UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 11, 2016

 


 

Centennial Resource Development, Inc.

(Exact name of registrant as specified in its charter)

 


 

Delaware

 

001-37697

 

47- 5381253

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS. Employer Identification No.)

 

1401 Seventeenth Street, Suite 1000
Denver, Colorado 80202
(Address of principal executive offices, including zip code)

 

(720) 441-5515
(Registrant’s telephone number, including area code)

 

Silver Run Acquisition Corporation
(Former name or former address, if changed since last report)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o                  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Introductory Note

 

On October 11, 2016 (the “Closing Date”), Centennial Resource Development, Inc. (formerly known as Silver Run Acquisition Corporation) (the “Company”) consummated the previously announced acquisition of approximately 89% of the outstanding membership interests in Centennial Resource Production, LLC, a Delaware limited liability company (“CRP”), pursuant to (i) that certain Contribution Agreement, dated as of July 6, 2016 (as amended by Amendment No. 1 thereto, dated as of July 29, 2016, the “Contribution Agreement”), among Centennial Resource Development, LLC, a Delaware limited liability company (“CRD”), NGP Centennial Follow-On LLC, a Delaware limited liability company (“NGP Follow-On”), Celero Energy Company, LP, a Delaware limited partnership (together with CRD and NGP Follow-On, the “Centennial Contributors”), CRP and New Centennial, LLC, a Delaware limited liability company (“NewCo”), (ii) that certain Assignment Agreement, dated as of October 7, 2016, between NewCo and Silver Run Acquisition Corporation and (iii) that certain Joinder Agreement, dated as of October 7, 2016, by Silver Run Acquisition Corporation. We refer to the acquisition and the other transactions contemplated by the Contribution Agreement as the “Business Combination.”

 

In connection with the closing of the Business Combination (the “Closing”), the Company changed its name from Silver Run Acquisition Corporation to Centennial Resource Development, Inc. Unless the context otherwise requires, “Silver Run” refers to the registrant prior to the Closing, and “we,” “us,” “our” and the “Company” refer to the registrant and its subsidiaries following the Closing.

 

Item 1.01. Entry into a Material Definitive Agreement.

 

Credit Agreement Amendment

 

On October 11, 2016, CRP entered into that certain Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”), which amends the Amended and Restated Credit Agreement, dated as of October 15, 2014, among CRP, each of the lenders from time to time party thereto and JPMorgan Chase Bank, N.A. as administrative agent (the “Credit Agreement”).

 

The Second Amendment, among other things, (1) permits the Business Combination, (2) reflects the repayment in full of all term loans under the Credit Agreement, (3) increases the borrowing base under the Credit Agreement from $140,000,000 to $200,000,000, (4) increases the interest rate to LIBOR plus 2.25% - 3.25% and (5) requires CRP to have sufficient liquidity and satisfy a maximum leverage ratio in order to make dividends.

 

The foregoing description of the Second Amendment is a summary only and is qualified in its entirety by reference to the Second Amendment, a copy of which is attached as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Amended and Restated Registration Rights Agreement

 

In connection with the Closing, on October 11, 2016, the Company entered into an amended and restated registration rights agreement (the “Registration Rights Agreement”) with Silver Run Sponsor, LLC (the “Sponsor”), certain of our former and current directors, Riverstone Centennial Holdings, L.P. (the “Riverstone private investor”) and the Centennial Contributors, pursuant to which such parties will be entitled to certain registration rights relating to (i) shares of our Class A Common Stock, par value $0.0001 per share (the “Class A Common Stock”), issued to the Sponsor and such former and current directors upon the conversion of their founder shares (as hereinafter defined) at the Closing, (ii) warrants owned by the Sponsor and warrants that may be issued upon conversion of working capital loans (and any shares of Class A Common Stock issuable upon the exercise of such warrants), (iii) shares of Class A Common Stock issuable upon the future redemption or exchange of the common membership interests in CRP (the “CRP Common Units”) owned by the Centennial Contributors and their permitted transferees and (iv) shares of Class A Common Stock owned by the Riverstone private investor and its permitted transferees. The material provisions of the Registration Rights Agreement are described in Silver Run’s Proxy Statement dated September 23, 2016 (the “Proxy Statement”) relating to the special meeting of Silver Run’s stockholders held on October 7, 2016 (the “Special Meeting”) in the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Registration Rights Agreement,” which is incorporated by reference herein.

 

1



 

A copy of the Registration Rights Agreement is filed with this Current Report on Form 8-K as Exhibit 4.1 and is incorporated herein by reference, and the foregoing description of the Registration Rights Agreement is qualified in its entirety by reference thereto.

 

Indemnity Agreements

 

On October 11, 2016, we entered into indemnity agreements with Messrs. Tony Weber, Robert Tichio, David M. Leuschen, Pierre F. Lapeyre, Jr. and Karl Bandtel and Ms. Marie A. Baldwin, each of whom became a director following the Business Combination, and Messrs. George Glyphis and Sean Smith and Ms. Jamie Wheat, who became executive officers of the Company following the Business Combination. Each indemnity agreement provides that, subject to limited exceptions, and among other things, we will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in his or her capacity as our director or officer.

 

A copy of a form indemnity agreement was filed as Exhibit 10.7 to Silver Run’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission (the “SEC”) on January 27, 2016 and is incorporated herein by reference, and the foregoing description of the indemnity agreements is qualified in its entirety by reference thereto.

 

Amended and Restated Limited Liability Company Agreement of CRP

 

Following the completion of the Business Combination, we will operate our business through CRP and its subsidiaries.  At the Closing, we and the Centennial Contributors entered into CRP’s fifth amended and restated limited liability company agreement (the “A&R LLC Agreement”).  Under the A&R LLC Agreement, we became a member and the sole manager of CRP.  As the sole manager, we are able to control all of the day-to-day business affairs and decision making of CRP without the approval of any other member, unless otherwise stated in the A&R LLC Agreement.  Pursuant to the terms of the A&R LLC Agreement, we cannot, under any circumstances, be removed as the sole member of CRP except by our election. The material terms of the A&R LLC Agreement are described in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Amended and Restated Limited Liability Company Agreement of CRP,” which is incorporated by reference herein.

 

A copy of the A&R LLC Agreement is filed with this Current Report on Form 8-K as Exhibit 10.5 and is incorporated herein by reference, and the foregoing description of the A&R LLC Agreement is qualified in its entirety by reference thereto.

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

 

The disclosure set forth under “Introductory Note” above is incorporated in this Item 2.01 by reference. The material provisions of the Contribution Agreement are described in the Proxy Statement in the section entitled “Proposal No. 1—Approval of the Business Combination—Contribution Agreement,” which is incorporated by reference herein.

 

The Business Combination was approved by Silver Run’s stockholders at the Special Meeting. At the Special Meeting, 55,330,555 shares of Silver Run common stock were voted in favor of the proposal to approve the Business Combination, 2,525 shares of Silver Run common stock were voted against that proposal, and holders of 10,515 shares abstained from voting on the proposal. Although Silver Run’s public stockholders had the opportunity, in connection with the Closing, to redeem shares of Class A Common Stock pursuant to the terms of Silver Run’s amended and restated certificate of incorporation (the “Charter”), no shares were redeemed.

 

In connection with the Business Combination, (i) Silver Run contributed $1,485,999,739.31 to CRP, representing the net cash proceeds received by Silver Run pursuant to the Transactions (as hereinafter defined), plus the amount of funds from its trust account and minus deferred expenses payable by Silver Run to the underwriters in its initial public offering (the “IPO”), (ii) CRP paid the Centennial Contributors $1,186,744,348 in aggregate cash consideration and (iii) the Centennial Contributors retained 20,000,000 CRP Common Units, representing approximately 11% of the outstanding membership interests in CRP.

 

2



 

We refer to (a) the Business Combination, (b) the completion of the issuance and sale of (i) 81,005,000 shares of Class A Common Stock to the Riverstone private investor in a private placement (the “Riverstone Private Placement”) and (ii) the issuance and sale of 20,000,000 shares of Class A Common Stock to certain other accredited investors in a private placement (the “PIPE Investment” and, together with the Riverstone Private Placement, the “Private Placements”), (c) the conversion of Silver Run’s outstanding shares of Class B Common Stock, par value $0.0001 per share (the “Class B Common Stock” and such outstanding shares, the “founder shares”), into shares of Class A Common Stock on a one-for-one basis in connection with the Business Combination and (d) the contribution of approximately $189 million in cash by Silver Run to CRP necessary for CRP to repay its outstanding debt that became due and payable as a result of the consummation of the Business Combination, collectively, as the “Transactions.”

 

As of the Closing Date and following the completion of the Transactions, the Company’s outstanding securities were as follows: (a) 163,505,000 shares of Class A Common Stock, (b) 20,000,000 shares of Class C Common Stock, par value $0.0001 per share (the “Class C Common Stock”) held by the Centennial Contributors, (c) warrants exercisable for 24,666,666 shares of Class A Common Stock and (d) one share of Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), held by CRD. As of the Closing Date and following the completion of the Business Combination, the Centennial Contributors owned 20,000,000 CRP Common Units exchangeable on a one-for-one basis for shares of Class A Common Stock of the Company. Upon the exchange of CRP Common Units for shares of Class A Common Stock, a corresponding number of shares of Class C Common Stock will be cancelled.

 

As of the Closing Date and following the completion of the Transactions, the ownership interests of the Company’s stockholders were as follows:

 

·                                           public stockholders owned an approximate 30.6% economic interest and 27.3% voting interest in the Company;

·                                           the Riverstone private investor, the Sponsor and the Company’s current and former independent directors owned an approximate 57.2% economic interest and 50.9% voting interest in the Company;

·                                           the PIPE investors owned an approximate 12.2% economic interest and 10.9% voting interest in the Company; and

·                                           the Centennial Contributors owned a 0.0% economic interest and an approximate 10.9% voting interest in the Company.

 

Prior to the Closing, Silver Run was a shell company with no operations, formed as a vehicle to effect a business combination with one or more operating businesses. After the Closing, the Company became a holding company whose assets primarily consist of interests in its subsidiary, CRP. The following information is provided about the business of the Company reflecting the consummation of the Business Combination.

 

Cautionary Note Regarding Forward-Looking Statements

 

The Company makes forward-looking statements in this Current Report on Form 8-K. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements may include statements relating to:

 

·                                           the benefits of the Business Combination;

·                                           the future financial performance of the Company following the Business Combination;

·                                           changes in CRP’s reserves and future operating results;

·                                           expansion plans and opportunities; and

·                                           other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

 

These forward-looking statements are based on information available as of the date of this Current Report on Form 8-K, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any

 

3



 

subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

·                                           the risk that the Business Combination disrupts our current plans and operations;

·                                           the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;

·                                           costs related to the Business Combination;

·                                           changes in applicable laws or regulations;

·                                           the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and

·                                           other risks and uncertainties set forth in the Proxy Statement in the section entitled “Risk Factors” beginning on page 41 of the Proxy Statement.

 

Business and Properties

 

The business and properties of CRP prior to the Business Combination are described in the Proxy Statement in the section entitled “Business of CRP” beginning on page 209, which is incorporated by reference herein. The business of Silver Run prior to the Business Combination is described in the Proxy Statement in the section entitled “Business of Silver Run” beginning on page 170, which is incorporated by reference herein.

 

Risk Factors

 

The risk factors related to the Company’s business and operations are described in the Proxy Statement in the section entitled “Risk Factors” beginning on page 41, which is incorporated by reference herein.

 

Selected Historical Financial Information of CRP

 

The selected historical financial information of CRP for the three years ended December 31, 2015 and the six months ended June 30, 2016 is provided in the Proxy Statement in the section entitled “Selected Historical Financial Information of CRP” beginning on page 36, which is incorporated by reference herein.

 

Unaudited Pro Forma Condensed Consolidated Combined Financial Information

 

The unaudited pro forma condensed consolidated combined financial information of Silver Run for the year ended December 31, 2015 and the six months ended June 30, 2016 included in the Proxy Statement beginning on page 79 is incorporated herein by reference.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Management’s discussion and analysis of financial condition and results of operations of CRP prior to the Business Combination is included in the Proxy Statement in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of CRP” beginning on page 182, which is incorporated by reference herein. Management’s discussion and analysis of financial condition and results of operations of Silver Run prior to the Business Combination is described in the Proxy Statement in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Silver Run” beginning on page 167, which is incorporated by reference herein.

 

4



 

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information known to the Company regarding ownership of shares of common stock of the Company as of October 11, 2016:

 

·                                           each person who is, or is expected to be, the beneficial owner of more than 5% of the outstanding shares of the Company’s voting common stock;

·                                           each of the Company’s current officers and executive directors; and

·                                           all current officers and executive directors of the Company, as a group.

 

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.

 

The beneficial ownership of voting common stock of the Company is based on 183,505,000 shares of common stock issued and outstanding in the aggregate as of October 11, 2016.

 

Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all shares of voting common stock beneficially owned by them.

 

Name and Address of Beneficial Owners

 

Number of
Shares of
Common Stock

 

Percent of Class
%

 

5% or Greater Stockholders

 

 

 

 

 

Riverstone Centennial Holdings, L.P.(1)

 

81,005,000

 

44.1

%

Silver Run Sponsor, LLC(2)

 

12,380,000

 

6.7

%

Centennial Resource Development, LLC(3)

 

12,227,062

 

6.7

%

Celero Energy Company, LP(4)

 

4,246,898

 

2.3

%

NGP Centennial Follow-On LLC(5)

 

3,526,040

 

1.9

%

Funds advised by Capital Research and Management Company(6)

 

10,706,400

 

5.8

%

Fidelity Contrafund: Fidelity Advisor Series Opportunistic Insights Fund(7)(8)

 

40,200

 

*

 

Fidelity Contrafund: Fidelity Contrafund(7)(8)

 

5,188,000

 

2.8

%

Fidelity Contrafund Commingled Pool(7)

 

512,900

 

*

 

Fidelity Contrafund: Fidelity Advisor New Insights Fund(7)(8)

 

1,224,500

 

*

 

Fidelity Contrafund: Fidelity Series Opportunistic Insights Fund(7)(8)

 

278,900

 

*

 

Variable Insurance Products Fund III: Balanced Portfolio(7)(8)

 

148,900

 

*

 

Fidelity Puritan Trust: Fidelity Balanced Fund(7)(8)

 

1,365,900

 

*

 

Variable Insurance Products Fund II: Contrafund Portfolio(7)(8)

 

872,100

 

*

 

Fidelity Advisor Series I: Fidelity Advisor Balanced Fund(7)(8)

 

110,100

 

*

 

Fidelity Select Portfolios: Energy Portfolio(7)(8)

 

115,200

 

*

 

Variable Insurance Products Fund IV: Energy Portfolio(7)(8)

 

14,400

 

*

 

Fidelity Central Investment Portfolios LLC: Fidelity Energy Central Fund(7)(8)

 

45,400

 

*

 

Fidelity Advisor Series VII: Fidelity Advisor Energy Fund(7)(8)

 

45,200

 

*

 

Fidelity Select Portfolios: Natural Resources Portfolio(7)(8)

 

38,300

 

*

 

 

 

 

 

 

 

Directors and Executive Officers

 

 

 

 

 

Mark G. Papa

 

10,000

 

*

 

George Glyphis

 

 

 

Sean Smith

 

 

 

Jeffrey H. Tepper

 

40,000

 

*

 

Tony Weber

 

 

 

Robert Tichio

 

 

 

David Leuschen(1)(2)

 

 

 

Pierre Lapeyre(1)(2)

 

 

 

Maire Baldwin

 

 

 

Karl Bandtel

 

 

 

All directors and executive officers, as a group (10 individuals)

 

50,000

 

*

 

 

5



 


*

Less than one percent.

(1)

Riverstone Centennial Holdings, L.P. will be the record holder of these securities upon the consummation of the transactions described herein. Riverstone Energy Partners GP VI, LLC is the general partner of Riverstone Energy Partners VI, L.P., which is the general partner of Riverstone Centennial Holdings, L.P. Riverstone Energy Partners GP VI, LLC is managed by a six person managing committee consisting of Pierre F. Lapeyre, Jr., David M. Leuschen, James T. Hackett, Michael B. Hoffman, N. John Lancaster and, on a rotating basis, one of E. Bartow Jones, Baran Tekkora and Robert M. Tichio. The members of the managing committee of Riverstone Energy Partners GP VI, LLC, Riverstone Energy Partners GP VI, LLC and Riverstone Energy Partners VI, L.P. may be deemed to share beneficial ownership of the securities owned of record by Riverstone Centennial Holdings, L.P. Each such entity or person disclaims any such beneficial ownership of such securities. The business address for each of the persons named in this footnote is c/o Riverstone Holdings, 712 Fifth Avenue, 36th Floor, New York, NY 10019.

(2)

Silver Run Sponsor, LLC is the record holder of these securities. Silver Run Sponsor Manager, LLC is the managing member of Silver Run Sponsor, LLC. Riverstone Holdings LLC is the managing member of Silver Run Sponsor Manager, LLC. Pierre F. Lapeyre, Jr. and David M. Leuschen are the managing directors of Riverstone Holdings LLC and have or share voting and investment discretion with respect to the securities held of record by Silver Run Sponsor, LLC. As such, each of Silver Run Sponsor Manager, LLC, Riverstone Holdings LLC, Mr. Leuschen and Mr. Lapeyre may be deemed to have or share beneficial ownership of the common stock held directly by Silver Run Sponsor, LLC. Each such entity or person disclaims any such beneficial ownership of such securities. The business address for Silver Run Sponsor, LLC and Silver Run Sponsor Manager, LLC is c/o Silver Run Acquisition Corporation, 1000 Louisiana Street, Suite 1450, Houston, Texas 77002. The business address for each other person named in this footnote is c/o Riverstone Holdings, 712 Fifth Avenue, 36th Floor, New York, NY 10019.

(3)

The board of managers of CRD has voting and dispositive power over these shares. The board of managers of CRD consists of Ward Polzin, Bret Siepman, Chris Carter, David Hayes, Martin Sumner, Christopher Ray and Tony Weber. None of such persons individually have voting and dispositive power over these shares, and the board of managers of CRD acts by majority vote and thus each such person is not deemed to beneficially own the shares held by CRD. NGP X US Holdings, L.P. (“NGP X US Holdings”) owns 99% of CRD, and certain members of CRD’s management team own the remaining 1%. Certain members of CRD’s management team and certain of CRD’s employees also own incentive units in CRD. Please see the section of the Proxy Statement entitled “Executive Compensation—Narrative Disclosures—Incentive Units” for more information on the incentive units. As a result, NGP X US Holdings may be deemed to indirectly beneficially own the shares held by CRD. NGP X US Holdings disclaims beneficial ownership of these shares except to the extent of its pecuniary interest therein. NGP X Holdings GP, L.L.C. (the sole general partner of NGP X US Holdings), NGP Natural Resources X, L.P. (the sole member of NGP X Holdings GP, L.L.C.), G.F.W. Energy X, L.P. (the sole general partner of NGP Natural Resources X, L.P.) and GFW X, L.L.C. (the sole general partner of G.F.W. Energy X, L.P.) may each be deemed to share voting and dispositive power over the reported shares and therefore may also be deemed to be the beneficial owner of these shares. GFW X, L.L.C. has delegated full power and authority to manage NGP X US Holdings to NGP Energy Capital Management, L.L.C. and accordingly, NGP Energy Capital Management, L.L.C. may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Chris Carter and Tony Weber, both of whom are members of CRD’s board of directors, are managing partners of NGP Energy Capital Management, L.L.C. In addition, Craig Glick and Christopher Ray are members of the executive committee of NGP Energy Capital Management, L.L.C. Although none of Messrs. Carter, Weber, Glick or Ray individually have voting or dispositive power over these shares, such individuals may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Each of Messrs. Carter, Weber, Glick and Ray disclaim beneficial ownership of these shares except to the extent of their respective pecuniary interest therein.

(4)

Celero Energy Management, LLC, the general partner of Celero (“Celero GP”), has voting and dispositive power over these shares. The board of managers of Celero GP consists of David Hayes, Bruce Selkirk and Christopher Ray. None of such persons individually have voting and dispositive power over these shares, and the board of managers of Celero GP acts by majority vote and thus each such person is not deemed to beneficially own the shares held by Celero GP. Natural Gas Partners VIII, L.P. (“NGP VIII”) owns 94.7% of the membership interests of Celero GP, and the remaining 5.3% is held by certain members of Celero’s management team and other minority owners. As a result, NGP VIII may be deemed to indirectly beneficially own these shares. NGP VIII disclaims beneficial ownership of these shares except to the extent of its pecuniary interest therein. G.F.W. Energy VIII, L.P. (the sole general partner of NGP VIII) and GFW VIII, L.L.C. (the sole general partner of G.F.W. Energy VIII, L.P.) may each be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. GFW VIII, L.L.C. has delegated full power and authority to manage NGP VIII to NGP Energy Capital Management, L.L.C. and accordingly, NGP Energy Capital Management, L.L.C. may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Chris Carter and Tony Weber (who will be one of our directors following the completion of the business combination) are managing partners of NGP Energy Capital Management, L.L.C. In addition, Craig Glick and Christopher Ray are members of the executive committee of NGP Energy Capital Management, L.L.C. Although none of Messrs. Carter, Weber, Glick or Ray individually have voting or dispositive power over these shares, such individuals may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Each of Messrs. Carter, Weber, Glick and Ray disclaim beneficial ownership of these shares except to the extent of their respective pecuniary interest therein.

(5)

NGP Centennial Follow-On LLC is managed by its managing member, NGP X US Holdings. As such, NGP X US Holdings has voting and dispositive power over these shares. NGP X US Holdings disclaims beneficial ownership of these shares except to the extent of its pecuniary interest therein. NGP X Holdings GP, L.L.C. (the sole general partner of NGP X US Holdings), NGP Natural Resources X, L.P. (the sole member of NGP X Holdings GP, L.L.C.), G.F.W. Energy X, L.P. (the sole general partner of NGP Natural Resources X, L.P.) and GFW X, L.L.C. (the sole general partner of G.F.W. Energy X, L.P.) may each be deemed to share voting and dispositive power over the reported shares and therefore may also be deemed to be the beneficial owner of these shares. G.F.W. Energy X, L.P. has delegated full power and authority to manage NGP Natural Resources X, L.P. to NGP Energy Capital Management, L.L.C. and accordingly, NGP Energy Capital Management, L.L.C. may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Chris Carter and Tony Weber (who will be one of our directors following completion of the business combination) are managing partners of NGP Energy Capital Management, L.L.C. In addition, Craig Glick and Christopher Ray are members of the executive committee of NGP Energy Capital Management, L.L.C. Although none of Messrs. Carter, Weber, Glick or Ray individually have voting or dispositive power over these shares, such individuals may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Each of Messrs. Carter, Weber, Glick and Ray disclaim beneficial ownership of these shares except to the extent of their respective pecuniary interest therein.

 

6



 

(6)

Includes 5,975,700 shares of Class A Common Stock held by SMALLCAP World Fund, Inc. (“SCWF”) and 4,730,700 shares of Class A Common Stock held by The Growth Fund of America (“GFA,” and, together with SCWF, the “CRMC Stockholders”). Capital Research and Management Company (“CRMC”) is the investment adviser to each of the CRMC Stockholders. CRMC and/or Capital World Investors (“CWI”) may be deemed to be the beneficial owner of all of the securities held by the CRMC Stockholders; however, each of CRMC and CWI expressly disclaim that it is the beneficial owner of such securities. Julian N. Abdey, Mark E. Denning, Peter Eliot, Brady L. Enright, J. Blair Frank, Bradford F. Freer, Leo Hee, Claudia P. Huntington, Jonathan Knowles, Lawrence Kymisis, Harold H. La, Aidan O’Connell, Andraz Razen and Gregory W. Wendt, as portfolio managers, have voting and investment power over the securities held by SCWF. Christopher D. Buchbinder, Barry S. Crosthwaite, J. Blair Frank, Joanna F. Jonsson, Carl M. Kawaja, Michael T. Kerr, Ronald B. Morrow, Donald D. O’Neal, Martin Romo, Lawrence R. Solomon, James Terrile and Alan J. Wilson, as portfolio managers, have voting and investment power over the securities held by GFA. The address for each of the CRMC Stockholders is c/o Capital Research and Management Company, 333 South Hope Street, 55th Floor, Los Angeles, CA 90071. The CRMC Stockholders may be affiliates of a broker-dealer. Each of the CRMC Stockholders acquired the shares being registered hereby in the ordinary course of its business.

(7)

These accounts are managed by direct or indirect subsidiaries of FMR LLC. Abigail P. Johnson is a Director, the Vice Chairman, the Chief Executive Officer and the President of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. The address is 245 Summer Street, Boston, MA 02210.

(8)

Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management & Research Company (“FMR Co”), a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. FMR Co carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees.

 

 

Directors and Officers

 

On the Closing Date, in connection with the Business Combination, the size of the Company’s board of directors was increased from four members to eight members. Mr. William D. Gutermuth and Ms. Diana J. Walters resigned from their positions as directors, and Ms. Maire A. Baldwin and Mr. Robert Tichio were appointed to serve as Class I directors, with terms expiring at the Company’s annual meeting of stockholders in 2017; Mr. Karl Bandtel was appointed to serve along with Mr. Jeffrey H. Tepper as a Class II director, with a term expiring at the Company’s annual meeting of stockholders in 2018; and Messrs. David M. Leuschen and Pierre F. Lapeyre Jr. were appointed to serve along with Mr. Mark G. Papa as Class III directors, with a term expiring at the Company’s annual meeting of stockholders in 2019. In addition, Mr. Tony Weber was nominated and elected as a director by CRD, as the holder of the Series A Preferred Stock, with a term expiring at the Company’s annual meeting of stockholders in 2017. The decision of each of Mr. Gutermuth and Ms. Walters to resign from the board of directors was not the result of any disagreement with the Company on any matter relating to its operations, policies or practices. Information with respect to the Company’s directors is set forth in the Proxy Statement in the section entitled “Officers and Directors of Silver Run” beginning on page 172, which is incorporated herein by reference.

