied or waived prior to the expiration date unless we assert them prior to the expiration date. The foregoing conditions to the exchange offer are for our sole benefit, and we may assert them prior to the expiration date regardless of the circumstances giving rise to any of these conditions, or we may waive them prior to the expiration date in whole or in part in our reasonable discretion. Our failure at any time to exercise any of the foregoing rights will not be deemed a waiver of any right.
In addition, we will not accept for exchange any original notes tendered, and no exchange notes will be issued in exchange for any original notes, if at the time the original notes are tendered any stop order is threatened or in effect relating to the registration statement of which this prospectus constitutes a part. We are required to make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible moment.
Exchange Agent
We have appointed The Bank of Nova Scotia Trust Company of New York as the exchange agent for the exchange offer. You should direct questions and requests for assistance and requests for additional copies of this prospectus or the related letter of transmittal and notice of guaranteed delivery to the exchange agent addressed as follows:
Delivery To:
The Bank of Nova Scotia Trust Company of New York
By Hand, Registered or Certified Mail, or Overnight Courier:
The Bank of Nova Scotia Trust Company of New York
Attention: Pat Keane
One Liberty Plaza
New York, NY 10006
By Facsimile: (212) 225-5436
(Eligible Guarantor Institutions only)
To confirm by telephone for more information: (212) 225-5427
(Eligible Guarantor Institutions Only)
Reference: CONSOL Energy Inc. Exchange
All other questions should be addressed to CONSOL Energy Inc., CNX Center, 1000 CONSOL Energy Drive, Canonsburg, PA 15317-6505, Attn. General Counsel.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal solicitation is being made by mailmail; however, we may make additional solicitation by the exchange agent. Additional solicitation may be made bye-mail, telephone facsimile or in person by our officers and regular employees and by persons so engaged bythose of our affiliates.
We have not retained any dealer-manager in connection with the exchange agent.
offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse it for its related reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection therewith and pay otherwith the exchange offer. They include SEC registration expenses, includingfees, fees and expenses of the exchange agent and trustee, under the indenture, filing fees, blue skyaccounting and legal fees and printing costs and distributionrelated fees and expenses. We will not make any payment to brokers, dealers or others soliciting acceptances of the exchange offer.
Accounting Treatment
We will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offer. We will amortize the expense of the exchange offer over the term of the exchange notes in accordance with accounting principles generally accepted in the United States of America.
Transfer Taxes
We will pay all transfer taxes, if any, in connection withapplicable to the exchange of originalold notes for exchangenew notes in the exchange offer. TheEach tendering holder, however, will be required to pay any transfer taxes, whether imposed on the recordregistered holder or any other person, if we are instructed to registera transfer tax is imposed for any reason other than the exchange of old notes for new notes in the nameexchange offer.
Consequences of or requestedFailure to return any originalExchange
If you do not exchange your old notes not tendered or not acceptedfor new notes in the exchange offer, the old notes you hold will remain outstanding and continue to a person other than the registered tendering holder.
Consequences of Exchanging or Failing to Exchange the Original Notes
Holders of original notes who do not exchange their original notes for exchange notes in the exchange offeraccrue interest, but will continue to be subject to the provisions in the indenture regarding transfer and exchange of the original notes and theexisting restrictions on transfer of the original notes as described in the legend on the original notes as a consequence of the issuance of the original notes under exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities laws.transfer. In general, the original notesyou may not be offeredoffer or sold, unless registered undersell the Securities Act,old notes except under an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Original note holders thatAfter the expiration of this exchange offer, we do not intend to register old notes under the Securities Act unless the registration rights agreement requires us to do so.
Accounting Treatment
We will record the new notes in our accounting records at the same carrying value as the old notes. This carrying value is the aggregate principal amount of the old notes, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange original notes foroffer, other than the recognition of the fees and expenses of the exchange notesoffer as stated under “—Fees and Expenses.”
Other
Participation in the exchange offer willis voluntary, and you should consider carefully whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered old notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no longer havepresent plans to acquire any registration rights with respect to such notes.
Based on existing interpretations of the Securities Act by the SEC’s staff contained in several no-action letters to third parties unrelated to us, and subject to the immediately following sentence, we believeold notes that the exchange notes would generally be freely transferable by holders after the exchange offer without further registration under the Securities Act, subject to certain representations required to be made by each holder of exchange notes, as set forth below. However, any purchaser of exchange notes who is one of our “affiliates” (as defined in Rule 405 under the Securities Act) or who intends to participateare not tendered in the exchange offer or to file a registration statement to permit resales of any untendered old notes.
DESCRIPTION OF OTHER INDEBTEDNESS
Revolving Credit Facility
On April 12, 2011, we entered into a five-year, $1 billion revolving credit facility (the “2011 Revolving Credit Facility”) pursuant to an amended and restated credit agreement with certain lenders and PNC Bank, National Association as administrative agent for the purposelenders, which was amended by Amendment No. 1, dated as of distributingDecember 5, 2013. The 2011 Revolving Credit Facility was used for general corporate purposes, including letters of credit, capital expenditures, acquisitions and working capital. The 2011 Revolving Credit Facility was secured by the exchange notes:assets of CONSOL Energy and certain of its subsidiaries.
will not be ableAlso on April 12, 2011, CNX Gas, entered into a revolving credit facility pursuant to rely onan amended and restated credit agreement with certain lenders, with PNC Bank, National Association, acting as administrative agent (the “CNX Gas Revolving Credit Facility”, and together with the applicable interpretation2011 Revolving Credit Facility, the “Prior Credit Facilities”). The CNX Gas Revolving Credit Facility provided for a revolving credit facility in an initial aggregate outstanding principal amount of up to $1.0 billion (with the staff of the SEC;
will not be ableability to tender its original notesrequest an increase in the exchange offer;aggregate outstanding principal amount up to $1.25 billion), including borrowings and
must comply with letters of credit. The borrowings under the registrationCNX Gas Revolving Credit Facility were used by CNX Gas for general corporate purposes, including, transaction fees, letters of credit, acquisitions, capital expenditures and prospectus delivery requirementsworking capital. The obligations of CNX Gas under the Securities ActCNX Gas Revolving Credit Facility were secured by the assets of CNX Gas and certain of its subsidiaries.
On June 18, 2014, the Prior Credit Facilities were refinanced in connection with the establishment by CONSOL Energy of a five-year, $2 billion revolving credit facility (the “Revolving Credit Facility”) pursuant to a credit agreement with certain lenders and PNC Bank, National Association as administrative agent.
The Revolving Credit Facility was used to refinance all amounts outstanding under the Prior Credit Facilities and is now used for general corporate purposes, including letters of credit, capital expenditures, acquisitions and working capital. CONSOL Energy may borrow, prepay and reborrow amounts at any sale or transfertime during the term of the notes unlessRevolving Credit Facility. The Revolving Credit Facility will mature on June 18, 2019. Interest on outstanding indebtedness under the Revolving Credit Facility currently accrues, at our option, at a rate based on either: (a) the highest of (i) PNC Bank, National Association’s prime rate, (ii) the federal funds open rate plus 0.5%, and (iii) the daily LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.50% to 1.50% or (b) the LIBOR rate plus a margin ranging from 1.50% to 2.00%. The applicable margin added to the underlying interest rate fluctuates based on the aggregate outstanding principal under the Revolving Credit Facility with the margin increasing as the outstanding principal amount increases.
The Revolving Credit Facility contains certain covenants and restrictions that limit the ability of CONSOL Energy and certain of its subsidiaries to, among other things:
The Revolving Credit Facility imposes the following additional obligations and restrictions (with certain limited exceptions) on, among others, CONSOL Energy and certain of its subsidiaries:
Ratios. CONSOL Energy is obligated to maintain minimum current ratio equal to or greater than 1.00 to 1.0, as calculated in accordance with the terms and definitions determining such ratio contained in the Revolving Credit Facility. CONSOL Energy is obligated to maintain an interest coverage ratio equal to or greater than 2.50 to 1.0, as calculated in accordance with the terms and definitions determining such ratio contained in the Revolving Credit Facility.
Defaults. The Revolving Credit Facility also contains customary events of default, including a cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants.
Security. The Revolving Credit Facility is secured by the assets of CONSOL Energy and substantially all of its subsidiaries.
On May 22, 2015, the Revolving Credit Facility was amended (the “Amendment”) to allow for, among other things, spinoffs, or other public equity offering transactions, in regard to subsidiaries that own certain coal assets and all arrangements, actions and transactions in connection therewith. The Amendment also permits the incurrence of a term loan facility and a revolving credit facility at those subsidiaries owning certain coal assets.
Accounts Receivables Securitization Facility
In 2007, we and certain of our U.S. subsidiaries amended and restated our accounts receivable facility with certain financial institutions for the sale or transfer is madeon a continuous basis of eligible trade accounts receivable. The amended facility allowed us to receive, on a revolving basis, up to $125 million. The amended facility also allowed for the issuance of letters of credit against the $125 million capacity.
In accordance with the amended facility, we were able to receive proceeds based upon total eligible accounts receivable at the previous month-end. We formed CNX Funding Corporation, a wholly owned, special purpose, bankruptcy-remote subsidiary for the sole purpose of buying and selling eligible trade receivables generated by certain of our subsidiaries. Under the amended facility, we and certain of our subsidiaries, irrevocably and without recourse, sold all of our eligible trade accounts receivable to CNX Funding Corporation. CNX Funding Corporation would then sell, on a revolving basis, an undivided percentage interest in the pool of eligible trade accounts receivable to financial institutions and their affiliates, while maintaining a subordinated interest in a portion of the trade receivables. We agreed to continue servicing the sold receivables for the financial institutions for a fee based upon market rates for similar services.
On July 7, 2015, we and certain of our subsidiaries entered into a payoff letter with the financial institutions party to the amended facility pursuant to an exemption from such requirements. See “Plan of Distribution.”
We do not intend to seek our own interpretation regardingwhich the exchange offeramended facility was paid off in full and there can be no assurance that the SEC’s staff would make a similar determination with respect to the exchange notes as it has in other interpretations to other parties, although we have no reason to believe otherwise.all lender commitments thereunder were terminated.
DESCRIPTION OF EXCHANGE NOTESExisting Senior Notes
CONSOL Energy issuedSet forth in the originaltable below are each of our series of senior notes and will issue the exchange notes offered hereby (the “Notes”) under the Indenture datedoutstanding as of March 9, 2011 (as supplemented through the date of this prospectus (our “existing senior notes”) as well as the amounts of each such series of existing senior notes outstanding as of the date indicated.
(in thousands) | Amount Outstanding as of September 30, 2015 | |||
8.25% senior notes due 2020 | $ | 74,470 | ||
6.375% senior notes due 2021 | $ | 20,611 | ||
5.875% senior notes due 2022(1) | $ | 1,855,840 | ||
8.000% senior notes due 2023(1) | $ | 493,213 |
(1) | Amount outstanding includes amortization of bond premium. |
Each series of our existing senior notes is guaranteed by certain of our subsidiaries. Interest on each series of our existing senior notes is payable semi-annually in arrears.
