If Ultra Resources experiences certain change of control triggering events set forth in the Indenture, each holder of the New Notes may require the Issuer to repurchase all or a portion of its Notes for cash at a price equal to 101% of the aggregate principal amount of such Notes, plus any accrued but unpaid interest (including PIK interest) to the date of repurchase.
The Indenture contains customary covenants that restrict the ability of Ultra Resources and the guarantors and certain of its subsidiaries to: (i) sell assets and subsidiary equity; (ii) incur or redeem indebtedness; (iii) create or incur certain liens; (iv) enter into affiliate agreements; (v) pay cash dividends, (vi) change the nature of its business or operations, (vii) make certain types of investments, (ix) enter into agreements that restrict distributions from certain restricted subsidiaries and the consummation of mergers and consolidations; (x) consolidate, merge or transfer all or substantially all of the assets of the Company or any Restricted Subsidiary (as defined in the Indenture); and (xi) create unrestricted and foreign subsidiaries. The covenants in the Indenture are subject to important exceptions and qualifications. Subject to conditions, the Indenture provides that the Company and its subsidiaries will no longer be subject to certain covenants when the New Notes receive investment grade ratings from any two of S&P Global Ratings, Moody’s Investors Service, Inc., and Fitch Ratings, Inc.
The Indenture contains customary events of default (each, an “Event of Default”). Unless otherwise noted in the Indenture, upon a continuing Event of Default, the Trustee, by notice to the Company, or the holders of at least 25% in principal amount of the then outstanding Notes, by notice to the Company and the Trustee, may declare the New Notes immediately due and payable, except that an Event of Default resulting from entry into a bankruptcy, insolvency or reorganization with respect to the Company, any Significant Subsidiary (as defined in the Indenture) or group of Restricted Subsidiaries (as defined in the Indenture), that taken together would constitute a Significant Subsidiary, will automatically cause the New Notes to become due and payable.
The foregoing description of the Indenture does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Indenture, which is filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated by reference in this Item 1.01.
Supplemental Indenture to Unsecured Indenture
On the Closing Date, following receipt of the requisite consents of the Supporting Holders pursuant to the Exchange Agreement, Ultra Resources, the Company and its other subsidiaries, as guarantors, and Wilmington Trust, National Association, as trustee, entered into the First Supplemental Indenture (the “Supplemental Indenture”) to the Indenture dated April 12, 2017, among Ultra Resources, the Company, the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee (the “Unsecured Indenture”). Pursuant to the Supplemental Indenture, the parties amended the Unsecured Indenture to, among other things, eliminate or amend substantially all of the restrictive covenants contained in the Indenture governing the Old Notes, other than those relating to the payment of principal and interest. The Supplemental Indenture is binding on all Old Notes that remain outstanding.
The foregoing description of the Supplemental Indenture does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Supplemental Indenture, which is filed as Exhibit 4.2 to this Current Report on Form 8-K and is incorporated by reference in this Item 1.01.
Warrant Agreement
On the Closing Date, in connection with the consummation of the Exchange Transaction, the Company entered into a Warrant Agreement (the “Warrant Agreement”), between the Company, Computershare Inc. and Computershare Trust Company, N.A., which provided for the Company’s issuance of up to an aggregate of 10,919,499 Warrants in accordance with the terms of the Exchange Agreement and the Warrant Agreement.
The Warrants are initially exercisable for one common share of the Company, no par value (the “Common Shares”), per Warrant at an initial exercise price of $0.01 per Warrant (the “Exercise Price”). No Warrants will be exercisable until the date on which the volume-weighted average price of the Common Shares is at least $2.50 per Common Share for 30 consecutive trading days (the “Trading Price Condition”). Subject to the Trading Price Condition, the Warrants are exercisable at the option of the holders thereof from the Closing Date until 5:00 p.m., New York City time, on July 14, 2025, at which time all unexercised Warrants will expire and the rights of the holders of such Warrants to purchase Common Shares will terminate. In the aggregate, if all Warrants are exercised, total shareholder dilution will be approximately 6% based on 197,053,583 Common Shares outstanding as of October 25, 2018.
Pursuant to the Warrant Agreement, no holder of a Warrant, by virtue of holding or having a beneficial interest in a Warrant, will have the right to vote, consent, receive dividends, receive notice as shareholders with respect to any meeting of shareholders for the election of the Company’s directors or any other matter, or exercise any rights whatsoever as a shareholder of the Company unless, until and only to the extent such holders become holders of record of Common Shares issued upon settlement of Warrants.
The number of Common Shares for which a Warrant is exercisable, and the Exercise Price, are subject to adjustment from time to time upon the occurrence of certain events, including: (1) stock splits, reverse stock splits or stock dividends to all or substantially all of the holders of Common Shares; (2) any combination or subdivision in respect of Common Shares; or (3) certain special dividends issued to all holders of Common Shares.