 

7



 

In connection with and effective as of the Closing, Thomas J. Walker resigned as the Company’s Chief Financial Officer. Also in connection with the Closing, Mr. George Glyphis was appointed to serve as the Company’s Chief Financial Officer, Treasurer and Assistant Secretary, Mr. Sean Smith was appointed to serve as the Company’s Chief Operating Officer and Ms. Jamie Wheat was appointed to serve as the Company’s Vice President and Chief Accounting Officer. Mr. Papa will continue to serve as the Company’s Chief Executive Officer. Information with respect to Messrs. Papa and Glyphis is set forth in the Proxy Statement in the section entitled “Officers and Directors of Silver Run” beginning on page 172, which is incorporated herein by reference.

 

Mr. Smith, age 43, has served as the Vice President, Geosciences of CRP since May 2014. Prior to joining CRP, from February 2013 to May 2014, Mr. Smith worked at QEP Resources, where he served in several roles, including as a General Manager, leading the geoscience, regulatory and reservoir engineering departments for the Williston, Powder River, and Denver Julesburg Basins. Prior to QEP Resources, from 2005 to February 2013, Mr. Smith worked at Resolute Energy Corporation as a Manager and Geologist. He has also worked in various geotechnical roles at Kerr-McGee and Sanchez Oil & Gas. Mr. Smith earned his B.A. in Geology from Lawrence University. He is licensed with the Texas Board of Professional Geoscientists and is a member of the American Association of Petroleum Geologists.

 

Ms. Wheat, age 46, has served as the Vice President and Chief Accounting Officer of CRP since January 2014. Immediately prior to joining CRP, Ms. Wheat served Berry Petroleum Company as the Vice President and Controller from March 2013 to December 2013, as the Controller from August 2009 to February 2013 and as the Accounting Manager from August 2008 to August 2009. Ms. Wheat also held various audit positions with KPMG from 2001 to 2008. She earned a B.S. in Accounting at the University of Colorado, Boulder, and an M.S. in Accounting at the University of Colorado, Denver. Ms. Wheat is a Certified Public Accountant and is a member of the American Institute of Certified Public Accountants and COPAS-Colorado.

 

Termination of Consulting Agreements

 

In connection with the execution of the Contribution Agreement, Centennial Resource Management, LLC (the “Management Company”) entered into Consulting Agreements (the “Consulting Agreements”) with each of Messrs. Ward Polzin, George Glyphis, Bret Siepman, Tim Muniz, Sean Smith and Terry Sherban and Mses. Roxy Forst and Jamie Wheat (each, an “Employee”). The description of the Consulting Agreements set forth in the Proxy Statement section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Consulting Agreements” beginning on page 112 is incorporated by reference. Prior to the Closing Date, the Management Company and each Employee agreed to terminate his or her Consulting Agreement, other than with respect to the confidentiality and non-competition restrictive covenants contained in the Consulting Agreement. Following the Closing, Messrs. Polzin, Siepman and Muniz and Ms. Forst will be at-will employees of the Management Company, in the case of Messrs. Polzin and Siepman, until October 31, 2016 or their earlier termination and, in the cases of Mr. Muniz and Ms. Forst, for an indefinite period. During this time, Messrs. Polzin, Siepman and Muniz and Ms. Forst will provide transitional services that are substantially the same as those contemplated by their Consulting Agreements and will receive base salaries at the same rate as they received on the Closing Date. The other Employees will remain at-will employees of the Management Company following the Closing Date instead of providing consulting services to the Management Company in accordance with the Consulting Agreements. Messrs. Glyphis and Smith and Ms. Wheat will serve in the roles described for them above. Mr. Sherban will have the duties assigned to him by the Management Company or that he and the Management Company otherwise agree.

 

Independence of Directors

 

Following the completion of the Transactions, affiliates of Riverstone Investment Group LLC control a majority of the combined voting power of all classes of our voting stock. As a result, we qualify as a “controlled company” within the meaning of the listing standards of the NASDAQ Global Select Market (“NASDAQ”) and may elect not to comply with certain NASDAQ corporate governance requirements, including the requirements that a majority of the board of directors consist of independent directors and that the compensation committee and corporate governance and nominating committee be composed entirely of independent directors. We have elected to utilize these exemptions, and therefore do not have a majority of independent directors serving on our board and have individuals serving on our compensation committee and corporate governance and nominating committee that may not qualify as independent according to NASDAQ listing standards and the rules and regulations of the SEC. These independence requirements will not apply to us as long as we remain a controlled company.

 

8



 

The Company’s board of directors has determined that Ms. Maire A. Baldwin and Messrs. Karl Bandtel, Jeffrey H. Tepper and Tony Weber are independent within the meaning of NASDAQ Rule 5605(a)(2).

 

Committees of the Board of Directors

 

Following the Closing, the standing committees of the Company’s board of directors consist of an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”) and a corporate governance and nominating committee (the “Corporate Governance and Nominating Committee”). Each of the committees reports to the board of directors.

 

The composition, duties and responsibilities of these committees are set forth below.

 

Audit Committee

 

The principal functions of the Company’s Audit Committee are detailed in the Company’s Audit Committee charter, which is available on the Company’s website, and include:

 

·                                           the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by the Company;

·                                           pre-approving all audit and permitted non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by the Company, and establishing pre-approval policies and procedures;

·                                           reviewing and discussing with the independent auditors all relationships the auditors have with the Company in order to evaluate their continued independence;

·                                           setting clear hiring policies for employees or former employees of the independent auditors;

·                                           setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

·                                           obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

·                                           reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and

·                                           reviewing with management, the independent auditors and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

 

Under the NASDAQ listing standards and applicable SEC rules, the Company is required to have at least three members of the Audit Committee, all of whom must be independent. Following the Closing, our Audit Committee consists of Messrs. Jeffrey H. Tepper and Karl Bandtel and Ms. Maire A. Baldwin, with Mr. Tepper serving as the Chair. We believe that Messrs. Tepper and Bandtel and Ms. Baldwin qualify as independent directors according to the rules and regulations of the SEC with respect to audit committee membership. We also believe that Mr. Tepper qualifies as our “audit committee financial expert,” as such term is defined in Item 401(h) of Regulation S-K.

 

Compensation Committee

 

The principal functions of the Company’s Compensation Committee are detailed in the Company’s Compensation Committee charter, which is available on the Company’s website, and include:

 

9



 

·                                           reviewing and approving on an annual basis the corporate goals and objectives relevant to the Company’s Chief Executive Officer’s compensation, evaluating its Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of its Chief Executive Officer based on such evaluation;

·                                           reviewing and approving on an annual basis the compensation of all of the Company’s other officers;

·                                           reviewing on an annual basis the Company’s executive compensation policies and plans;

·                                           implementing and administering the Company’s incentive compensation equity-based remuneration plans;

·                                           assisting management in complying with the Company’s proxy statement and annual report disclosure requirements;

·                                           approving all special perquisites, special cash payments and other special compensation and benefit arrangements for the Company’s officers and employees;

·                                           if required, producing a report on executive compensation to be included in the Company’s annual proxy statement; and

·                                           reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

 

Following the Closing, our Compensation Committee consists of Ms. Maire A. Baldwin and Messrs. Pierre F. Lapeyre, Jr., Jeffrey H. Tepper and Robert M. Tichio, with Mr. Lapeyre serving as the Chair.

 

Corporate Governance and Nominating Committee

 

The principal functions of the Company’s Corporate Governance and Nominating Committee are detailed in the Company’s Corporate Governance and Nominating Committee charter, which is available on the Company’s website, and include:

 

·                                           assisting the board of directors in identifying individuals qualified to become members of the board of directors, consistent with criteria approved by the board of directors;

·                                           recommending director nominees for election or for appointment to fill vacancies;

·                                           recommending the election of officer candidates;

·                                           monitoring the independence of board of director members;

·                                           ensuring the availability of director education programs; and

·                                           advising the board of directors about appropriate composition of the board of directors and its committees.

 

The Corporate Governance and Nominating Committee also develops and recommends to the board of directors corporate governance principles and practices and assists in implementing them, including conducting a regular review of our corporate governance principles and practices. The Corporate Governance and Nominating Committee oversees the annual performance evaluation of the board of directors and the committees of the board of directors and makes a report to the board of directors on succession planning.

 

Following the Closing, our Corporate Governance and Nominating Committee consists of Messrs. David M. Leuschen, Tony Weber and Robert M. Tichio, with Mr. Leuschen serving as the Chair.

 

Indemnification of Directors and Executive Officers

 

Information about the indemnification of the Company’s directors and executive officers is set forth in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal—The Contribution Agreement” beginning on page 98 and in Amendment No. 2 to Silver Run’s Registration Statement on Form S-1 (File No. 333-209140) filed with the SEC on February 17, 2016, in the section entitled “Limitation on Liability and Indemnification of Officers and Directors” beginning on page 114, which are incorporated herein by reference. Please also see the information set forth under “Item 1.01. Entry into a Material Definitive Agreement—Indemnity Agreements” of this Current Report on Form 8-K.

 

10



 

Executive Officer and Director Compensation

 

CRP

 

The compensation of CRP’s named executive officers and directors before the consummation of the Business Combination is set forth in the Proxy Statement in the section entitled “Executive Compensation—CRP” beginning on page 176, which is incorporated herein by reference.

 

Post-Closing Compensation of Executive Officers and Directors

 

As of the date of this Current Report on Form 8-K, the compensation of the Company’s executive officers and directors has not been finally determined. Any such compensation to be provided to our officers and directors will be reviewed and approved by our board of directors or our Compensation Committee and will be publicly disclosed by the Company when such arrangements are approved.

 

On October 7, 2016, the stockholders of the Company approved the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan (the “LTIP”). The description of the LTIP set forth in the Proxy Statement section entitled “Proposal No. 6—The LTIP Proposal” beginning on page 157 is incorporated herein by reference. A copy of the full text of the LTIP is filed as Exhibit 10.6 to this Current Report on Form 8-K and is incorporated herein by reference. Following the consummation of the Business Combination, we expect that our board of directors or our Compensation Committee will make grants of awards under the LTIP to certain key management employees, including each of our current named executive officers.

 

Certain Relationships and Related Party Transactions

 

Founder Shares

 

On November 6, 2015, the Sponsor purchased 11,500,000 shares of Class B Common Stock, the founder shares, from Silver Run, for an aggregate purchase price of $25,000, or approximately $0.002 per share. In February 2016, the Sponsor transferred 40,000 founder shares to each of Silver Run’s then independent directors (together with the Sponsor, the “Initial Stockholders”) at their original purchase price. On February 24, 2016, Silver Run effected a stock dividend of approximately 0.125 shares for each outstanding share of Class B Common Stock, resulting in the Initial Stockholders holding an aggregate of 12,937,500 founder shares. On April 8, 2016, following the expiration of the underwriters’ remaining over-allotment option in connection with the IPO, the Sponsor forfeited 437,500 founder shares, so that the remaining 12,500,000 founder shares held by the Initial Stockholders would represent 20% of the then issued and outstanding shares of common stock of Silver Run. Founder shares are identical to the Class A Common Stock included in the units sold in the IPO, which consisted of one share of Class A Common Stock and one-third of one warrant, except that the founder shares would automatically convert into shares of Class A Common Stock at the time of the closing of Silver Run’s initial business combination and are subject to certain transfer restrictions, as described in more detail below.

 

11



 

On October 11, 2016, all of the outstanding shares of Class B Common Stock were automatically converted into shares of Class A Common Stock on a one-for-one basis in connection with the Closing. As used herein, unless the context otherwise requires, “founder shares” are deemed to include the shares of Class A Common Stock issued upon conversion thereof.

 

The Company’s Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A) one year after the completion of the Business Combination or (B) subsequent to the Business Combination, (x) if the last sale price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least 150 days after the Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

 

Private Placement Warrants

 

On February 29, 2016, the Sponsor purchased from Silver Run an aggregate of 8,000,000 warrants (the “Private Placement Warrants”) at a price of $1.50 per whole warrant ($12,000,000 in the aggregate) in a private placement that occurred simultaneously with the closing of the IPO. Each whole Private Placement Warrant is exercisable for one whole share of Class A Common Stock at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was placed in Silver Run’s  trust account along with the proceeds from the IPO. The Private Placement Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.

 

The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Private Placement Warrants until 30 days after the completion of the Business Combination.

 

Related Party Loans

 

On November 6, 2015, the Sponsor agreed to loan Silver Run an aggregate of up to $300,000 to cover expenses related to the IPO pursuant to a promissory note (the “2015 Note”). The 2015 Note was non-interest bearing and payable on the earlier of March 31, 2016 or the completion of the IPO. On November 10, 2015, Silver Run borrowed $150,000 under the 2015 Note, and Silver Run borrowed the remaining $150,000 under the 2015 Note in February 2016. On February 29, 2016, the full $300,000 balance of the 2015 Note was repaid to the Sponsor.

 

On August 2, 2016, Silver Run issued an unsecured, non-interest bearing promissory note to the Sponsor (the “2016 Note”).  Silver Run borrowed $300,000 under the 2016 Note, and repaid the full $300,000 balance on the Closing Date.

 

Administrative Support Agreement

 

On February 23, 2016, Silver Run entered into an administrative support agreement pursuant to which it agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Silver Run paid the affiliate of the Sponsor $30,000 and $40,000 for such services for the three and six months ended June 30, 2016, respectively. Following the Business Combination, the Company will cease paying these monthly fees.

 

The information set forth under “Item 1.01. Entry into a Material Definitive Agreement—Registration Rights Agreement” and “Item 1.01. Entry into a Material Definitive Agreement—Indemnity Agreements,” of this Current Report on Form 8-K is incorporated herein by reference.

 

12



 

Legal Proceedings

 

Information about legal proceedings of the Company is set forth in the Proxy Statement in the section entitled “Business of CRP—Legal Proceedings” beginning on page 235, which is incorporated herein by reference.

 

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

 

Silver Run

 

Silver Run’s units, shares of Class A Common Stock and warrants were historically quoted on NASDAQ under the symbols “SRAQU,” “SRAQ” and “SRAQW,” respectively.  Silver Run’s units commenced public trading on February 25, 2016, and the shares of Class A Common Stock and warrants each commenced separate trading on April 15, 2016.

 

The following table sets forth, for the calendar quarter indicated, the high and low sales prices per unit and share of Class A Common Stock as reported on NASDAQ for the periods presented.  Since warrants are not currently eligible to be exercised, there is no information presented for the warrants in the table below.

 

 

 

Units (SRAQU)

 

Class A Common Stock
(SRAQ)

 

 

 

High

 

Low

 

High

 

Low

 

Fiscal 2016:

 

 

 

 

 

 

 

 

 

Fourth Quarter(1)

 

$

19.16

 

$

17.50

 

$

16.96

 

$

16.25

 

Third Quarter

 

$

18.08

 

$

9.95

 

$

16.10

 

$

9.65

 

Second Quarter(2)

 

$

10.67

 

$

9.95

 

$

10.70

 

$

9.80

 

First Quarter(3)

 

$

10.83

 

$

10.10

 

N/A

 

N/A

 

 


(1)          Through October 7, 2016.

 

(2)          Beginning on April 15, 2016 with respect to the Class A Common Stock.

 

(3)          Beginning on February 25, 2016 with respect to the units.  The Class A Common Stock and the warrants commenced separate trading on April 15, 2016.

 

On July 6, 2016, the trading date before the public announcement of the Business Combination, Silver Run’s units and Class A Common Stock closed at $10.31 and $9.80, respectively.

 

Silver Run has not paid any cash dividends on the Class A Common Stock to date. Following completion of the Business Combination, the Company’s board of directors will consider whether or not to institute a dividend policy. It is the present intention of the Company to retain any earnings for use in its business operations and, accordingly, the Company does not anticipate the board of directors declaring any dividends in the foreseeable future.

 

As of the Closing Date, there were 22 holders of record of the Company’s Class A Common Stock.

 

In connection with the closing of the Business Combination, the Company’s trading symbol for its Class A Common Stock was changed to “CDEV” and the trading symbol for its warrants was changed to “CDEVW.”

 

On October 11, 2016, in connection with the Closing, all of the units of the Company separated into their component parts of one share of Class A Common Stock and one-third of one warrant to purchase one share of Class A Common Stock of the Company, and the units ceased trading on NASDAQ.

 

13



 

CRP

 

Historical market price information regarding CRP is not provided because there is no public market for CRP’s units. CRP has not made any cash distributions on its units to date.

 

Recent Sales of Unregistered Securities

 

Information about unregistered sales of Silver Run’s equity securities is set forth in “Part II, Item 15. Recent Sales of Unregistered Securities” of Amendment No. 2 to Silver Run’s Registration Statement on Form S-1 (File No. 333-209140) filed with the SEC on February 17, 2016.

 

Private Placements

 

On the Closing Date, Silver Run completed the Private Placements for approximately $1.01 billion in aggregate proceeds, which were used to fund a portion of the cash consideration in the Business Combination. The shares of Class A Common Stock sold in the Private Placements were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The information set forth under “Item 1.01. Entry Into a Material Definitive Agreement—Subscription Agreements” of Silver Run’s Current Report on Form 8-K filed with the SEC on July 27, 2016 is incorporated herein by reference.

 

Class C Common Stock and Series A Preferred Stock Issuance

 

On the Closing Date, the Company issued 20,00,000 shares of Class C Common Stock to the Centennial Contributors and one share of Series A Preferred Stock to CRD in connection with the Business Combination. These issuances were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.  Descriptions of the rights, preferences and privileges of the Class C Common Stock and the Series A Preferred Stock are set forth under “—Description of the Company’s Securities—Class C Common Stock” and “—Description of the Company’s Securities—Series A Preferred Stock,” respectively, below.

 

Description of the Company’s Securities

 

The Company has authorized 641,000,000 shares of capital stock, consisting of (a) 640,000,000 shares of common stock, including (i) 600,000,000 shares of Class A Common Stock, (ii) 20,000,000 shares of Class B Common Stock and (iii) 20,000,000 shares of Class C Common Stock and (b) 1,000,000 shares of preferred stock, including one share of Series A Preferred Stock.  As of the Closing Date, there were: (a) 22 holders of record of Class A Common Stock and 163,505,000 shares of Class A Common Stock outstanding; (b) no holders of record of Class B Common Stock and no shares of Class B Common Stock outstanding; (c) three holders of record of Class C Common Stock and 20,000,000 shares of Class C Common Stock outstanding; (d) one holder of record of Series A Preferred Stock and one share of Series A Preferred Stock outstanding; and (e) 2 holders of the Company’s warrants and 24,666,644 warrants outstanding.

 

Class A Common Stock

 

Holders of the Company’s Class A Common Stock are entitled to one vote for each share held on all matters to be voted on by the Company’s stockholders. Holders of the Class A Common Stock and holders of the Class C Common Stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required by law. Unless specified in the Second Amended and Restated Charter (including any certificate of designation of preferred stock) or Amended and Restated Bylaws (each as defined below), or as required by applicable provisions of the Delaware General Corporation Law or applicable stock exchange rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such matter voted on by the Company’s stockholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors (subject to the right of the holder of our Series A Preferred Stock to nominate and elect one director). Subject to the rights of the holders of any outstanding series of preferred stock, the Company’s stockholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.

 

14



                In the event of a liquidation, dissolution or winding up of the Company, the holders of the Class A Common Stock are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the Class A Common Stock. The Company’s stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the Class A Common Stock.

Class C Common Stock

In connection with the Business Combination, Silver Run issued 20,000,000 shares of Class C Common Stock to the Centennial Contributors. Holders of Class C Common Stock, together with holders of Class A Common Stock voting as a single class, will have the right to vote on all matters properly submitted to a vote of the stockholders. In addition, the holders of Class C Common Stock, voting as a separate class, will be entitled to approve any amendment, alteration or repeal of any provision of our Second Amended and Restated Charter that would alter or change the powers, preferences or relative, participating, optional or other or special rights of the Class C Common Stock. Holders of Class C Common Stock will not be entitled to any dividends from the Company and will not be entitled to receive any of our assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs.

Shares of Class C Common Stock may be issued only to the Centennial Contributors, their respective successors and assigns, as well as any permitted transferees of the Centennial Contributors. A holder of Class C Common Stock may transfer shares of Class C Common Stock to any transferee (other than the Company) only if such holder also simultaneously transfers an equal number of such holder’s CRP Common Units to such transferee in compliance with the A&R LLC Agreement. The Centennial Contributors generally have the right to cause CRP to redeem all or a portion of their CRP Common Units in exchange for shares of the Company’s Class A Common Stock or, at CRP’s option, an equivalent amount of cash. The Company may, however, at its option, effect a direct exchange of cash or Class A Common Stock for such CRP Common Units in lieu of such a redemption by CRP. Upon the future redemption or exchange of CRP Common Units held by a Centennial Contributor, a corresponding number of shares of Class C Common Stock will be cancelled. For more information on the redemption and exchange rights related to the Class C Common Stock and CRP Common Units, see the section of the Proxy Statement entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Amended and Restated Limited Liability Company Agreement of CRP—CRP Common Unit Redemption Right,” which is incorporated by reference herein.

Series A Preferred Stock

In connection with the Business Combination, Silver Run also issued one share of Series A Preferred Stock to CRD.  CRD, as the holder of the Series A Preferred Stock, will not be entitled to any dividends from the Company, but will be entitled to preferred distributions in liquidation in the amount of $0.0001 per share of Series A Preferred Stock and will have a limited voting right as described below. The Series A Preferred Stock will be redeemable by us (a) at such time as CRD and its affiliates cease to own, in the aggregate, at least 5,000,000 CRP Common Units and/or shares of Class A Common Stock (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and other similar transactions), (b) at any time at CRD’s option or (c) upon a breach by CRD of the transfer restrictions relating to the Series A Preferred Stock. In addition, for so long as the Series A Preferred Stock remains outstanding, CRD will be entitled to nominate one director for election to our board of directors in connection with any vote of our stockholders for the election of directors, and the vote of CRD will be the only vote required to elect such nominee to our board.

The terms, rights, obligations and preferences of the Series A Preferred Stock are set forth in that certain Certificate of Designation of Series A Preferred Stock (the “Certificate of Designation”) filed with the Secretary of State of the State of Delaware on October 11, 2016. A copy of the Certificate of Designation is attached as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated herein by reference, and the foregoing description of the Series A Preferred Stock is qualified in its entirety by reference thereto .

 

15



 

Warrants

 

Public Stockholders’ Warrants

 

Each whole warrant issued in Silver Run’s IPO entitles the registered holder to purchase one whole share of our Class A Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 12 months from the closing of the IPO. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A Common Stock. No fractional warrants have been issued and only whole warrants trade. The warrants will expire five years after the Closing Date, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

 

The Company will not be obligated to deliver any shares of Class A Common Stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act, with respect to the shares of Class A Common Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A Common Stock upon exercise of a warrant unless Class A Common Stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless.

 

The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of the Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A Common Stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

 

Once the warrants become exercisable, the Company may call the warrants for redemption:

 

·                                           in whole and not in part;

 

·                                           at a price of $0.01 per warrant;

 

·                                           upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and

 

·                                           if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.

 

If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

 

The Company has established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Class A Common Stock may fall below the $18.00 redemption trigger price as well as the $11.50 warrant exercise price after the redemption notice is issued.

 

If the Company calls the warrants for redemption as described above, the Company’s management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the Company’s

 

16



 

management will consider, among other factors, its cash position, the number of warrants that are outstanding and the dilutive effect on its stockholders of issuing the maximum number of shares of Class A Common Stock issuable upon the exercise of its warrants. If the Company’s management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If the Company’s management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Class A Common Stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. The Company believes this feature is an attractive option to the Company if it does not need the cash from the exercise of the warrants. If the Company calls its warrants for redemption and its management does not take advantage of this option, the Sponsor and its permitted transferees would still be entitled to exercise their Private Placement Warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.

 

A holder of a warrant may notify the Company in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of the shares of Class A Common Stock outstanding immediately after giving effect to such exercise.

 

If the number of outstanding shares of Class A Common Stock is increased by a stock dividend payable in shares of Class A Common Stock, or by a split-up of shares of Class A Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Class A Common Stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Class A Common Stock. A rights offering to holders of Class A Common Stock entitling holders to purchase shares of Class A Common Stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Class A Common Stock equal to the product of (i) the number of shares of Class A Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A Common Stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of Class A Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Class A Common Stock, in determining the price payable for Class A Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Class A Common Stock as reported during the 10 trading day period ending on the trading day prior to the first date on which the shares of Class A Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.

 

In addition, if the Company, at any time while the warrants are outstanding and unexpired, pays a dividend or makes a distribution in cash, securities or other assets to the holders of Class A Common Stock on account of such shares of Class A Common Stock (or other shares of the Company’s capital stock into which the warrants are convertible), other than (a) as described above or (b) certain ordinary cash dividends, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A Common Stock in respect of such event.

 

If the number of outstanding shares of Class A Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Class A Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Class A Common Stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Class A Common Stock.

 

17



 

Whenever the number of shares of Class A Common Stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Class A Common Stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Class A Common Stock so purchasable immediately thereafter.

 

In case of any reclassification or reorganization of the outstanding shares of Class A Common Stock (other than those described above or that solely affects the par value of such shares of Class A Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the Company’s outstanding shares of Class A Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of Class A Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of Class A Common Stock in such a transaction is payable in the form of Class A Common Stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within 30 days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the Black-Scholes value (as defined in the warrant agreement) of the warrant.

 

The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to the Company, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of Class A Common Stock and any voting rights until they exercise their warrants and receive shares of Class A Common Stock. After the issuance of shares of Class A Common Stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

 

No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number of shares of Class A Common Stock to be issued to the warrant holder.

 

The warrants have been issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Silver Run. A copy of the warrant agreement, which was filed as Exhibit 4.4 to Silver Run’s Current Report on Form 8-K filed with the SEC on February 29, 2016, is incorporated herein by reference, and the foregoing description of the warrants is qualified in its entirety by reference thereto. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.

 

Private Placement Warrants

 

The Private Placement Warrants (including the Class A Common Stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or saleable until 30 days after the completion of the Business Combination (except, among other limited exceptions, to the Company’s officers and directors and other persons or entities affiliated with the Sponsor) and they will not be redeemable by the Company so long as they are held by the Sponsor or its permitted transferees. Otherwise, the Private Placement Warrants have terms and

 

18



 

provisions that are identical to those of the warrants sold as part of the units in the IPO, including as to exercise price, exercisability and exercise period. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the units sold in the IPO.