Optional Redemption
Each series of our existing senior notes is redeemable at any time prior to certain dates specified in the indenture governing such series notes, at a price equal to 100% of the principal amount thereof, plus a make-whole premium and accrued and unpaid interest, if any, to the applicable redemption date.
In addition, on or after certain dates specified in the indenture governing each series of our existing senior notes, the applicable series of existing senior notes are redeemable in whole or in part, at fixed redemption prices plus accrued and unpaid interest, if any, to the redemption date.
Further, we may redeem up to 35% of each of series of our existing senior notes in an amount equal to the net cash proceeds we receive from certain qualified equity offerings if such redemption takes place prior to a date specified in the indenture governing such series of notes.
Change of Control and Covenants
Upon a change of control, each noteholder of our existing senior notes will be entitled to require us to purchase all or a portion of its notes at a purchase price of 101% plus accrued and unpaid interest, if any. In addition, our existing senior notes contain various covenants that limit, among other things, our ability, and the ability of certain of our subsidiaries, to:
If the existing senior notes achieve investment grade ratings by both Moody’s and Standard & Poor’s and no default or event of default has occurred and is continuing, we will no longer be subject to many of the foregoing covenants. At September 30, 2015, we were in compliance with these covenants.
MEDCO Bonds
As of September 30, 2015, we had approximately $103 million outstanding of our Maryland Economic Development Corporation Port Facilities Refunding Revenue Bonds (MEDCO) 5.75% revenue bonds due September 2025.
We are offering to exchange up to $500 million aggregate principal amount of our new 8.000% Senior Notes due 2023, which have been registered under the Securities Act, referred to in this prospectus as the “new notes,” for any and all of our outstanding unregistered 8.000% Senior Notes due 2023, referred to in this prospectus as the “old notes.” We issued $500 million aggregate principal amount of old notes on March 30, 2015 in a transaction exempt from registration under the Securities Act. We are offering new notes to the holders of the old notes in exchange for such notes in order to satisfy our registration obligations under the registration rights agreement that we entered into in connection with the issuance of the old notes.
The new notes will be treated as a single class with any old notes that remain outstanding after the completion of the exchange offer. The new notes will be issued, and the old notes are currently outstanding, under an indenture dated as of March 30, 2015 (the “Indenture”), among CONSOL Energy,the Company, the Guarantors (as defined below) and TheWells Fargo Bank National Association, as trustee (the “Trustee”), as supplemented and amended. You can find the definition of Nova Scotia Trust Companyvarious terms used in this Description of New York, as trustee. TheNotes under “—Certain Definitions” below.
This Description of New Notes is intended to be a useful overview of the material provisions of the new notes, the guarantees and the Indenture. Since this Description of New Notes is only a summary, you should refer to the Indenture has beenwhich is filed as an exhibit to the registration statement of which this prospectus is part. The Indenture complies with the Trust Indenture Acta part for a complete description of 1939. The terms of the notes include those stated in the Indentureour obligations and those made part of the Indenture by reference to the Trust Indenture Act.
On March 9, 2011, CONSOL Energy issued $250 million aggregate principal amount of original notesyour rights under the Indenture. The terms of the exchange notes will be identical in all material respects to the terms of the original notes, except for certain transfer restrictions and registration and other rights relating to the exchange of the original notes for exchange notes. The Bank of Nova Scotia Trust Company of New York, as trustee, will authenticate and deliver exchange notes for original issue in exchange for a like principal amount of original notes.
Description of Notes
Certain terms used inIn this description, are defined under the subheading “—Certain definitions.” As used in this section, the terms “Company,” “we,” “us” and “our” refer only to CONSOL Energy Inc., the issuer of the new notes offered hereby, and not to any of its subsidiaries.
subsidiaries;provided that following an E&P Spin Transaction constituting a Qualified Spin Transaction, “Company” shall refer to the Person designated by CONSOL Energy Inc. as provided in the definition of “Qualified Spin Transaction.” The termsterm “Notes” in this section of the Notes include those stated inprospectus includes the Indenture and those made partold notes issued on March 30, 2015 as well as the new notes, unless the context otherwise requires.
If the exchange offer is consummated, Holders of the Indenture by reference to the Trust Indenture Act of 1939 (the “Trust Indenture Act”). The following description is only a summary of the material provisions of the Indenture. We urge you to read the Indenture because it,old notes who do not this description, defines your rights asexchange their old notes for new notes will vote together with the Holders of the Notes. You may request copiesnew notes for all relevant purposes under the Indenture. In that regard, the Indenture requires that certain actions by the Holders under the Indenture (including acceleration after an Event of Default as defined in “—Defaults” below) must be taken, and certain rights must be exercised, by Holders of specified minimum percentages of the aggregate principal amount of all outstanding Notes issued under the Indenture. In determining whether Holders of the requisite percentage in aggregate principal amount of Notes have given any notice, consent or waiver or taken any other action permitted or required under the Indenture, any old notes that remain outstanding after the exchange offer will be aggregated with the new notes, and the registrationHolders of these old notes and the new notes will vote together as a single class for all such purposes. Accordingly, all references in this Description of New Notes to specified percentages in aggregate principal amount of the outstanding Notes mean, at any time after the exchange offer for the old notes is consummated, such percentage in aggregate principal amount of such old notes and the new notes then outstanding.
The registered Holder of a Note will be treated as the owner of it for all purposes. Only registered Holders will have rights agreement at our address set forth under the heading “Where You Can Find More Information.”Indenture.
General
The Company issued $250.0 million of 6.375% Senior Notes due 2021 (the “Notes”) under an indenture, dated as of March 9, 2011 (the “Indenture”), among the Company, the Subsidiary Guarantors (as defined below) and The Bank of Nova Scotia Trust Company of New York as Trustee.
Principal of and interest on the Notes will be payable, and the Notes may be exchanged or transferred, at our office or agency in the Borough of Manhattan, The City and State of New York (which initially shall be the corporate trust office of the Trustee), except that, at our option, payment of interest may be made by check mailed to the address of the Holders as such address appears in the note register.
The Notes will be issued only in fully registered form, without coupons, in denominations of $2,000 and any integral multiple of $1,000 in excess thereof. No service charge shall be made for any registration of transfer or exchange of Notes, but we may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith.
Subject to the covenants described below under “—Certain covenants” and applicable law,Covenants,” the Company may issue additional Notes (the “Additional Notes”) under the Indenture in unlimited principal amounts.amounts (any Notes so issued, “Additional Notes”). The Notes and any Additional Notes subsequently issued under the Indenture would be treated as a single class for all purposes under the Indenture, in each case including without limitation, waivers, amendments, redemptions and offers to purchase. Unless the context otherwise requires, for all purposes of the Indenture and this “Description of theNew Notes,” references to the Notes include any Additional Notes actually issued.
Terms of the Notes
The $250.0$500 million aggregate principal amount of Notesnew notes offered hereby will be unsecured senior obligations of the Company. The Notes will mature on MarchApril 1, 20212023 and bear interest at the rate per annum shown on the
cover page hereofof the prospectus from the date of original issuance, or from the most recent date to which interest has been paid or provided for, payable semiannually to Holders of record at the close of business (whether or not a Business Day) on the FebruaryMarch 15 or AugustSeptember 15 immediately preceding the interest payment date on MarchApril 1 and SeptemberOctober 1 of each year, beginning SeptemberApril 1, 2011. Interest2015. If a payment date falls on overdue principala day that is not a Business Day, the payment made on such payment date will be made on the next succeeding Business Day with the same force and (to the extent permitted by law)effect as if made on overdue installments ofsuch payment date, and no additional interest will accrue, at 1% per annum in excessor default will occur, as a result of such rate.delayed payment. Interest on the Notes will be computed on the basis of a 360-day year of twelve 30-day months.
Optional redemptionRedemption
Except as set forth in the following two paragraphs or the last paragraph under the caption “—Change of Control,” the Notes will not be redeemable at the option of the Company prior to MarchApril 1, 2016.2018. Thereafter, the Notes will be redeemable, at our option, in whole or in part, at any time or from time to time, upon not less than 30 nor more than 60 days’ prior notice mailedas described below under “—Selection and Notice,” given by first-classfirst class mail to each Holder’s registered address (or sent electronically if The Depository Trust Company (“DTC”) is the recipient), at the following redemption prices (expressed in percentages of principal amount on the redemption date)amount), plus accrued and unpaid interest (including additional interest, if any) to, but not including, the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on March 1April 15 of the years set forth below:
Period | Redemption price | |||
2016 | 103.188 | % | ||
2017 | 102.125 | % | ||
2018 | 101.062 | % | ||
2019 and thereafter | 100.000 | % |
Year | Percentage | |||
2018 | 106.000 | % | ||
2019 | 104.000 | % | ||
2020 | 102.000 | % | ||
2021 and thereafter | 100.000 | % |
Prior to MarchApril 1, 2014,2018, we may at our option on one or more occasions redeem the Notes (which includes Additional Notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Notes (which includes Additional Notes, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 106.375%108.000%, plus accrued and unpaid interest (including additional interest, if any) to, but not including, the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), with an amount of cash equal to the net cash proceedsNet Cash Proceeds from one or more Stock Offerings;provided that at least 65% of suchthe aggregate principal amount of Notes (which includes Additional Notes, if any)issued on the Issue Date (including, for the avoidance of doubt, outstanding old notes) remains outstanding immediately after the occurrence of each such redemption (excluding Notes held directly or indirectly, by the Company or its Affiliates)Subsidiaries) and each such redemption occurs within 60180 days after the date of consummation of the relatedsuch Stock Offering.Offerings.
In addition, at any time and from time to time prior to MarchApril 1, 2016,2018, upon not less than 30 nor more than 60 days’ prior notice mailedas described below under “—Selection and Notice,” given by first-classfirst class mail to each Holder’s registered address (or sent electronically if DTC is the recipient), the Company may redeem the Notes, in whole but notor in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium, plus accrued and unpaid interest, (including additional interest, if any), if any, to, but not including, the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date).
Selection and Notice
In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee on apro rata basis by lot(or, in the case of Notes issued in global form as discussed under the caption “—Book-Entry, Delivery and Form,” based on such method as DTC or byits nominee or successor may require or, where such othernominee or successor is the Trustee, such method that most nearly approximatespro rata selection as the Trustee in its sole discretion shall deem to bedeems fair and appropriate, although nounless otherwise required by law).
No Note of $2,000 in original principal amount or less shallcan be redeemed in part. Notices of redemption will be mailed by first class mail (or sent electronically if DTC is the recipient) at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address, except that redemption notices may be sent more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture. Notices of redemption may be subject to one or more conditions specified in the notice of redemption.
If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Notenote in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note.
old note. Notes called for redemption without condition become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption.
