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): June 30, 2017

 

 

WildHorse Resource Development Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-37964   81-3470246

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

9805 Katy Freeway, Suite 400

Houston, TX

  77024
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (713) 568-4910

 

 

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:

 

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

 

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

 

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

 

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

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

 

 

 


Introductory Note

On June 30, 2017, WildHorse Resource Development Corporation (the “Company,” “we,” “us” and “our”) closed (the “Closing”) its acquisition of certain acreage and associated production in Burleson, Brazos, Lee, Milam, Robertson, and Washington Counties, Texas (the “Purchase”) pursuant to a Purchase and Sale Agreement (the “First Acquisition Agreement”) by and among the Company, as purchaser, and Anadarko E&P Onshore LLC (“APC”), Admiral A Holding L.P., TE Admiral A Holding L.P. and Aurora C-I Holding L.P. (collectively, “KKR” and, together with APC, the “First Sellers”), as sellers, and its acquisition of certain acreage and associated production in Burleson, Brazos, Lee, Milam, Robertson, and Washington Counties, Texas (together, with the Purchase, the “Acquisition”) pursuant to a Purchase and Sale Agreement (together, with the First Acquisition Agreement, the “Acquisition Agreements”), by and among the Company, as purchaser, and APC and Anadarko Energy Services Company (together, with APC, the “APC Subs” and together, with the First Sellers, the “Sellers”), as sellers. Further, in exchange for $435 million in cash, in connection with the Closing, the Company issued 435,000 shares of its preferred stock, par value $0.01 per share, designated as “6.00% Series A Perpetual Convertible Preferred Stock” (the “Preferred Stock”), pursuant to a Preferred Stock Purchase Agreement (the “Preferred Stock Purchase Agreement”) with CP VI Eagle Holdings, L.P. (the “Carlyle Investor”), an affiliate of The Carlyle Group, L.P.

Item 1.01 Entry into Material Definitive Agreement.

As conditions to the Closing, on June 30, 2017, the Company amended and restated its existing registration rights agreement (the “A&R Registration Rights Agreement”) with WHR Holdings, LLC (“WildHorse Holdings”), Esquisto Holdings, LLC (“Esquisto Holdings”), WHE AcqCo Holdings, LLC (“Acquisition Co. Holdings”) (collectively, the “Sponsoring Holders”), NGP XI US Holdings, L.P. (“NGP XI”), Jay C. Graham and Anthony Bahr (together with KKR, the Carlyle Investor, the Sponsoring Holders and any of their permitted transferees, the “Holders”) in order to grant certain registration rights to KKR and the Carlyle Investor. The Carlyle Group, L.P. indirectly owns a non-controlling revenue interest in NGP Energy Capital Management, L.L.C. (“NGP ECM”), which manages investment funds that indirectly own a majority of our outstanding common stock. Further, The Carlyle Group, L.P. and certain of its affiliates indirectly own a 55% interest in certain gross revenues of NGP ECM, is a limited partner, and is entitled to 47.5% of the carried interest from, NGP XI, and is entitled to 40% of the carried interest from NGP X US Holdings, L.P. (“NGP X US Holdings”) (without, in either case, any rights to vote or dispose of either such fund’s direct or indirect interest in us). NGP ECM manages investment funds, including NGP IX US Holdings, L.P., NGP X US Holdings and NGP XI, that collectively directly or indirectly through their equity interests in WildHorse Holdings, Esquisto Holdings and Acquisition Co. Holdings own a majority of our outstanding shares of common stock. Pursuant to the A&R Registration Rights Agreement, we have agreed to register the sale of shares of our common stock under the circumstances described below.

Demand Rights

At any time after (i) for the Sponsoring Holders, the 180 lock-up period, related to our initial public offering, or (ii) for the Carlyle Investor, the first anniversary of the date of the A&R Registration Rights Agreement, and subject to the limitations set forth below, each of the Sponsoring Holders and the Carlyle Investor (or its permitted transferees) has the right to require us by written notice to prepare and file a registration statement registering the offer and sale of a certain number of its shares of our common stock. Generally, we are required to provide notice of the request to certain other holders of our common stock who may, in certain circumstances, participate in the registration. Subject to certain exceptions, we are not obligated to effect a demand registration within 90 days after the closing of any underwritten offering of shares of our common stock. Further, we are not obligated to effect more than a total of four demand registrations for each of WildHorse Holdings, Esquisto Holdings and Acquisition Co. Holdings, and more than a total of six demand registration for the Carlyle Investor.

Subject to certain exceptions, we are also not obligated to effect any demand registration in which the anticipated aggregate offering price for our common stock included in such offering is less than $75 million. Once we are eligible to effect a registration on Form S-3, any such demand registration may be for a shelf registration statement. We will be required to use reasonable best efforts to maintain the effectiveness of any such registration statement until all such securities registered for resale thereunder cease to be registrable securities under such agreement.

 

2


In addition, each of the Sponsoring Holders (or its permitted transferees) has the right to require us, subject to certain limitations, to effect a distribution of any or all of its shares of our common stock by means of an underwritten offering. In general, any demand for an underwritten offering (other than the first requested underwritten offering made in respect of a prior demand registration and other than a requested underwritten offering made concurrently with a demand registration) shall constitute a demand request subject to the limitations set forth above.

Piggyback Rights

Subject to certain exceptions, if at any time we propose to register an offering of common stock or conduct an underwritten offering, whether or not for our own account, then we must notify each of the Holders (or its permitted transferees) of such proposal to allow them to include a specified number of their shares of our common stock in that registration statement or underwritten offering, as applicable. KKR was made a Holder under the A&R Registration Rights Agreement for purposes of obtaining such piggyback rights.