 

If holders of the Private Placement Warrants elect to exercise them on a cashless basis, they would pay the exercise price in the same manner as holders of warrants sold in the IPO as described above under “ —Public Stockholders’ Warrants.” The reason that the Company has agreed that the Private Placement Warrants will be exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees is because it was not known at the time of issuance whether the Sponsor would be affiliated with the Company following an initial business combination. If the Sponsor remains affiliated with the Company, its ability to sell the Company’s securities in the open market will be significantly limited. The Company has policies in place that prohibit insiders from selling the Company’s securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell the Company’s securities, an insider cannot trade in the Company’s securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could sell the shares of Class A Common Stock issuable upon exercise of the warrants freely in the open market, the insiders could be significantly restricted from doing so. As a result, the Company believes that allowing the holders to exercise the Private Placement Warrants on a cashless basis is appropriate.

 

The Sponsor has agreed not to transfer, assign or sell any of the Private Placement Warrants (including the Class A Common Stock issuable upon exercise of any of the Private Placement Warrants) until the date that is 30 days after the Closing Date, except to, among other limited exceptions, the Company’s officers and directors and other persons or entities affiliated with the Sponsor.

 

The Private Placement Warrants were sold in a private placement pursuant to a purchase agreement between Silver Run and the Sponsor and have the terms set forth in a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Silver Run. Copies of the warrant purchase agreement and the warrant agreement, which were filed as Exhibit 10.5 and Exhibit 4.4, respectively, to Silver Run’s Current Report on Form 8-K filed with the SEC on February 29, 2016, are incorporated herein by reference, and the foregoing description of the Private Placement Warrants is qualified in its entirety by reference thereto.

 

Financial Statements and Supplementary Data

 

The historical financial statements of CRP for the three years ended December 31, 2015 and the six months ended June 30, 2016 included in the Proxy Statement beginning on page Fin-33 are incorporated herein by reference.

 

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information set forth under “Item 1.01. Entry into a Material Definitive Agreement—Credit Agreement Amendment” is incorporated in this Item 2.03 by reference.

 

19



 

Item 3.02. Unregistered Shares of Equity Securities.

 

The information set forth under “Item 2.01. Completion of Acquisition or Disposition of Assets—Recent Sales of Unregistered Securities” is incorporated in this Item 3.02 by reference.

 

Item 5.01. Changes in Control of Registrant.

 

To the extent required, the information set forth under “Introductory Note” and “Item 2.01. Completion of Acquisition or Disposition of Assets” of this Current Report on Form 8-K is incorporated herein by reference.

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

The information set forth under “Item 2.01. Completion of Acquisition or Disposition of Assets—Directors and Executive Officers,” “— Executive Compensation” and “—Director Compensation” of this Current Report on Form 8-K is incorporated herein by reference.

 

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

Second Amended and Restated Charter

 

On the Closing Date, the Company’s Charter was amended and restated (as amended and restated, the “Second Amended and Restated Charter”) to, among other things:

 

·                   create a new class of capital stock, the Class C Common Stock, that was issued to the Centennial Contributors at the Closing;

 

·                   increase in the number of authorized shares of the Company’s Class A Common Stock from 200,000,000 shares to 600,000,000; and

 

·                   eliminate certain provisions relating to the Company’s initial business combination that are no longer applicable to the Company following the Closing.

 

A copy of the Second Amended and Restated Charter is filed with this Current Report on Form 8-K as Exhibit 3.1 and is incorporated herein by reference, and the foregoing description of the Second Amended and Restated Charter is qualified in its entirety by reference thereto.

 

Item 5.06. Change in Shell Company Status.

 

As a result of the Business Combination, which fulfilled the definition of an initial business combination as required by Silver Run’s Charter, the Company ceased to be a shell company as of the Closing Date. The material terms of the Business Combination are described in the Proxy Statement in the section entitled “Proposal No. 1—The Business Combination Proposal” beginning on page 98, which is incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

(a)                                  Financial Statements of Businesses Acquired

 

The historical financial statements of CRP for the three years ended December 31, 2015 and the six months ended June 30, 2016 included in the Proxy Statement beginning on page Fin-33 are incorporated herein by reference.

 

(b)                                  Pro Forma Financial Information

 

The unaudited pro forma condensed consolidated combined financial information of Silver Run for the year ended December 31, 2015 and the six months ended June 30, 2016 included in the Proxy Statement beginning on page 79 is incorporated herein by reference.

 

20



 

(d)                                  Exhibits

 

Exhibit 
No.

 

Description

3.1*

 

Second Amended and Restated Certificate of Incorporation of Centennial Resource Development, Inc.

 

 

 

3.2*

 

Certificate of Designation of Series A Preferred Stock.

 

 

 

4.1*

 

Amended and Restated Registration Rights Agreement, dated as of October 11, 2016, by and among Centennial Resource Development, Inc. (formerly known as Silver Run Acquisition Corporation), Silver Run Sponsor, LLC, the individuals party thereto, Centennial Resource Development, LLC, NGP Centennial Follow-On LLC, Celero Energy Company, LP and Riverstone Centennial Holdings, L.P.

 

 

 

4.2

 

Warrant Agreement, dated February 23, 2016, between Silver Run Acquisition Corporation and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.4 to Silver Run’s Current Report on Form 8-K filed with the SEC on February 29, 2016).

 

 

 

10.1

 

Amended and Restated Credit Agreement, dated as of October 15, 2014, among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1 of Centennial Resource Development, Inc. (Registration No. 333-) filed with the SEC on June 22, 2016).

 

 

 

10.2

 

First Amendment to Amended and Restated Credit Agreement, dated as of May 6, 2015, among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and guarantors party thereto (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 of Centennial Resource Development, Inc. (Registration No. 333-) filed with the SEC on June 22, 2016).

 

 

 

10.3*

 

Second Amendment to Amended and Restated Credit Agreement, dated as of October 11, 2016, by and among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and guarantors party thereto.

 

 

 

10.4

 

Form of Indemnity Agreement (incorporated by reference to Exhibit 10.7 to Silver Run’s Registration Statement on Form S-1 (Registration No. 333-209140) filed with the SEC on January 27, 2016).

 

 

 

10.5*

 

Fifth Amended and Restated Limited Liability Company Agreement of Centennial Resource Production, LLC, dated as of October 11, 2016.

 

 

 

10.6*

 

Centennial Resource Development, Inc. 2016 Long Term Incentive Plan.

 

 

 

10.7*

 

Form of Stock Option Agreement under the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan

 

 

 

10.8*

 

Form of Restricted Stock Unit Agreement under the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan

 

 

 

10.9*

 

Form of Restricted Stock Agreement under the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan

 

 

 

10.10

 

Sponsor Warrants Purchase Agreement, dated February 23, 2016, between Silver Run Acquisition Corporation and Silver Run Sponsor, LLC (incorporated by reference to Exhibit 10.5 to Silver Run’s Current Report on Form 8-K filed with the SEC on February 29, 2016).

 

 

 

21.1*

 

Subsidiaries of the Registrant.

 

 

 

99.1

 

Financial statements of CRP for the three years ended December 31, 2015 and the six months ended June 30, 2016 (incorporated by reference to Silver Run’s definitive proxy statement filed with the SEC on September 23, 2016).

 

 

 

99.2

 

Unaudited pro forma condensed consolidated combined financial information of Silver Run for the three years ended December 31, 2015 and the six months ended June 30, 2016 (incorporated by reference to Silver Run’s definitive proxy statement filed with the SEC on September 23, 2016).

 


* Filed herewith.

 

21



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

CENTENNIAL RESOURCE DEVELOPMENT, INC.

 

 

 

Date: October 11, 2016

 

 

 

By:

/s/ Stephen S. Coats

 

Name:

Stephen S. Coats

 

Title:

Secretary

 

22



 

EXHIBIT INDEX

 

Exhibit 
No.

 

Description

3.1*

 

Second Amended and Restated Certificate of Incorporation of Centennial Resource Development, Inc.

 

 

 

3.2*

 

Certificate of Designation of Series A Preferred Stock.

 

 

 

4.1*

 

Amended and Restated Registration Rights Agreement, dated as of October 11, 2016, by and among Centennial Resource Development, Inc. (formerly known as Silver Run Acquisition Corporation), Silver Run Sponsor, LLC, the individuals party thereto, Centennial Resource Development, LLC, NGP Centennial Follow-On LLC, Celero Energy Company, LP and Riverstone Centennial Holdings, L.P.

 

 

 

4.2

 

Warrant Agreement, dated February 23, 2016, between Silver Run Acquisition Corporation and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.4 to Silver Run’s Current Report on Form 8-K filed with the SEC on February 29, 2016).

 

 

 

10.1

 

Amended and Restated Credit Agreement, dated as of October 15, 2014, among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1 of Centennial Resource Development, Inc. (Registration No. 333-) filed with the SEC on June 22, 2016).

 

 

 

10.2

 

First Amendment to Amended and Restated Credit Agreement, dated as of May 6, 2015, among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and guarantors party thereto (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 of Centennial Resource Development, Inc. (Registration No. 333-) filed with the SEC on June 22, 2016).

 

 

 

10.3*

 

Second Amendment to Amended and Restated Credit Agreement, dated as of October 11, 2016, by and among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and guarantors party thereto.

 

 

 

10.4

 

Form of Indemnity Agreement (incorporated by reference to Exhibit 10.7 to Silver Run’s Registration Statement on Form S-1 (Registration No. 333-209140) filed with the SEC on January 27, 2016).

 

 

 

10.5*

 

Fifth Amended and Restated Limited Liability Company Agreement of Centennial Resource Production, LLC, dated as of October 11, 2016.

 

 

 

10.6*

 

Centennial Resource Development, Inc. 2016 Long Term Incentive Plan.

 

 

 

10.7*

 

Form of Stock Option Agreement under the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan

 

 

 

10.8*

 

Form of Restricted Stock Unit Agreement under the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan

 

 

 

10.9*

 

Form of Restricted Stock Agreement under the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan

 

 

 

10.10

 

Sponsor Warrants Purchase Agreement, dated February 23, 2016, between Silver Run Acquisition Corporation and Silver Run Sponsor, LLC (incorporated by reference to Exhibit 10.5 to Silver Run’s Current Report on Form 8-K filed with the SEC on February 29, 2016).

 

 

 

21.1*

 

Subsidiaries of the Registrant.

 

 

 

99.1

 

Financial statements of CRP for the three years ended December 31, 2015 and the six months ended June 30, 2016 (incorporated by reference to Silver Run’s definitive proxy statement filed with the SEC on September 23, 2016).

 

 

 

99.2

 

Unaudited pro forma condensed consolidated combined financial information of Silver Run for the three years ended December 31, 2015 and the six months ended June 30, 2016 (incorporated by reference to Silver Run’s definitive proxy statement filed with the SEC on September 23, 2016).

 


* Filed herewith.

 

23


Exhibit 3.1

 

Execution Version

 

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SILVER RUN ACQUISITION CORPORATION

 

October 11, 2016

 

Silver Run Acquisition Corporation, a corporation organized and existing under the laws of the State of Delaware (the “ Corporation ”), DOES HEREBY CERTIFY AS FOLLOWS:

 

1.                                       The name of the Corporation is “Silver Run Acquisition Corporation”. The original certificate of incorporation of the Corporation (f/k/a Rockstream Corp.)  was filed with the Secretary of State of the State of Delaware on November 4, 2015 (the “ Original Certificate ”). A certificate of amendment to the Original Certificate was filed with the Secretary of State of the State of Delaware on November 12, 2015 (together with the Original Certificate, the “ Amended Certificate ”).

 

2.                                       An amended and restated certificate of incorporation, which amended and restated the Amended Certificate in its entirety, was filed with the Secretary of State of the State of Delaware on February 23, 2016 (the “ Existing Certificate ”).

 

3.                                       This Second Amended and Restated Certificate of Incorporation (the “ Second Amended and Restated Certificate ”), which both restates and further amends the provisions of the Existing Certificate, was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware and by the Corporation’s stockholders in accordance with Section 212 of the General Corporation Law of the State of Delaware, as amended from time to time (the “ DGCL ”).

 

4.                                       This Second Amended and Restated Certificate shall become effective on the date of filing with the Secretary of State of the State of Delaware.

 

5.                                       The text of the Existing Certificate is hereby amended and restated in its entirety to read as follows:

 

ARTICLE I
NAME

 

The name of the corporation is Centennial Resource Development, Inc.

 

ARTICLE II
PURPOSE

 

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL. In addition to the powers and privileges conferred upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges that are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation, including, but not limited to, effecting a merger, capital stock exchange, asset acquisition, stock purchase,

 

1



 

reorganization or similar business combination, involving the Corporation and one or more businesses (a “ Business Combination ”).

 

ARTICLE III
REGISTERED AGENT

 

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware, 19801, and the name of the Corporation’s registered agent at such address is The Corporation Trust Company.

 

ARTICLE IV
CAPITALIZATION

 

Section 4.1                                     Authorized Capital Stock . The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which the Corporation is authorized to issue is 641,000,000 shares, consisting of (a) 640,000,000 shares of common stock (the “ Common Stock ”), including (i) 600,000,000 shares of Class A Common Stock (the “ Class A Common Stock ”), (ii) 20,000,000 shares of Class B Common Stock (the “ Class B Common Stock ”), and (iii) 20,000,000 shares of Class C Common Stock (the “ Class C Common Stock ”), and (b) 1,000,000 shares of preferred stock, par value $0.0001 per share (the “ Preferred Stock ”).

 

Section 4.2                                     Preferred Stock . The Board of Directors of the Corporation (the “ Board ”) is hereby expressly authorized to provide out of the unissued shares of the Preferred Stock for one or more series of Preferred Stock and to establish from time to time the number of shares to be included in each such series and to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions thereof, as shall be stated in the resolution or resolutions adopted by the Board providing for the issuance of such series and included in a certificate of designation (a “ Preferred Stock Designation ”) filed pursuant to the DGCL, and the Board is hereby expressly vested with the authority to the full extent provided by law, now or hereafter, to adopt any such resolution or resolutions.

 

Section 4.3                                     Common Stock .

 

(a)                                  Voting .

 

(i)                                      Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), the holders of the Common Stock shall exclusively possess all voting power with respect to the Corporation.

 

(ii)                                   Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), the holders of shares of Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of the Common Stock are entitled to vote.

 

2



 

(iii)                                Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), at any annual or special meeting of the stockholders of the Corporation, holders of the Class A Common Stock, holders of the Class B Common Stock and holders of the Class C Common Stock, voting together as a single class, shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), holders of shares of any series of Common Stock shall not be entitled to vote on any amendment to this Second Amended and Restated Certificate (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock or other series of Common Stock if the holders of such affected series of Preferred Stock or Common Stock, as applicable, are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Second Amended and Restated Certificate (including any Preferred Stock Designation) or the DGCL.

 

(b)                                  Class B Common Stock .

 

(i)                                      Shares of Class B Common Stock shall be convertible into shares of Class A Common Stock on a one-for-one basis (the “ Initial Conversion Ratio ”) (A) at any time and from time to time at the option of the holder thereof and (B) automatically upon the consummation of the Business Combination.  Concurrently with such conversion pursuant to Section 4.3(b)(i)(B) , the number of authorized shares of Class B Common Stock shall be reduced to zero. It is intended that the conversion of shares of Class B Common Stock into shares of Class A Common Stock pursuant to Section 4.3(b)(i)(B)  will be treated as a reorganization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended.

 

(ii)                                   Notwithstanding the Initial Conversion Ratio, in the case that additional shares of Class A Common Stock, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Corporation’s initial public offering of securities (the “ Offering ”) and related to the closing of the initial Business Combination, all issued and outstanding shares of Class B Common Stock shall automatically convert into shares of Class A Common Stock at the time of the closing of the initial Business Combination at a ratio for which:

 

·                                           the numerator shall be equal to the sum of (A) 25% of all shares of Class A Common Stock issued or issuable (upon the conversion or exercise of any equity-linked securities or otherwise) by the Corporation, related to or in connection with the consummation of the initial Business Combination (excluding any securities issued or issuable to any seller in the initial Business Combination) plus (B) the number of shares of Class B Common Stock issued and outstanding prior to the closing of the initial Business Combination; and

 

3



 

·                                           the denominator shall be the number of shares of Class B Common Stock issued and outstanding prior to the closing of the initial Business Combination.

 

Notwithstanding anything to the contrary contained herein, (i) the foregoing adjustment to the Initial Conversion Ratio may be waived as to any particular issuance or deemed issuance of additional shares of Class A Common Stock or equity-linked securities by the written consent or agreement of holders of a majority of the shares of Class B Common Stock then outstanding consenting or agreeing separately as a single class in the manner provided in Section 4.3(b)(iii) , and (ii)  in no event shall the Class B Common Stock convert into Class A Common Stock at a ratio that is less than one-for-one.

 

The foregoing conversion ratio shall also be adjusted to account for any subdivision (by stock split, subdivision, exchange, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, exchange, reclassification, recapitalization or otherwise) or similar reclassification or recapitalization of the outstanding shares of Class A Common Stock into a greater or lesser number of shares occurring after the original filing of this Second Amended and Restated Certificate without a proportionate and corresponding subdivision, combination or similar reclassification or recapitalization of the outstanding shares of Class B Common Stock.

 

Each share of Class B Common Stock shall convert into its pro rata number of shares of Class A Common Stock pursuant to this Section 4.3(b) . The pro rata share for each holder of Class B Common Stock will be determined as follows: Each share of Class B Common Stock shall convert into such number of shares of Class A Common Stock as is equal to the product of one (1) multiplied by a fraction, the numerator of which shall be the total number of shares of Class A Common Stock into which all of the issued and outstanding shares of Class B Common Stock shall be converted pursuant to this Section 4.3(b)  and the denominator of which shall be the total number of issued and outstanding shares of Class B Common Stock at the time of conversion.

 

(iii)                                Voting . Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), for so long as any shares of Class B Common Stock shall remain outstanding, the Corporation shall not, without the prior vote or written consent of the holders of a majority of the shares of Class B Common Stock then outstanding, voting separately as a single class, amend, alter or repeal any provision of this Second Amended and Restated Certificate, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers, preferences or relative, participating, optional or other or special rights of the Class B Common Stock. Any action required or permitted to be taken at any meeting of the holders of Class B Common Stock may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding Class B Common Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of Class B Common Stock

 

4



 

were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt written notice of the taking of corporate action without a meeting by less than unanimous written consent of the holders of Class B Common Stock shall, to the extent required by law, be given to those holders of Class B Common Stock who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders of Class B Common Stock to take the action were delivered to the Corporation.

 

(c)                                   Class C Common Stock .

 

(i)                                      Permitted Owners .  Shares of Class C Common Stock may be issued only to, and registered in the name of, the Existing Owners (as defined below), their respective successors and assigns as well as their respective transferees permitted in accordance with Section 4.3(c)(iv)  (including all subsequent successors, assigns and permitted transferees) (the Existing Owners together with such persons, collectively, “ Permitted Class C Owners ”).  As used in this Second Amended and Restated Certificate, (i) “ Existing Owner ” means each of Centennial Resource Development, LLC, a Delaware limited liability company (“ CRD ”), NGP Centennial Follow-On LLC, a Delaware limited liability company, and Celero Energy Company, LP, a Delaware limited partnership, and (ii) “ Common Unit ” means a membership interest in Centennial Resource Production, LLC, a Delaware limited liability company or any successor entities thereto (the “ LLC ”), authorized and issued under its Fifth Amended and Restated Limited Liability Company Agreement, dated as of October 11, 2016, as such agreement may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time (the “ LLC Agreement ”), and constituting a “Common Unit” as defined in the LLC Agreement as in effect as of the effective time of this Second Amended and Restated Certificate.

 

(ii)                                   Voting . Except as otherwise required by law or this Second Amended and Restated Certificate (including any Preferred Stock Designation), for so long as any shares of Class C Common Stock shall remain outstanding, the Corporation shall not, without the prior vote or written consent of the holders of a majority of the shares of Class C Common Stock then outstanding, voting separately as a single class, amend, alter or repeal any provision of this Amended and Restated Certificate, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers, preferences or relative, participating, optional or other or special rights of the Class C Common Stock. Any action required or permitted to be taken at any meeting of the holders of Class C Common Stock may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding Class C Common Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of Class C Common Stock were present and

 

5



 

voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt written notice of the taking of corporate action without a meeting by less than unanimous written consent of the holders of Class C Common Stock shall, to the extent required by law, be given to those holders of Class C Common Stock who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders of Class C Common Stock to take the action were delivered to the Corporation.

 

(iii)                                Dividends . Notwithstanding anything to the contrary in this Amended and Restated Certificate, other than as set forth in Section 4.3(e) , dividends shall not be declared or paid on the Class C Common Stock.

 

(iv)                               Transfer of Class C Common Stock

 

(1)                                  A holder of Class C Common Stock may surrender shares of Class C Common Stock to the Corporation for no consideration at any time.  Following the surrender of any shares of Class C Common Stock to the Corporation, the Corporation will take all actions necessary to retire such shares and such shares shall not be re-issued by the Corporation.

 

(2)                                  A holder of Class C Common Stock may transfer shares of Class C Common Stock to any transferee (other than the Corporation) only if, and only to the extent permitted by the LLC Agreement, such holder also simultaneously transfers an equal number of such holder’s Common Units to such transferee in compliance with the LLC Agreement.  The transfer restrictions described in this Section 4.3(c)(iv)(2)  are referred to as the “ Restrictions ”.

 

(3)                                  Any purported transfer of shares of Class C Common Stock in violation of the Restrictions shall be null and void.  If, notwithstanding the Restrictions, a person shall, voluntarily or involuntarily, purportedly become or attempt to become, the purported owner (“ Purported Owner ”) of shares of Class C Common Stock in violation of the Restrictions, then the Purported Owner shall not obtain any rights in and to such shares of Class C Common Stock (the “ Restricted Shares ”), and the purported transfer of the Restricted Shares to the Purported Owner shall not be recognized by the Corporation’s transfer agent (the “ Transfer Agent ”).

 

(4)                                  Upon a determination by the Board that a person has attempted or may attempt to transfer or to acquire Restricted Shares in violation of the Restrictions, the Board may take such action as it deems advisable to refuse to give effect to such transfer or acquisition on the books and records of the Corporation, including without limitation to cause the Transfer Agent to record

 

6



 

the Purported Owner’s transferor as the record owner of the Restricted Shares, and to institute proceedings to enjoin or rescind any such transfer or acquisition.

 

(5)                                  The Board may, to the extent permitted by law, from time to time establish, modify, amend or rescind, by bylaw or otherwise, regulations and procedures that are consistent with the provisions of this Section 4.3(c)(iv)  for determining whether any transfer or acquisition of shares of Class C Common Stock would violate the Restrictions and for the orderly application, administration and implementation of the provisions of this Section 4.3(c)(iv) .  Any such procedures and regulations shall be kept on file with the Secretary of the Corporation and with its Transfer Agent and shall be made available for inspection by any prospective transferee and, upon written request, shall be mailed to holders of shares of Class C Common Stock.

 

(6)                                  The Board shall have all powers necessary to implement the Restrictions, including without limitation the power to prohibit the transfer of any shares of Class C Common Stock in violation thereof.

 

(v)                                  Issuance of Class A Common Stock Upon Redemption; Cancellation of Class C Common Stock .

 

(1)                                  To the extent that any Permitted Class C Owner exercises its right pursuant to the LLC Agreement to have its Common Units redeemed by the LLC in accordance with the LLC Agreement, then simultaneous with the payment of the consideration due under the LLC Agreement to such Permitted Class C Owner, the Corporation shall cancel for no consideration a number of shares of Class C Common Stock registered in the name of the redeeming or exchanging Permitted Class C Owner equal to the number of Common Units held by such Permitted Class C Owner that are redeemed or exchanged in such redemption or exchange transaction.  The Corporation will at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of issuance upon redemption of the Common Units for Class A Common Stock pursuant to the LLC Agreement, such number of shares of Class A Common Stock that shall be issuable upon any such redemption pursuant to the LLC Agreement; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such redemption of Common Units pursuant to the LLC Agreement by delivering to the holder of Common Units upon such redemption cash in lieu of shares of Class A Common Stock in the amount permitted by and provided in the LLC Agreement. All shares of Class A Common Stock that shall be issued upon any such redemption will, upon issuance in accordance with the LLC Agreement, be validly issued, fully paid and nonassessable.

 

(2)                                  Notwithstanding the Restrictions, (A) in the event that an outstanding share of Class C Common Stock shall cease to be held by a registered holder of Common Units, such share of Class C Common Stock shall automatically and without further action on the part of the Corporation or any

 

7



 

holder of Class C Common Stock be cancelled for no consideration, and the Corporation will take all actions necessary to retire such share and such share shall not be re-issued by the Corporation, (B) in the event that one or more of the Common Units held by a registered holder of Class C Common Stock ceases to be held by such holder (other than as a result of a transfer of one or more Common Units together with an equal number of shares of Class C Common Stock as permitted by the LLC Agreement), a corresponding number of shares of Class C Common Stock registered in the name of such holder shall automatically and without further action on the part of the Corporation or such holder be cancelled for no consideration, and the Corporation will take all actions necessary to retire such shares and such shares shall not be re-issued by the Corporation and (C) in the event that no Permitted Class C Owner owns any Common Units that are redeemable pursuant to the LLC Agreement, then all shares of Class C Common Stock will be cancelled for no consideration, and the Corporation will take all actions necessary to retire such shares and such shares shall not be re-issued by the Corporation.

 

(vi)                               Restrictive Legend .  All certificates or book entries representing shares of Class C Common Stock, as the case may be, shall bear a legend substantially in the following form (or in such other form as the Board may determine):

 

THE SECURITIES REPRESENTED BY THIS [CERTIFICATE][BOOK ENTRY] ARE SUBJECT TO THE RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER) SET FORTH IN THE SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION AND SHALL BE PROVIDED FREE OF CHARGE TO ANY STOCKHOLDER MAKING A REQUEST THEREFOR).