Mandatory redemption; offersRedemption; Offers to purchase; open market purchasesPurchase; Open Market Purchases
We are not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, we may be required to offer to purchase Notes as described under the captions “—Change of control”Control” and “—Certain covenants—Covenants—Limitation on salesSales of assetsAssets and subsidiary stock.Subsidiary Stock.” We may at any time and from time to time purchaseacquire Notes in theby means other than a redemption, whether pursuant to a tender offer, open market purchase or otherwise.
Guarantees
The Subsidiary Guarantors, jointly and severally, as primary obligors and not merely as sureties, will irrevocably, fully and unconditionally guaranteeGuarantee (each, a “Subsidiary Guarantee”) on a senior basis the performance and the punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, all of the obligations of the Company under the Indenture and the Notes (all such obligations guaranteed by the Subsidiary Guarantors being herein called the “Guaranteed Obligations”).Notes. The Company derives a substantial portion of its operating income and cash flow from its subsidiaries,Subsidiaries, including the Subsidiary Guarantors.
Each Subsidiary Guarantee will be limited in amount to an amount not to exceed the maximum amount that can be guaranteedGuaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. If a Subsidiary Guarantee were to be rendered voidable, it could be subordinated by a court to all other indebtednessIndebtedness (including guaranteesGuarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and depending on the amount of such indebtedness,Indebtedness, a Subsidiary Guarantor’s liability on its Subsidiary Guarantee could be reduced to zero. See “Risk Factors— factors—Risks
Related to the New Notes—A court couldFederal and state statutes allow courts, under specific circumstances, to void our subsidiaries’ guarantees of the notes under fraudulent transfer laws.and require noteholders to return payments received from guarantors.”
Pursuant to the Indenture, a Subsidiary Guarantor may consolidate with, merge with or into, or transfer all or substantially all its assets to any other Person to the extent described below under “—Certain covenants— Covenants—Merger and consolidation”Consolidation”;provided however, that if such Person is not the Company or another Subsidiary Guarantor, the Subsidiary Guarantor’s obligations under the Indenture and its Subsidiary Guarantee must be expressly assumed by such other Person. However, uponPerson, unless such Subsidiary Guarantee is released as described in the sale or other disposition (including by waynext paragraph.
The Subsidiary Guarantee of consolidation or merger) of a Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of a Subsidiary Guarantor (in each case other than to the Company or an Affiliate of the Company) in compliance with the covenant described below under “—Limitation on sales of assets and subsidiary stock,” such Subsidiary Guarantor will be released automatically and relieved from all its obligations under its Subsidiary Guarantee. See “—Certain covenants—Merger and consolidation.”unconditionally:
(1) | in connection with any sale or other disposition of all or substantially all of the assets of that Subsidiary Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, if the sale or other disposition does not violate the covenant described under the caption “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock”; |
(2) | in connection with any sale or other disposition of such amount of Capital Stock of that Subsidiary Guarantor to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, including a disposition in connection with a Qualified Spin Transaction, if such sale or other disposition does not violate the covenant described under the caption “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock,” and the Subsidiary Guarantor ceases to be a Restricted Subsidiary of the Company as a result thereof; |
(3) | if the Company designates that Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the covenant described below under “—Certain Covenants—Designation of Unrestricted Subsidiaries”; |
(4) | upon Legal Defeasance or Covenant Defeasance as described under the caption “—Defeasance” or upon satisfaction and discharge of the Indenture as described under caption “—Satisfaction and Discharge”; |
(5) | at such time as such Subsidiary Guarantor becomes an Immaterial Subsidiary of the Company; or |
(6) | as provided in the covenant described blow under “—Certain Covenants—Future Subsidiary Guarantors.” |
Ranking
The indebtednessIndebtedness evidenced by the Notes and the Subsidiary Guarantees will be unsecured, general obligations of the Company and the relevant Subsidiary Guarantor, as the case may be, senior in right of payment, as set forth in the Indenture, to the payment of any future Indebtedness of the Company or the relevant Subsidiary Guarantor, as the case may be, that is expressly subordinated in right of payment to the Notes or the Subsidiary Guarantees. The Notes and Subsidiary Guarantees will bepari passu in right of payment with all existing and future unsecured senior obligations of the Company or the relevant Subsidiary Guarantor, as the case may be. The Notes and Subsidiary Guarantees will be effectively subordinated to Secured Indebtedness of the Company and the applicable Subsidiary Guarantor, to the extent of the value of the assetscollateral securing such Indebtedness, including the obligations of the Company under, and such Subsidiary Guarantor’s guarantee, if any, of the Company’s obligations with respect to,Guarantor under the Credit Facilities and the 2012 Notes.Agreement.
At JuneSeptember 30, 2011, the Company and the Subsidiary Guarantors would have2015, we had total consolidated long-term debt of approximately $331$3.7 billion, excluding approximately $281 million of secured indebtedness outstanding (excluding $337 million ofsecured letters of credit, outstandingand no subordinated indebtedness and we would have been able to incur up to approximately $774 million of additional indebtedness under our Credit
Facilities), an additional $1,902 million of unused commitments available to be borrowed under our Credit Facilities and an additional $130 million available under our accounts receivable securitizationcredit facility.
Although the Indenture containswill contain limitations on the amount of additional Indebtedness that the Company and the Subsidiary Guarantors may incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case,certain cases, such Indebtedness may be Secured Indebtedness. See “—Certain covenants— Covenants—Limitation on indebtedness.Indebtedness.”
The operations of the Company are currently conducted through its Subsidiaries and not all of its Subsidiaries will guaranteeGuarantee the Notes.
The Notes will be effectivelystructurally subordinated to all existing and future obligations, including Indebtedness, of any Restricted Subsidiaries of the Company that do not guaranteeGuarantee the Notes and of any Unrestricted Subsidiaries. Claims of creditors of these Subsidiaries, including trade creditors, will generally have priority as to the assets of these Subsidiaries over the claims of the Company and the holders of the Company’s Indebtedness, including the Notes. CNX Funding Corporation (a Receivables Subsidiary) will be an Unrestricted Subsidiary. The Notes
We own a 50% equity interest in CONE Gathering LLC, a Joint Venture with Noble Energy, which, in turn, indirectly owns the general partner interest in CONE Midstream Partners LP, a publicly traded master limited partnership (“MLP”) that owns and operates the gathering system for most of our Marcellus shale production. Our equity interest in this Joint Venture, and our 32.1% limited partnership interest in the MLP, had a total carrying value of approximately $184 million at September 30, 2015. Neither CONE Gathering LLC nor CONE Midstream Partners LP will qualify as our “Subsidiary” for purposes of the Indenture and, therefore neither will be structurally subordinatedsubject to the liabilities ofrestrictive covenants in the Unrestricted Subsidiaries.Indenture nor will they guarantee the Notes.
Same day settlementDay Settlement and paymentPayment
WeThe Company will make payments in respect of the Notes (includingboth principal premium, if any, and interest if any)on the Notes by wire transfer of immediately available funds to the accounts specified by the holder.Holder. The Notesnew notes are expected to be eligible to trade in DTC’s Same-Day Funds Settlement System, and any permitted secondary market trading activity in suchany Notes will, therefore, be required by DTC to be settled in immediately available funds.
Change of controlControl
(a) UponExcept as provided below, upon the occurrence of any of the following events (each a “Change of Control”), each Holder shall have the right to require that the Company purchaserepurchase such Holder’s Notes atpursuant to a purchase pricecash tender offer (a “Change of Control Offer”) on the terms set forth in the Indenture. In the Change of Control Offer, the Company will offer a payment in cash (the “Change of Control Payment”) equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, (including additional interest, if any), to, but not including, the date of purchase (the “Change of Control Purchase Date”) (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date), in accordance with the terms contemplated in paragraph (b) below:the next succeeding paragraph:
(1) | the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the |
(2) |
the shareholders of the Company shall have approved any plan of liquidation or dissolution of the Company; or |
(b)
Within 30 days following a Change of Control, the Company shall mail a notice to each Holder (or send electronically if DTC is the recipient) with a copy to the Trustee stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder’s Notes at a purchase price in cash equal to 101%the Change of the principal amount thereof plus accrued and unpaid interest, if any (including additional interest, if any), to the date of purchaseControl Payment (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts regarding such Change of Control; (3) the purchase dateChange of Control Purchase Date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed)sent); and (4) the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes purchased.
(c) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) ofRule 14e-1 under the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this covenant, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this covenant by virtue thereof.of such compliance.
ThePromptly following the expiration of the Change of Control purchase featureOffer, the Company will, to the extent lawful, accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer. Promptly after such acceptance, the Company will, on the Change of Control Purchase Date:
(1) | deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and |
(2) | deliver or cause to be delivered to the Trustee the Notes properly accepted together with an officers’ certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company. |
The paying agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes (or, if all the Notes are then in global form, make such payment through the facilities of DTC), and the Trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes may in certain circumstances make more difficultsurrendered, if any. The Company will publicly announce the results of the Change of Control Offer on or discourageas soon as practicable after the Change of Control Purchase Date.
Notwithstanding the preceding, (i) a sale or takeoverconversion of the Company and, thus, the removalor any of incumbent management. The Change of Control purchase feature isits Restricted Subsidiaries from a result of negotiations between the Company and the initial purchasers. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company would decide to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancingcorporation, limited partnership, limited liability company or other recapitalizations, that wouldform of entity to a limited liability company, corporation, limited partnership or other form of entity or (ii) an exchange of all of the outstanding Capital Stock in one form of entity for Capital Stock in another form of entity shall not constitute a Change of Control, underso long as immediately following such conversion or exchange the Indenture, but“persons” (as that could increaseterm is used in Sections 13(d) and 14(d) of the amount of Indebtedness outstanding at such time or otherwise affectExchange Act) who Beneficially Owned the Company’s capital structure or credit ratings. Restrictions on the abilityCapital Stock of the Company immediately prior to Incur additional Indebtedness are containedsuch transactions continue to Beneficially Own in the covenants described under “—Certain covenants—Limitation on indebtedness” and “—Limitation on liens.” Such restrictions can only be waived with the consentaggregate more than 50% of the HoldersVoting Stock of such entity, or continue to Beneficially Own sufficient Capital Stock in such entity to elect a majority of its directors, managers, trustees or other persons serving in principal amounta similar capacity for such entity or its general partner, as applicable, and, in either case no “person” Beneficially Owns more than 50% of the Notes then outstanding. Except for the limitations contained inVoting Stock of such covenants, however, the Indenture will not contain any covenantsentity or provisions that may afford Holders of the Notes protection in the event of a highly leveraged transaction.its general partner, as applicable.
Future indebtednessThe Credit Agreement contains, and agreements governing future Indebtedness of the Company may contain, prohibitions on the occurrence of certain events that would constitute a Change of Control or require such indebtednessIndebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the Notes could cause a default under such indebtedness,Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company’s ability to pay cash to the Holders of Notes following the occurrence of a Change of Control may be limited by the Company’s then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases.
The provisions under the Indenture relating to the Company’s obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in outstanding principal amount of the Notes.
