Subsequent Events | 3 Months Ended |
Mar. 31, 2015 |
Subsequent Events | |
Subsequent Events | 14.Subsequent Events |
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Unit Distribution |
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On April 20, 2015, we announced that the board of directors of our general partner declared a cash distribution for the first quarter of 2015 of $0.1875 per outstanding unit, or $0.75 on an annualized basis. The distribution will be paid on May 15, 2015 to all unitholders of record as of the close of business on May 1, 2015. The aggregate amount of the distribution will be $5.3 million. |
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Merger with Vanguard Natural Resources, LLC |
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On April 20, 2015, we entered into a Purchase Agreement and Plan of Merger (the “Merger Agreement”) with Vanguard Natural Resources, LLC (“Vanguard”), Lighthouse Merger Sub, LLC, a wholly owned indirect subsidiary of Vanguard (“Merger Sub” and together with Vanguard, the “Vanguard Entities”), Lime Rock Management, Fund I, Fund II (together with the Fund I and Lime Rock Management, the “GP Sellers”) and our General Partner (together with the GP Sellers and the Partnership, the “Partnership Entities”). Upon the terms and conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Partnership, with the Partnership continuing as the surviving entity and as a wholly owned subsidiary of Vanguard (the “Merger”) and, at the same time, all of the limited liability company interests in our General Partner will be acquired by Vanguard. Based upon the recommendation of the conflicts committee of the board of directors of our General Partner (the “Board”), the Board approved the Merger Agreement on April 20, 2015. |
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At the effective time of the Merger (the “Effective Time”), each of our common units issued and outstanding immediately prior to the Effective Time will be converted into the right to receive 0.550 common units representing limited liability company interests in Vanguard (“Vanguard Units”) or, in the case of fractional Vanguard Units, cash (without interest and rounded up to the nearest whole cent) in an amount equal to the product of (i) such fractional part of a Vanguard Unit multiplied by (ii) the average closing price for a Vanguard Unit as reported on the NASDAQ Global Select Market (the “NASDAQ”) for the ten consecutive full trading days ending at the close of trading on the full trading day immediately preceding the closing date of the transactions contemplated by the Merger Agreement (the “Closing Date”). Each of our restricted common units that is outstanding pursuant to the 2011 LTIP will vest immediately prior to the Effective Time and be converted into the right to receive Vanguard Units. In addition, on the Closing Date, Vanguard will issue and deliver to the GP Sellers 12,320 Vanguard Units in exchange for all of the limited liability interests in our General Partner (the “GP Equity Consideration”). |
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As a condition to closing of transactions contemplated under the Merger Agreement, the parties have agreed to execute and deliver a Termination and Continuing Obligations Agreement (the “Termination Agreement”) substantially in the form attached as an exhibit to the Merger Agreement. Pursuant to the Termination Agreement, (i) that certain Omnibus Agreement, entered into, and effective as of, November 16, 2011 (the “Omnibus Agreement”), by and among us, our General Partner, OLLC, Fund I, LRR GP, LLC, the ultimate general partner of each of the Fund I entities, and Lime Rock Management, will be terminated and (ii) the Fund I entities, severally and in proportion to each entity’s Property Contributor Percentage (as defined in the Omnibus Agreement), will agree to indemnify the Partnership, our General Partner, OLLC and all of our and their respective subsidiaries from and against any losses arising out of any federal, state or local income tax liabilities attributable to the ownership or operation of the oil and natural gas properties owned or leased by any of the Partnership, our General Partner, OLLC or our or their respective subsidiaries prior to the closing of our initial public offering. The indemnification obligations of Fund I under the Termination Agreement will survive until the first anniversary of the Closing Date. |
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The Partnership Entities and the Vanguard Entities have each made certain representations and warranties and agreed to certain covenants in the Merger Agreement. Each of the Partnership, our General Partner and Vanguard has agreed, among other things, subject to certain exceptions, to conduct its respective business in the ordinary course during the period between the execution of the Merger Agreement and the Effective Time (unless the Merger Agreement is earlier terminated in accordance with its terms). In addition, we have agreed not to solicit alternative business combination transactions during such period, and, subject to certain exceptions, not to engage in discussions or negotiations regarding any alternative business combination transactions during such period. |