 

(vii)                            Amendment .  At any time when there are no longer any shares of Class C Common Stock outstanding, this Second Amended and Restated Certificate automatically shall be deemed amended to delete this Section 4.3(c) .

 

(viii)                         Liquidation, Dissolution or Winding Up of the Corporation .  The holders of Class C Common Stock shall not be entitled to receive any assets of the Corporation in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

 

(d)                                  Dividends . Subject to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, the holders of shares of Common Stock (other than holders of shares of Class C Common Stock) shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions.

 

(e)                                   Class A Common Stock and Class C Common Stock .  In no event shall the shares of either Class A Common Stock or Class C Common Stock be split, divided, or combined

 

8



 

(including by way of stock dividend) unless the outstanding shares of the other class shall be proportionately split, divided or combined.

 

(f)                                    Liquidation, Dissolution or Winding Up of the Corporation . Subject to applicable law, and the rights, if any, of the holders of any outstanding series of the Preferred Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of Common Stock (other than holders of shares of Class C Common Stock) shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock (other than shares of Class C Common Stock) held by them.

 

Section 4.4                                     Rights and Options . The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to acquire from the Corporation any shares of its capital stock of any class or classes, with such rights, warrants and options to be evidenced by or in instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration, times for exercise and other terms and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any shares of capital stock issuable upon exercise thereof may not be less than the par value thereof.

 

ARTICLE V
BOARD OF DIRECTORS

 

Section 5.1                                     Board Powers . The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the powers and authority expressly conferred upon the Board by statute, this Second Amended and Restated Certificate or the Bylaws of the Corporation (“ Bylaws ”), the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Second Amended and Restated Certificate, and any Bylaws adopted by the stockholders; provided, however, that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted.

 

Section 5.2                                     Number, Election and Term .

 

(a)                                  The number of directors of the Corporation, shall be fixed from time to time in the manner provided in the Bylaws.

 

(b)                                  Subject to Section 5.5 , the Board shall be divided into three classes, as nearly equal in number as possible and designated Class I, Class II and Class III. The Board is authorized to assign members of the Board already in office to Class I, Class II or Class III. The term of the initial Class I Directors shall expire at the first annual meeting of the stockholders of the Corporation following the effectiveness of this Amended and Restated Certificate; the term of the initial Class II Directors shall expire at the second annual meeting of the stockholders of the Corporation following the effectiveness of this Amended and Restated Certificate; and the term of the initial Class III Directors shall expire at the third annual meeting of the stockholders of the Corporation following the effectiveness of this Amended and Restated Certificate. At each

 

9



 

succeeding annual meeting of the stockholders of the Corporation, beginning with the first annual meeting of the stockholders of the Corporation following the effectiveness of this Amended and Restated Certificate, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term or until the election and qualification of their respective successors in office, subject to their earlier death, resignation or removal. Subject to Section 5.5 , if the number of directors is changed, any increase or decrease shall be apportioned by the Board among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. Directors shall be elected by a plurality of the votes cast at an annual meeting of stockholders by holders of the Common Stock. The Board is hereby expressly authorized, by resolution or resolutions thereof, to assign members of the Board already in office to the aforesaid classes at the time this Second Amended and Restated Certificate(and therefore such classification) becomes effective in accordance with the DGCL.

 

(c)                                   Subject to Section 5.5 , a director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.

 

(d)                                  Unless and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot.

 

Section 5.3                                     Newly Created Directorships and Vacancies . Subject to Section 5.5 , newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely and exclusively by a majority vote of the remaining directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office for the remainder of the full term of the class of directors to which the new directorship was added or in which the vacancy occurred and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.

 

Section 5.4                                     Removal . Subject to Section 5.5 , any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

 

Section 5.5                                     Preferred Stock - Directors . Notwithstanding any other provision of this Article V , and except as otherwise required by law, whenever the holders of one or more series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the terms of such series of the Preferred Stock as set forth in this Second Amended and Restated Certificate (including any Preferred Stock Designation) and such directors shall not be included in any of the classes created pursuant to this Article V unless expressly provided by such terms.

 

10



 

ARTICLE VI
BYLAWS

 

In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power and is expressly authorized to adopt, amend, alter or repeal the Bylaws. The affirmative vote of a majority of the Board shall be required to adopt, amend, alter or repeal the Bylaws. The Bylaws also may be adopted, amended, altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by law or by this Second Amended and Restated Certificate (including any Preferred Stock Designation), the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the Bylaws; and provided further, however, that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted.

 

ARTICLE VII
MEETINGS OF STOCKHOLDERS;
ACTION BY WRITTEN CONSENT

 

Section 7.1                                     Meetings . Subject to the rights, if any, of the holders of any outstanding series of the Preferred Stock, and to the requirements of applicable law, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, Chief Executive Officer of the Corporation, or the Board pursuant to a resolution adopted by a majority of the Board, and the ability of the stockholders to call a special meeting is hereby specifically denied. Except as provided in the foregoing sentence, special meetings of stockholders may not be called by another person or persons.

 

Section 7.2                                     Advance Notice . Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws.

 

Section 7.3                                     Action by Written Consent . Except as may be otherwise provided for or fixed pursuant to this Second Amended and Restated Certificate (including any Preferred Stock Designation) relating to the rights of the holders of any outstanding series of Preferred Stock, subsequent to the consummation of the Offering, any action required or permitted to be taken by the stockholders of the Corporation must be effected by a duly called annual or special meeting of such stockholders and may not be effected by written consent of the stockholders.

 

ARTICLE VIII
LIMITED LIABILITY; INDEMNIFICATION

 

Section 8.1                                     Limitation of Director Liability . A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended unless they violated their duty of loyalty to the Corporation or its stockholders, acted in bad faith,

 

11



 

knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived improper personal benefit from their actions as directors. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.

 

Section 8.2                                     Indemnification and Advancement of Expenses .

 

(a)                                  To the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ proceeding ”) by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “ indemnitee ”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this Section 8.2 or otherwise. The rights to indemnification and advancement of expenses conferred by this Section 8.2 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Section 8.2(a) , except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.

 

(b)                                  The rights to indemnification and advancement of expenses conferred on any indemnitee by this Section 8.2 shall not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Amended and Restated Certificate, the Bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.

 

(c)                                   Any repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Second Amended and Restated Certificate inconsistent with this Section 8.2 , shall, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than

 

12



 

permitted prior thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.

 

(d)                                  This Section 8.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than indemnitees.

 

ARTICLE IX
CORPORATE OPPORTUNITY

 

The doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Corporation or any of its officers or directors, or any of their respective affiliates, in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have as of the date of this Second Amended and Restated Certificate or in the future. In addition to the foregoing, the doctrine of corporate opportunity shall not apply to any other corporate opportunity with respect to any of the directors or officers of the Corporation unless such corporate opportunity is offered to such person solely in his or her capacity as a director or officer of the Corporation and such opportunity is one the Corporation is legally and contractually permitted to undertake and would otherwise be reasonable for the Corporation to pursue.

 

ARTICLE X
AMENDMENT OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

 

The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Second Amended and Restated Certificate (including any Preferred Stock Designation), and other provisions authorized by the laws of the State of Delaware at the time in force that may be added or inserted, in the manner now or hereafter prescribed by this Second Amended and Restated Certificate and the DGCL; and, except as set forth in Article VIII , all rights, preferences and privileges of whatever nature herein conferred upon stockholders, directors or any other persons by and pursuant to this Second Amended and Restated Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article X .

 

13



 

IN WITNESS WHEREOF, Silver Run Acquisition Corporation has caused this Second Amended and Restated Certificate to be duly executed and acknowledged in its name and on its behalf by an authorized officer as of the date first set forth above.

 

 

SILVER RUN ACQUISITION CORPORATION

 

 

 

By:

/s/ Mark G. Papa

 

Name:

Mark G. Papa

 

Title:

Chief Executive Officer

 

[ Signature Page to Second Amended and Restated Certificate of Incorporation ]

 


Exhibit 3.2

 

Execution Version

 

CERTIFICATE OF DESIGNATION OF
SERIES A PREFERRED STOCK OF
CENTENNIAL RESOURCE DEVELOPMENT, INC.

 

Centennial Resource Development, Inc. (f/k/a Silver Run Acquisition Corporation), a Delaware corporation (the “ Corporation ”), hereby certifies that, pursuant to the provisions of Sections 103, 141 and 151 of the General Corporation Law of the State of Delaware, on October 11, 2016, the board of directors of the Corporation (the “ Board ”) adopted the resolution shown immediately below, which resolution is now, and at all times since its date of adoption, has been in full force and effect:

 

RESOLVED, that pursuant to the provisions of the Second Amended and Restated Certificate of Incorporation of the Corporation (as such may be amended, modified or restated from time to time, the “ Amended and Restated Certificate ”) (which authorizes 1,000,000 shares of preferred stock, par value $0.0001 per share (the “ Preferred Stock ”)), and the authority thereby vested in the Board, a series of Preferred Stock be, and it hereby is, created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof are as set forth in the Amended and Restated Certificate and this Certificate of Designation, as it may be amended from time to time (the “ Certificate of Designation ”) as follows:

 

SECTION 1.  Designation and Number of Shares .  Pursuant to the Amended and Restated Certificate, there is hereby created out of the authorized and unissued shares of Preferred Stock a series of Preferred Stock consisting of one (1) share of Preferred Stock designated as “Series A Preferred Stock” (the “ Series A Preferred Stock ”).

 

SECTION 2 .  Permitted Owners.  The Series A Preferred Stock may be issued only to, and registered in the name of, Centennial Resource Development, LLC, a Delaware limited liability company (“ CRD ”), its successors and assigns as well as their respective transferees permitted in accordance with Section 5 .

 

SECTION 3 .  Voting.  Except as provided herein, the holder of the Series A Preferred Stock shall not be entitled to vote on any matter on which stockholders of the Corporation generally are entitled to vote.

 

SECTION 4 .  Dividends.  Notwithstanding anything to the contrary in the Amended and Restated Certificate, dividends shall not be declared or paid on the Series A Preferred Stock.

 

SECTION 5 .  Transfer of Series A Preferred Stock.  Neither the Series A Preferred Stock nor any rights, powers, preferences or privileges thereunder shall be transferable, in whole or in part, except to an Affiliate (as defined in the Fifth Amended and Restated Limited Liability Company Agreement of Centennial Resource Production, LLC, a Delaware limited liability company, dated as of October 11, 2016, as such agreement may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time (the “ LLC Agreement ”)) of CRD.

 

1



 

SECTION 6 .  Conversion; Redemption.  The Series A Preferred Stock is not convertible into any other security of the Corporation.  The Series A Preferred Stock will be redeemable for the par value thereof by the Corporation (1) at such time that CRD, NGP Centennial Follow-On LLC, a Delaware limited liability company, Celero Energy Company, LP, a Delaware limited partnership and their respective affiliates cease to hold, in the aggregate, at least five million (5,000,000) Common Units (as defined in the LLC Agreement) and/or shares of Class A Common Stock, par value $0.0001 per share, of the Corporation (the “ Class A Common Stock ”) (as adjusted to account for any subdivision (by stock split, subdivision, exchange, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, exchange, reclassification, recapitalization or otherwise) or similar reclassification or recapitalization of the outstanding shares of Class A Common Stock or the Common Units into a greater or lesser number of shares of Class A Common Stock or Common Units occurring after the date of this Certificate of Designation), (2) at any time at the option of the holder thereof or (3) upon a breach of the restrictions on transfer in Section 5 .

 

SECTION 7 .  Director Election .  So long as the Series A Preferred Stock remains outstanding, the holder of the Series A Preferred Stock will be entitled to nominate one (1) director for election to the Board in connection with any vote (whether at a meeting or by written consent) of the stockholders of the Corporation for the election of directors, and the vote of the holder of the Series A Preferred Stock shall be the only vote required to elect such nominee to the Board (such director, in such capacity, the “ Series A Director ”).  So long as the Series A Preferred Stock remains outstanding, vacancies on the Board resulting from the death, resignation, retirement, disqualification or removal of a Series A Director shall be filled only by the affirmative vote of the holder of the Series A Preferred Stock (and not pursuant to Section 5.3 of the Amended and Restated Certificate).  The Corporation will have the right to cause the removal of the Series A Director from the Board immediately upon redemption of the Series A Preferred Stock in accordance with Section 6 .  The Series A Director shall not be included in any of the classes created pursuant to Section 5.2(b) of the Amended and Restated Certificate.

 

SECTION 8.  Liquidation, Dissolution or Winding Up of the Corporation .  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holder of the Series A Preferred Stock shall be entitled to receive, out of the assets of the Corporation or proceeds thereof available for distribution to stockholders of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of common stock of the Corporation and any other stock of the Corporation ranking junior to the Series A Preferred Stock as to such distribution, payment in full in an amount equal to $0.0001 per share.

 

[ signature page follows ]

 

2



 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be signed by its undersigned duly authorized officer this 11th day of October, 2016.

 

 

CENTENNIAL RESOURCE DEVELOPMENT, INC.

 

 

 

By:

/s/ Mark G. Papa

 

 

Name:

Mark G. Papa

 

 

Title:

Chief Executive Officer

 

[ Signature Page to Certificate of Designation ]

 


Exhibit 4.1

 

Execution Version

 

AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT

 

THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of October 11, 2016, is made and entered into by and among Centennial Resource Development, Inc. (f/k/a Silver Run Acquisition Corporation), a Delaware corporation (the “ Company ”), Silver Run Sponsor, LLC, a Delaware limited liability company (the “ Sponsor ”), the undersigned individuals listed under Holder on the signature page hereto (collectively, the “ Individual Holders and, together with the Sponsor, the “ Existing Holders ”), Centennial Resource Development, LLC, a Delaware limited liability company (“ CRD ”), NGP Centennial Follow-On LLC, a Delaware limited liability company (“ NGP Follow-On ”), Celero Energy Company, LP, a Delaware limited partnership (“ Celero ”) and Riverstone Centennial Holdings, L.P., a Delaware limited partnership (“ Riverstone ”).

 

RECITALS

 

WHEREAS, the Company and the Sponsor have entered into that certain Securities Purchase Agreement (the “ Founder Shares Purchase Agreement ”), dated as of November 6, 2015, pursuant to which the Sponsor purchased an aggregate of 11,500,000 shares (the “ Initial Founder Shares ”) of the Company’s Class B common stock, par value $0.0001 per share (the “ Class B Common Stock ”), and the Sponsor subsequently transferred an aggregate of 120,000 Founder Shares to the Individual Holders;

 

WHEREAS, on February 23, 2016, the Company declared a stock dividend with respect to the Class B Common Stock of 1,437,500 shares of Class B Common Stock (together with the Initial Founder Shares, the “ Founder Shares ”);

 

WHEREAS, on April 8, 2016, the Sponsor forfeited 437,500 Founder Shares following the expiration of the underwriters’ remaining over-allotment option in connection with the Company’s initial public offering;

 

WHEREAS, upon the closing of the transactions (the “ Transactions ”) contemplated by that certain Contribution Agreement, dated as of July 6, 2016, by and among CRD, NGP Follow-On, Celero, New Centennial, LLC, a Delaware limited liability company, and Centennial Resource Production, LLC, a Delaware limited liability company (“ CRP ”), as amended by that certain Amendment No. 1 to Contribution Agreement dated July 29, 2016 and as supplemented by that certain Joinder Agreement dated as of October 7, 2016 (the “ Contribution Agreement ”), the Founder Shares converted into shares of the Company’s Class A common stock, par value $0.0001 per share (the “ Common Stock ”), on a one-for-one basis;

 

WHEREAS, on February 23, 2016, the Company and the Sponsor entered into that certain Sponsor Warrants Purchase Agreement, pursuant to which the Sponsor purchased 8,000,000 warrants (the “ Private Placement Warrants ”), in a private placement transaction occurring simultaneously with the closing of the Company’s initial public offering;

 

WHEREAS, on February 23, 2016, the Company and the Existing Holders entered into that certain Registration Rights Agreement (the “ Existing Registration Rights Agreement ”), pursuant to which the Company granted the Existing Holders certain registration rights with respect to certain securities of the Company;

 

1



 

WHEREAS, in connection with the Transactions, among other things, the Centennial Holders will receive an aggregate of 20,000,000 common units in CRP (the “ CRP Units ”);

 

WHEREAS, in accordance with the Fifth Amended and Restated Limited Liability Company Agreement of Centennial Resource Production, LLC, dated as of the date hereof (the “ CRP LLC Agreement ”), the Centennial Holders will be entitled to cause CRP to redeem or exchange all or a portion of their CRP Units for cash or shares of Common Stock at the Company’s election;

 

WHEREAS, in connection with the Transactions, on July 21, 2016, the Company and Riverstone, entered into that certain Subscription Agreement, pursuant to which Riverstone purchased 81,005,000 shares of Common Stock in a private placement transaction occurring simultaneously with the closing of the Transactions (the “ Private Placement ”);

 

WHEREAS, pursuant to Section 5.5 of the Existing Registration Rights Agreement, the provisions, covenants and conditions set forth therein may be amended or modified upon the written consent of the Company and the Holders (as defined in the Existing Registration Rights Agreement) of at least a majority-in-interest of the Registrable Securities (as defined in the Existing Registration Rights Agreement) at the time in question; and

 

WHEREAS, the Company and all of the Existing Holders desire to amend and restate the Existing Registration Rights Agreement in order to provide the Holders (as defined below) certain registration rights with respect to certain securities of the Company, as set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

ARTICLE I. DEFINITIONS

 

1.1                                Definitions . The terms defined in this Article I shall, for all purposes of this Agreement, have the respective meanings set forth below:

 

Adverse Disclosure ” shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Chief Executive Officer or principal financial officer of the Company, after consultation with counsel to the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business purpose for not making such information public.

 

2



 

Affiliate ” means, with respect to a specified Person, each other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified; provided that no Holder shall be deemed an Affiliate of any other Holder by reason of an investment in, or holding of Common Stock (or securities convertible or exchangeable for share of Common Stock) of, the Company. As used in this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities or by contract or other agreement).

 

Agreement ” shall have the meaning given in the Preamble.

 

Blackout Period ” shall have the meaning given in subsection 3.4.2 .

 

Board ” shall mean the Board of Directors of the Company.

 

Celero ” shall have the meaning given in the Preamble.

 

Centennial Holder ” and “ Centennial Holders ” means Celero, CRD, NGP Follow-On and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.2 in connection with a Permitted Transfer (as defined in the CRP LLC Agreement) of CRP Units by any Centennial Holder.

 

Centennial Minimum Amount ” shall have the meaning given in subsection 2.1.4.2 .

 

Commission ” shall mean the Securities and Exchange Commission.

 

Common Stock ” shall have the meaning given in the Recitals hereto.

 

Company ” shall have the meaning given in the Preamble.

 

Contribution Agreement ” shall have the meaning given in the Recitals hereto.

 

Contribution Closing Date ” means October 11, 2016, the date on which the Transactions closed.

 

CRD ” shall have the meaning given in the Preamble.

 

CRP ” shall have the meaning given in the Recitals hereto.

 

CRP LLC Agreement ” shall have the meaning given in the Recitals hereto.

 

CRP Units ” shall have the meaning given in the Recitals hereto.

 

Demand Registration ” shall have the meaning given in subsection 2.1.1 .

 

Demanding Holder ” means, as applicable, (a) the Holders making a written demand for the Registration of Registrable Securities pursuant to Section 2.1.1 or (b) the Centennial Holders making a written demand for a Shelf Underwritten Offering of Registrable Securities pursuant to Section 2.1.4.2 .

 

3



 

Effectiveness Deadline ” shall have the meaning given in subsection 2.3.1.1 .

 

Exchange Act ” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.

 

Existing Holders ” shall have the meaning given in the Preamble.

 

Existing Registration Rights Agreement ” shall have the meaning given in the Recitals hereto.

 

Form S-1 ” shall have the meaning given in subsection 2.1.1 .

 

Form S-3 ” shall have the meaning given in subsection 2.3 .

 

Founder Shares ” shall have the meaning given in the Recitals hereto and shall be deemed to include the shares of Common Stock issued upon conversion thereof.

 

Founder Shares Lock-up Period ” shall mean, with respect to the Founder Shares, the period ending on the earlier of (A) one year after the Contribution Closing Date, (B) if the last sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Contribution Closing Date or (C) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property.

 

Founder Shares Purchase Agreement ” shall have the meaning given in the Recitals hereto.

 

Holder ” and “ Holders ” means the Existing Holders, the Centennial Holders, Riverstone and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.2 .

 

Individual Holders ” shall have the meaning given in the Preamble.

 

Initial Founder Shares ” shall have the meaning given in the Recitals hereto.

 

Insider Letter ” shall mean that certain letter agreement, dated as of February 23, 2016, by and between the Company, the Sponsor and each of the Company’s officers, directors and director nominees.

 

Maximum Number of Securities ” shall have the meaning given in subsection 2.1.4 .

 

Misstatement ” shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus in the light of the circumstances under which they were made not misleading.

 

4



 

NGP Follow-On ” shall have the meaning given in the Preamble.

 

Permitted Transferees ” shall mean, with respect to an Existing Holder, a person or entity to whom an Existing Holder of Registrable Securities is permitted to transfer such Registrable Securities prior to the expiration of the Founder Shares Lock-up Period or Private Placement Lock-up Period, as the case may be, under the Insider Letter and any other applicable agreement between such Existing Holder and the Company, and to any transferee thereafter.

 

Person ” means an individual or any corporation, partnership, limited liability company, trust, unincorporated organization, association, joint venture or any other organization or entity, whether or not a legal entity.

 

Piggyback Registration ” shall have the meaning given in subsection 2.2.1 .

 

Private Placement ” shall have the meaning given in the Recitals hereto.

 

Private Placement Lock-up Period ” shall mean, with respect to Private Placement Warrants that are held by the initial purchasers of such Private Placement Warrants or their Permitted Transferees, and any of the Common Stock issued or issuable upon the exercise or conversion of the Private Placement Warrants and that are held by the initial purchasers of the Private Placement Warrants or their Permitted Transferees, the period ending 30 days after the Contribution Closing Date.

 

Private Placement Warrants ” shall have the meaning given in the Recitals hereto.

 

Prospectus ” shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.

 

Registrable Security ” shall mean (a) the shares of Common Stock issued upon the conversion of the Founder Shares, (b) the Private Placement Warrants (including any shares of Common Stock issued or issuable upon the exercise of any such Private Placement Warrants), (c) any outstanding share of Common Stock or any other equity security (including the shares of Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by an Existing Holder as of the date of this Agreement, (d) any equity securities (including the shares of Common Stock issued or issuable upon the exercise of any such equity security) of the Company issuable upon conversion of any working capital loans in an amount up to $1,500,000 made to the Company by an Existing Holder, (e) the shares of Common Stock issued or issuable upon the redemption or exchange of any CRP Units, (f) the shares of Common Stock issued to Riverstone in the Private Placement and (g) any other equity security of the Company issued or issuable with respect to any such share of Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization; provided, however , that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (A) a Registration Statement with respect to the sale of such securities shall have become effective under the

 

5



 

Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities shall have ceased to be outstanding; or (D) such securities have been sold pursuant to Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission).

 

Registration ” shall mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

 

Registration Expenses ” shall mean the out-of-pocket expenses of a Registration, including, without limitation, the following:

 

(A)                                all registration and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.) and any securities exchange on which the Common Stock is then listed;

 

(B)                                fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the Underwriters in connection with blue sky qualifications of Registrable Securities);

 

(C)                                printing, messenger, telephone and delivery expenses;

 

(D)                                reasonable fees and disbursements of counsel for the Company;

 

(E)                                 reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration; and

 

(F)                                  reasonable fees and expenses of one (1) legal counsel selected by the majority-in-interest of the Demanding Holders initiating a Demand Registration to be registered for offer and sale in the applicable Registration.

 

Registration Statement ” shall mean any registration statement that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.

 

Requesting Holder ” shall have the meaning given in subsection 2.1.1 .

 

Riverstone Holder ” and “ Riverstone Holders ” means Riverstone and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.2 in connection with a transfer of Common Stock by any Riverstone Holder to an Affiliate.

 

Securities Act ” shall mean the Securities Act of 1933, as amended from time to time.

 

6



 

Shelf Underwritten Offering ” shall have the meaning given in subsection 2.1.4.2 .

 

Sponsor ” shall have the meaning given in the Recitals hereto.

 

Subscription Agreements ” shall mean those certain subscription agreements, dated as of July 21, 2016, by and between the Company and (i) certain funds managed by Capital World Investors, (ii) certain funds managed by Fidelity Management & Research Company and (iii) Riverstone.

 

Suspension Period ” shall have the meaning given in subsection 3.4.1 .

 

Transactions ” shall have the meaning given in the Recitals hereto.

 

Underwriter ” shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such dealer’s market-making activities.

 

Underwritten Offering ” shall mean an offering in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public (which shall, for the avoidance of doubt, include any Shelf Underwritten Offering).

 

Warrant Agreement ” shall mean that certain Warrant Agreement, dated as of February 23, 2016, by and between the Company and Continental Stock Transfer & Trust Company.