The Company will not be required to make an offer to purchase the Notes as a result of a Change of Control if (a) a third party:party makes such offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture relating to the Company’s obligations to make such an offer and purchases all Notes validly tendered and not withdrawn under such an offer, (b) notice of redemption of all outstanding Notes has been given pursuant to the Indenture as described above under the caption “—Optional Redemption,” unless and until there is a default in payment of the applicable redemption price or (c) in connection with or in contemplation of any Change of Control, the Company has made an offer to purchase (an “Alternate Offer”) any and all Notes validly tendered at a cash price equal to or higher than the Change of Control Payment and has purchased all Notes properly tendered in accordance with the terms of the Alternate Offer. Notwithstanding anything to the contrary contained in the Indenture, a Change of Control Offer may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement or letter of intent is in place for the Change of Control at the time the Change of Control Offer is made.
In the event that, upon consummation of a Change of Control Offer or Alternate Offer, less than 10% in aggregate principal amount of the Notes (including Additional Notes, if any) that were originally issued are held by Holders other than the Company or Affiliates thereof, the Company will have the right, upon not less than 30 nor more than 60 days’ prior notice, given not more than 30 days following the purchase pursuant to the Change of Control Offer or Alternate Offer described above, to redeem all of the Notes that remain outstanding following such purchase at a redemption price equal to the Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest, if any, on the Notes that remain outstanding, to, but not including, the date of redemption (subject to the rights of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date).
Certain Covenants
Changes in Covenants When Notes Rated Investment Grade
Beginning on the date that:
(1) |
(2) |
Certain covenants
Changes in Covenants when Notes Rated Investment Grade
If on any date following the Issue Date:
no Default or Event of Default shall have occurred and be continuing, |
the covenants specifically listed under the following captions in this prospectus will no longer be applicable to the Notes:
“—Limitation on |
“—Limitation on |
“— |
“—Limitation on |
“—Limitation on |
(f) | “—Limitation on Affiliate Transactions”; |
(g) | clause (3) of the first paragraph under “—Merger and Consolidation”; and |
andThere can be no Defaultassurance that the Notes will ever achieve or Eventmaintain an Investment Grade Rating. After such covenants terminate, the Company may not designate any of Default will be deemed to have occurredits Subsidiaries as a result of a failure to comply with the foregoing covenants.Unrestricted Subsidiaries.
Limitation on indebtedness
(a) The Company shall not, and shall not permit any of its Restricted SubsidiarySubsidiaries to, Incur, directly or indirectly, incur, assume, Guarantee or otherwise become liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness; Indebtedness, and the Company will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any Preferred Stock;provided,however, that the Company or a Restricted Subsidiary Guarantorof the Company may Incurincur Indebtedness, the Company may issue Disqualified Stock and any Restricted Subsidiary of the Company may issue Preferred Stock if, on the date of such Incurrenceincurrence and after giving effect thereto, the Consolidated Coverage Ratio equals or exceeds 2.0 to 1.0.1.0;provided,further, that the amount of Indebtedness that may be incurred and the Preferred Stock that may be issued pursuant to the foregoing by Restricted Subsidiaries that are not Guarantors shall not exceed at any one time outstanding the greater of (a) $200 million and (b) 2.0% of the Company’s ACNTA.
(b) The limitation described in the foregoingpreceding paragraph (a) shall not prohibit the incurrence of the following Indebtedness:Indebtedness by the Company or any of its Restricted Subsidiaries or the issuance of Disqualified Stock by the Company or Preferred Stock by any Restricted Subsidiary of the Company (“Permitted Debt”):
(1) | Indebtedness of the Company or any |
(2) |
Indebtedness owed to and Preferred Stock issued to and, in each case, held by the Company or any of its Restricted |
the Notes (other than any Additional Notes) |
Indebtedness outstanding on the Issue Date (other than Indebtedness described in |
(5) | Refinancing Indebtedness in respect of Indebtedness incurred by the Company or any of its Restricted Subsidiaries in exchange for, or the net proceeds of which are used to Refinance any Indebtedness (other than intercompany Indebtedness), Disqualified Stock or Preferred Stock, as applicable, that was permitted by the Indenture to be incurred or issued pursuant to the first paragraph of this covenant or pursuant to clauses (3) and (4) of this |
(6) | Indebtedness represented by Capital Lease Obligations, mortgage financings, purchase money obligations or other Indebtedness, in each case incurred for the purpose of financing all or any part of the price or cost of design, construction, installation, development, repair or improvement of plant, property or equipment used in the business of the Company or any of its Restricted Subsidiaries, and Refinancing Indebtedness thereof, in |
(7) |
Guaranteed is subordinated to orpari passu with the Notes, then the Subsidiary |
Indebtedness under Hedging Contracts, Interest Rate Agreements and Currency Agreements entered into in the ordinary course of business for the purpose of limiting risks |
Indebtedness in respect of self-insurance obligations or bid, plugging and abandonment, appeal, reimbursement, performance, |
Permitted Marketing Obligations; |
in-kind obligations relating to oil |
Indebtedness under the Existing Receivables Financing and |
(13) | liability in |
(14) | Permitted Acquisition Indebtedness; and |
(15) | Indebtedness of the Company |
(c) For purposes of determining compliance with this covenant, inIn the event that an item of Indebtedness meets the criteria of more than one of the categories of Indebtedness described in clauses (1) through (15) of the immediately preceding paragraph or is entitled to be Incurredincurred pursuant to the first paragraph (a) of this covenant, the Company shall, in its sole discretion, divide, classify or reclassify (or later divide, classify, redivide or reclassify) such item of Indebtedness in any manner that complies with this covenant (including splitting into multiple exceptions) and will only be required to include the amount and type of such Indebtedness in one of such clauses of the immediately preceding paragraph or pursuant
to the first paragraph (a) of this covenant;provided that Indebtedness of the Company and any of its Restricted Subsidiaries outstanding under the Credit Agreement as of the Issue Date and Indebtedness outstanding under the CNX Gas Credit Agreement as of the Issue Date shall initially be deemed to have been Incurredincurred pursuant to clause (1) of paragraph (b)the preceding paragraph.
The accrual of interest or Preferred Stock or Disqualified Stock dividends or distributions, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of Preferred Stock or Disqualified Stock as Indebtedness due to a change in accounting principles, and the payment of dividends or distributions on Preferred Stock or Disqualified Stock in the form of additional securities of the same class of Preferred Stock or Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Preferred Stock or Disqualified Stock
for purposes of this covenant andcovenant;providedthat the amount thereof shall not be reclassified.included in the calculation Consolidated Interest Expense of the Company as accrued to the extent required by the definition of such term.
Limitation on restricted paymentsRestricted Payments
(a) The Company shall not, and shall not permit any of its Restricted Subsidiary,Subsidiaries to, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment:
(1) | a Default (other than a Reporting Default) shall have occurred and be continuing (or would result therefrom); |
(2) | the Company is not able to |
(3) | the aggregate amount of such Restricted Payment and all other Restricted Payments since |
50% of the |
the aggregate Net Cash Proceeds and the Fair Market Value of property or securities other than cash received (including Equity Interests of Persons other than the Company or a Subsidiary of the Company, engaged primarily in the Permitted Business or assets used or useful in the Permitted Business) in each case by the Company since January 1, 2010 as a contribution to its common equity capital or from the issuance or sale of its |
the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company’s balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to |
(d) | to the extent not already included in Consolidated Net Income for such period, if any Restricted Investment is that was made by the Company or any of its Restricted Subsidiaries after January 1, 2010 is sold for cash (other than to the Company or any Subsidiary of the Company) or otherwise cancelled, liquidated, released or repaid for cash, the cash return or other reduction with respect to such Restricted Investment resulting from such sale, cancellation, liquidation, release or repayment; |
(e) | the extent that any Unrestricted Subsidiary of the Company or a Restricted Subsidiary of the Company designated as such after January 1, 2010 is redesignated as a Restricted Subsidiary pursuant to the terms of the Indenture or is merged or consolidated with or into, or transfers or otherwise disposes of all of substantially all of its assets to or is liquidated into, the Company or a Restricted Subsidiary of the Company after January 1, 2010, the lesser of, as of the date of such |
redesignation, merger, consolidation, transfer, disposition or liquidation, (i) the Fair Market Value of the Company’s Restricted Investment in such Subsidiary (or of the properties or assets disposed of, as applicable) as of the date of such redesignation, merger, consolidation, transfer, disposition or liquidation and (ii) such Fair Market Value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary after January 1, 2010; and |
(b) As of September 30, 2015, the amount available for Restricted Payments pursuant to this clause (3) would have been approximately $2,766 million.
