| Item 1.01 | Entry into a Material Definitive Agreement. |
Second Amended and Restated Crestwood Niobrara Company Agreement
On December 28, 2017, Crestwood Midstream Partners LP (“CMLP”) and CN Jackalope Holdings, LLC (“Holdings”) entered into a Second Amended and Restated Limited Liability Company Agreement for Crestwood Niobrara LLC (the “Crestwood Niobrara Company Agreement”).
In connection with the entry into the Crestwood Niobrara Company Agreement, Crestwood Niobrara LLC (“Crestwood Niobrara”) redeemed 100% of the outstanding Series A Preferred Units for an aggregate price of approximately $202.7 million and Crestwood Niobrara issued $175 million in new SeriesA-2 Preferred Units to Holdings.
Pursuant to the terms of the Crestwood Niobrara Company Agreement, certain additional capital contributions may be required until the earlier to occur of the fourth anniversary of the Crestwood Niobrara Company Agreement and a Conversion (as such term is defined below), whereby Holdings has agreed to provide up to 49.99% of the future capital contributions for certain midstream projects and CMLP has agreed to provide the remaining future capital contributions for such midstream projects, subject to certain exceptions, including an aggregate cap on Holdings’ future capital contributions of $200 million.
At any time after the fourth anniversary of the date of the Crestwood Niobrara Company Agreement, CMLP may cause Crestwood Niobrara to redeem some or all of the outstanding SeriesA-2 Preferred Units for an amount in cash or Crestwood Equity Partners LP (“CEQP”) common units (“CEQP Units”) equal to an agreed multiple of an amount necessary for Holdings to achieve a certain rate of return with respect to each SeriesA-2 Preferred Unit so redeemed.
At any time on or after the fifth anniversary of the date of the Crestwood Niobrara Company Agreement until such time as there are no SeriesA-2 Preferred Units (“Holdings Member Option Period”), Holdings shall have the right to choose among the following options: (a) to have 100% of all adjusted available cash on hand and subsequently received by Crestwood Niobrara automatically paid to the owners of SeriesA-2 Preferred Units to redeem all outstanding SeriesA-2 Preferred Units, provided, among other things, that a certain rate of return is met with respect to each redeemed unit; (b) to require CMLP to acquire some or all of the then-outstanding SeriesA-2 Preferred Units in exchange for issuing to Holdings a number of CEQP Units, provided, among other things, that a certain rate of return is met with respect to each redeemed unit and the Registration Rights Agreement discussed below is complied with; and (c) to require Crestwood Niobrara to promptly effect a sale of all of the assets of Crestwood Niobrara, including its ownership interests in Jackalope Gas Gathering Services, L.L.C. in order to generate proceeds to Crestwood Niobrara and, in turn, Crestwood Niobrara will use such proceeds to redeem all of Holdings’ outstanding SeriesA-2 Preferred Units, provided, among other things, that a certain rate of return is met with respect to each redeemed unit. Upon such a Holdings election, CMLP will have the right, subject to certain exceptions and limitations, to elect to acquire all outstanding SeriesA-2 Preferred Units in exchange for CEQP Units or to cause Crestwood Niobrara to redeem all outstanding SeriesA-2 Preferred Units in exchange for cash or to effect a combination thereof, in each case so long as a certain rate of return is met.
Additionally, for so long as any outstanding SeriesA-2 Preferred Units are issued and outstanding and until the fourth anniversary of the date of the Crestwood Niobrara Company Agreement, (i) if certain change of control transactions or public offerings are consummated, (ii) if Crestwood Niobrara’s EBITDA for twelve months surpasses a certain threshold or (iii) at any time following the third anniversary of the date of the Crestwood Niobrara Company Agreement, Holdings may elect to cause Crestwood Niobrara to convert all, but not less than all, of the then-outstanding SeriesA-2 Preferred Units into an aggregate number of Crestwood Niobrara common units that, following such conversion, shall equal 49.99% of the aggregate number of outstanding Crestwood Niobrara common units as of immediately following such conversion (the “Conversion”).
In addition to the foregoing, following certain change of control transactions, Holdings may also elect to require Crestwood Niobrara to redeem its SeriesA-2 Preferred Units at a price as calculated in accordance with the Crestwood Niobrara Company Agreement. Upon such a Holdings election, CMLP will determine, subject to certain exceptions and limitations, if the consideration for such SeriesA-2 Preferred Units will consist of cash, CEQP Units, or a combination thereof.
Pursuant to the Crestwood Niobrara Company Agreement, CMLP will serve as the managing member of Crestwood Niobrara. However, certain actions require the unanimous consent of the members.