 

ARTICLE II. REGISTRATIONS

 

2.1                                Demand Registration .

 

2.1.1                      Request for Registration . Subject to the provisions of subsection 2.1.5 and Section 3.4 , (a) the Existing Holders of at least a majority-in-interest of the then-outstanding number of Registrable Securities held by the Existing Holders and (b) the Riverstone Holders of at least a majority-in-interest of the then-outstanding number of Registrable Securities held by the Riverstone Holders may make a written demand for Registration of all or part of their Registrable Securities, which written demand shall describe the amount and type of securities to be included in such Registration and the intended method(s) of distribution thereof (such written demand a “ Demand Registration ”). The Company shall, within ten (10) days of the Company’s receipt of the Demand Registration, notify, in writing, all other Holders of Registrable Securities of such demand, and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in a Registration pursuant to a Demand Registration (each such Holder that includes all or a portion of such Holder’s Registrable Securities in such Registration, a “ Requesting Holder ”) shall so notify the Company, in writing, within five (5) days after the receipt by the Holder of the notice from the Company. Upon receipt by the Company of any such written notification from a Requesting Holder(s) to the Company, such Requesting Holder(s) shall be entitled to have their Registrable Securities included in a Registration pursuant to a Demand Registration and the Company shall effect, as soon thereafter as practicable, but not more than forty five (45) days immediately after the Company’s receipt of the Demand Registration, the Registration of all Registrable Securities requested by the Demanding Holders and Requesting Holders pursuant to such Demand Registration. Under no circumstances shall the Company be obligated to effect more than (x) an aggregate of three (3)

 

7



 

Registrations pursuant to a Demand Registration by the Existing Holders under this subsection 2.1.1 with respect to any or all Registrable Securities held by such Existing Holders and (y) an aggregate of five (5) Registrations pursuant to a Demand Registration by the Riverstone Holders under this subsection 2.1.1 with respect to any or all Registrable Securities held by such Riverstone Holders; provided, however , that a Registration shall not be counted for such purposes unless a Form S-1 or any similar long-form registration statement that may be available at such time (“ Form S-1 ”) has become effective and all of the Registrable Securities requested by the Demanding Holders and the Requesting Holders to be registered on behalf of the Demanding Holders and the Requesting Holders in such Form S-1 Registration have been sold, in accordance with Section 3.1 .  Notwithstanding the foregoing, the Company shall not be required to give effect to a Demand Registration if the Company has registered Registrable Securities pursuant to a Demand Registration in the preceding ninety (90) days.

 

2.1.2                      Effective Registration . Notwithstanding the provisions of subsection 2.1.1 or any other part of this Agreement, a Registration pursuant to a Demand Registration shall not count as a Registration unless and until (i) the Registration Statement filed with the Commission with respect to a Registration pursuant to a Demand Registration has been declared effective by the Commission and (ii) the Company has complied with all of its obligations under this Agreement with respect thereto; provided, further , that if, after such Registration Statement has been declared effective, an offering of Registrable Securities in a Registration pursuant to a Demand Registration is subsequently interfered with by any stop order or injunction of the Commission, federal or state court or any other governmental agency the Registration Statement with respect to such Registration shall be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders initiating such Demand Registration thereafter affirmatively elect to continue with such Registration and accordingly notify the Company in writing, but in no event later than five (5) days, of such election; provided, further , that the Company shall not be obligated or required to file another Registration Statement until the Registration Statement that has been previously filed with respect to a Registration pursuant to a Demand Registration becomes effective or is subsequently terminated.

 

2.1.3                      Underwritten Offering . Subject to the provisions of subsection 2.1.5 and Section 3.4 , if a majority-in-interest of the Demanding Holders so advise the Company as part of their Demand Registration that the offering of the Registrable Securities pursuant to such Demand Registration shall be in the form of an Underwritten Offering, then the right of such Demanding Holder or Requesting Holder (if any) to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such Underwritten Offering and the inclusion of such Holder’s Registrable Securities in such Underwritten Offering to the extent provided herein. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection 2.1.3 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.

 

2.1.4                      Shelf Registration .

 

2.1.4.1                                                            The Company shall, as soon as practicable after the Contribution Closing Date, but in any event within thirty (30) days after the Contribution

 

8



 

Closing Date, file a Registration Statement under the Securities Act to permit the public resale of all the Registrable Securities held by the Centennial Holders from time to time as permitted by Rule 415 under the Securities Act (or any successor or similar provision adopted by the Commission then in effect) on the terms and conditions specified in this subsection 2.1.4.1 and shall use its commercially reasonable efforts to cause such Registration Statement to be declared effective as soon as practicable after the filing thereof, but in any event no later than the earlier of (i) ninety (90) days (or one hundred and twenty (120) days if the Commission notifies the Company that it will “review” the Registration Statement) after the Contribution Closing Date and (ii) the tenth (10 th ) business day after the date the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review (such earlier date, the “ Effectiveness Deadline ”). The Registration Statement filed with the Commission pursuant to this subsection 2.1.4.1 shall be on Form S-3 or, if Form S-3 is not then available to the Company, on Form S-1 or such other form of registration statement as is then available to effect a registration for resale of such Registrable Securities, covering such Registrable Securities, and shall contain a prospectus in such form as to permit any Centennial Holder to sell such Registrable Securities pursuant to Rule 415 under the Securities Act (or any successor or similar provision adopted by the Commission then in effect) at any time beginning on the effective date for such Registration Statement. A Registration Statement filed pursuant to this subsection 2.1.4.1 shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Centennial Holders. The Company shall use its reasonable best efforts to cause a Registration Statement filed pursuant to this subsection 2.1.4.1 to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, that another registration statement is available, for the resale of all the Registrable Securities held by the Centennial Holders until all such Registrable Securities have ceased to be Registrable Securities. As soon as practicable following the effective date of a Registration Statement filed pursuant to this subsection 2.1.4.1 , but in any event within three (3) business days of such date, the Company shall notify the Centennial Holders of the effectiveness of such Registration Statement. When effective, a Registration Statement filed pursuant to this subsection 2.1.4.1 (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained in such Registration Statement, in the light of the circumstances under which such statement is made).

 

2.1.4.2                                                            In the event that the Centennial Holders of at least a majority-in-interest of the then-outstanding number of Registrable Securities held by the Centennial Holders elect to dispose of Registrable Securities under a Registration Statement pursuant to an Underwritten Offering (a “ Shelf Underwritten Offering ”) of all or part of such Registrable Securities that are registered by such Registration Statement and reasonably expect aggregate gross proceeds in excess of $50,000,000 (the “ Centennial Minimum Amount ”) from such Shelf Underwritten Offering, the Company shall, upon the written demand of such Centennial Holder(s), enter into an underwriting

 

9



 

agreement in a form as is customary in Underwritten Offerings of securities by the Company with the managing Underwriter or Underwriters selected by the Company after consultation with the Demanding Holders and shall take all such other reasonable actions as are requested by the managing Underwriter or Underwriters in order to expedite or facilitate the disposition of such Registrable Securities; provided, however , that the Company shall have no obligation to facilitate or participate in more than one (1)  Shelf Underwritten Offering pursuant to this subsection 2.1.4.2 .  In connection with any Shelf Underwritten Offering contemplated by this subsection 2.1.4.2 , the underwriting agreement into which each Centennial Holder and the Company shall enter shall contain such representations, covenants, indemnities (subject to Article IV ) and other rights and obligations as are customary in underwritten offerings of securities by the Company. No Centennial Holder shall be required to make any representations or warranties to or agreements with the Company or the Underwriters other than representations, warranties or agreements regarding such Centennial Holder’s authority to enter into such underwriting agreement and to sell, and its ownership of, the securities being registered on its behalf, its intended method of distribution and any other representation required by law.

 

2.1.4.3                                                            Notwithstanding anything to the contrary in this Agreement, neither the Company nor the Demanding Holders in a Shelf Underwritten Offering shall be required to include in any Shelf Underwritten Offering of Registrable Securities subject to an effective Registration Statement filed pursuant to subsection 2.1.4.1 other Registrable Securities that are not subject to such effective Registration Statement unless such Registrable Securities are subject to another effective Registration Statement or may be added to an effective Registration Statement by means of an automatically effective amendment thereto.

 

2.1.5                      Reduction of Underwritten Offering . If the managing Underwriter or Underwriters in an Underwritten Offering pursuant to a Demand Registration or a Shelf Underwritten Offering, in good faith, advises the Company, the Demanding Holders and the Requesting Holders (if any) in writing that the dollar amount or number of Registrable Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other Common Stock or other equity securities that the Company desires to sell and the Common Stock, if any, as to which a Registration has been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “ Maximum Number of Securities ”), then the Company shall include in such Underwritten Offering, as follows:

 

(a)                                  first , the Registrable Securities of the Demanding Holders (pro rata based on the respective number of Registrable Securities that each Demanding Holder has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Demanding Holders have requested be included in such Underwritten Offering) that can be sold without exceeding the Maximum Number of Securities;

 

10



 

(b)                                  second , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a) , the Registrable Securities of the Requesting Holders (if any) (pro rata based on the respective number of Registrable Securities that each Requesting Holder (if any) or other Holder, as the case may be, has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Requesting Holders and such other Holders have requested be included in such Underwritten Offering) that can be sold without exceeding the Maximum Number of Securities;

 

(c)                                   third , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a)  and clause (b) , the Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and

 

(d)                                  fourth , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a) , clause (b)  and clause (c) , the Common Stock or other equity securities of other persons or entities that the Company is obligated to register in a Registration pursuant to separate written contractual arrangements with such persons and that can be sold without exceeding the Maximum Number of Securities.

 

2.1.6                      Demand Registration Withdrawal . A Demanding Holder or a Requesting Holder shall have the right to withdraw all or any portion of its Registrable Securities included in a Demand Registration pursuant to subection 2.1.1 or a Shelf Underwritten Offering pursuant to subsection 2.1.4.2 for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of its intention to so withdraw at any time prior to (x) in the case of a Demand Registration not involving any Underwritten Offering, the effectiveness of the applicable Registration Statement or (y) in the case of any Demand Registration involving an Underwritten Offering or any Shelf Underwritten Offering, prior to the pricing of such Underwritten Offering or Shelf Underwritten Offering; provided, however , that upon withdrawal by a majority-in-interest of the Demanding Holders initiating a Demand Registration (or, in the case of a Shelf Underwritten Offering, withdrawal of an amount of Registrable Securities that results in the remaining amount of Registrable Securities included by the Centennial Holders in such Shelf Underwritten Offering, in their capacity as Demanding Holders, being less than the Centennial Minimum Amount), the Company shall cease all efforts to secure effectiveness of the applicable Registration Statement or complete the Underwritten Offering, as applicable.  Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with a Registration pursuant to a Demand Registration or a Shelf Underwritten Offering prior to its withdrawal under this subsection 2.1.6 .

 

2.2                                Piggyback Registration .

 

2.2.1                      Piggyback Rights . If the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by the Company and by the stockholders of the Company including, without limitation, pursuant to Section 2.1 ), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit

 

11



 

plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that is convertible into equity securities of the Company, (iv) for a dividend reinvestment plan or (v) filed pursuant to subsection 2.1.4.1 , then the Company shall give written notice of such proposed filing to all of the Holders of Registrable Securities as soon as practicable but not less than ten (10) days before the anticipated filing date of such Registration Statement, which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, in such offering, and (B) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five (5) days after receipt of such written notice (such Registration a “ Piggyback Registration ”). The Company shall, in good faith, cause such Registrable Securities to be included in such Piggyback Registration and shall use its reasonable best efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holders pursuant to this subsection 2.2.1 to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection 2.2.1 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.

 

2.2.2                      Reduction of Piggyback Registration . If the managing Underwriter or Underwriters in an Underwritten Offering that is to be a Piggyback Registration, in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration in writing that the dollar amount or number of the Common Stock that the Company desires to sell, taken together with (i) the Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holders of Registrable Securities hereunder, (ii) the Registrable Securities as to which registration has been requested pursuant Section 2.2 , and (iii) the Common Stock, if any, as to which Registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:

 

(a)                                  If the Registration is undertaken for the Company’s account, the Company shall include in any such Registration (i)  first , the Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (ii)  second , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i) , the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 (pro rata based on the respective number of Registrable Securities that each Holder has requested be included in such Piggyback Registration and the aggregate number of Registrable Securities that the Holders have requested be included in such Piggyback Registration), which can be sold without exceeding the Maximum Number of Securities; and (iii)  third , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i)  and clause (ii) , the Common Stock, if any, as to which Registration has been requested pursuant to written contractual piggy-back registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities;

 

12



 

(b)                                  If the Registration is pursuant to a request by persons or entities other than the Holders of Registrable Securities, then the Company shall include in any such Registration (i)  first , the Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (ii)  second , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i) , the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 (pro rata based on the number of Registrable Securities that each Holder has requested be included in such Piggyback Registration and the aggregate number of Registrable Securities that the Holders have requested to be included in such Piggyback Registration), which can be sold without exceeding the Maximum Number of Securities; (iii)  third , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i)  and clause (ii) , the Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (iv)  fourth , to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i) , clause (ii)  and clause (iii) , the Common Stock or other equity securities for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities.

 

2.2.3                      Piggyback Registration Withdrawal . Any Holder of Registrable Securities shall have the right to withdraw all or any portion of its Registrable Securities included in a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw such Registrable Securities from such Piggyback Registration prior to (x) in the case of a Piggyback Registration not involving an Underwritten Offering or Shelf Underwritten Offering, the effectiveness of the applicable Registration Statement or (y) in the case of any Piggyback Registration involving an Underwritten Offering or any Shelf Underwritten Offering, prior to the pricing of such Underwritten Offering or Shelf Underwritten Offering. The Company (whether on its own good faith determination or as the result of a request for withdrawal by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal under this subsection 2.2.3 .

 

2.2.4                      Unlimited Piggyback Registration Rights . For purposes of clarity, any Registration effected pursuant to Section 2.2 shall not be counted as a Registration pursuant to a Demand Registration effected under Section 2.1 or a Shelf Underwritten Offering effected under subsection 2.1.4.2 .

 

2.3                                Registrations on Form S-3 . The Holders of Registrable Securities may at any time, and from time to time, request in writing that the Company, pursuant to Rule 415 under the

 

13



 

Securities Act (or any successor rule promulgated thereafter by the Commission), register the resale of any or all of their Registrable Securities on Form S-3 or similar short form registration statement that may be available at such time (“ Form S-3 ”); provided, however , that the Company shall not be obligated to effect such request through an Underwritten Offering (i) in the case of the Centennial Contributors, except as provided in Section 2.1.4.2 , and (ii) in the case of all other Holders, unless such Underwritten Offering is reasonably expected to result in gross proceeds in excess of $50,000,000. Within five (5) days of the Company’s receipt of a written request from a Holder or Holders of Registrable Securities for a Registration on Form S-3, the Company shall promptly give written notice of the proposed Registration on Form S-3 to all other Holders of Registrable Securities, and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in such Registration on Form S-3 shall so notify the Company, in writing, within ten (10) days after the receipt by the Holder of the notice from the Company. As soon as practicable thereafter, but not more than twelve (12) days after the Company’s initial receipt of such written request for a Registration on Form S-3, the Company shall register all or such portion of such Holder’s Registrable Securities as are specified in such written request, together with all or such portion of Registrable Securities of any other Holder or Holders joining in such request as are specified in the written notification given by such Holder or Holders; provided, however , that the Company shall not be obligated to effect any such Registration pursuant to this Section 2.3 if (i) a Form S-3 is not available for such offering; or (ii) the Holders of Registrable Securities, together with the Holders of any other equity securities of the Company entitled to inclusion in such Registration, propose to sell the Registrable Securities and such other equity securities (if any) at any aggregate price to the public of less than $10,000,000.

 

2.4                                Restrictions on Registration Rights .  Notwithstanding anything to the contrary contained in this Agreement, no Registration shall be effected or permitted and no Registration Statement shall become effective, with respect to any Registrable Securities held by any Existing Holder, until after the expiration of the Founder Shares Lock-Up Period or the Private Placement Lock-Up Period, as the case may be.

 

ARTICLE III. COMPANY PROCEDURES

 

3.1                                General Procedures . If the Company is required to effect the Registration of Registrable Securities, the Company shall use its reasonable best efforts to effect such Registration to permit the sale of such Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company shall, as expeditiously as possible:

 

3.1.1                      prepare and file with the Commission as soon as practicable a Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective until all Registrable Securities covered by such Registration Statement have been sold;

 

3.1.2                      prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be requested by the Holders or any Underwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable to the registration form used by the

 

14



 

Company or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus;

 

3.1.3                      prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the Underwriters, if any, and the Holders of Registrable Securities included in such Registration, and one legal counsel to such Holders, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents as the Underwriters and the Holders of Registrable Securities included in such Registration or the one legal counsel for such Holders may request in order to facilitate the disposition of the Registrable Securities owned by such Holders;

 

3.1.4                      prior to any public offering of Registrable Securities, use its reasonable best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however , that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;

 

3.1.5                      use its reasonable best efforts to cause all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;

 

3.1.6                      provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;

 

3.1.7                      advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;

 

3.1.8                      at least five (5) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus, furnish a copy thereof to each seller of such Registrable Securities or one counsel on behalf of such sellers;

 

15



 

3.1.9                      notify the Holders at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then to correct such Misstatement as set forth in Section 3.4 ;

 

3.1.10               permit a representative of the Holders, the Underwriters, if any, and any attorney or accountant retained by such Holders or Underwriter to participate, at each such person’s own expense, in the preparation of the Registration Statement, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; provided, however , that such representatives or Underwriters enter into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information;

 

3.1.11               obtain a “cold comfort” letter from the Company’s independent registered public accountants in the event of an Underwritten Offering, in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the managing Underwriter may reasonably request;

 

3.1.12               on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion, dated such date, of counsel representing the Company for the purposes of such Registration, addressed to the Holders, the placement agent or sales agent, if any, and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as the Holders, placement agent, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions and negative assurance letters, and reasonably satisfactory to a majority-in-interest of the participating Holders;

 

3.1.13               in the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing Underwriter of such offering;

 

3.1.14               make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the Commission);

 

3.1.15               if the Registration involves the Registration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in any Underwritten Offering; and

 

16



 

3.1.16               otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Holders, in connection with such Registration.

 

3.2                                Registration Expenses . The Registration Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Holders that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions and discounts, brokerage fees, Underwriter marketing costs and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holders.

 

3.3                                Requirements for Participation in Underwritten Offerings . No person may participate in any Underwritten Offering for equity securities of the Company unless such person (i) agrees to sell such person’s securities on the basis provided in any underwriting arrangements approved by the Company and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements.

 

3.4                                Suspension of Sales; Adverse Disclosure .

 

3.4.1                      Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, each of the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice), or until it is advised in writing by the Company that the use of the Prospectus may be resumed (any such period, a “ Suspension Period ”).

 

3.4.2                      If the filing, initial effectiveness or continued use of (including in connection with any Underwritten Offering) a Registration Statement in respect of any Registration at any time would require the Company to make an Adverse Disclosure or would require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, then the Company may, upon giving prompt written notice to the Holders, delay the filing or initial effectiveness of, or suspend use of (including in connection with any Underwritten Offering), such Registration Statement for the shortest period of time, but in no event more than sixty (60) days, determined in good faith by the Company to be necessary for such purpose (any such period, a “ Blackout Period ”). In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities.

 

3.4.3.                   The Company shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 3.4 .  Notwithstanding anything to the contrary in this Section 3.4 , in no event shall any Blackout Periods and any Suspension Periods continue for more than ninety (90) days in the aggregate during any 365-day period.

 

17



 

3.5                                Reporting Obligations . As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings (the delivery of which will be satisfied by the Company’s filing of such reports on the Commission’s EDGAR system). The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Common Stock held by such Holder without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission), including providing any legal opinions. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.

 

ARTICLE IV. INDEMNIFICATION AND CONTRIBUTION

 

4.1                                Indemnification .

 

4.1.1                      The Company agrees to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and each person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including attorneys’ fees) caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein. The Company shall indemnify the Underwriters, their officers and directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to the indemnification of the Holder.

 

4.1.2                      In connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and agents and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such Holder expressly for use therein; provided, however , that the obligation to indemnify shall be several, not joint and several, among such Holders of Registrable Securities, and the liability of each such Holder of Registrable Securities shall be in proportion to and limited to the net proceeds received by such Holder from the sale of

 

18



 

Registrable Securities pursuant to such Registration Statement. The Holders of Registrable Securities shall indemnify the Underwriters, their officers, directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification of the Company.

 

4.1.3                      Any person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification ( provided that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

 

4.1.4                      The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer of securities. The Company and each Holder of Registrable Securities participating in an offering also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s or such Holder’s indemnification is unavailable for any reason.

 

4.1.5                      If the indemnification provided under Section 4.1 from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however , that the liability of any Holder under this

 

19



 

subsection 4.1.5 shall be limited to the amount of the net proceeds received by such Holder in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in subsections 4.1.1 , 4.1.2 and 4.1.3 , any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection 4.1.5 were determined by pro rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in this subsection 4.1.5 . No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this subsection 4.1.5 from any person who was not guilty of such fraudulent misrepresentation.

 

ARTICLE V. MISCELLANEOUS

 

5.1                                Notices . Any notice or communication under this Agreement must be in writing and given by (i) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) delivery in person or by courier service providing evidence of delivery, or (iii) transmission by hand delivery, electronic mail, telecopy, telegram or facsimile. Each notice or communication that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received, in the case of mailed notices, on the third business day following the date on which it is mailed and, in the case of notices delivered by courier service, hand delivery, electronic mail, telecopy, telegram or facsimile, at such time as it is delivered to the addressee (with the delivery receipt or the affidavit of messenger) or at such time as delivery is refused by the addressee upon presentation. Any notice or communication under this Agreement must be addressed, if to the Company, to: 1401 Seventeenth Street, Suite 1000, Denver, CO 80202, Attention: Davis O’Connor or by facsimile at (303) 845-9516, and, if to any Holder, at such Holder’s address or facsimile number as set forth in the Company’s books and records. Any party may change its address for notice at any time and from time to time by written notice to the other parties hereto, and such change of address shall become effective thirty (30) days after delivery of such notice as provided in this Section 5.1 .

 

5.2                                Assignment; No Third Party Beneficiaries .

 

5.2.1                      This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part.

 

5.2.2                      Prior to the expiration of the Founder Shares Lock-up Period or the Private Placement Lock-up Period, as the case may be, no Existing Holder may assign or delegate such Existing Holder’s rights, duties or obligations under this Agreement, in whole or in part, except in connection with a transfer of Registrable Securities by such Existing Holder to a Permitted Transferee.  No Centennial Holder or Riverstone Holder may assign or delegate its rights, duties or obligations under this Agreement, in whole or in part, except (i) in the case of a Centennial Holder, in connection with a Permitted Transfer (as defined in the CRP LLC Agreement) of CRP Units by such Centennial Holder and (ii) in the case of a Riverstone Holder, in connection with a transfer of Common Stock by such Riverstone Holder to an Affiliate.

 

20



 

5.2.3                      This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and its successors and the permitted assigns of the Holders, which shall include Permitted Transferees.

 

5.2.4                      This Agreement shall not confer any rights or benefits on any persons that are not parties hereto, other than as expressly set forth in this Agreement and Section 5.2 .

 

5.2.5                      No assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have received (i) written notice of such assignment as provided in Section 5.1 and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement). Any transfer or assignment made other than as provided in this Section 5.2 shall be null and void.

 

5.3                                Counterparts . This Agreement may be executed in multiple counterparts (including facsimile or PDF counterparts), each of which shall be deemed an original, and all of which together shall constitute the same instrument, but only one of which need be produced.

 

5.4                                Governing Law; Venue . NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO AGREEMENTS AMONG NEW YORK RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION.

 

5.5                                Amendments and Modifications . Upon the written consent of the Company and the Holders of at least a majority-in-interest of the Registrable Securities at the time in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided, however , that notwithstanding the foregoing, (i) any amendment hereto or waiver hereof that adversely affects one Holder, solely in its capacity as a holder of the shares of capital stock of the Company, in a manner that is materially different from the other Holders (in such capacity) shall require the consent of the Holder so affected and (ii) any amendment hereto or waiver hereof that adversely affects the Existing Holders, Centennial Holders or Riverstone Holders, as applicable, solely in their respective capacity as Existing Holders, Centennial Holders or Riverstone Holders, as applicable, in a manner that is materially different from the other Holders, shall require the consent of the Existing Holders, Centennial Holders or Riverstone Holders, as applicable, of a majority-in-interest of the then-outstanding number of Registrable Securities held by the Existing Holders, Centennial Holders or Riverstone Holders, as applicable. No course of dealing between any Holder or the Company and any other party hereto or any failure or delay on the part of a Holder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.

 

21



 

5.6                                Other Registration Rights . Other than pursuant to the terms of the Subscription Agreements and the Warrant Agreements, the Company represents and warrants that no person, other than a Holder of Registrable Securities, has any right to require the Company to register any securities of the Company for sale or to include such securities of the Company in any Registration filed by the Company for the sale of securities for its own account or for the account of any other person. The Company (i) represents and warrants that no Subscription Agreement or Warrant Agreement has been amended in any manner since its applicable effective date and (ii) shall not amend the Subscription Agreements or the Warrant Agreements in any manner that would provide to any party thereto registration rights superior to the rights of the Centennial Holders set forth herein unless the Company amends this Agreement to provide substantially similar rights to the Centennial Holders.  Further, the Company represents and warrants that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions among the parties hereto and in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.

 

5.7                                Term . This Agreement shall terminate upon the earlier of (i) the tenth anniversary of the date of this Agreement or (ii) the date as of which (A) all of the Registrable Securities have been sold pursuant to a Registration Statement (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder (or any successor rule promulgated thereafter by the Commission)) or (B) no Registrable Securities remain outstanding. The provisions of Section 3.5 and Article IV shall survive any termination.

 

[SIGNATURE PAGES FOLLOW]

 

22



 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.