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The closing of the Merger is subject to the satisfaction or waiver of certain customary conditions, including, among others, (i) the approval of the Merger Agreement by our unitholders; (ii) the registration statement on Form S-4 used to register the Vanguard Units to be issued in the Merger being declared effective by the Securities and Exchange Commission (the “SEC”); (iii) the approval for listing on the NASDAQ of the Vanguard Units to be issued in the Merger; (iv) subject to specified materiality standards, the accuracy of the representations and warranties of, and the performance of all covenants by, the parties; (v) the delivery of certain tax opinions; and (vi) entry into the Termination Agreement by the parties thereto. |
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The Merger Agreement contains certain termination rights for each of the Partnership and Vanguard, including, among others, if (i) the Merger is not consummated on or before December 31, 2015; (ii) the requisite approval of the Merger Agreement by our unitholders is not obtained; and (iii) the other party breaches a representation, warranty or covenant, and such breach results in the failure of certain closing conditions to be satisfied (a “terminable breach”). The Merger Agreement also provides that (a) we may terminate the Merger Agreement to enter into a third party’s “superior proposal” and (b) Vanguard may terminate the Merger Agreement if the Board changes its recommendation to our unitholders to approve the Merger Agreement (a “Partnership Change in Recommendation”); provided, in each case, that we pay Vanguard the Termination Fee (as described below). |
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The Merger Agreement provides for the payment of a termination fee of approximately $7.3 million (the “Termination Fee”) by the Partnership to Vanguard upon the termination of the Merger Agreement under specified circumstances, including if: (i) (a) prior to our unitholder meeting, a third party proposal has been publicly submitted, publicly proposed or publicly disclosed and has not been withdrawn at the time of such meeting, (b) thereafter, the Merger Agreement is terminated in accordance with its terms under specified circumstances, and (c) prior to the date that is 12 months after the date of the Merger Agreement is terminated, we enter into or consummate any definitive agreement related to a third party proposal ; (ii) Vanguard terminates the Merger Agreement due to a Partnership Change in Recommendation; or (iii) we terminate the Merger Agreement to enter into a third party’s “superior proposal.” The Merger Agreement also provides that the non-terminating party may be required to pay the other party’s expenses (up to a maximum of approximately $1.2 million (the “Expenses”) if either party terminates the Merger Agreement due to a terminable breach by the other party. If the Termination Fee is payable at a time when Vanguard has received or concurrently receives payment from us in respect of Expenses, the Termination Fee will be reduced by the amount of such Expenses received by Vanguard. |
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Amendments to the Credit Agreement and Term Loan Agreement |
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On May 4, 2015, we entered into the Fifth Amendment (“Fifth Credit Agreement Amendment”) to our Credit Agreement. The Fifth Credit Agreement Amendment, among other things, (i) increased the interest rate margins applicable to the loans with margins ranging from 2.00% to 3.10% for Eurodollar loans, and from 1.00% to 2.10% for base rate loans, in each case based on utilization of the credit facility, (ii) increased the commitment fee applicable to the unused portion of the borrowing base with amounts ranging from 0.375% to 0.800% based on utilization of the credit facility, (iii) restricted the payments of distributions to $10.6 million through September 30, 2015; however, after October 1, 2015, distributions are subject to having a minimum of 15% availability under a conforming borrowing base amount after the distribution has been paid, and (iv) decreased the borrowing base to $245.0 million. Pursuant to the amendment, the borrowing base will decrease in the amount of $1.0 million per month, beginning in June 2015 and continuing until the next redetermination of the borrowing base in the fall of 2015. The borrowing base of the Credit Agreement will revert to $195.0 million upon the earlier of November 1, 2015 and a termination of the Merger Agreement. If the next scheduled redetermination has not occurred by November 1, 2015, the borrowing base shall decrease to $195.0 million until the scheduled redetermination is completed. |
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On May 4, 2015, we entered into the Fifth Amendment (“Fifth Term Loan Amendment”) to our Term Loan Agreement. The Fifth Term Loan Amendment, among other things, amended the Term Loan Agreement to (i) increase the interest rate margins applicable to the loan with margins for Eurodollar loans and Alternate Base Rate loans increasing to 9.50% and 8.50%, respectfully, after September 30, 2015, and (ii) restrict the payments of distributions to $10.6 million through September 30, 2015; however, after October 1, 2015, distributions are subject to having a minimum of 15% availability under a conforming borrowing base amount. In connection with the Fifth Term Loan Amendment, we received a waiver on our asset coverage test ratio as discussed in Note 7. |
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