| Item 1.01 | Entry into a Material Definitive Agreement. |
On March 27, 2022, USD Partners LP (the “Partnership”) entered into a Contribution, Conveyance and Assumption Agreement to (i) acquire certain assets from entities affiliated with its sponsor, US Development Group LLC (“USD Group”), and (ii) eliminate the incentive distribution rights and economic general partner interest in the Partnership, each as described in more detail below (together referred to as the “Transactions”). As consideration for the Transactions, the Partnership will (a) pay to USD Group $75 million in cash and (b) issue to USD Partners GP LLC, the general partner of the Partnership (the “General Partner”), approximately 5.75 million common units representing limited partner interests in the Partnership, which will be listed on the New York Stock Exchange.
The terms of the Transactions, including the Contribution Agreement and the Third Amended and Restated Partnership Agreement (each as defined below), were approved by the board of directors (the “Board”) of the General Partner, based on the approval and recommendation of the conflicts committee of the Board, which consists entirely of independent directors. The conflicts committee engaged an independent financial advisor and legal counsel.
Contribution Agreement
On March 27, 2022, the Partnership and certain of its subsidiaries (the “Acquiring Entities”) entered into a Contribution, Conveyance and Assumption Agreement (the “Contribution Agreement”) with USD Group and certain subsidiaries of USD Group (the “Contributor Parties”) to acquire: (i) equity interests in certain subsidiaries of USD Group that own 100% of the Hardisty South terminal, and (ii) all of the outstanding incentive distribution rights in the Partnership and an approximate 1.6% general partner economic interest in the Partnership (which interest shall be converted to a non-economic interest, as described below).
The closing of the Transactions is expected to occur during the second quarter of 2022 and is subject to customary closing conditions.
The Contribution Agreement contains customary representations, warranties and covenants of the Acquiring Entities and the Contributor Parties. The Acquiring Entities, on the one hand, and the Contributor Parties, on the other hand, have agreed to indemnify each other and their respective affiliates, officers, directors and other representatives against certain losses resulting from any breach of their representations, warranties or covenants contained in the Contribution Agreement, subject to certain limitations and survival periods.
The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Contribution Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Third Amended and Restated Partnership Agreement
Pursuant to the Contribution Agreement, at the closing of the Transactions, all of the outstanding incentive distribution rights in the Partnership will be cancelled and the approximate 1.6% general partner economic interest in the Partnership owned by the General Partner will be converted into a non-economic general partner interest in the Partnership (the “GP/IDR Restructuring”).
Subject to the terms and conditions of the Contribution Agreement, simultaneously with the closing of the Transactions, the General Partner will amend and restate the Second Amended and Restated Agreement of Limited Partnership of USD Partners LP, dated as of October 15, 2014 to reflect the GP/IDR Restructuring (the “Third Amended and Restated Partnership Agreement”).