The provisions of the foregoing paragraph (a) shall not prohibit:
(1) | the payment of any dividends |
(2) | the making of any |
Company (other than Disqualified Stock and other than |
(3) | any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations or Disqualified Stock of the Company or Subordinated Obligations or Preferred Stock of any Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Subordinated Obligations or Equity Interests of the |
(4) | repurchases of Subordinated Obligations of the Company or any Guarantor at a purchase price not greater than (i) 101% of the principal amount of such |
(a) | in the case of a change of control, the Company has first complied with and fully satisfied its obligations under the provisions described under the caption “—Change of Control”; or |
(b) | in the case of an asset disposition, the Company has complied with and fully satisfied its obligations in accordance with the covenant described under the caption “—Limitation on Sales of Assets and Subsidiary Stock”; |
(5) | the repurchase, redemption |
provided that such amount shall not exceed $10 million at any time);provided further |
the repurchase of Equity Interests deemed to occur upon the exercise of stock or other equity options to the extent such Equity Interests represent a portion of the exercise price of those stock or other equity options and any repurchase or other acquisition of Equity Interests made in lieu of withholding taxes in connection with any exercise or exchange of stock options, warrants, incentives or other rights to acquire Equity Interests; |
(7) | dividends on the Company’s |
(8) | the declaration and payment of regularly scheduled or accrued dividends or distributions to holders of any class or series of Disqualified Stock of the Company or any Preferred Stock of any Restricted Subsidiary of the Company issued on or after the Issue Date in accordance with the covenant described under the caption “—Limitation on Indebtedness”; |
(9) | payments of cash, dividends, distributions, advances or other Restricted Payments by the Company or any of its Restricted Subsidiaries to allow the payment of cash in lieu of the issuance of fractional shares upon (i) the exercise of options or warrants or (ii) the conversion or exchange of Equity Interests of any such Person; |
(10) | payments to dissenting stockholders of the Company not to exceed $5 million in the aggregate made (a) pursuant to applicable law or (b) in connection with the settlement or other satisfaction of legal claims made pursuant to or in connection with a consolidation, merger or transfer of assets in connection with a transaction not prohibited by the Indenture; |
(11) | Equity Repurchases (a) in an aggregate amount not in excess of $500 million and (b) in excess of the amount provided in clause (a) provided that, in the case of (b), immediately after giving effect to such Restricted Payment and the incurrence of any Indebtedness to finance such repurchase, as if it had occurred at the beginning of the most recently ended four full fiscal quarters for which internal financial statements of the Company are available, the Total Leverage Ratio would not be greater than 2.75 to 1.0;provided, however |
(13) | Restricted Payments in an aggregate amount since January 1, 2010 not to exceed |
For the purposes of this covenant, a sale of Equity Interests or Subordinated Obligations shall be deemed “substantially concurrent” if such sale occurs within 120 days of the applicable exchange. For purposes of determining compliance with the foregoing covenant, in the event that a Restricted Payment or other transaction governed by this covenant meets the criteria of more than one of the categories of Restricted Payments described in clauses (1) through (13) of the preceding paragraph, or is permitted pursuant to the first paragraph of this covenant, the Company will be permitted to classify or divide (or later classify, reclassify, divide or redivide in whole or in part in its sole discretion) such Restricted Payment or other such transaction (or portion thereof) on the date made or later classify, reclassify, divide or re-divide such Restricted Payment or other such transaction (or portion thereof) in any manner that complies with this covenant. The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment (or, in the case of a dividend or distribution, on the date of declaration) of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Limitation on restrictionsRestrictions on distributionsDistributions from restricted subsidiariesRestricted Subsidiaries
The Company shall not, and shall not permit any of its Restricted SubsidiarySubsidiaries to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary (A) to pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness owed toof the Company to:
(1) | pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness owed to the Company or any Restricted Subsidiary of the Company (provided,however, that (i) the priority that any series of Preferred Stock of a Restricted Subsidiary of the Company has in receiving dividends or liquidating distributions shall not be deemed to be a restriction on the ability to pay dividends or make other distributions on its Capital Stock for purposes of this covenant and (ii) the subordination of Indebtedness owed to the Company or any Restricted Subsidiary to other Indebtedness incurred by any Restricted Subsidiary shall not be deemed a restriction on the ability to pay Indebtedness); |
(2) | make any loans or advances to the Company or a Restricted Subsidiary of the Company (it being understood that the subordination of loans or advances made to the Company or any Restricted Subsidiary to other Indebtedness incurred by the Company or any Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances); or |
(3) | sell, lease or transfer any of its property or assets to the Company or a Restricted Subsidiary of the Company. |
However, the preceding restrictions will not apply to encumbrances or a Restricted Subsidiary, (B) to make any loansrestrictions existing under or advances to the Company or a Restricted Subsidiary or (C) to transfer any of its property or assets to the Company or a Restricted Subsidiary, except:by reason of:
(1) | any encumbrance or restriction in |
(2) | the Indenture, the Notes and the Subsidiary Guarantees; |
(3) | any encumbrance or restriction with respect to a Restricted Subsidiary of the Company pursuant to an agreement relating to any Indebtedness |
any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness |
contained in any amendment to an agreement referred to in clause (1), (2) or |
(5) | (a) customary non-assignment provisions in any contract, license, lease or sale or exchange agreement and (b) cash, other deposits, or net worth or similar requirements, in each case, imposed by suppliers, customers or lessors under contracts or leases, in the case of each of clauses (a) and (b), entered into in the ordinary course of business; |
(6) | in the case of clause |
any restriction with respect to a Restricted Subsidiary of the Company imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; |
any encumbrance or restriction in any agreement or instrument in the Existing Receivables |
(9) | Refinancing Indebtedness;provided that the encumbrances or restrictions contained in the agreements governing such Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced, as determined in good faith by the Company; |
(10) | Liens securing Indebtedness otherwise permitted to be incurred under the provisions of the covenant described below under the caption “—Limitation on Liens” that limit the right of the debtor to dispose of the assets subject to such Liens; |
(11) | provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements (including, without limitation, agreements entered into in connection with a Restricted Investment) entered into with the approval of the Company’s Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements; |
(12) | encumbrances or restrictions applicable only to a Restricted Subsidiary of the Company that is not a Domestic Subsidiary; |
(13) | customary encumbrances and restrictions contained in agreements of the types described in the definition of “Permitted Business Investments”; |
(14) | agreements governing Hedging Contracts, Interest Rate Agreements and Currency Agreements incurred in the ordinary course of business; |
(15) | any encumbrance or restriction with respect to an Unrestricted Subsidiary pursuant to or by reason of an agreement that the Unrestricted Subsidiary is a party to or entered into before the date on which such Unrestricted Subsidiary became a Restricted Subsidiary of the Company;provided that such agreement was not entered into in anticipation of the Unrestricted Subsidiary becoming a Restricted Subsidiary of the Company and any such encumbrance or restriction does not extend to any assets or property of the Company or any other Restricted Subsidiary of the Company other than the assets and property of such Unrestricted Subsidiary; |
(16) | provisions limiting the distribution or dividend of assets or any portion of Capital Stock of SpinCo in connection with a Qualified Spin Transaction; and |
any encumbrances or restrictions imposed by any amendments |
Limitation on salesSales of assetsAssets and subsidiary stockSubsidiary Stock
(a) The Company will not, and will not permit any of its Restricted SubsidiarySubsidiaries to, directly or indirectly, consummate any Asset Disposition unless:
(1) | the Company or |
(2) | at least 75% of the consideration received by the Company or |
(a) | any liabilities, as shown on the Company’s most recent consolidated balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by |
their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee by written agreement that releases the Company or such Restricted Subsidiary from or indemnifies the Company or such Restricted Subsidiary against further liability; |
(b) | with respect to any Asset Disposition of Oil and Gas Properties by the Company or any Restricted Subsidiary where the Company or such Restricted Subsidiary retains an interest in such property, the costs and expenses of the Company or such Restricted Subsidiary related to the exploration, development, completion or production of such properties and activities related thereto which the transferee (or an Affiliate thereof) agrees to pay; |
(c) | any securities, notes or other obligations received by the Company or any Restricted Subsidiary from the transferee that are, within 180 days of the Asset Disposition, converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion; and |
(d) | any Designated Non-Cash Consideration received by the Company or such Restricted Subsidiary in such Asset Disposition having an aggregate Fair Market Value, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (d), not to exceed an amount equal to 7.5% of the Company’s ACNTA (determined at the time of receipt of such Designated Non-Cash Consideration), with the Fair Market Value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value; and |
(3) | an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or |
The requirement of clauses (3)(b) and (3)(c) of the preceding paragraph shall be deemed to be satisfied if a bona fide binding contract committing to make the investment, acquisition or expenditure referred to therein is entered into by the Company (or any Restricted Subsidiary of the Company) with a Person other than a Restricted Subsidiary of the Company within the time period specified in the preceding paragraph and such Net Available Cash is subsequently applied in accordance with such contract within six months following the date such agreement is entered into.
Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Temporary Cash Investments or applied to temporarily reduce revolving credit Indebtedness.
For the purposes of this covenant, any liabilities, as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and Subordinated Obligations)of the Company may apply the Net Available Cash to temporarily reducing Indebtedness under any Credit Facility or otherwise invest the Net Available Cash in any manner that are assumedis not prohibited by the transferee of any such assets pursuant to (1) a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability or (2) an assignment agreement that includes, in lieu of such a release, the agreement of the transferee or its parent company to indemnify and hold harmless the Company or such Restricted Subsidiary from and against any loss, liability or cost in respect of such assumed liability, shall be deemed to be cash or cash equivalents.Indenture.
(b) The amount of Net Available Cash not applied or invested as provided above will constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds equals or exceeds $50.0$50 million, the Company shall make suchan offer to purchase Notes and other Pari Passu Indebtedness of the Company (an “Offer”) on or before the 366th day after the later of the date of such Asset Disposition or the receipt of such Net Available Cash,within 30 days, and shall purchase Notes tendered pursuant to an Offer by the Company for the Notes (and such other Pari Passu Indebtedness of the Company) at a purchase price of 100% of their principal amount without premium, plus accrued but unpaid interest (including additionalto, but not including, the date of purchase, subject to the right of Holders of record on the relevant record date to receive interest if any)on the relevant interest payment date (or, in respect of such other Pari Passu Indebtedness of the Company, such lesser price, if any, as may be provided for by the terms of such Pari PassuPariPassu Indebtedness of the Company) in accordance with the procedures (including prorating in the event of oversubscription) set forth in the Indenture. If the aggregate purchase price of the securities tendered exceeds the amount of Excess Proceeds, the Company will select the securities to be purchased on apro rata basis (except that any Notes represented by a Note in global form will be selected by such method as DTC or its nominee or successor may require or, where such nominee or successor is the Trustee, a method that most nearly
approximatespro rata selection as the Trustee deems fair and appropriate unless otherwise required by law) but in round denominations, which in the case of the Notes will be denominations of $2,000 principal amount or integral multiples of $1,000 in excess thereof. Upon completion of such an Offer, to purchase, Excess Proceeds will be deemed to be reset to zero.
(c) The provisions of the Indenture relative to the Company’s obligation to make an offer to repurchase the Notes as a result of an Asset Disposition may be waived or modified with the consent of a majority in principal amount of the outstanding Notes (including, without limitation, Additional Notes, if any).
The Company will comply, to the extent applicable, with the requirements of Section 14(e) ofRule 14e-1 under the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue of its compliance with such securities laws or regulations.
Limitation on affiliate transactionsAffiliate Transactions
(a) The Company shall not, and shall not permit any of its Restricted SubsidiarySubsidiaries to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an “Affiliate Transaction”) unless the terms thereof:
(1) | are |
(2) | if such Affiliate Transaction involves an amount in excess of |
(b) The following items will not be deemed to be Affiliate Transactions under the Indenture and, therefore, will not be subject to the provisions of the foregoing paragraph (a) shall not prohibit:paragraph:
(1) | any employment agreement, employee benefit plan, officer or director indemnification agreement or any similar arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto; |
(2) | any sale of |
the sale or issuance to an Affiliate of the Company of Capital Stock of the Company that does not constitute Disqualified Stock, and the sale to an Affiliate of the Company of Indebtedness (including Disqualified Stock) of the Company in connection with an offering of such Indebtedness in a market transaction and on terms substantially identical to those of other purchasers in such market transaction; |
transactions |
(5) | transactions between the Company or any Restricted Subsidiary of |
the payment of reasonable fees to and reimbursements of expenses (including travel and entertainment expenses and similar expenditures in the ordinary course of business) of employees, officers, directors |
transactions between or among the Company and its Restricted Subsidiaries; |
Restricted Payments that are permitted by the provisions of the Indenture described above under the caption “—Limitation on |
sales, contributions, conveyances and other transfers of Receivables and related assets of the type specified in the definition of Qualified Receivables Transaction to a Receivables Subsidiary or any other similar transactions in connection with any Qualified Receivables Transaction; |
any transaction in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an accounting, appraisal or investment banking firm of national standing stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or that such transaction meets the requirements of clause (1) of the preceding paragraph; |
(12) | loans or advances to employees, officers or directors in the ordinary course of business and approved by the Company’s Board of Directors in an aggregate principal amount not to exceed $7.5 million outstanding at any one |
(13) | agreements and transactions entered into or effected in connection with a Qualified Spin Transaction; and |
(14) | (a) Guarantees by the Company or any of its Restricted Subsidiaries of performance of obligations of the Company’s Unrestricted Subsidiaries in the ordinary course of business, except for Guarantees of Indebtedness and (b) pledges by the Company or any Restricted Subsidiary of the Company of (or any Guarantee by the Company or any Restricted Subsidiary limited in recourse solely to) Equity Interests in Unrestricted Subsidiaries for the benefit of lenders or other creditors of the Company’s Unrestricted Subsidiaries. |
Limitation on liensLiens
The Company shall not, and shall not permit any of its Restricted SubsidiarySubsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Lien (other(the “Initial Lien”), other than Permitted Liens)Liens, of any nature whatsoever against any assets of the Company or any Restricted Subsidiary of the Company (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, which Lien secures Indebtedness or trade payables, unless contemporaneously therewith:
(1) | in the case of any such Lien securing an obligation that rankspari passu with the Notes or a |
(2) | in the case of any such Lien securing an obligation that is subordinated in right of payment to the Notes or a |
in each case,provided that any Lien created for so long asthe benefit of the Holders of the Notes pursuant to this covenant shall provide by its terms that such obligation is secured by suchLien shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien.
