Item 1.01 Entry into a Material Definitive Agreement
Preferred Unit Closing
As previously disclosed, on May 8, 2019, Altus Midstream LP, a Delaware limited partnership (the “Partnership”), and Altus Midstream Company, a Delaware corporation (the “Corporation”) that indirectly controls the Partnership, entered into a Preferred Unit Purchase Agreement among the Partnership, the Corporation, and the purchasers party thereto (the “Purchasers”) to provide for the sale by the Partnership to the Purchasers of $625 million in aggregate issue price of the Partnership’s Series A Cumulative Redeemable Preferred Units (the “Preferred Units”) in a private offering exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The Preferred Units were issued and the transaction closed (the “Closing”) on June 12, 2019. The Partnership received approximately $621.3 million in cash proceeds from the sale after deducting discounts to certain Purchasers.
In connection with the Closing, the partners of the Partnership entered into a Second Amended and Restated Agreement of Limited Partnership of the Partnership (the “Partnership Agreement”) that provides the terms of the Preferred Units, including the distribution rate, redemption rights, and rights to exchange the Preferred Units for shares of the Corporation’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”), as well as rights of holders of Preferred Units to approve certain Partnership business, financial, and governance-related matters.
In connection with the Closing, the Corporation and the Purchasers also entered into a registration rights agreement (the “Registration Rights Agreement”) that provides the holders of Preferred Units certain registration rights with respect to shares of Class A Common Stock received by such holders upon exchange of Preferred Units.
Since the Preferred Units could be exchanged for a number of shares of Class A Common Stock equal to 20% or more of the Corporation’s outstanding voting power, the Corporation has agreed to submit the potential issuance of such shares for approval of its stockholders (the “Stockholder Approval”) at its annual stockholder meeting in 2020. In connection with the Closing, Apache Corporation, a Delaware corporation (“Apache”) that, through direct and indirect subsidiaries, controls the Corporation and the Partnership, entered into a voting agreement (the “Voting Agreement”) with the Corporation and certain Purchasers, pursuant to which Apache has agreed to vote all shares of the Corporation’s common stock over which it has beneficial ownership in favor of the Stockholder Approval and against certain of the Partnership Agreement’s restrictive provisions if submitted for a vote of the Corporation’s common stockholders. The Partnership Agreement provides that the Preferred Units will not be exchangeable into more than 19.5% of the outstanding voting power of the Corporation unless the Stockholder Approval is obtained.
Cautionary Note Regarding Summaries
The foregoing summary of each of the Partnership Agreement, the Registration Rights Agreement, and the Voting Agreement (each an “Agreement”) does not purport to be complete and is subject to, and qualified in its entirety by, the full text of each Agreement. A copy of each Agreement is filed as an exhibit to this report.
Each Agreement has been filed with this report to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about the Partnership or the Corporation. Representations, warranties, and covenants in each Agreement were made only for purposes of the Agreement, were solely for the benefit of the parties to the Agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Agreement. Representations and warranties in each Agreement may have been made as of specific dates and for purposes of allocating contractual risk between the parties instead of establishing matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under any Agreement and should not rely on the representations, warranties, or covenants therein or any descriptions thereof as characterizations of the actual state of facts or condition of the Partnership or the Corporation or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of an Agreement, which subsequent information may or may not be fully reflected in the public disclosures of the Corporation.
