| Business Combination Agreements | Note 7 — Business Combination Agreements
Contribution Agreement
On August 8, 2018, the Company, and Altus Midstream, entered
into a Contribution Agreement (the “Contribution
Agreement”) with Apache Midstream LLC, a Delaware limited
liability company (the “Apache Contributor”) and wholly
owned subsidiary of Apache Corporation, a Delaware corporation
(“Apache”), Alpine High Gathering LP, a Delaware
limited partnership (“Alpine High Gathering”), Alpine
High Pipeline LP, a Delaware limited partnership (“Alpine
High Pipeline”), Alpine High Processing LP, a Delaware
limited partnership (“Alpine High Processing”), Alpine
High NGL Pipeline LP, a Delaware limited partnership (“Alpine
High NGL”), and Alpine High Subsidiary GP LLC, a Delaware
limited liability company (“Alpine High GP” and,
together with Alpine High Gathering, Alpine High Pipeline, Alpine
High Processing and Alpine High NGL, the “Alpine High
Entities”), pursuant to which Altus Midstream and/or its
subsidiaries will acquire from the Apache Contributor:
•100% of the equity interests in each of the Alpine High
Entities; and
• options, currently held by the Apache Contributor, to
acquire equity interests in certain third party pipelines that are
expected to be placed into service in 2019 and 2020 (the
“Options”), which include:
•an option to acquire up to a 15% equity interest (as well as
pursuant to a supplemental option, an addition 1% equity interest)
in the Gulf Coast Express pipeline (the “GCX
Option”);
•an option to acquire up to a 15% equity interest in the EPIC
Crude pipeline (the “EPIC Option”);
•an option to acquire a 50% equity interest in the Salt Creek
NGL pipeline; and
•an option to acquire up to a 33% equity interest in the Shin
Oak pipeline (the “Shin Oak Option”).
In addition, pursuant to the Purchase Rights and Restrictive
Covenant Agreement to be entered into between the Company and
Apache at the closing of the business combination (the
“Purchase Rights and Restrictive Covenant Agreement”),
Apache will, among other things, assign to the Company an option to
acquire equity in either (i) a long-haul natural gas pipeline
from the Permian Basin in Texas to the Texas Gulf Coast which
recently announced it reached a “final investment
decision” and is being developed by affiliates of Kinder
Morgan, Inc. (the “Permian Highway Pipeline Project”)
or (ii) the next similar pipeline project if the Permian
Highway Pipeline Project is not placed into service (the
“Additional Option”).
The acquisition of the Alpine High Entities and the Options
pursuant to the Contribution Agreement is referred to herein as the
“Altus Business Combination,” and the transactions
contemplated by the Contribution Agreement are referred to herein
as the “Transactions.”
Consideration
Pursuant to the Contribution Agreement, at the closing of the
Transactions (the “Closing”), the Apache Contributor
will receive the following consideration:
• equity consideration, consisting of: (a) 250,000,000 Common
Units, (b) 1,862,606 newly-issued shares of Class A Common
Stock and (c) a number of newly-issued shares of Class A
Common Stock equal to the product of (i) the number of public
shares of Class A Common Stock redeemed for cash at the
closing of the Altus Business Combination minus 2,000,000 and (ii)
26.6% (provided that such number of shares of Class A Common
Stock will not be less than zero or greater than 5,450,422) (the
number of shares referred to in this clause (c), the
“Assigned Shares”), with such amounts of Class A
Common Stock set forth in clauses (b) and (c) corresponding to
certain forfeitures of Class B Common Stock (as defined below)
by the Sponsor, as described below in “Ancillary Agreements
– Sponsor Forfeiture Agreement”;
• cash consideration in an amount equal to the capital
expenditures incurred by or on behalf of the Alpine High Entities
from and including October 1, 2018 through and including the
closing date of the Altus Business Combination (the “Closing
Date”);
• 3,182,140 warrants exercisable for shares of Class A
Common Stock (the “Apache Warrants”), with such amount
of Apache Warrants corresponding to certain forfeitures of Private
Placement Warrants by the Sponsor as described below in
“Ancillary Agreements — Sponsor Forfeiture
Agreement”; and
• the right to receive earn-out
Pursuant to the Contribution Agreement, at the Closing, the Company
will contribute cash to Altus Midstream in an amount equal to the
Available Funds (as defined below) in exchange for the issuance by
Altus Midstream to the Company of (a) a number of common units
representing limited partner interests in Altus Midstream
(“Common Units”) equal to the number of shares of the
Company’s Class A Common Stock, outstanding as of the
Closing and (b) a number of Altus Midstream warrants
exercisable for Common Units equal to the number of the
Company’s Warrants outstanding as of the Closing. Following
the Closing, the Company will control Altus Midstream through its
ownership of Altus Midstream GP LLC, a Delaware limited liability
company and the sole general partner of Altus Midstream.