Limitation on Sale and Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into any Sale/Leaseback Transaction;providedthat the Company or any Restricted Subsidiary may enter into a Sale/ Leaseback Transaction if:
Merger and consolidationConsolidation
The Company shall not consolidate with or merge with or into, or convey, transfer, lease or lease,otherwise dispose of, in one transaction or a series of related transactions, all or substantially all the assets of the Company and its Restricted Subsidiaries, taken as a whole, to any Person, unless:
(1) |
(2) | immediately after giving effect to such transaction, |
(3) | immediately after giving effect to such transaction and any related financing transaction on a pro forma basis as if the same had occurred at the beginning of the applicable four-quarter period, either (i) the Company or the Successor Company (if other than the Company) would be able to |
(4) | the Company |
provided, however,that clause (3) shall not be applicable to any such transaction solely between the Company and any Restricted Subsidiary.
For purposes of this paragraph, except as provided in the foregoing,next paragraph, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitute all or substantially all of the properties and assets of the Company, will be deemed to be the transfer of all or substantially all of the properties and assets of the Company.
The foregoing notwithstanding, the restrictions in the preceding paragraph will not apply to any disposition of assets resulting from a Qualified Spin Transaction that is effected in accordance with the definition of that term. Furthermore, any Restricted Subsidiary of the Company may consolidate with or merge into the Company and the Company may consolidate with or merge into or dispose of all or substantially all of its assets to any Guarantor, without complying with the foregoing clause (3) in connection with any such consolidation, merger or disposition.
The foregoing notwithstanding, the Company is permitted to reorganize as any other form of entity in accordance with the following proceduresprovided that:
(1) | the reorganization involves the conversion (by merger, sale, contribution or exchange of assets or otherwise) of the Company into a form of entity other than a corporation formed under Delaware law; |
(2) | the entity so formed by or resulting from such reorganization is an entity organized or existing under the laws of the United States, any state thereof or the District of Columbia; |
(3) | the entity so formed by or resulting from such reorganization assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee; |
(4) | immediately after such reorganization no Default exists; and |
(5) | such reorganization is not materially adverse to the Holders or Beneficial Owners of the Notes. |
The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, and the predecessor Company, except in the case of a lease, shall be released from the obligation to pay the principal of and interest on the Notes.
The Company will not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer, lease or otherwise dispose of, in one transaction or a series of transactions, all or substantially all of its assets to any Person (other than the Company or a Subsidiary Guarantor) unless:unless either the Subsidiary Guarantee of such Subsidiary Guarantor is released as described above under “—Guarantees” or:
(1) | the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and |
(2) | immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and |
(3) | the Company shall have complied with certain additional conditions contained in the Indenture. |
The provisions of clauses (1) and (2) above shall not apply to any one or more transactions which constitute an Asset Disposition if the Company has complied with the applicable provisions of the covenant described under “—Limitation on sales of assets and subsidiary stock” above.
SEC reportsReports
Whether or not required by the Securities and Exchange Commission (the “SEC”), so long as any Notes are outstanding, the Company will furnish or make available to the Holders of Notes, within the time periods specified in the SEC’s rules and regulations for a company that is subject to Section 13(a) or 15(d) of the Exchange Act:
(1) | all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by the Company’s certified independent accountants; and |
(2) | all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports; |
providedthat any such above information or reports filed with the EDGAR system of the SEC (or any successor system) and available publicly on the Internet shall be deemed to be furnished or made available to the Holders of Notes.
TheIf the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries and such Unrestricted Subsidiaries hold more than 10.0% of the Adjusted Consolidated Net Tangible Assets of the Company in the aggregate, then the quarterly and annual financial information required by the preceding paragraph shall include
a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Company’s Unrestricted Subsidiaries.
In addition, whether or not required by the SEC, the Company will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the SEC’s rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The Company agrees that it will not take any action for the purpose of causing the SEC not to accept such filings. If, notwithstanding the foregoing, the SEC will not accept such filings for any reason, the Company will post the reports specified in the preceding sentence on its website within the time periods that would apply if the Company were required to file those reports with the SEC.
The Company and the Subsidiary Guarantors have agreedwill agree in the Indenture that, for so long as any Notes remain outstanding and are “restricted securities” under Rule 144 of the Securities Act, if at any time they are not required to file with the SEC the reports required by the first paragraph of this covenant, the Company and the Subsidiary Guarantors will furnish to Holders of Notes and securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Future subsidiary guarantorsSubsidiary Guarantors
If, after the Issue Date, (a)any Domestic Subsidiary of the Company that is not an Immaterial Subsidiary and that is not already a Subsidiary Guarantor Guarantees or otherwise becomes an obligor with respect to any other Indebtedness of the Company or any Restricted Subsidiary Guarantor in excess of the De Minimis Amount, then such Domestic Subsidiary will become a Guarantor by executing a supplemental indenture and delivering it to the Trustee within 20 Business Days of the date on which it Guaranteed or became an obligor with respect to such Indebtedness;provided, however, that the preceding shall acquire or create another domestic wholly ownednot apply to Subsidiaries of the Company that have properly been designated as Unrestricted Subsidiaries in accordance with the Indenture for so long as they continue to constitute Unrestricted Subsidiaries. Notwithstanding the preceding, any Subsidiary (other thanGuarantee of a Domestic Subsidiary that has been designatedwas incurred pursuant to this paragraph shall provide by its terms that it shall be automatically and unconditionally released at such time as such Subsidiary Guarantor ceases to Guarantee or otherwise be an Unrestricted Subsidiary), (b)obligor with respect to any Unrestricted Subsidiary that is a domestic wholly owned Subsidiary is redesignated a Restricted Subsidiary or (c) any Restricted Subsidiary (including any newly formed, newly acquired or newly redesignated Restricted Subsidiary) Guarantees anyother Indebtedness of the Company then,or any other Subsidiary Guarantor in each such case,excess of the De Minimis Amount.
Designation of Unrestricted Subsidiaries
The Board of Directors of the Company shall, within 30 days following such event, cause suchmay designate any Restricted Subsidiary to:to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary designated as Unrestricted will be deemed to be either an Investment made as of the time of the designation that will reduce the amount available for Restricted Payments under the covenant described above under the caption “—Limitation on Restricted Payments” or represent a Permitted Investment under one or more clauses of the definition of Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
DefaultsAny designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a copy of a resolution of the Board of Directors giving effect to such designation and an officers’ certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described above under the caption “—Limitation on Restricted Payments.” If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption “—Limitation on Indebtedness,” the Company will be in default of such covenant.
AnThe Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company;provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant
described under the caption “—Limitation on Indebtedness,” calculated on a pro forma basis as if suchdesignation had occurred at the beginning of the applicable reference period; and (2) no Default or Event of Default would be in existence following such designation.
Defaults
Each of the following is defined in the Indenture as:an “Event of Default”:
(1) | a default in |
(2) | a default in the payment of principal of any Note when |
(3) | the failure by the Company for 30 days after written notice has been given to the Company by the Trustee or Holders of at least 25% in principal amount of the Notes then outstanding to comply with any of its obligations to offer to purchase or purchase Notes in the covenants described above under “—Change of Control” and “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock” or with its obligations under “—Certain |
(4) | the failure by the Company |
(5) | the failure by the Company for 60 days after written notice to the Company by the Trustee or Holders of at least 25% in principal amount of the Notes then outstanding to comply |
(6) | default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness |
(a) | is caused by a failure to pay principal of, premium, if any, on, or interest, if any, on, such Indebtedness prior to the expiration of the grace period |
(b) | results in the |
and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $75 million or more;provided,however, that if, prior to any acceleration of the Notes, (i) any such Payment Default is cured or waived, (ii) any such acceleration is rescinded, or (iii) such Indebtedness is repaid during the 30 Business Day period commencing upon the end of any applicable grace period for such Payment Default or the occurrence of such acceleration, as the case may be, any Default or Event of Default (but not any acceleration of the Notes) caused by such Payment Default or acceleration shall be automatically rescinded, so long as such rescission does not conflict with any judgment, decree or applicable law;
(7) | certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the “bankruptcy provisions”) |
(8) | any judgment or decree for the payment of money in an |
Significant Subsidiary |
(9) | any Subsidiary Guarantee of any Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Subsidiary Guarantee and the Indenture) or is declared null and void and unenforceable or found to be invalid or any Subsidiary Guarantor denies its liability under its Subsidiary Guarantee (other than by reason of release of a Subsidiary Guarantor from its Subsidiary Guarantee in accordance with the terms of the Indenture and the Subsidiary Guarantee) (the “guarantee default provision”). |
However, a default under clause (4) or (5) will not constitute an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes notify the Company of the default and the Company does not cure such default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the principal of and interest on all the Notes will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders of the Notes. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the Trustee in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders of the Notes unless such Holders have furnished to the Trustee reasonable indemnity or security satisfactory to it against any loss, liability or expense. Except to enforce the right to receive payment of principal premium (if any) or interest when due, no Holder of a Note may pursue any remedy with respect to the Indenture or the Notes unless:
(1) | such Holder has previously given the Trustee notice that an Event of Default is continuing; |
(2) | Holders of at least 25% in principal amount of the outstanding Notes have requested in writing the Trustee to pursue the remedy; |
(3) | such Holders have |
(4) | the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and |
(5) | the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction 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 givenwill have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse 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 of a Note or that would involve the Trustee in personal liability.
The Indenture provideswill provide that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder of the Notes (or send electronically if DTC is the recipient) notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any Note, the Trustee may withhold notice if and so long as a committee of its trust officersit determines that withholding notice is not opposed to the interest of the Holders of
the Notes. In addition, the Company iswill be required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company also iswill be required to deliver to the Trustee, within 30 days afterof becoming aware of the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof.