 

 

COMPANY:

 

 

 

 

CENTENNIAL RESOURCE DEVELOPMENT, INC.,
a Delaware corporation

 

 

 

 

 

 

 

By:

/s/ Mark. G. Papa

 

Name: Mark G. Papa

 

Title:  Chief Executive Officer

 

[ Signature Page to Amended and Restated Registration Rights Agreement ]

 



 

 

HOLDERS:

 

 

 

 

 

SILVER RUN SPONSOR, LLC,

 

a Delaware limited liability company

 

 

 

 

By:

Silver Run Sponsor Manager, LLC,

 

 

Member and Managing Member

 

 

 

 

 

 

 

By:

/s/ Thomas J. Walker

 

Name: Thomas J. Walker

 

Title: Managing Director

 

[ Signature Page to Amended and Restated Registration Rights Agreement ]

 



 

 

By:

/s/ William D. Gutermuth

 

Name: William D. Gutermuth

 

[ Signature Page to Amended and Restated Registration Rights Agreement ]

 



 

 

By:

/s/ Jeffrey H. Tepper

 

Name: Jeffrey H. Tepper

 

[ Signature Page to Amended and Restated Registration Rights Agreement ]

 



 

 

By:

/s/ Diana J. Walters

 

Name: Diana J. Walters

 

[ Signature Page to Amended and Restated Registration Rights Agreement ]

 



 

 

CENTENNIAL RESOURCE DEVELOPMENT, LLC,
a Delaware limited liability company

 

 

 

 

 

 

 

By:

/s/ Ward Polzin

 

Name: Ward Polzin

 

Title: Chief Executive Officer

 

[ Signature Page to Amended and Restated Registration Rights Agreement ]

 



 

 

NGP CENTENNIAL FOLLOW-ON LLC,

 

a Delaware limited liability company

 

 

 

 

By:

NGP X US Holdings, L.P.,

 

 

Managing Member

 

 

 

 

By:

NGP X US Holdings GP, L.L.C.,

 

 

General Partner

 

 

 

 

 

 

 

By:

/s/ Tony R. Weber

 

Name: Tony R. Weber

 

Title: Authorized Person

 

[ Signature Page to Amended and Restated Registration Rights Agreement ]

 



 

 

CELERO ENERGY COMPANY, LP,

 

a Delaware limited partnership

 

 

 

 

By:

Celero Energy Management, LLC,

 

 

General Partner

 

 

 

 

 

 

 

By:

/s/ Bruce Selkirk

 

Name: Bruce Selkirk

 

Title: Authorized Person

 

[ Signature Page to Amended and Restated Registration Rights Agreement ]

 



 

 

RIVERSTONE CENTENNIAL HOLDINGS, L.P.,

 

a Delaware limited partnership

 

 

 

By: Riverstone VI REL Holdings GP, LLC, its general partner

 

 

 

 

 

By:

/s/ Thomas J. Walker

 

Name: Thomas J. Walker

 

Title:   Managing Director

 

[ Signature Page to Amended and Restated Registration Rights Agreement ]

 


Exhibit 10.3

 

EXECUTION VERSION

 

SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

 

This SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “ Second Amendment ”), dated as of October 11, 2016 (the “ Second Amendment Effective Date ”), is among CENTENNIAL RESOURCE PRODUCTION, LLC, a Delaware limited liability company (the “ Borrower ”); each of the undersigned guarantors (the “ Guarantors ”, and together with the Borrower, the “ Credit Parties ”); each of the Lenders party hereto; and JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “ Administrative Agent ”).

 

Recitals

 

A.                                     The Borrower, the Administrative Agent and the Lenders are parties to that certain Amended and Restated Credit Agreement dated as of October 15, 2014 (as amended prior to the date hereof, the “ Credit Agreement ”), pursuant to which the Lenders have, subject to the terms and conditions set forth therein, made certain credit available to and on behalf of the Borrower.

 

B.                                     The Borrower has advised the Administrative Agent and the Lenders that certain members of the NGP Group and Affiliates of Riverstone Investment Group LLC (“ Riverstone ”) entered into the Contribution Agreement dated as of July 6, 2016, as amended, modified or assigned on or before the date hereof (the “ Acquisition Agreement ”) whereby Silver Run Acquisition Corporation, a Delaware corporation to be renamed Centennial Resource Development, Inc. (“ Silver Run ”), agreed to acquire approximately 89% of the outstanding Equity Interests of the Borrower from NGP (such acquisition, the “ Silver Run Acquisition ”).

 

C.                                     The Borrower has advised the Administrative Agent and the Lenders that, concurrently with the Silver Run Acquisition, Silver Run will issue approximately 101,005,000 shares of its Class A Common Stock to certain Affiliates of Riverstone and certain other accredited investors (the “ Silver Run Equity Issuance ”), the proceeds of which will be used, directly or indirectly by Silver Run and the Borrower, to, among other things, (i) consummate the Silver Run Acquisition, (ii) repay in full the Term Loans, (iii) repay the aggregate principal amount of any outstanding Revolving Loans, and (iv) make a one-time cash distribution to the Centennial Contributors (as defined in the Acquisition Agreement) pursuant to Section 2.1(b) of the Acquisition Agreement, and make redemptions by Silver Run’s public stockholders of shares of Class A Common Stock to the extent required by the Acquisition Agreement (the “ Specified Distribution ”), in each case, on the Second Amendment Effective Date (the consummation of the Silver Run Acquisition, the making of the Silver Run Equity Issuance and the Specified Distribution, the repayment in full of the Term Loans and the repayment of any outstanding Revolving Loans, collectively, the “ Second Amendment Transactions ”).

 

D.                                     The Borrower has requested that the Lenders enter into this Second Amendment to (i) amend the Credit Agreement in certain respects as set forth herein including, without limitation, to (A) permit the Silver Run Acquisition and (B) replace Annex I to reflect the repayment in full of all Term Loans, and (ii) reflect the increase of the Borrowing Base from $140,000,000 to $200,000,000, in each case upon the terms and conditions set forth herein and in each case to be effective as of the Second Amendment Effective Date.

 



 

E.                                      The Administrative Agent and the Lenders have agreed, subject to the terms and conditions set forth herein, to enter into this Second Amendment.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

Section 1.                                            Defined Terms .  Each capitalized term which is defined in the Credit Agreement, but which is not defined in this Second Amendment, shall have the meaning ascribed such term in the Credit Agreement, as amended hereby.  Unless otherwise indicated, all section references in this Second Amendment refer to the Credit Agreement.

 

Section 2.                                            Amendments .  In reliance on the representations, warranties, covenants and agreements contained in this Second Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, the Credit Agreement shall be amended effective as of the Second Amendment Effective Date in the manner provided in this Section 2 .

 

2.1                                Additional Definitions .  Section 1.02 of the Credit Agreement is hereby amended to add thereto in alphabetical order the following definitions which shall read in full as follows:

 

Bail-In Action ” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of any EEA Financial Institution.

 

Bail-In Legislation ” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

EEA Financial Institution ” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clause (a) or clause (b) of this definition and is subject to consolidated supervision with its parent.

 

EEA Member Country ” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

EEA Resolution Authority ” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

2



 

EU Bail-In Legislation Schedule ” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

Immaterial Subsidiary ” shall mean any Restricted Subsidiary designated by the Borrower as an Immaterial Subsidiary if and for so long as such Immaterial Subsidiary, together with all other Immaterial Subsidiaries so designated as Immaterial Subsidiaries, does not have total assets at such time exceeding $100,000; provided that no Subsidiary may be an Immaterial Subsidiary if it owns Oil and Gas Properties that are included in the then effective Borrowing Base.

 

Riverstone ” means Riverstone Investment Group LLC (the “Manager”), Riverstone Global Energy and Power Fund VI, L.P., Riverstone Non-ECI Partners, L.P., and Riverstone Energy Limited, together with the parallel investment entities and alternative investment entities of the foregoing, and any future investment fund or co-investment fund managed by the Manager or any of its Affiliates, and any Affiliates of one or more of the foregoing; provided that in no event will any portfolio company of any of the foregoing be included in the definition of “Riverstone”.

 

Second Amendment ” means that certain Second Amendment to Amended and Restated Credit Agreement dated as of the Second Amendment Effective Date, among the Borrower, the Guarantors party thereto, the Administrative Agent and the Lenders party thereto.

 

Second Amendment Effective Date ” means October 11, 2016.

 

Second Amendment Transactions ” has the meaning set forth in the Second Amendment.

 

Centennial Resource Development ” means Centennial Resource Development, Inc., a Delaware corporation formerly known as Silver Run Acquisition Corporation.

 

Write-Down and Conversion Powers ” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

2.2                                Amended Definitions . The following definitions contained in Section 1.02 of the Credit Agreement are hereby amended as follows:

 

(a)                                  Clause (d) of the definition of “Defaulting Lender” is hereby amended to insert “or become the subject of a Bail-In Action” immediately after “or bankruptcy” therein.

 

3



 

(b)                                  The definition of “LIBO Rate” is hereby amended to add the following sentence at the end of such definition:  “Notwithstanding anything to the contrary contained herein, in no event shall the LIBO Rate be less than 0%.”

 

(c)                                   The last sentence of the definition of “Parent” is hereby deleted in its entirety.

 

2.3                                Amended and Restated Definitions .  The following definitions contained in Section 1.02 of the Credit Agreement are hereby amended and restated in their entirety to read in full as follows:

 

Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

Applicable Margin ” means for any day, with respect to any ABR Loan or Eurodollar Loan that is a Revolving Loan, or with respect to the Revolving Credit Commitment Fee Rate, as the case may be, the rate per annum set forth in the Borrowing Base Utilization Grid below based upon the Borrowing Base Utilization Percentage then in effect:

 

Borrowing Base Utilization Grid

 

Borrowing Base Utilization Percentage

 

< 25%

 

> 25% < 50%

 

> 50% < 75%

 

> 75% < 90%

 

> 90%

 

Eurodollar Loans

 

2.250%

 

2.500%

 

2.750%

 

3.000%

 

3.250%

 

ABR Loans

 

1.250%

 

1.500%

 

1.750%

 

2.000%

 

2.250%

 

Revolving Credit Commitment Fee Rate

 

0.500%

 

0.500%

 

0.500%

 

0.500%

 

0.500%

 

 

Each change in the Applicable Margin for Revolving Loans shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change; provided that if at any time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a) , then the “ Applicable Margin ” means, with respect to Revolving Loans, the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level until such Reserve Report is delivered.

 

Change in Control ” means (a)  any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 of the Securities Exchange Act) other than Riverstone, shall have acquired beneficial ownership or control of Equity Interests representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Centennial Resource Development, the Parent or the Borrower, (b) the occupation of a majority of the seats (other than vacant seats) on the board of directors of Centennial Resource

 

4



 

Development by Persons who were neither (i) nominated, appointed or approved for consideration by shareholders for election by the board of directors of Centennial Resource Development or (ii) appointed by directors so nominated, appointed or approved, (c) the failure of Centennial Resource Development to (i) own more than 50% of the Equity Interests of the Borrower with ordinary voting power to elect or appoint the managers of the Borrower or (ii) Control the Borrower, or (d) the failure of the Parent (at any time that the Parent is not the Borrower) to own 100% of the Equity Interests in the Borrower.

 

EBITDAX ” means, for any period, the sum of Consolidated Net Income for such period plus (a) the following expenses or charges to the extent deducted from Consolidated Net Income in such period: (i) interest, (ii) income taxes (however denominated), (iii) depreciation, depletion, amortization and other similar noncash charges, (iv) exploration expenses, including plugging and abandonment expenses, (v) transaction costs, expenses and charges with respect to the acquisition or disposition of Oil and Gas Properties incurred in such period in an aggregate amount not to exceed $5,000,000 in any Reference Period, (vi) costs, fees and expenses incurred by the Credit Parties in connection with the closing of this Agreement and the Transactions occurring on or about the Effective Date, and (vi) costs, fees and expenses incurred by the Credit Parties in connection with the Second Amendment Transactions, minus (b) all noncash income added to Consolidated Net Income. For the purposes of calculating EBITDAX (including any component thereof) for any period of four (4) consecutive fiscal quarters (each, a “ Reference Period ”) pursuant to any determination of the financial ratio contained in Section 9.01(a), if at any time during such Reference Period the Parent or any Restricted Subsidiary shall have made any Material Disposition or Material Acquisition, the EBITDAX for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Disposition or Material Acquisition had occurred on the first day of such Reference Period (such calculations to be reasonably acceptable to the Administrative Agent).

 

Loan Documents ” means this Agreement, the First Amendment, the Second Amendment, the Notes, the Letter of Credit Agreements, the Letters of Credit, the Engagement Letter and the Security Instruments.

 

Permitted Tax Distributions ” means, with respect to the Borrower so long as it is taxable as a partnership for United Stated federal income tax purposes, tax distributions to the members of the Borrower in an aggregate amount that does not exceed (a) the sum of the highest marginal United States federal and New York state income tax rates applicable to individuals on ordinary income, multiplied by (b) the Borrower’s federal taxable income.

 

Qualifying IPO ” means the Second Amendment Transactions.

 

5



 

2.4                                Amendments to Section 3.04.  Section 3.04(c)(iv), 3.04(c)(v) and 3.04(c)(vi) of the Credit Agreement are each hereby deleted in their respective entireties and replaced in each instance with “[Reserved]”.

 

2.5                                Amendment to Article VII .  Article VII of the Credit Agreement is hereby amended to insert the new Section 7.24 below immediately after Section 7.23 thereof, which shall read in full as follows:

 

Section 7.24 EEA Financial Institutions .  No Credit Party is an EEA Financial Institution.

 

2.6                                Amendment to Section 8.14(a) .  Section 8.14(a) of the Credit Agreement is hereby amended to amend and restate each instance therein of “80%” with “85%”.

 

2.7                                Amendment to Section 8.14(b) .  Section 8.14(b) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 

(b)                                  In the event that (i) the Parent creates or acquires any Restricted Subsidiary other than an Immaterial Subsidiary (including by designating any Unrestricted Subsidiary as a Restricted Subsidiary pursuant to the terms hereof) or (ii) any Domestic Subsidiary incurs or guarantees any Funded Debt, the Borrower shall, or shall cause the Parent to, promptly cause such Restricted Subsidiary (if other than the Borrower) to execute and deliver the Guaranty Agreement and the Security Agreement (or supplements thereto or assumption agreements thereto, as applicable) pursuant to which such Restricted Subsidiary shall guarantee the Indebtedness and grant liens and security interests in its personal property that constitutes Collateral (as defined in the Security Agreement). In the event that the Parent creates or acquires any Restricted Subsidiary other than an Immaterial Subsidiary, the Credit Party that owns the Equity Interests in such new Restricted Subsidiary shall execute and deliver a supplement to the Security Agreement pursuant to which such Credit Party will confirm the pledge of all of the Equity Interests of such new Restricted Subsidiary to secure the Indebtedness. In connection with the foregoing, the Credit Parties shall (i) deliver original stock certificates, if any, evidencing the Equity Interests of such new Restricted Subsidiary, together with an appropriate undated stock power for each certificate duly executed in blank by the registered owner thereof and (ii) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent. Parent and Borrower shall cause any Subsidiary (if other than the Borrower) that guarantees the obligations with respect to any Permitted Senior Unsecured Notes to become a Guarantor by executing and delivering to the Administrative Agent an assumption agreement with respect to the Guaranty Agreement.

 

2.8                                Amendments to Section 9.04(a) .  Section 9.04(a) of the Credit Agreement is hereby amended to (a) delete the “and” immediately before “(vi)” therein, (b) amend and restate the “.” at the end of the first sentence thereof with “; (vii) the Parent may make cash distributions; provided that, in the case of the this clause (vii), (A) no Default or Event of Default exists or results from the making of such Restricted Payment, (B) after giving effect to such Restricted Payment, Liquidity is not less than the greater of (1) $40,000,000 or (2) twenty percent (20%) of the Borrowing Base then in effect and (C) after giving effect to such Restricted

 

6



 

Payment, the Parent’s ratio of Total Funded Debt (as of such date) to EBITDAX (for the Rolling Period for which financial statements have been, or are required to have been, delivered pursuant to Section 8.01(a)  or (b) ) shall not exceed 2.75 to 1.00 on a pro forma basis, and (viii) the Borrower may use proceeds from the Silver Run Cash Contribution (as defined in the Acquisition Agreement (as defined in the Second Amendment)) to make a cash distribution on the Second Amendment Effective Date to the Centennial Contributors (as defined in the Acquisition Agreement) pursuant to Section 2.1(b) of the Acquisition Agreement and (c) amend and restate clause (iv) therein in its entirety with the following clause (iv) which shall read in full as “(iv) the Borrower may make Permitted Tax Distributions in accordance with the last sentence of this Section 9.04 ;”.

 

2.9                                Amendments to Section 9.13 . Section 9.13 of the Credit Agreement is hereby amended to (a) delete the “and” immediately before “(g)” therein, (b) amend and restate the “.” at the end of the first sentence thereof with “; and (h) the Second Amendment Transactions”.

 

2.10                         Amendment to Section 9.17(a)(i) .  Section 9.17(a)(i) of the Credit Amendment is hereby amended and restated in its entirety to read in full as follows:

 

(i)                                            Subject to clause (b)  of this Section 9.17 , Swap Agreements with an Approved Counterparty in respect of commodities the notional volumes of which (when aggregated with other commodity Swap Agreements then in effect) do not exceed, as of the date such Swap Agreement is entered into (and for each month during the period during which such Swap Agreement is in effect), the applicable percentage set forth in the table below for the time periods (relative to the execution date of the relevant Swap Agreement) set forth in the table below of the reasonably anticipated production of crude oil, natural gas and natural gas liquids and condensate, calculated separately and, in each case, as such production is forecast from the Parent’s and its Restricted Subsidiaries’ Oil and Gas Properties constituting Proved Reserves as set forth on the most recent Reserve Report delivered pursuant to the terms of this Agreement:

 

Period (relative to execution date of
relevant Swap Agreement)

 

Percentage Limitation

Months 1-24

 

80% of Proved

Months 25-60

 

65% of Proved

 

provided , however , that such Swap Agreements shall not, in any case, have a tenor of greater than five (5) years.  It is understood that Swap Agreements in respect of commodities which may, from time to time, “hedge” the same volumes, but different elements of commodity risk thereof (such as, for example, basis risk and price risk), shall not be aggregated together when calculating the foregoing limitations on notional volumes or for any other purpose of this Section.

 

2.11                         Amendment to Section 12.02(b)(vii) .  Section 12.02(b)(vii) of the Credit Agreement is hereby amended to amend and restate “80%” therein with “85%”.

 

7



 

2.12                         Amendment to Article XII .  Article XII of the Credit Agreement is hereby amended to insert the new Section 12.20 below immediately after Section 12.19 thereof, which shall read in full as follows:

 

Section 12.20 Acknowledgement and Consent to Bail-In of EEA Financial Institutions .  Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)                                        the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

 

(b)                                        the effects of any Bail-In Action on any such liability, including, if applicable:

 

(i)                                            a reduction in full or in part or cancellation of any such liability;

 

(ii)                                         a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(iii)                                      the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.

 

2.13                         Replacement of Annex I .  Annex I to the Credit Agreement is hereby replaced in its entirety with Annex I attached hereto and Annex I attached hereto shall be deemed to be attached as Annex I to the Credit Agreement.

 

Section 3.                                            Redetermination of Borrowing Base .  The Lenders hereby agree that for the period from and including the Second Amendment Effective Date, but until the next Scheduled Redetermination Effective Date, the next Interim Redetermination Date or the next adjustment to the Borrowing Base under Section 2.08(e) of the Credit Agreement or Section 8.13(c) of the Credit Agreement, whichever occurs first, the amount of the Borrowing Base shall be increased from $140,000,000 to $200,000,000, which redetermination of the Borrowing Base shall constitute the October 1, 2016 Scheduled Redetermination of the Borrowing Base.  This Section 3 constitutes the New Borrowing Base Notice for the October 1, 2016 Scheduled Redetermination of the Borrowing Base.

 

8



 

Section 4.                                            Conditions Precedent .  The effectiveness of this Second Amendment is subject to the following:

 

4.1                                The Administrative Agent shall have received counterparts of this Second Amendment from the Credit Parties and each of the Lenders.

 

4.2                                The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Second Amendment Effective Date including, without limitation, the Second Amendment Upfront Fees referred to in Section 4.3 below.

 

4.3                                The Administrative Agent shall have received, for the account of each of the Second Amendment Increasing Lenders (as defined below) party to this Second Amendment (including, without limitation, JPMorgan Chase Bank, N.A.), upfront fees (the “ Second Amendment Upfront Fees ”) in an aggregate amount for each such Second Amendment Increasing Lender equal to 45 basis points (0.45%) of the amount of such Second Amendment Increasing Lender’s Second Amendment Increased Commitment (as defined below).  As used herein, “ Second Amendment Increasing Lender ” means each Lender whose Revolving Credit Commitment after giving effect to the increase to the Borrowing Base pursuant to Section 3 of this Second Amendment exceeds such Lender’s Revolving Credit Commitment (including if such Revolving Credit Commitment was zero), if any, that was in effect immediately prior to giving effect to the increase to the Borrowing Base pursuant to Section 3 of this Second Amendment, and “ Second Amendment Increased Commitment ” means the amount of such excess.

 

4.4                                (a) The Borrower will have received the direct or indirect proceeds from the Silver Run Equity Issuance made, on or prior to the Second Amendment Effective Date, in cash by Silver Run, in an amount sufficient to repay the Term Loans and the aggregate principal amount of all outstanding Revolving Loans in full, (b) the Term Loans and all such outstanding Revolving Loans shall have been repaid, or shall concurrently be repaid, with the closing of the Second Amendment Transactions on the Second Amendment Effective Date and (c) after giving effect to the Second Amendment Transactions on the Second Amendment Effective Date, the Borrower shall have no less than $100,000,000 of unencumbered cash on its balance sheet.

 

4.5                                The Silver Run Acquisition shall have been consummated, or shall concurrently be consummated, on the Second Amendment Effective Date pursuant to the terms of the Acquisition Agreement.

 

4.6                                The Administrative Agent shall be reasonably satisfied that the Security Instruments create first priority, perfected Liens (subject only to Excepted Liens) on at least 85% of the total value of the Proved Oil and Gas Properties evaluated in the most recently delivered Reserve Report.

 

4.7                                The Administrative Agent shall have received one or more certificates of the Secretary or an Assistant Secretary of the Borrower and each Guarantor setting forth (a) resolutions of its board of directors (or comparable governing body) with respect to the authorization of the Borrower or such Guarantor to execute and deliver the Second Amendment and to enter into the transactions contemplated herein and in the Loan Documents, (b) the articles or certificate of incorporation and bylaws (or comparable organizational documents for any

 

9



 

Credit Parties that are not corporations) of the Borrower and such Guarantor, certified as being true and complete (or, alternatively with respect to this clause (b), a certification that there have been no changes to the organizational documents most recently delivered and certified to under the Credit Agreement), (c) the officers of the Borrower or such Guarantor (i) who are authorized to sign the Loan Documents to which the Borrower or such Guarantor is a party and (ii) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with the Credit Agreement (as amended hereby) and the transactions contemplated thereby and (d) specimen signatures of such authorized officers.  The Administrative Agent and the Lenders may conclusively rely on such certificates until the Administrative Agent receives notice in writing from the Borrower to the contrary.

 

4.8                                The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying (a) as to the foregoing Sections 4.4(c)  and 4.5 and (b) that attached thereto is a true and correct copy of the Acquisition Agreement and all amendments, supplements or modifications thereto.

 

4.9                                The Administrative Agent shall have received such other documents as the Administrative Agent or counsel to the Administrative Agent may reasonably request.

 

Section 5.                                            Miscellaneous .

 

5.1                                Confirmation and Effect .  The provisions of the Credit Agreement (as amended by this Second Amendment) shall remain in full force and effect in accordance with its terms following the effectiveness of this Second Amendment, and this Second Amendment shall not constitute a waiver of any provision of the Credit Agreement or any other Loan Document, except as expressly provided for herein.  Each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof’, “herein”, or words of like import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference to the Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Credit Agreement shall mean and be a reference to the Credit Agreement as amended hereby.

 

5.2                                Ratification and Affirmation of Credit Parties .  Each of the Credit Parties hereby expressly (a) acknowledges the terms of this Second Amendment, (b) ratifies and affirms its obligations under the Credit Agreement, the Guaranty Agreement and the other Loan Documents to which it is a party, (c) acknowledges, renews and extends its continued liability under the Credit Agreement, the Guaranty Agreement and the other Loan Documents to which it is a party, (d) agrees that its guarantee under the Guaranty Agreement and the other Loan Documents to which it is a party remains in full force and effect with respect to the Indebtedness as amended hereby, (e) represents and warrants to the Lenders and the Administrative Agent that each representation and warranty of such Credit Party contained in the Credit Agreement, the Guaranty Agreement and the other Loan Documents to which it is a party is true and correct in all material respects as of the date hereof and after giving effect to the amendments set forth in Section 2 hereof except (i) to the extent any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the date hereof, such representations and warranties shall continue to be true and correct as of such specified earlier date, and (ii) to the

 

10



 

extent that any such representation and warranty is expressly qualified by materiality or by reference to Material Adverse Effect, such representation and warranty (as so qualified) shall continue to be true and correct in all respects, (f) represents and warrants to the Lenders and the Administrative Agent that the execution, delivery and performance by such Credit Party of this Second Amendment are within such Credit Party’s corporate, limited partnership or limited liability company powers (as applicable), have been duly authorized by all necessary action and that this Second Amendment constitutes the valid and binding obligation of such Credit Party enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor’s rights generally, and (g) represents and warrants to the Lenders and the Administrative Agent that, after giving effect to this Second Amendment, no Borrowing Base Deficiency, Default or Event of Default exists.

 

5.3                                Counterparts .  This Second Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of this Second Amendment by facsimile or electronic (e.g. pdf) transmission shall be effective as delivery of a manually executed original counterpart hereof.

 

5.4                                No Oral Agreement .  THIS WRITTEN SECOND AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES THAT MODIFY THE AGREEMENTS OF THE PARTIES IN THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

5.5                                Governing Law .  THIS SECOND AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

5.6                                Payment of Expenses .  The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with this Second Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent.

 

5.7                                Severability .  Any provision of this Second Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

5.8                                Successors and Assigns .  This Second Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

[Signature Pages Follow.]

 

11



 

The parties hereto have caused this Second Amendment to be duly executed as of the day and year first above written.