In addition, the Company will issue to Apache Contributor
250,000,000 newly issued shares of non-economic
Redemption of Common Units
Beginning 180 days after Closing and subject to the requirement
that the Apache Contributor hold a number of Common Units (and a
corresponding number of shares of Class C Common Stock)
sufficient to fulfill its obligations set forth under the Option
Letter (as defined below), the Apache Contributor will have the
right to redeem the Common Units it receives at Closing for shares
of Class A Common Stock or cash (at the Company’s
election). Upon any redemption of Common Units by the Apache
Contributor, a corresponding number of shares of Class C
Common Stock owned by the Apache Contributor will be cancelled.
Warranties and Covenants
The Contribution Agreement contains customary warranties by the
parties thereto, which shall not survive the Closing. The
Contribution Agreement also contains
customary pre-closing
Conditions to the Parties’ Obligations to Consummate
the Transactions
Under the Contribution Agreement, the obligations of the parties to
consummate the Transactions are subject to a number of customary
conditions, including, among others, the following: (i) the
absence of specified adverse laws or orders, (ii) the
warranties of the other parties being true and correct, subject to
the materiality standards contained in the Contribution Agreement,
(iii) material compliance by the other parties with their
respective pre-closing out-of-pocket out-of-pocket out-of-pocket
Termination Rights
The Contribution Agreement contains certain customary termination
rights, including, among others, the following: (i) if the
Closing has not occurred on or before December 31, 2018 (the
“Outside Date”); (ii) upon the applicable
parties’ mutual written consent; (iii) if the
consummation of the Transactions is prohibited by law; or
(iv) breach of a warranty, covenant or other agreement by a
party which is not capable of being cured by the Outside Date,
subject to the materiality standards contained in the Contribution
Agreement.
None of the parties to the Contribution Agreement is required to
pay a termination fee or reimburse any other party for its expenses
as a result of a termination of the Contribution Agreement.
Ancillary Agreements
Option Letter
On August 8, 2018, the Company entered into a letter agreement
with Apache and the Apache Contributor with respect to the GCX
Option, the Shin Oak Option, and the EPIC Option (the “Option
Letter”). Pursuant to the Option Letter, the Apache
Contributor is required to comply in all material respects with the
terms and conditions of the agreements governing such Options and
use commercially reasonable efforts to preserve the ability of the
Company or its designated subsidiaries to exercise such Options
from and after closing of the Altus Business Combination. The
Option Letter also imposes certain obligations on Apache with
respect to certain commercial agreements associated with such
Options. If, as a result of a breach of the obligations of the
Apache Contributor or Apache, as applicable, under the Option
Letter, the Company is not able to exercise one or more of the GCX
Option, the Shin Oak Option, or the EPIC Option, certain of the
Common Units (together with a corresponding number of shares of
Class C Common Stock) received by the Apache Contributor at
the closing of the Altus Business Combination will be subject to
forfeiture. The maximum number of Common Units (and associated
shares of Class C Common Stock) subject to forfeiture pursuant
to the Option Letter is 40,000,000.