No Personal Liability of Directors, Officers, Employees and Stockholders No director, officer, employee, manager, incorporator, member, partner or stockholder or other owner of Capital Stock of the Company or any of its Subsidiaries, as such, will have any liability for any obligations of the Company or the Subsidiary Guarantors under the Notes, the Indenture or the Subsidiary Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of a Note by accepting the Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Amendments and waivers
Subject to certain exceptions, the Indenture may be amended with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange for the Notes) and any past default or compliance with any provisions may also be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each Holder of an outstanding Note affected thereby, an amendment or waiver may not, among other things:
(1) | reduce the amount of Notes whose Holders must consent to an |
(2) | reduce the rate of or extend the time for payment of interest on any Note; |
(3) | reduce the principal of or change the Stated Maturity of any Note; |
(4) | reduce the premium payable upon |
(5) | make any Note payable in money other than that stated in the Note; |
(6) | impair the right of any Holder of the Notes to receive payment of principal of and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes; |
(7) | make any change in the amendment provisions which require each Holder’s consent or in the waiver provisions; |
(8) | make the Notes or the Subsidiary Guarantees subordinated in right of payment to any other obligation; or |
(9) | make any change in any Subsidiary Guarantee that could adversely affect such Holder. |
Without the consent of any Holder of the Notes, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or the Notes to:
(1) | cure any ambiguity, omission, defect or inconsistency; |
(2) | provide for the assumption by a successor |
(3) | provide for uncertificated Notes in addition to or in place of certificated |
(4) | add |
(5) | secure the |
(6) | add to the covenants of the Company for the benefit of the Holders of the Notes or surrender any right or power conferred upon the Company or any Subsidiary Guarantor, including to comply with the |
(7) | make any change that does not adversely affect the rights of any Holder of the Notes; |
(8) | comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act; |
(9) | provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of the Issue Date; |
(10) | evidence or provide for the acceptance of appointment under the Indenture of a successor Trustee; or |
(11) | conform the text of the Indenture, the Notes or the Subsidiary Guarantees to any provision of this “Description of New Notes,” as certified to the |
The consent of the Holders of the Notes is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture requiring the consent of the Holders becomes effective, the Company is required to mail to Holders of the Notes (or sent electronically if DTC is the recipient) a notice briefly describing such amendment. However, the failure to give such notice to all Holders of the Notes, or any defect therein, will not impair or affect the validity of the amendment.
Transfer
The Notes will be issued in registered form and will be transferable only upon the surrender of the Notes being transferred for registration of transfer. The Company may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and exchanges.
Defeasance
The Company at any time may terminate all its obligations under the Notes and the Indenture (“legal defeasance”Legal Defeasance”), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. The Company at any time may terminate its obligations under “—Change of control”Control” and under the covenants described under the caption “—Certain covenants”Covenants” (other than the covenant described under the caption “—Certain Covenants—Merger and consolidation”Consolidation”), the operation of the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries, the judgment default provision and the guarantee default provision described under the caption “—Defaults” above and the limitations contained in clause (3) underof the first paragraph ofunder the caption “—Certain covenants—Covenants—Merger and consolidation” aboveConsolidation” (“covenant defeasance”Covenant Defeasance”).
The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasanceCovenant Defeasance option. If the Company exercises its legal defeasanceLegal Defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasanceCovenant Defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (3), (4), (5), (6), (7) (with respect only to Significant Subsidiaries) or (8) under “—Defaults” above or because of the failure of the Company to comply with clause (3) underof the first paragraph ofunder “—Certain covenants—Covenants—Merger and consolidation” above.Consolidation.” If the Company exercises its legal defeasanceLegal Defeasance option or its covenant defeasanceCovenant Defeasance option, each Subsidiary Guarantor will be released from all its obligations with respect to its Subsidiary Guarantee.
In order to exercise either defeasance option,Legal Defeasance or Covenant Defeasance:
(1) | the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in amounts as will be sufficient, in the opinion of an accounting, appraisal or investment banking firm of national standing, to |
pay the principal of, and interest on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date (provided that if such redemption is made as provided in the third paragraph under “—Optional Redemption,” (x) the amount of cash in U.S. dollars, Government Securities, or a combination thereof, that must be irrevocably deposited will be determined using an assumed Applicable Premium calculated as of the date of such deposit and (y) the depositor must irrevocably deposit or cause to be deposited additional money in trust on the redemption date as necessary to pay the Applicable Premium as determined by such redemption date); |
(2) | in the case of Legal Defeasance, the Company must deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; |
(3) | in the case of Covenant Defeasance, the Company must deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; |
(4) | no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit (and any similar concurrent deposit relating to other Indebtedness), and the granting of Liens to secure such borrowings); |
(5) | such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the Indenture and the agreements governing any other Indebtedness being defeased, discharged or replaced) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; |
(6) | the Company must deliver to the Trustee an officers’ certificate stating that the deposit was not made by the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and |
(7) | the Company must deliver to the Trustee an officers’ certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. |
Satisfaction and Discharge
The Indenture will be satisfied and discharged and will cease to be of further effect as to all Notes issued thereunder (except as to surviving rights of registration of transfer or exchange of the Notes and as otherwise specified in the Indenture), when:
(1) | either: |
(a) | all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or |
(b) | all Notes that have not been delivered to the Trustee for cancellation have become due and payable or will become due and payable within one year by reason of the giving of a notice of |
redemption or otherwise and either the Company or any Subsidiary Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal of, or interest on, the Notes to the date of Stated Maturity or redemption (providedthat if such redemption is made as provided in the third paragraph under “—Optional Redemption,” (i) the amount of cash in U.S. dollars, Government Securities, or a combination thereof, that must be irrevocably deposited will be determined using an assumed Applicable Premium calculated as of the date of such deposit and (ii) the depositor must irrevocably deposit or cause to be deposited additional money in trust on the redemption date as necessary to pay the Applicable Premium as determined by such date); |
(2) | in respect of clause (1)(b), no Event of Default has occurred and is continuing on the date of the deposit (other than an Event of Default resulting from the borrowing of funds to be applied to such deposit and any similar deposit relating to other Indebtedness and, in each case, the granting of Liens to secure such borrowings) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Subsidiary Guarantor is a party or by which the Company or any Subsidiary Guarantor is bound (other than with respect to the borrowing of funds to be applied concurrently to make the deposit required to effect such satisfaction and discharge and any similar concurrent deposit relating to other Indebtedness, and in each case the granting of Liens to secure such borrowings); |
(3) | the Company has paid or caused to be paid all other sums payable by the Company under the Indenture; and |
(4) | the Company has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at Stated Maturity or on the redemption date, as the case may be. |
In addition, the Company must irrevocably deposit in trust (the “defeasance trust”) with the Trustee money or U. S. Government Obligations for the payment of principaldeliver an officers’ certificate and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an opinion of counsel to the effectTrustee stating that Holders of the Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such depositall conditions precedent to satisfaction and defeasance and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as woulddischarge have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such opinion of counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law).satisfied.
Concerning the Trustee
TheWells Fargo Bank, of Nova Scotia Trust Company of New York isNational Association will be the Trustee under the Indenture and has been appointed by the Company as Registrarregistrar and Paying Agentpaying agent with regard to the Notes.
If the Trustee becomes a creditor of the Company or any Subsidiary Guarantor, the Indenture will limit the right of the Trustee to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest (as defined in the Trust Indenture Act) after a Default has occurred and is continuing it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee (if the Indenture has been qualified under the Trust Indenture Act) or resign.
The Holders of a majority in principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that ifIf an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent manperson in the conduct of hissuch person’s own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have furnished to the Trustee security andor indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of the Indenture.
Governing law
The Indenture will provide that it, the Notes and the NotesSubsidiary Guarantees will be governed by, and construed in accordance with, the laws of the State of New York.
Certain definitionsWhere You Can Find More Information
“2012Any prospective investor in this offering who receives this prospectus may obtain a copy of the Indenture without charge by writing to CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, PA 15317-6506; Attention: Stephen W. Johnson.
Book-Entry, Delivery and Form
The new notes will be issued initially only in the form of one or more global notes (collectively, the “Global Notes” means). The Global Notes will be deposited upon issuance with the $250.0 millionTrustee as custodian for DTC, and registered in the name of DTC’s nominee, Cede & Co., in each case for credit to an account of a direct or indirect participant in DTC that has exchanged old notes for new notes in the exchange offer, as described below. Beneficial interests in the Global Notes may be held through the Euroclear System (“Euroclear”) and Clearstream Banking, S.A. (“Clearstream”) (as indirect participants in DTC).
The Global Notes may be transferred, in whole but not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for notes in registered, certificated form (“Certificated Notes”) except in the limited circumstances described below. See “—Exchange of Global Notes for Certificated Notes.”
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear and Clearstream are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. The Company takes no responsibility for these operations and procedures and urges investors to contact the system or their participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the “Participants”) and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the “Indirect Participants”). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by it:
(1) | upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the exchange agent with portions of the principal amount of the Global Notes; and |
(2) | ownership of these interests in the Global Notes will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Notes). |
Investors in the Global Notes who are Participants in DTC’s system may hold their interests therein directly through DTC. Investors in the Global Notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Clearstream) which are Participants in such system. Euroclear and Clearstream may hold interests in the Global Notes on behalf of their participants through customers’ securities accounts in their respective names on the books of their depositories, which are Euroclear Bank S.A./N.V., as operator of Euroclear, and Citibank, N.A., as operator of Clearstream. All interests in a Global Note, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems.
The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of beneficial interests in the Global Notes will not have notes registered in their names, will not receive physical delivery of Certificated Notes and will not be considered the registered owners or “Holders” thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest and premium, if any, on, a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company, the Guarantors and the Trustee will treat the Persons in whose names the notes, including the Global Notes, are registered as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, none of the Company, the Guarantors, the Trustee or any agent of the Company or the Trustee has or will have any responsibility or liability for:
(1) | any aspect of DTC’s records or any Participant’s or Indirect Participant’s records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any of DTC’s records or any Participant’s or Indirect Participant’s records relating to the beneficial ownership interests in the Global Notes; or |
(2) | any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. |
DTC has advised the Company that its current practice, at the due date of any payment in respect of securities such as the notes, is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the notes as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with DTC’s procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTC’s rules on behalf of
Euroclear or Clearstream, as the case may be, by its depository; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depository to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream.
DTC has advised the Company that it will take any action permitted to be taken by a Holder of notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the Company’s 7.875%notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the Global Notes due 2012 outstandingfor Certificated Notes, and to distribute such notes to its Participants.
Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. None of the Company, the Trustee or any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes in minimum denominations of $2,000 and in integral multiples of $1,000 in excess of $2,000, if:
(1) | DTC (a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Note or (b) has ceased to be a clearing agency registered under the Exchange Act and in either event the Company fails to appoint a successor depositary within 90 days; or |
(2) | there has occurred and is continuing an Event of Default and DTC notifies the Trustee of its decision to exchange the Global Note for Certificated Notes. |
Beneficial interests in a Global Note may also be exchanged for Certificated Notes in the other limited circumstances permitted by the Indenture, including if an affiliate of ours acquires such interests. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any Global Note, except in the limited circumstances provided in the Indenture.