 

BORROWER:

CENTENNIAL RESOURCE PRODUCTION, LLC , a Delaware limited liability company

 

 

 

 

 

 

By:

/s/ George S. Glyphis

 

 

George S. Glyphis

 

 

Vice President and Chief Financial Officer

 

SIGNATURE PAGE TO SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

CENTENNIAL RESOURCE PRODUCTION, LLC

 



 

GUARANTORS:

ATLANTIC EXPLORATION, LLC , a Delaware limited liability company

 

 

 

 

 

 

By:

/s/ George S. Glyphis

 

 

George S. Glyphis

 

 

Vice President and Chief Financial Officer

 

 

 

CENTENNIAL RESOURCE MANAGEMENT, LLC , a Delaware limited liability company

 

 

 

 

 

 

 

By:

/s/ Ward Polzin

 

 

Ward Polzin

 

 

Chief Executive Officer

 

SIGNATURE PAGE TO SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

CENTENNIAL RESOURCE PRODUCTION, LLC

 



 

 

JPMORGAN CHASE BANK, N.A. , as Administrative Agent and a Lender

 

 

 

 

 

 

By:

/s/ Ryan Fuessel

 

Name:

Ryan Fuessel

 

Title:

Authorized Officer

 

SIGNATURE PAGE TO SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

CENTENNIAL RESOURCE PRODUCTION, LLC

 



 

 

WELLS FARGO BANK, N.A. , as a Lender

 

 

 

 

 

 

 

By:

/s/ Brad Elliott

 

Name:

Brad Elliott

 

Title:

Vice President

 

SIGNATURE PAGE TO SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

CENTENNIAL RESOURCE PRODUCTION, LLC

 



 

 

COMERICA BANK , as a Lender

 

 

 

 

 

 

 

By:

/s/ Garrett R. Merrell

 

Name:

Garrett R. Merrell

 

Title:

Relationship Manager

 

SIGNATURE PAGE TO SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

CENTENNIAL RESOURCE PRODUCTION, LLC

 



 

 

BMO HARRIS BANK, N.A. , as a Lender

 

 

 

 

 

 

 

By:

/s/ Matthew Davis

 

Name:

Matthew Davis

 

Title:

Vice President

 

SIGNATURE PAGE TO SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

CENTENNIAL RESOURCE PRODUCTION, LLC

 



 

 

CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK BRANCH , as a Lender

 

 

 

 

 

 

 

By:

/s/ Daria Mahoney

 

Name:

Daria Mahoney

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

By:

/s/ Trudy Nelson

 

Name:

Trudy Nelson

 

Title:

Authorized Signatory

 

SIGNATURE PAGE TO SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

CENTENNIAL RESOURCE PRODUCTION, LLC

 



 

 

U.S. BANK NATIONAL ASSOCIATION , as a Lender

 

 

 

 

 

 

 

By:

/s/ Benjamin J. Leonard

 

Name:

Benjamin J. Leonard

 

Title:

Vice President

 

SIGNATURE PAGE TO SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

CENTENNIAL RESOURCE PRODUCTION, LLC

 



 

ANNEX I

ALLOCATION OF MAXIMUM REVOLVING CREDIT AMOUNTS

 

Name of Lender

 

Applicable Revolving
Credit Percentage

 

Maximum Revolving Credit
Amount

 

JPMorgan Chase Bank, N.A.

 

20.23809524

%

$

101,190,476.22

 

Wells Fargo Bank, N.A.

 

20.23809524

%

$

101,190,476.22

 

Comerica Bank

 

20.23809524

%

$

101,190,476.21

 

BMO Harris Bank, N.A.

 

13.09523809

%

$

65,476,190.45

 

Canadian Imperial Bank of Commerce, New York Branch

 

13.09523809

%

$

65,476,190.45

 

U.S. Bank National Association

 

13.09523809

%

$

65,476,190.45

 

TOTAL

 

100.00000000

%

$

500,000,000.00

 

 


Exhibit 10.5

 

Execution Version

 

 

 

CENTENNIAL RESOURCE PRODUCTION, LLC

 

FIFTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT

 

Dated as of October 11, 2016

 


 

THE COMPANY INTERESTS REPRESENTED BY THIS FIFTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH COMPANY INTERESTS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.

 

 

 

1



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

Article I. DEFINITIONS

2

 

 

 

Article II. ORGANIZATIONAL MATTERS

14

Section 2.01

Formation of Company

14

Section 2.02

Fifth Amended and Restated Limited Liability Company Agreement

14

Section 2.03

Name

14

Section 2.04

Purpose

14

Section 2.05

Principal Office; Registered Office

14

Section 2.06

Term

15

Section 2.07

No State-Law Partnership

15

 

 

 

Article III. MEMBERS; UNITS; CAPITALIZATION

15

Section 3.01

Members

15

Section 3.02

Units

15

Section 3.03

Recapitalization; the Corporation’s Capital Contribution; the Corporation’s Purchase of Common Units

16

Section 3.04

Authorization and Issuance of Additional Units

16

Section 3.05

Repurchases or Redemptions

18

Section 3.06

Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units

18

Section 3.07

Negative Capital Accounts

19

Section 3.08

No Withdrawal

19

Section 3.09

Loans From Members

19

Section 3.10

Tax Treatment of Corporate Stock Option Plans and Equity Plans

19

Section 3.11

Dividend Reinvestment Plan, Cash Option Purchase Plan, Stock Incentive Plan or Other Plan

21

 

 

 

Article IV. DISTRIBUTIONS

21

Section 4.01

Distributions

21

Section 4.02

Restricted Distributions

22

 

 

 

Article V. CAPITAL ACCOUNTS; ALLOCATIONS; TAX MATTERS

22

Section 5.01

Capital Accounts

22

Section 5.02

Allocations

23

Section 5.03

Regulatory and Special Allocations

24

Section 5.04

Tax Allocations

25

Section 5.05

Withholding; Indemnification and Reimbursement for Payments on Behalf of a Member

27

 

 

 

Article VI. MANAGEMENT

28

Section 6.01

Authority of Manager

28

Section 6.02

Actions of the Manager

29

Section 6.03

Resignation; No Removal

29

 

ii



 

Section 6.04

Vacancies

29

Section 6.05

Transactions Between Company and Manager

29

Section 6.06

Reimbursement for Expenses

29

Section 6.07

Delegation of Authority

30

Section 6.08

Limitation of Liability of Manager

30

Section 6.09

Investment Company Act

31

Section 6.10

Outside Activities of the Manager

31

Section 6.11

Standard of Care

31

 

 

 

Article VII. RIGHTS AND OBLIGATIONS OF MEMBERS

32

Section 7.01

Limitation of Liability and Duties of Members; Investment Opportunities

32

Section 7.02

Lack of Authority

33

Section 7.03

No Right of Partition

33

Section 7.04

Indemnification

33

Section 7.05

Members Right to Act

34

Section 7.06

Inspection Rights

35

 

 

 

Article VIII. BOOKS, RECORDS, ACCOUNTING AND REPORTS, AFFIRMATIVE COVENANTS

36

Section 8.01

Records and Accounting

36

Section 8.02

Fiscal Year

36

Section 8.03

Reports

36

 

 

 

Article IX. TAX MATTERS

36

Section 9.01

Preparation of Tax Returns

36

Section 9.02

Tax Elections

37

Section 9.03

Tax Controversies

37

 

 

 

Article X. RESTRICTIONS ON TRANSFER OF UNITS; PREEMPTIVE RIGHTS

38

Section 10.01

Transfers by Members

38

Section 10.02

Permitted Transfers

38

Section 10.03

Restricted Units Legend

39

Section 10.04

Transfer

39

Section 10.05

Assignee’s Rights

40

Section 10.06

Assignor’s Rights and Obligations

40

Section 10.07

Overriding Provisions

40

 

 

 

Article XI. REDEMPTION AND EXCHANGE RIGHTS

41

Section 11.01

Redemption Right of a Member

41

Section 11.02

Contribution of the Corporation

45

Section 11.03

Exchange Right of the Corporation

45

Section 11.04

Reservation of Shares of Class A Common Stock; Listing; Certificate of the Corporation

46

Section 11.05

Effect of Exercise of Redemption or Exchange Right

46

Section 11.06

Tax Treatment

46

 

iii



 

Article XII. ADMISSION OF MEMBERS

47

Section 12.01

Substituted Members

47

Section 12.02

Additional Members

47

 

 

 

Article XIII. WITHDRAWAL AND RESIGNATION; TERMINATION OF RIGHTS

47

Section 13.01

Withdrawal and Resignation of Members

47

 

 

 

Article XIV. DISSOLUTION AND LIQUIDATION

47

Section 14.01

Dissolution

47

Section 14.02

Liquidation and Termination

48

Section 14.03

Deferment; Distribution in Kind

48

Section 14.04

Cancellation of Certificate

49

Section 14.05

Reasonable Time for Winding Up

49

Section 14.06

Return of Capital

49

 

 

 

Article XV. VALUATION

49

Section 15.01

Determination

49

Section 15.02

Dispute Resolution

49

 

 

 

Article XVI. GENERAL PROVISIONS

50

Section 16.01

Power of Attorney

50

Section 16.02

Confidentiality

51

Section 16.03

Amendments

51

Section 16.04

Title to Company Assets

52

Section 16.05

Addresses and Notices

52

Section 16.06

Binding Effect; Intended Beneficiaries

52

Section 16.07

Creditors

52

Section 16.08

Waiver

53

Section 16.09

Counterparts

53

Section 16.10

Applicable Law

53

Section 16.11

Severability

53

Section 16.12

Further Action

53

Section 16.13

Delivery by Electronic Transmission

53

Section 16.14

Right of Offset

53

Section 16.15

Effectiveness

54

Section 16.16

Entire Agreement

54

Section 16.17

Remedies

54

Section 16.18

Descriptive Headings; Interpretation

54

 

Schedules

 

 

 

 

 

Schedule 1

Initial Schedule of Members

 

 

 

Exhibits

 

 

 

 

 

Exhibit A

Form of Joinder Agreement

 

iv



 

CENTENNIAL RESOURCE PRODUCTION, LLC

 

FIFTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT

 

This FIFTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “ Agreement ”), dated as of October 11, 2016, is entered into by and among Centennial Resource Production, LLC, a Delaware limited liability company (the “ Company ”), and its Members (as defined herein).

 

WHEREAS, the Company was formed as a limited liability company pursuant to and in accordance with the Delaware Act (as defined herein) by the filing of the Certificate (as defined herein) with the Secretary of State of the State of Delaware pursuant to Section 18-201 of the Delaware Act on August 10, 2012;

 

WHEREAS, the Company entered into a Limited Liability Company Agreement of the Company, dated as of August 30, 2012 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding December 17, 2012, together with all schedules, exhibits and annexes thereto, the “ Initial LLC Agreement ”), with the members of the Company party thereto;

 

WHEREAS, the Company entered into an Amended and Restated Limited Liability Company Agreement of the Company, dated as of December 17, 2012 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding May 16, 2013, together with all schedules, exhibits and annexes thereto, the “ First A&R LLC Agreement ”), with the members of the Company party thereto;

 

WHEREAS, the Company entered into a Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of May 16, 2013 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding October 15, 2014, together with all schedules, exhibits and annexes thereto, the “ Second A&R LLC Agreement ”), with the members of the Company party thereto;

 

WHEREAS, the Company entered into a Third Amended and Restated Limited Liability Company Agreement of the Company, dated as of October 15, 2014 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding April 15, 2015, together with all schedules, exhibits and annexes thereto, the “ Third A&R LLC Agreement ”), with the members of the Company party thereto;

 

WHEREAS, the Company entered into a Fourth Amended and Restated Limited Liability Company Agreement of the Company, dated as of April 15, 2015 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding the date hereof, together with all schedules, exhibits and annexes thereto, the “ Fourth A&R LLC Agreement ”), with Centennial Resource Development, LLC, a Delaware limited liability company (“ CRD ”), NGP Centennial Follow-On LLC, a Delaware limited liability company

 

1



 

(“ NGP Follow-On ”), and Celero Energy Company, LP, a Delaware limited partnership (“ Celero ” and, together with CRD and NGP Follow-On, the “ Original Members ”), in their respective capacity as members of the Company;

 

WHEREAS, immediately prior to the Effective Time, the Original Members held Class A membership interests in the Company (the “ Original Class A Interests ”) and Class B membership interests in the Company (the “ Original Class B Interests ” and, together with the Original Class A Interests, the “ Original Interests ”);

 

WHEREAS, the Company and the Original Members desire to amend and restate the Fourth A&R LLC Agreement as of the Effective Time (as defined herein) to reflect (a) the Recapitalization (as defined herein) and the consummation of the transactions contemplated by the Contribution Agreement (as defined herein), (b) the Common Unit Purchase (as defined herein) and the addition of Centennial Resource Development, Inc. (f/k/a Silver Run Acquisition Corporation), a Delaware corporation (the “ Corporation ”), as a Member, (c) the Corporation’s designation as the Manager (as defined herein), and (d) the rights and obligations of the Members that are enumerated and agreed upon in the terms of this Agreement effective as of the Effective Time, at which time the Fourth A&R LLC Agreement shall be superseded entirely by this Agreement; and

 

WHEREAS, in connection with the Recapitalization and as of the Effective Time, the Original Interests of each Original Member will be canceled and Common Units (as defined herein) will be issued as contemplated by this Agreement;

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Members, intending to be legally bound, hereby agree as follows:

 

ARTICLE I.
DEFINITIONS

 

The following definitions shall be applied to the terms used in this Agreement for all purposes, unless otherwise clearly indicated to the contrary.

 

Additional Member ” has the meaning set forth in Section 12.02 .

 

Adjusted Capital Account Deficit ” means with respect to the Capital Account of any Member as of the end of any Taxable Year, the amount by which the balance in such Capital Account is less than zero.  For this purpose, such Member’s Capital Account balance shall be:

 

(a)                                  reduced for any items described in Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4), (5), and (6); and

 

(b)                                  increased for any amount such Member is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to minimum gain).

 

2



 

Admission Date ” has the meaning set forth in Section 10.06 .

 

Affiliate ” (and, with a correlative meaning, “ Affiliated ”) means, with respect to a specified Person, each other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified.  As used in this definition and the definition of Majority Member, “control” (including with correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities or by contract or other agreement).

 

Agreement ” has the meaning set forth in the preamble to this Agreement.

 

Appraisers ” has the meaning set forth in Section 15.02 .

 

Assignee ” means a Person to whom a Company Interest has been transferred but who has not become a Member pursuant to Article XII .

 

Base Rate ” means, on any date, a variable rate per annum equal to the rate of interest most recently published by The Wall Street Journal as the “prime rate” at large U.S. money center banks.

 

Black-Out Period ” means any “black-out” or similar period under the Corporation’s policies covering trading in the Corporation’s securities to which the applicable Redeemed Member is subject, which period restricts the ability of such Redeemed Member to immediately resell shares of Class A Common Stock to be delivered to such Redeemed Member in connection with a Share Settlement.

 

Book Value ” means, with respect to any Company property, the Company’s adjusted basis for U.S. federal income tax purposes, adjusted from time to time to reflect the adjustments required or permitted by Treasury Regulations Sections 1.704-1(b)(2)(iv)(d)-(g) and 1.704-1(b)(2)(iv)(s); provided , that if any noncompensatory options (including the Warrants) are outstanding upon the occurrence of any adjustment described herein, the Company shall adjust the Book Values of its properties in accordance with Treasury Regulations Sections 1.704-1(b)(2)(iv)(f)(1) and 1.704-1(b)(2)(iv)(h)(2).

 

Business Day ” means any day other than a Saturday or a Sunday or a day on which banks located in New York City, New York generally are authorized or required by Law to close.

 

Capital Account ” means the capital account maintained for a Member in accordance with Section 5.01 .

 

Capital Contribution ” means, with respect to any Member, the amount of any cash, cash equivalents, promissory obligations or the Fair Market Value of other property that such Member contributes (or is deemed to contribute) to the Company pursuant to Article III hereof.

 

Cash Settlement ” means immediately available funds in U.S. dollars in an amount equal to the product of (a) the Share Settlement and (b) the Common Unit Redemption Price.

 

3



 

Celero ” has the meaning set forth in the recitals to this Agreement.

 

Certificate ” means the Company’s Certificate of Formation as filed with the Secretary of State of Delaware.

 

Change of Control Transaction ” means (a) a sale of all or substantially all of the Company’s assets determined on a consolidated basis, (b) a sale of a majority of the Company’s outstanding Units (other than (i) to the Corporation or (ii) in connection with a Redemption or Direct Exchange in accordance with Article XI ) or (c) a sale of a majority of the outstanding voting securities of any Material Subsidiary of the Company; in any such case, whether by merger, recapitalization, consolidation, reorganization, combination or otherwise; provided, however , that neither (w) a transaction solely between the Company or any of its Subsidiaries, on the one hand, and the Company or any of its Subsidiaries, on the other hand, nor (x) a transaction solely for the purpose of changing the jurisdiction of domicile of the Company, nor (y) a transaction solely for the purpose of changing the form of entity of the Company, nor (z) a sale of a majority of the outstanding shares of Class A Common Stock, whether by merger, recapitalization, consolidation, reorganization, combination or otherwise, shall in each case of clauses (w), (x), (y) and (z) constitute a Change of Control Transaction.

 

Class A Common Stock ” means the Class A Common Stock, par value $0.0001 per share, of the Corporation.

 

Class A Warrants ” has the meaning set forth in Section 3.03(b) .

 

Class B Common Stock ” means the Class B Common Stock, par value $0.0001 per share, of the Corporation.

 

Class C Common Stock ” means the Class C Common Stock, par value $0.0001 per share, of the Corporation.

 

Code ” means the United States Internal Revenue Code of 1986, as amended.

 

Common Stock ” means all classes and series of common stock of the Corporation, including the Class A Common Stock and the Class C Common Stock.

 

Common Unit ” means a Unit representing a fractional part of the Company Interests of the Members and having the rights and obligations specified with respect to the Common Units in this Agreement.

 

Common Unit Purchase ” has the meaning set forth in Section 3.03(c) .

 

Common Unit Redemption Price ” means the average of the volume-weighted closing price for a share of Class A Common Stock on the principal U.S. securities exchange or automated or electronic quotation system on which the Class A Common Stock trades, as reported by Bloomberg, L.P., or its successor, for each of the five (5) consecutive full Trading Days ending on and including the last full Trading Day immediately prior to the Redemption Notice Date, subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends or similar events affecting the Class A Common Stock.  If the Class A Common

 

4



 

Stock no longer trades on a securities exchange or automated or electronic quotation system, then the Common Unit Redemption Price shall be the fair market value of one share of Class A Common Stock, as determined by a majority of the Independent Directors in good faith, that would be obtained in an arms-length transaction between an informed and willing buyer and an informed and willing seller, with neither party having any compulsion to buy or sell, and without regard to the particular circumstances of the buyer or seller.

 

Company ” has the meaning set forth in the preamble to this Agreement.

 

Company Interest ” means the interest of a Member in Profits, Losses and Distributions.

 

Company Minimum Gain ” means “partnership minimum gain” determined pursuant to Treasury Regulations Section 1.704-2(d).

 

Contribution Agreement ” means that certain Contribution Agreement, dated as of July 6, 2016, by and among the Original Members, the Company and New Centennial (as may be amended or supplemented from time to time).

 

Contribution Closing ” means the “Closing” as defined in Section 2.2 of the Contribution Agreement.

 

Corporate Board ” means the Board of Directors of the Corporation.

 

Corporation ” has the meaning set forth in the recitals to this Agreement, together with its successors and assigns.

 

CRD ” has the meaning set forth in the recitals to this Agreement.

 

Credit Agreement ” means that certain Amended and Restated Credit Agreement, dated as of October 15, 2014, by and among the Company, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (as amended by the First Amendment to Amended and Restated Credit Agreement, dated as of May 6, 2015, among the Company, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and guarantors party thereto, and the Second Amendment, dated as of October 11, 2016, among the Company, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and guarantors party thereto and as may be subsequently amended, restated, supplemented or otherwise modified from time to time and including any one or more refinancings or replacements thereof, in whole or in part, with any other debt facility or debt obligation).

 

Delaware Act ” means the Delaware Limited Liability Company Act, 6 Del.L. § 18-101, et seq. , as it may be amended from time to time, and any successor thereto.

 

Depletable Property ” means each separate oil and gas property as defined in Code Section 614.

 

Depreciation ” means, for each Taxable Year or other Fiscal Period, an amount equal to the depreciation, amortization or other cost recovery deduction (excluding depletion) allowable

 

5



 

for U.S. federal income tax purposes with respect to property for such Taxable Year or other Fiscal Period, except that (a) with respect to any such property the Book Value of which differs from its adjusted tax basis for U.S. federal income tax purposes and which difference is being eliminated by use of the “remedial method” pursuant to Treasury Regulations Section 1.704-3(d), Depreciation for such Taxable Year or other Fiscal Period shall be the amount of book basis recovered for such Taxable Year or other Fiscal Period under the rules prescribed by Treasury Regulations Section 1.704-3(d)(2), and (b) with respect to any other such property, the Book Value of which differs from its adjusted tax basis at the beginning of such Taxable Year or other Fiscal Period, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such Taxable Year or other Fiscal Period bears to such beginning adjusted tax basis; provided , however , that if the adjusted tax basis of any property at the beginning of such Taxable Year or other Fiscal Period is zero dollars ($0.00), Depreciation with respect to such property shall be determined with reference to such beginning Book Value using any reasonable method selected by the Manager.

 

Direct Exchange ” has the meaning set forth in Section 11.03(a) .

 

Discount ” has the meaning set forth in Section 6.06 .

 

Distributable Cash ” shall mean, as of any relevant date on which a determination is being made by the Manager regarding a potential distribution pursuant to Section 4.01(a) , the amount of cash that could be distributed by the Company for such purposes in accordance with the Credit Agreement (and without otherwise violating any applicable provisions of the Credit Agreement).

 

Distribution ” (and, with a correlative meaning, “ Distribute ”) means each distribution made by the Company to a Member with respect to such Member’s Units, whether in cash, property or securities of the Company and whether by liquidating distribution or otherwise; provided, however , that none of the following shall be a Distribution: (a) any recapitalization that does not result in the distribution of cash or property to Members or any exchange of securities of the Company, and any subdivision (by Unit split or otherwise) or any combination (by reverse Unit split or otherwise) of any outstanding Units, (b) any other payment made by the Company to a Member in redemption of all or a portion of such Member’s Units or (c) any amounts payable pursuant to Section 6.06 .

 

Effective Time ” has the meaning set forth in Section 16.15 .

 

Equity Plan ” means any stock or equity purchase plan, restricted stock or equity plan or other similar equity compensation plan now or hereafter adopted by the Company or the Corporation.

 

Equity Securities ” means (i) with respect to the Company or any of its Subsidiaries, (a) Units or other equity interests in the Company or any Subsidiary of the Company (including other classes or groups thereof having such relative rights, powers and duties as may from time to time be established by the Manager pursuant to the provisions of this Agreement, including rights, powers and/or duties senior to existing classes and groups of Units and other equity

 

6



 

interests in the Company or any Subsidiary of the Company), (b) obligations, evidences of indebtedness or other securities or interests convertible or exchangeable into Units or other equity interests in the Company or any Subsidiary of the Company, and (c) warrants, options or other rights to purchase or otherwise acquire Units or other equity interests in the Company or any Subsidiary of the Company and (ii) with respect to the Corporation, any and all shares, interests, participation or other equivalents (however designated) of corporate stock, including all common stock and preferred stock, or warrants, options or other rights to acquire any of the foregoing, including any debt instrument convertible or exchangeable into any of the foregoing.

 

Event of Withdrawal ” means the expulsion, bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the Company.  “Event of Withdrawal” shall not include an event that does not terminate the existence of such Member under applicable state law (or, in the case of a trust that is a Member, does not terminate the trusteeship of the fiduciaries under such trust with respect to all the Company Interests of such trust that is a Member).

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

Exchange Election Notice ” has the meaning set forth in Section 11.03(b) .

 

Fair Market Value ” means, with respect to any asset, its fair market value determined according to Article XV .

 

First A&R LLC Agreement ” has the meaning set forth in the recitals to this Agreement.

 

Fiscal Period ” means any interim accounting period within a Taxable Year established by the Company and which is permitted or required by Section 706 of the Code.

 

Fiscal Year ” means the Company’s annual accounting period established pursuant to Section 8.02 .

 

Fourth A&R LLC Agreement ” has the meaning set forth in the recitals to this Agreement.

 

Governmental Entity ” means (a) the United States of America, (b) any other sovereign nation, (c) any state, province, district, territory or other political subdivision of (a) or (b) of this definition, including any county, municipal or other local subdivision of the foregoing, or (d) any entity exercising executive, legislative, judicial, regulatory or administrative functions of government on behalf of (a), (b) or (c) of this definition.

 

Indemnified Person ” has the meaning set forth in Section 7.04(a) .

 

Independent Directors ” means the members of the Corporate Board who are “independent” under the standards set forth in Rule 10A-3 promulgated under the Securities Act and the corresponding rules of the applicable exchange on which the Class A Common Stock is traded or quoted.

 

Initial LLC Agreement ” has the meaning set forth in the recitals to this Agreement.

 

7



 

Investment Company Act ” means the U.S. Investment Company Act of 1940, as amended from time to time.

 

Joinder ” means a joinder to this Agreement, in form and substance substantially similar to Exhibit A to this Agreement.

 

Law ” means all laws, statutes, ordinances, rules and regulations of the United States, any foreign country and each state, commonwealth, city, county, municipality, regulatory body, agency or other political subdivision thereof.

 

LLC Employee ” means an employee of, or other service provider to, the Company or any Subsidiary, in each case acting in such capacity.

 

Losses ” means items of Company loss or deduction determined according to Section 5.01(b) .

 

Majority Members ” means the Members (which may include the Manager) holding a majority of the Units then outstanding; provided that, if as of any date of determination, a majority of the Units are then held by the Manager or any Affiliates controlled by the Manager, then “Majority Members” shall mean the Manager together with Members holding a majority of the Units (excluding Units held by the Manager and its controlled Affiliates) then outstanding.

 

Manager ” has the meaning set forth in Section 6.01 .