Subscription Agreements
In connection with its entry into the Contribution Agreement, the
Company entered into Subscription Agreements (the
“Subscription Agreements”) with certain qualified
institutional buyers and accredited investors, including certain
funds and accounts managed by Kayne Anderson Capital Advisors,
L.P., a California limited partnership, pursuant to which, among
other things, the Company agreed to issue and sell in private
placements an aggregate of 57,234,023 shares of Class A Common
Stock to investors for aggregate consideration of approximately
$572.3 million (the “Private Placements”). The
proceeds from the Private Placements will be used to fund a portion
of the cash consideration required to effect the Altus Business
Combination. The Subscription Agreements provide that the Company
must register the resale of the shares of Class A Common Stock
issued thereunder pursuant to a registration statement that must be
filed with the Securities and Exchange Commission (the
“SEC”) within 30 calendar days after the Closing. In
the event that (i) the registration statement has not been
declared effective by the SEC by the earlier of (x) the 90th
calendar day (or 120th calendar day if the SEC notifies the Company
that it will “review” the registration statement)
following the closing of the Altus Business Combination and
(y) the 10th business day after the date that the Company is
notified (orally or in writing, whichever is earlier) by the SEC
that the registration statement will not be “reviewed”
or will not be subject to further review, due to the
Company’s failure to use commercially reasonable efforts;
(ii) after the registration statement is declared effective by
the SEC, (x) the registration statement ceases for any reason
to remain continuously effective or (y) a holder is not
permitted to utilize the registration statement to resell shares of
Class A Common Stock; or (iii) after the date one year
following the Closing Date, and only if the registration statement
is not effective or available to sell shares of Class A Common
Stock, the Company fails to file with the SEC any required reports
under Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended, such that the Company is not in
compliance with Rule 144(c)(1) under the Securities Act of 1933, as
amended (the “Securities Act”) (or Rule 144(i)(2) under
the Securities Act, if applicable), as a result of which
unaffiliated holders are unable to sell shares of Class A
Common Stock without restriction under Rule 144 under the
Securities Act) (each event referred to in clauses (i) through
(iii), a “Registration Default” and the date on which
such Registration Default occurs, a “Default Date”),
then on each Default Date and on each monthly anniversary of each
Default Date until the applicable Registration Default is cured,
the Company will pay to each holder an amount in cash, as
liquidated damages and not as a penalty, equal to 0.50% of the
aggregate purchase price paid by such holder for any shares of
Class A Common Stock that may not be disposed by the holder
without restriction on the Default Date; provided, however, that in
no event will the Company be required to pay to a holder an
aggregate amount that exceeds 5.0% of the aggregate purchase price
paid by such holder for any shares of Class A Common Stock
that may not be disposed.
The closings under the Subscription Agreements will occur
substantially concurrently with the Closing of the Altus Business
Combination and are conditioned thereon, as well as on other
customary closing conditions. The Subscription Agreements will be
terminated, and be of no further force and effect, upon the earlier
to occur of (i) the termination of the Contribution Agreement
in accordance with its terms, (ii) if any of the conditions to
the closing under the Subscription Agreements are not satisfied or
waived on or prior to the closing, and (iii) December 31,
2018, if the Closing has not occurred by such date.
The shares of Class A Common Stock to be issued pursuant to
the Subscription Agreements have not been registered under the
Securities Act and will be issued in reliance upon the exemption
provided in Section 4(a)(2) of the Securities Act and/or
Regulation D promulgated thereunder. The Company will pay a
placement fee of approximately $3.8 million in the aggregate
in connection with such sales.
Sponsor Forfeiture Agreement
On August 8, 2018, the Company and the Sponsor entered into a
Sponsor Forfeiture Agreement (the “Forfeiture
Agreement”) with the Apache Contributor, pursuant to which
the Sponsor will at the Closing forfeit to the Company (a)
1,862,606 shares of the Company’s Class B common stock,
par value $0.0001 per share (the “Class B Common
Stock”), (b) a number of shares of Class B Common Stock
equal to the number of Assigned Shares and (c) 3,182,140 of the
Private Placement Warrants exercisable for shares of Class A
Common Stock that were issued to the Sponsor simultaneously with
the closing of the Public Offering.
For copies of the Contribution Agreement, Option Letter,
Subscription Agreements and Sponsor Forfeiture Agreement, please
see the Company’s Current Report on Form 8-K filed on
August 8, 2018. The foregoing description of the agreements
listed above, does not purport to be complete and is qualified in
its entirety by the terms and conditions of the respective
agreements.
Other Ancillary Agreements
In connection with the closing of the Altus Business Combination,
the Company will also enter into various agreements with the Apache
Contributor and certain of its affiliates and Kayne Anderson
Capital Advisors, L.P. and certain of its affiliates, including,
among others, a stockholders agreement; construction, operations
and maintenance agreement and the Purchase Rights and Restrictive
Covenant Agreement. For more information related to these
agreements, please see the Form 8-K filed with the SEC on
August 8, 2018 and/or the Definitive Proxy Statement on
Schedule 14A filed with the SEC on October 22, 2018. |