Same-Day Settlement and Payment
The Company will make payments in respect of the Notes represented by the Global Notes (including principal, premium, if any, and interest) by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. The Company will make all payments of principal, interest and premium, if any, with respect to Certificated Notes by wire transfer of immediately available funds to the accounts specified by the Holders of the Certificated Notes or, if no such account is specified, by mailing a check to each such Holder’s
registered address. The Notes represented by the Global Notes are eligible to trade in DTC’s Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. The Issuers expect that secondary trading in any Certificated Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. DTC has advised the Company at cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream participant to a Participant in DTC will be received with value on the Issue Date.settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC’s settlement date.
Certain Definitions
“Additional Assets” means:
(1) | any property or assets (other than Indebtedness and Capital Stock) used or useful in a Permitted Business; |
(2) | the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or |
(3) | Capital Stock constituting a non-controlling interest in any Person that at such time is a Restricted Subsidiary; |
provided however,that any such Restricted Subsidiary described in clauses (2) or (3) above is primarily engaged in a Permitted Business.
“Adjusted Consolidated Net Tangible Assets” or “ACNTA” means (without duplication), as of the date of determination:
(a) the sum of:
(1) | the sum of: |
(a) | the discounted future net |
(i) | estimated proved |
(ii) | estimated |
anddecreased by, as of the date of determination, the discounted future net revenue attributable to:
(iii) | estimated proved |
|
(iv) | reductions in |
in the case of the preceding clauses (i) through (iv), calculated on a pre-tax basis in accordance with SEC guidelines (utilizing the prices utilized in such Person’s year-end reserve report) and estimated by such Person’s petroleum engineers or any independent petroleum engineers engaged by such Person for that purpose;
(b) | the capitalized costs that are attributable to oil and gas properties of such Person and its Restricted Subsidiaries to which no proved oil and natural gas reserves are attributable, based on such Person’s books and records as of a date no earlier than the last day of such Person’s most recent quarterly or annual period for which internal financial statements are available; |
(c) | the Net Working Capital of such Person and its Restricted Subsidiaries as of a date no earlier than the last day of such Person’s most recent quarterly or annual period for which internal financial statements are available; and |
(d) | the greater of: |
(i) | the net book value, and |
(ii) | the appraised value, as estimated by independent appraisers, of other tangible assets (including Investments in |
in each case, of such Person and its Restricted Subsidiaries as of a date no earlier than the last day of the date of such Person’s most recent quarterly or annual period for which internal financial statements are available;providedthat if no such appraisal has been performed, such Person shall not be required to obtain such an appraisal and only clause (1)(d)(i) of this definition shall apply,
minus,to the extent not otherwise taken into account in this clause (1),
(2) | the sum of: |
(a) | minority interests; |
(b) | any net gas balancing liabilities of such Person and its Restricted Subsidiaries as of the last day of such Person’s most recent annual or quarterly period for which internal financial statements are available; |
(c) | the discounted future net revenues, calculated in accordance with SEC guidelines (utilizing the prices utilized in such Person’s year-end reserve report) |
(b) to the extent not otherwise taken into account in the immediately preceding clause (a), the sum of:
the discounted future net |
If such Person changes its method of accounting from the successful efforts method to the full costs method or a similar method of accounting, “Adjusted Consolidated Net Tangible Assets” will continue to be calculated as if such Person were still using the successful efforts method of accounting. For the avoidance of doubt, “oil and gas reserves” shall include any reserves attributable to natural gas liquids.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when“control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management andor policies of such Person, directly or indirectly, whether through the ownership of voting securities,Voting Stock, by contractagreement or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.otherwise. For purposes of this definition, the provisions described under “—Certain covenants—Limitation on restricted payments,terms “controlling,” “—Limitation on affiliate transactions”“controlled by” and “—Limitation on sales of assets and subsidiary stock” only, “Affiliate” shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof.“under common control with” have correlative meanings.
“Applicable Premium” means, with respect to a Note onat any date of redemption,time, as determined by the greaterCompany, the excess of:
(1) |
|
plus (ii) all required interest payments due on |
(2) | the then outstanding principal of such Note. |
“As determined in good faith by the Company” means a determination made in good faith by the Board of Directors of the Company or any officer of the Company involved in or otherwise familiar with the transaction for which such determination is being made, any such determination being conclusive for all purposes under the Indenture.
“Asset Disposition” means any sale, lease (other than an operating lease), transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary of the Company, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a “disposition”), of:
(1) | any shares of Capital Stock of a Restricted Subsidiary of the Company (other than directors’ qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary); |
(2) | all or substantially all the assets of any division or line of business of the Company or any Restricted |
(3) | any other assets of the Company or any Restricted Subsidiary of the Company outside of the ordinary course of business of the Company or such Restricted |
providedthat the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption “—Change of Control” and/or the provisions described above under the caption “—Certain Covenants—Merger and Consolidation” and not by the provisions of the covenant described under the caption “—Certain Covenants—Limitation of Sales of Assets and Subsidiary Stock.”
Notwithstanding the foregoing, none of the following shall be deemed to be an Asset Disposition:
(1) | a disposition |
(2) |
(3) | an issuance or sale of Equity Interests by a Restricted Subsidiary of the |
(4) |
(5) | the sale or |
(6) | a sale, contribution, conveyance or other |
(7) | any Production Payments and Reserve Sales;provided that any such Production Payments and Reserve Sales, other than incentive compensation programs on terms that are reasonably customary in the Permitted Business for geologists, geophysicists and other providers of technical services to the Company or a Restricted Subsidiary of the Company, shall have been created, incurred, issued, assumed or Guaranteed in connection with the financing of, and within 60 days after the acquisition of, the property that is subject thereto; |
(8) | the sale, lease or other disposition of products, services or accounts receivable in the ordinary course of business and any sale or other disposition of surplus, damaged, worn-out or obsolete assets in the ordinary course of business (including the abandonment or other disposition of intellectual property, including seismic data and interpretations thereof, that is, in the reasonable judgment of the Company, no longer economically practicable to maintain or useful in the conduct of the business of the Company and its Restricted Subsidiaries taken as whole); |
(9) | licenses and sublicenses by the Company or any of its Restricted Subsidiaries of software or intellectual property, including seismic data and interpretations thereof, in the ordinary course of business; |
(10) | any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business; |
(11) | the granting of Liens not prohibited by the covenant described above under the caption “—Certain Covenants—Limitation on Liens” and dispositions in connection with Permitted Liens; |
(12) | the sale or other disposition of cash or Temporary Cash Investments or other financial instruments; |
(13) | any sale or other disposition of Equity Interests in an Unrestricted Subsidiary; |
(14) | the early termination or unwinding of any Hedging Obligations; and |
a single transaction or series of related transactions that involve the disposition of assets with a |
“Attributable Debt”Asset Swap” means any substantially contemporaneous (and in respectany event occurring within 180 days of a Sale/Leaseback Transaction means, as at the timeeach other) purchase and sale or exchange of determination, the present value (discounted at the interest rate implicitany assets or properties used or useful in the Sale/Leaseback Transaction, compounded annually)Permitted Business between the Company or any of its Restricted Subsidiaries and another Person;provided that the Fair Market Value of the total obligationsproperties or assets traded or exchanged by the Company or such Restricted Subsidiary (together with any cash) is reasonably equivalent to the Fair Market Value of the lessee for rental payments duringproperties or assets (together with any cash) to be received by the remaining termCompany or such Restricted Subsidiary, andprovided further that any net cash received must be applied in accordance with the provisions described above under the caption “—Certain Covenants—Limitation on Sales of the lease includedAssets and Subsidiary Stock” if then in such Sale/Leaseback Transaction (including any period for which such lease has been extended).effect.
“Average Life” means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing
(1) | the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by |
(2) | the sum of all such payments. |
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have corresponding meanings. For purposes of this definition, a Person shall be deemed not to Beneficially Own securities that are the subject of a stock purchase agreement, merger agreement, amalgamation agreement, arrangement agreement or similar agreement until consummation of the transactions or, as applicable, series of related transactions contemplated thereby.
“Board of Directors” means the Board of Directors of the Company or other than for purposes of the definition of “Change of Control,” any committee thereof duly authorized to act on behalf of such Board.
“Business Day” means each day which is not a Legal Holiday (as defined in the Indenture).
“Capital Lease Obligation” means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. Notwithstanding the foregoing, any lease (whether entered into before or after the Issue Date) that would have been classified as an operating lease pursuant to GAAP as in effect on the Issue Date will be deemed not to represent a Capital Lease Obligation.
“Capital Stock” of any Person means (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights to purchase, warrants, options, participations or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or interests in (however designated) equitydistributions of suchassets of, the issuing Person, including any Preferred Stock, but excluding from all of the foregoing any debt securities exercisable for, exchangeable for or convertible into Capital Stock, whether or not such equity.debt securities include any right of participation with Capital Stock.
“CNX Gas”Funding” means CNX GasFunding Corporation, a Delaware corporation.
“CNX Gas Credit Agreement”Consolidated Cash Flow” for any period means, with respect to any specified Person for any period, the Credit Agreement among CNX Gas Corporation, as Borrower,sum of its Consolidated Net Income, plus, to the guarantors party thereto,extent deducted in calculating such Consolidated Net Income:
(1) | Consolidated Interest Expense; |
(2) | provision for taxes based on income or profits (including state franchise taxes accounted for as income taxes in accordance with GAAP) of such Person and its Restricted Subsidiaries for such period; |
(3) | depletion, depreciation and impairment charges and expenses of such Person and its Restricted Subsidiaries for such period; |
(4) | amortization expense (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) of such Person and its Restricted Subsidiaries for such period; |
(5) | if such Person accounts for its oil and natural gas operations using successful efforts or a similar method of accounting, exploration and abandonment expense of such Person and its Restricted Subsidiaries for such period; and |
(6) | all other non-cash charges, including non-cash charges taken pursuant to FASB ASC 815 (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period except such amounts as the Company determines in good faith are nonrecurring or represent a write-off, write-down or reserve with respect to a current asset), |
minus all non-cash items increasing Consolidated Net Income for such period (other than any such non-cash item to the lenders party thereto and PNC Bank, National Association, as Administrative Agent, and certain other financial institutions, dated May 7, 2010, as amended, includingextent that it (i) will result in the receipt of cash payments in any related notes, guarantees, instruments and agreements executedfuture period or (ii) represents the reversal of any accrual, or cash reserve for, anticipated cash expenditures in connection therewith, and in each case as amended, restated, modified, renewed, refunded, replaced, refinancedany prior period where such accrual or increased in whole or in part from time to time.
“Code” means the Internal Revenue Code of 1986, as amended.reserve is no longer required).
“Consolidated Coverage Ratio” of any Person as of any date of determination means the ratio ofof:
(x) the aggregate amount of EBITDA