 

Manager Change of Control ” shall be deemed to have occurred if or upon:

 

(a)                                  both the stockholders of the Corporation and the Corporate Board approve, in accordance with the Corporation’s certificate of incorporation and applicable law, the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Corporation’s assets (determined on a consolidated basis), including a sale of all of the equity interests in the Company, to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than to any directly or indirectly wholly owned subsidiary of the Corporation, and such sale, lease or transfer is consummated;

 

(b)                                  both the stockholders of the Corporation and the Corporate Board approve, in accordance with the Corporation’s certificate of incorporation and applicable law, a merger or consolidation of the Corporation with any other Person, other than a merger or consolidation which would result in the Voting Securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50.01% of the total voting power represented by the Voting Securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, and such merger or consolidation is consummated; or

 

(c)                                   the acquisition, directly or indirectly, by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than (a) a trustee or other

 

8



 

fiduciary holding securities under an employee benefit plan of the Corporation, or (b) a corporation or other entity owned, directly or indirectly, by all of the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of at least 50.01% of the aggregate voting power of the Voting Securities of the Corporation; provided, that the Corporate Board recommends or otherwise approves or determines that such acquisition is in the best interests of the Corporation and its stockholders.

 

Market Price ” means, with respect to a share of Class A Common Stock as of a specified date, the last sale price per share of Class A Common Stock, regular way, or if no such sale took place on such day, the average of the closing bid and asked prices per share of Class A Common Stock, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Stock Exchange or, if the Class A Common Stock is not listed or admitted to trading on the Stock Exchange, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Class A Common Stock is listed or admitted to trading or, if the Class A Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if the Class A Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Class A Common Stock selected by the Corporate Board or, in the event that no trading price is available for the shares of Class A Common Stock, the fair market value of a share of Class A Common Stock, as determined in good faith by the Corporate Board.

 

Material Subsidiary ” means any direct or indirect Subsidiary of the Company that, as of any date of determination, represents more than (a) 50% of the consolidated net tangible assets of the Company or (b) 50% of the consolidated net income of the Company before interest, taxes, depreciation and amortization (calculated in a manner substantially consistent with the definition of “Consolidated Net Income” and “EBITDAX” or similar definition(s) appearing in the Credit Agreement, including such additional adjustments that are permitted to be made to such measure as described in “EBITDAX” or a similar definition appearing in the Credit Agreement).

 

Member ” means, as of any date of determination, (a) each of the members named on the Schedule of Members and (b) any Person admitted to the Company as a Substituted Member or Additional Member in accordance with Article XII , but in each case only so long as such Person is shown on the Company’s books and records as the owner of one or more Units.

 

Member Minimum Gain ” means “partner nonrecourse debt minimum gain” as defined in Treasury Regulations Section 1.704-2(i)(3).

 

New Centennial ” means New Centennial, LLC, a Delaware limited liability company.

 

NGP Follow-On ” has the meaning set forth in the recitals to this Agreement.

 

9



 

Officer ” has the meaning set forth in Section 6.01(b) .

 

Optionee ” means a Person to whom a stock option is granted under any Stock Option Plan.

 

Original Class A Interests ” has the meaning set forth in the recitals to this Agreement.

 

Original Class B Interests ” has the meaning set forth in the recitals to this Agreement.

 

Original Interests ” has the meaning set forth in the recitals to this Agreement.

 

Original Members ” has the meaning set forth in the recitals to this Agreement.

 

Other Agreements ” has the meaning set forth in Section 10.04 .

 

Other Business ” has the meaning given to such term in Section 7.01(d)(ii) .

 

Partnership Representative ” has the meaning set forth in Section 9.03(b) .

 

Percentage Interest ” means, with respect to a Member at a particular time, such Member’s percentage interest in the Company determined by dividing such Member’s Units by the total Units of all Members at such time.  The Percentage Interest of each member shall be calculated to the 4 th  decimal place.

 

Permitted Transfer ” has the meaning set forth in Section 10.02 .

 

Person ” means an individual or any corporation, partnership, limited liability company, trust, unincorporated organization, association, joint venture or any other organization or entity, whether or not a legal entity.

 

Pro rata ,” “ proportional ,” “ in proportion to ,” and other similar terms, means, with respect to the holder of Units, pro rata based upon the number of such Units held by such holder as compared to the total number of Units outstanding.

 

Profits ” means items of Company income and gain determined according to Section 5.01(b) .

 

Recapitalization ” has the meaning set forth in Section 3.03(a) .

 

Reclassification Event ” means any of the following: (i) any reclassification or recapitalization of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination or any transaction subject to Section 3.04 ), (ii) any merger, consolidation or other combination involving the Corporation, or (iii) any sale, conveyance, lease, or other disposal of all or substantially all the properties and assets of the Corporation to any other Person, in each of clauses (i), (ii) or (iii), as a result of which holders of Common Stock shall be entitled to receive cash, securities or other property for their shares of Common Stock.

 

Redeemed Units ” has the meaning set forth in Section 11.01(a) .

 

10



 

Redeemed Member ” has the meaning set forth in Section 11.01(a) .

 

Redemption ” has the meaning set forth in Section 11.01(a) .

 

Redemption Date ” has the meaning set forth in Section 11.01(a) .

 

Redemption Notice ” has the meaning set forth in Section 11.01(a) .

 

Redemption Notice Date ” has the meaning set forth in Section 11.01(a) .

 

Redemption Right ” has the meaning set forth in Section 11.01(a) .

 

Registration Rights Agreement ” means that certain Registration Rights Agreement, dated as of the date hereof, by and among the Corporation, the Original Members, Riverstone Centennial Holdings, L.P. and the other parties named therein (together with any joinder thereto from time to time by any successor or assign to any party to such Agreement).

 

Related Person ” has the meaning set forth in Section 7.01(c) .

 

Relative ” means, with respect to any natural person: (a) such natural person’s spouse; (b) any lineal descendant, parent, grandparent, great grandparent or sibling or any lineal descendant of such sibling (in each case whether by blood or legal adoption); and (c) the spouse of a natural person described in clause (b) of this definition.

 

Retraction Notice ” has the meaning set forth in Section 11.01(b) .

 

Revised Partnership Audit Provisions ” shall mean Section 1101 of Title XI (Revenue Provisions Related to Tax Compliance) of the Bipartisan Budget Act of 2015, H.R. 1314, Public Law Number 114-74.

 

Schedule of Members ” has the meaning set forth in Section 3.01(b) .

 

SEC ” means the U.S. Securities and Exchange Commission, including any governmental body or agency succeeding to the functions thereof.

 

Second A&R LLC Agreement ” has the meaning set forth in the recitals to this Agreement.

 

Securities Act ” means the U.S. Securities Act of 1933, as amended, and applicable rules and regulations thereunder, and any successor to such statute, rules or regulations.  Any reference herein to a specific section, rule or regulation of the Securities Act shall be deemed to include any corresponding provisions of future Law.

 

Settlement Method Notice ” has the meaning set forth in Section 11.01(b) .

 

Share Settlement ” means a number of shares of Class A Common Stock equal to the number of Redeemed Units.

 

11



 

Simulated Basis ” means, with respect to each Depletable Property, the Book Value of such property.  For purposes of such computation, the Simulated Basis of each Depletable Property (including any additions to such Simulated Basis resulting from expenditures required to be capitalized in such Simulated Basis) shall be allocated to each Member in accordance with such Member’s relative Percentage Interest as of the time such Depletable Property (or such addition to such Simulated Basis resulting from expenditures required to be capitalized in such Simulated Basis) is acquired (or expended) by the Company, and shall be reallocated among the Members in accordance with the such Members’ Percentage Interest as determined immediately following the occurrence of an event giving rise to an adjustment to the Book Value of the Company’s Depletable Properties pursuant to the definition of Book Value. Upon a transfer by a Member of any Units, a portion of the Simulated Basis allocated to such Member shall be reallocated to the transferee in accordance with the relative Percentage Interest transferred.

 

Simulated Depletion ” means, with respect to each Depletable Property, a depletion allowance computed in accordance with U.S. federal income tax principles and in a manner specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2). For purposes of computing Simulated Depletion with respect to any Depletable Property, in no event shall such allowance, in the aggregate, exceed the Simulated Basis of such Depletable Property. If the Book Value of a Depletable Property is adjusted pursuant to the definition of Book Value during a Taxable Year or other Fiscal Period, following such adjustment Simulated Depletion shall thereafter be calculated under the foregoing provisions based upon such adjusted Book Value.

 

Simulated Gain ” means the excess, if any, of the amount realized from the sale or other disposition of a Depletable Property over the Book Value of such Depletable Property and determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2).

 

Simulated Loss ” means the excess, if any, of the Book Value of a Depletable Property over the amount realized from the sale or other disposition of such Depletable Property and determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2).

 

Sponsor Person ” has the meaning set forth in Section 7.04(d) .

 

Stock Exchange ” means the NASDAQ Capital Market.

 

Stock Option Plan ” means any stock option plan now or hereafter adopted by the Company or by the Corporation.

 

Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of the voting interests thereof are at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, references to a “Subsidiary” of the Company shall be given effect only at such times that the

 

12



 

Company has one or more Subsidiaries, and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Company.

 

Substituted Member ” means a Person that is admitted as a Member to the Company pursuant to Section 12.01 .

 

Tax Distribution Date ” has the meaning set forth in Section 4.01(b)(i) .

 

Tax Distributions ” has the meaning set forth in Section 4.01(b)(i) .

 

Tax Matters Partner ” has the meaning set forth in Section 9.03(a) .

 

Taxable Year ” means the Company’s accounting period for U.S. federal income tax purposes determined pursuant to Section 9.02 .

 

Third A&R LLC Agreement ” has the meaning set forth in the recitals to this Agreement.

 

Trading Day ” means a day on which the Stock Exchange or such other principal United States securities exchange on which the Class A Common Stock is listed or admitted to trading is open for the transaction of business (unless such trading shall have been suspended for the entire day).

 

Transfer ” (and, with a correlative meaning, “ Transferring ”) means any sale, transfer, assignment, pledge, encumbrance or other disposition of (whether directly or indirectly, whether with or without consideration and whether voluntarily or involuntarily or by operation of Law) (a) any interest (legal or beneficial) in any Equity Securities of the Company or (b) any equity or other interest (legal or beneficial) in any Member if substantially all of the assets of such Member consist solely of Units.

 

Treasury Regulations ” means the regulations promulgated under the Code and any corresponding provisions of succeeding regulations.

 

Unit ” means a Company Interest of a Member or a permitted Assignee in the Company representing a fractional part of the Company Interests of all Members and Assignees as may be established by the Manager from time to time in accordance with Section 3.02 ; provided, however , that any class or group of Units issued shall have the relative rights, powers and duties set forth in this Agreement, and the Company Interest represented by such class or group of Units shall be determined in accordance with such relative rights, powers and duties.

 

Unvested Corporate Shares ” means shares of Class A Common Stock issued pursuant to an Equity Plan that are not vested pursuant to the terms thereof or any award or similar agreement relating thereto.

 

Value ” means (a) for any Stock Option Plan, the Market Price for the trading day immediately preceding the date of exercise of a stock option under such Stock Option Plan and (b) for any Equity Plan other than a Stock Option Plan, the Market Price for the trading day immediately preceding the Vesting Date.

 

13



 

Vesting Date ” has the meaning set forth in Section 3.10(c) .

 

Voting Securities ” means any Equity Securities of the Corporation that are entitled to vote generally in matters submitted for a vote of the Corporation’s stockholders or generally in the election of the Corporate Board.

 

Warrants ” has the meaning set forth in Section 3.03(b) .

 

ARTICLE II.
ORGANIZATIONAL MATTERS

 

Section 2.01                              Formation of Company .  The Company was formed on August 10, 2012 pursuant to the provisions of the Delaware Act.

 

Section 2.02                              Fifth Amended and Restated Limited Liability Company Agreement .  The Members hereby execute this Agreement for the purpose of continuing the affairs of the Company and the conduct of its business in accordance with the provisions of the Delaware Act.  The Members hereby agree that during the term of the Company set forth in Section 2.06 the rights and obligations of the Members with respect to the Company will be determined in accordance with the terms and conditions of this Agreement and the Delaware Act.  On any matter upon which this Agreement is silent, the Delaware Act shall control.  No provision of this Agreement shall be in violation of the Delaware Act and to the extent any provision of this Agreement is in violation of the Delaware Act, such provision shall be void and of no effect to the extent of such violation without affecting the validity of the other provisions of this Agreement; provided, however , that where the Delaware Act provides that a provision of the Delaware Act shall apply “unless otherwise provided in a limited liability company agreement” or words of similar effect, the provisions of this Agreement shall in each instance control; provided further , that notwithstanding the foregoing, Section 18-210 of the Delaware Act shall not apply or be incorporated into this Agreement.

 

Section 2.03                              Name .  The name of the Company shall be “Centennial Resource Production, LLC.” The Manager in its sole discretion may change the name of the Company at any time and from time to time.  Notification of any such change shall be given to all of the Members and, to the extent practicable, to all of the holders of any Equity Securities then outstanding.  The Company’s business may be conducted under its name and/or any other name or names deemed advisable by the Manager.

 

Section 2.04                              Purpose .  The primary business and purpose of the Company shall be to engage in such activities as are permitted under the Delaware Act and determined from time to time by the Manager in accordance with the terms and conditions of this Agreement.

 

Section 2.05                              Principal Office; Registered Office .  The principal office of the Company shall be at 1000 Louisiana Street, Suite 1450, Houston, TX 77002, or such other place as the Manager may from time to time designate.  The address of the registered office of the Company in the State of Delaware shall be 1209 Orange Street, Wilmington, County of New Castle, DE 19801, and the registered agent for service of process on the Company in the State of Delaware at such registered office shall be The Corporation Trust Company.  The Manager may from time to time change the Company’s registered agent and registered office in the State of Delaware.

 

14



 

Section 2.06                              Term .  The term of the Company commenced upon the filing of the Certificate in accordance with the Delaware Act and shall continue in existence until termination and dissolution of the Company in accordance with the provisions of Article XIV .

 

Section 2.07                              No State-Law Partnership .  The Members intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member by virtue of this Agreement, for any purposes other than as set forth in the last sentence of this Section 2.07 , and neither this Agreement nor any other document entered into by the Company or any Member relating to the subject matter hereof shall be construed to suggest otherwise.  The Members intend that the Company shall be treated as a partnership for U.S. federal (and applicable state and local) income tax purposes, and that each Member and the Company shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment.

 

ARTICLE III.
MEMBERS; UNITS; CAPITALIZATION

 

Section 3.01                              Members .

 

(a)                                  Each Original Member previously was admitted as a Member and shall remain a Member of the Company upon the Effective Time.  At the Effective Time and concurrently with the Common Unit Purchase, the Corporation shall be admitted to the Company as a Member.

 

(b)                                  The Company shall maintain a schedule setting forth: (i) the name and address of each Member; (ii) the aggregate number of outstanding Units and the number and class of Units held by each Member; (iii) the aggregate amount of cash Capital Contributions that has been made by the Members with respect to their Units; and (iv) the Fair Market Value of any property other than cash contributed by the Members with respect to their Units (including, if applicable, a description and the amount of any liability assumed by the Company or to which contributed property is subject) (such schedule, the “ Schedule of Members ”).  The applicable Schedule of Members in effect as of the Effective Time (after giving effect to the Recapitalization and the Common Unit Purchase) is set forth as Schedule 1 to this Agreement.  The Schedule of Members shall be the definitive record of ownership of each Unit of the Company and all relevant information with respect to each Member.  The Company shall be entitled to recognize the exclusive right of a Person registered on its records as the owner of Units for all purposes and shall not be bound to recognize any equitable or other claim to or interest in Units on the part of any other Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the Delaware Act.

 

(c)                                   No Member shall be required or, except as approved by the Manager pursuant to Section 6.01 and in accordance with the other provisions of this Agreement, permitted to loan any money or property to the Company or borrow any money or property from the Company.

 

Section 3.02                              Units .  Interests in the Company shall be represented by Units, or such other securities of the Company, in each case as the Manager may establish in its discretion in accordance with the terms and subject to the restrictions hereof.  Immediately after the Effective Time, the Units will be comprised of a single class of Common Units.  To the extent required

 

15



 

pursuant to Section 3.04(a) , the Manager may create one or more classes or series of Common Units or preferred Units solely to the extent they are in the aggregate substantially equivalent to a class of common stock of the Corporation or class or series of preferred stock of the Corporation.

 

Section 3.03                              Recapitalization; Warrants; the Corporation’s Capital Contribution; the Corporation’s Purchase of Common Units .

 

(a)                                  Recapitalization .  Pursuant to the Contribution Agreement, at the Contribution Closing, the Original Members received certain cash distributions from the Company in partial redemption of certain Original Class A Interests and Original Class B Interests and all remaining Original Class A Interests and Original Class B Interests that were issued and outstanding and held by the Original Members prior to the execution and effectiveness of this Agreement are hereby converted into the number of Common Units set forth next to each Original Member’s name on Schedule 1 , which are hereby issued and outstanding as of the Effective Time (collectively, the “ Recapitalization ”).

 

(b)                                  Warrants.  Immediately upon the Recapitalization, and prior to giving effect to Section 3.04 , the Company shall issue to the Corporation a number of warrants exercisable for Units (the “ Warrants ”) in an amount equal to the number of warrants exercisable for shares of Class A Common Stock (the “ Class A Warrants ”) outstanding immediately prior to such issuance of Warrants pursuant to this Section 3.03(b) . For the avoidance of doubt, each Warrant shall be treated as a “noncompensatory option” within the meaning of Treasury Regulations Sections 1.721-2(f) and 1.761-3(b)(2) and not be treated as a partnership interest pursuant to Treasury Regulations Section 1.761-3(a).

 

(c)                                   The Corporation’s Common Unit Purchase .  Pursuant to the Contribution Agreement, at the Contribution Closing, the Corporation contributed to the Company cash in the aggregate amount of $1,485,999,739.31 in exchange for 163,505,000 Common Units pursuant to the Contribution Agreement (the “ Common Unit Purchase ”).  The parties hereto acknowledge and agree that the Common Unit Purchase will result in a “revaluation of partnership property” and corresponding adjustments to Capital Account balances as described in Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations.

 

Section 3.04                              Authorization and Issuance of Additional Units .

 

(a)                                  If at any time the Corporation issues a share of its Class A Common Stock or any other Equity Security of the Corporation, (i) the Company shall issue to the Corporation one Common Unit (if the Corporation issues a share of Class A Common Stock), or such other Equity Security of the Company (if the Corporation issues Equity Securities other than Class A Common Stock) corresponding to the Equity Securities issued by the Corporation, and with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Corporation and (ii) the net proceeds received by the Corporation with respect to the corresponding share of Class A Common Stock or other Equity Security, if any, shall be concurrently contributed by the Corporation to the Company as a Capital Contribution; provided , that if the Corporation issues any shares of Class A Common Stock in order to directly purchase from another Member (other than the Corporation) a number of Common Units pursuant to Section 11.03(a)  (and a

 

16



 

corresponding number of shares of Class C Common Stock), then the Company shall not issue any new Common Units in connection therewith and the Corporation shall not be required to transfer such net proceeds to the Company (it being understood that such net proceeds shall instead be transferred to such other Member as consideration for such purchase). Notwithstanding the foregoing, this Section 3.04(a)  shall not apply to (i) (A) the issuance and distribution to holders of shares of Class A Common Stock of rights to purchase Equity Securities of the Corporation under a “poison pill” or similar shareholders rights plan or (B) the issuance under the Corporation’s Equity Plans or Stock Option Plans of any warrants, options, other rights to acquire Equity Securities of the Corporation or rights or property that may be converted into or settled in Equity Securities of the Corporation, but shall in each of the foregoing cases apply to the issuance of Equity Securities of the Corporation in connection with the exercise or settlement of such rights, warrants, options or other rights or property or (ii) the issuance of Equity Securities pursuant to any Equity Plan (other than a Stock Option Plan) that are restricted, subject to forfeiture or otherwise unvested upon issuance, but shall apply on the applicable Vesting Date with respect to such Equity Securities.  Except pursuant to Article XI , (x) the Company may not issue any additional Common Units to the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary issues or sells an equal number of shares of the Corporation’s Class A Common Stock to another Person, and (y) the Company may not issue any other Equity Securities of the Company to the Corporation or any of its Subsidiaries (other than the issuance of Warrants pursuant to Section 3.03(b) ) unless substantially simultaneously the Corporation or such Subsidiary issues or sells, to another Person, an equal number of shares of a new class or series of Equity Securities of the Corporation or such Subsidiary with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Company.

 

(b)                                  The Company shall only be permitted to issue additional Units or other Equity Securities in the Company to the Persons and on the terms and conditions provided for in Section 3.02 , this Section 3.04 and Section 3.11 .

 

(c)                                   The Company shall not in any manner effect any subdivision (by equity split, equity distribution, reclassification, recapitalization or otherwise) or combination (by reverse equity split, reclassification, recapitalization or otherwise) of the outstanding Common Units unless accompanied by an identical subdivision or combination, as applicable, of the outstanding Common Stock, with corresponding changes made with respect to any other exchangeable or convertible securities. The Corporation shall not in any manner effect any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of the outstanding Common Stock unless accompanied by an identical subdivision or combination, as applicable, of the outstanding Common Units, with corresponding changes made with respect to any other exchangeable or convertible securities.  The Company shall not in any manner effect any subdivision (by equity split, equity distribution, reclassification, recapitalization or otherwise) or combination (by reverse equity split, reclassification, recapitalization or otherwise) of any outstanding Equity Securities of the Company (other than the Common Units) unless accompanied by an identical subdivision or combination, as applicable, of the corresponding Equity Securities of the Corporation, with corresponding changes made with respect to any other exchangeable or convertible securities. The Corporation shall not in any manner effect any subdivision (by stock

 

17



 

split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of any outstanding Equity Securities of the Corporation (other than the Common Stock) unless accompanied by an identical subdivision or combination, as applicable, of the corresponding Equity Securities of the Company, with corresponding changes made with respect to any other exchangeable or convertible securities.

 

Section 3.05                              Repurchases or Redemptions .  The Corporation or any of its Subsidiaries may not redeem, repurchase or otherwise acquire (i) any shares of Class A Common Stock unless substantially simultaneously the Company redeems, repurchases or otherwise acquires from the Corporation an equal number of Common Units for the same price per security or (ii) any other Equity Securities of the Corporation unless substantially simultaneously the Company redeems, repurchases or otherwise acquires from the Corporation an equal number of Equity Securities of the Company of a corresponding class or series with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Corporation for the same price per security. The Company may not redeem, repurchase or otherwise acquire (A) any Common Units from the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary redeems, repurchases or otherwise acquires an equal number of shares of Class A Common Stock for the same price per security from holders thereof, or (B) any other Equity Securities of the Company from the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary redeems, repurchases or otherwise acquires for the same price per security an equal number of Equity Securities of the Corporation of a corresponding class or series with substantially the same rights to dividends and distributions (including distribution upon liquidation) and other economic rights as those of such Equity Securities of the Corporation. Notwithstanding the foregoing, to the extent that any consideration payable by the Corporation in connection with the redemption or repurchase of any shares of Class A Common Stock or other Equity Securities of the Corporation or any of its Subsidiaries consists (in whole or in part) of shares of Class A Common Stock or such other Equity Securities (including, for the avoidance of doubt, in connection with the cashless exercise of an option or warrant), then the redemption or repurchase of the corresponding Common Units or other Equity Securities of the Company shall be effectuated in an equivalent manner.

 

Section 3.06                              Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units .

 

(a)                                  Units shall not be certificated unless otherwise determined by the Manager.  If the Manager determines that one or more Units shall be certificated, each such certificate shall be signed by or in the name of the Company, by the Chief Executive Officer and any other officer designated by the Manager, representing the number of Units held by such holder.  Such certificate shall be in such form (and shall contain such legends) as the Manager may determine.  Any or all of such signatures on any certificate representing one or more Units may be a facsimile, engraved or printed, to the extent permitted by applicable Law.  The Manager agrees that it shall not elect to treat any Unit as a “security” within the meaning of Article 8 of the Uniform Commercial Code unless thereafter all Units then outstanding are represented by one or more certificates.

 

18



 

(b)                                  If Units are certificated, the Manager may direct that a new certificate representing one or more Units be issued in place of any certificate theretofore issued by the Company alleged to have been lost, stolen or destroyed, upon delivery to the Manager of an affidavit of the owner or owners of such certificate, setting forth such allegation.  The Manager may require the owner of such lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.

 

(c)                                   Upon surrender to the Company or the transfer agent of the Company, if any, of a certificate for one or more Units, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, in compliance with the provisions hereof, the Company shall issue a new certificate representing one or more Units to the Person entitled thereto, cancel the old certificate and record the transaction upon its books.  Subject to the provisions of this Agreement, the Manager may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, Transfer and registration of Units.

 

Section 3.07                              Negative Capital Accounts .  No Member shall be required to pay to any other Member or the Company any deficit or negative balance which may exist from time to time in such Member’s Capital Account (including upon and after dissolution of the Company).

 

Section 3.08                              No Withdrawal .  No Person shall be entitled to withdraw any part of such Person’s Capital Contribution or Capital Account or to receive any Distribution from the Company, except as expressly provided in this Agreement.

 

Section 3.09                              Loans From Members .  Loans by Members to the Company shall not be considered Capital Contributions.  Subject to the provisions of Section 3.01(c) , the amount of any such advances shall be a debt of the Company to such Member and shall be payable or collectible in accordance with the terms and conditions upon which such advances are made.

 

Section 3.10                              Tax Treatment of Corporate Stock Option Plans and Equity Plans .

 

(a)                                  Options Granted to Persons other than LLC Employees .  If at any time or from time to time, in connection with any Stock Option Plan, a stock option granted over shares of Class A Common Stock to a Person other than an LLC Employee is duly exercised, notwithstanding the amount of the Capital Contribution actually made pursuant to Section 3.04(a) , solely for U.S. federal (and applicable state and local) income tax purposes, the Corporation shall be deemed to have contributed to the Company as a Capital Contribution, in lieu of the Capital Contribution actually made and in consideration of additional Common Units, an amount equal to the Value of a share of Class A Common Stock as of the date of such exercise multiplied by the number of shares of Class A Common Stock then being issued by the Corporation in connection with the exercise of such stock option.

 

(b)                                  Options Granted to LLC Employees .  If at any time or from time to time, in connection with any Stock Option Plan, a stock option granted over shares of Class A Common Stock to an LLC Employee is duly exercised, solely for U.S. federal (and applicable state and local) income tax purposes, the following transactions shall be deemed to have occurred:

 

19