Conditions and Limitations; Expenses

These registration rights are subject to certain conditions and limitations, including the right of the underwriters to limit the number of shares to be included in a registration and our right to delay or withdraw a registration statement under certain circumstances. We will generally pay all registration expenses in connection with our obligations under the A&R Registration Rights Agreement, regardless of whether a registration statement is filed or becomes effective.

The foregoing description of the A&R Registration Rights Agreement is qualified in its entirety by reference to the full text of such agreement, which is attached as Exhibit 4.1 to this Current Report on Form 8-K and incorporated herein by reference.

Credit Agreement Amendment

On June 30, 2017, the Company, each of WildHorse Resources II, LLC, Esquisto Resources II, LLC, WHE AcqCo., LLC, WHR Eagle Ford LLC, WildHorse Resources Management Company, LLC, Oakfield Energy LLC, Petromax E&P Burleson, LLC and Burleson Water Resources, LLC (each as a guarantor), Wells Fargo Bank, National Association, as administrative agent (the “Administrative Agent”), and the lenders party thereto entered into a second amendment (the “Amendment”) to the Credit Agreement dated as of December 19, 2016, among the Company, the Administrative Agent and the other agents and lenders party thereto (as amended, the “Credit Agreement”).

The Amendment, among other things, modifies the Credit Agreement to (a) permit the Company to enter into the Purchase, the Acquisition, and the Preferred Stock Purchase Agreement, and perform its obligations under and in connection therewith, including the issuance of the Preferred Stock, (b) increase the Company’s borrowing base and elected commitment amount from $450 million to $650 million, (c) increase the annual cap on certain restricted payments from $50 million to $75 million, and (d) modify the definition of net debt so that certain contingent obligations, accounts payable, obligations to make deliveries in respect of advance payments, take or pay obligations, disqualified capital stock and obligations in respect of production payments are excluded from net debt for purposes of the Company’s leverage covenant.

The foregoing description of the Amendment is qualified in its entirety by reference to the full text of such agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference. Certain of the agents, bookrunners and lenders under the Credit Agreement and their respective affiliates have received customary fees and commissions in connection with the Purchase, the Acquisition, and the Preferred Stock and may in the future receive customary fees and commissions in connection with investment banking, commercial lending, hedging and financial advisory services to the Company and its affiliates.

Item 2.01 Completion of Acquisition or Disposition of Assets.

Pursuant to the Acquisition Agreements, the Company purchased oil and gas working interests covering approximately 111,000 aggregate net acres and the associated production therefrom. The aggregate purchase price for the assets, as described in the Acquisition Agreements, consisted of the payment of an aggregate of

 

3


approximately $534 million of cash to the APC Subs (the “Cash Consideration”) and the issuance of approximately 5.5 million shares of the Company’s common stock valued at approximately $61 million to KKR and/or its designated affiliates. The Company funded the Cash Consideration with borrowings under its Credit Agreement and the proceeds from the sale of the Preferred Stock. The Closing occurred on June 30, 2017.

Item 3.03 Material Modification to Rights of Security Holders.

Until conversion, the holders of the Preferred Stock will vote together with the Company’s common stock on an as-converted basis and will also have rights to vote as a separate class on certain customary matters impacting the Preferred Stock. However, the holders of the Preferred Stock are not entitled to vote with the common stock on an as-converted basis, the Preferred Stock is not convertible into the Company’s common stock and the holders of the Preferred Stock are not entitled to the board election rights described below in Item 5.03 to this Current Report on Form 8-K, which is incorporated by reference herein, until the date on which the Company has delivered written notice of both (i) the expiration of the 20-day period following the date on which the Company mails to its stockholders an information statement regarding the corporate action taken by the holders of a majority of the Company’s outstanding common stock pursuant to a written consent in connection with the issuance of the Preferred Stock and (ii) the receipt of required regulatory approvals (the “Requisite Approvals Notice Date”).

In addition, from and after the Requisite Approvals Notice Date, the Carlyle Investor as a holder of Preferred Stock is entitled to elect (i) two directors to the Company’s board of directors for so long as the Carlyle Investor or its affiliates hold Preferred Stock and shares of the Company’s common stock, including shares of common stock issuable upon the conversion of Preferred Stock, representing at least 10% of the Company’s outstanding common stock on an as-converted basis and (ii) one board seat for so long as the Carlyle Investor or its affiliates hold Preferred Stock and shares of the Company’s common stock, including shares of common stock issuable upon the conversion of Preferred Stock, representing 5% or more of the Company’s outstanding common stock on an as-converted basis.

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

Appointment of Directors

In connection with the Closing, and pursuant to the terms of the Preferred Stock Purchase Agreement, on June 30, 2017, the Company’s board of directors was expanded by two members and Brian A. Bernasek and Martin W. Sumner were appointed as members of the Company’s board of directors. Messrs. Bernasek and Sumner are each Managing Directors at The Carlyle Group, L.P., which manages the Carlyle Investor, the holder of the Preferred Stock. The information set forth in Items 1.01 and 5.03 of this Current Report on Form 8-K regarding the Carlyle Investor’s relationship with the Company and the rights of the holders of the Preferred Stock to elect members of the board of directors, respectively, are incorporated herein by reference.

Neither Messrs. Bernasek or Sumner will receive any compensation from the Company for his service on the board of directors or is expected to serve on any committees of the board. In connection with their appointments, each of Messrs. Bernasek and Sumner entered into an indemnification agreement with the Company, which are attached as Exhibits 10.2 and 10.3, respectively, to this Current Report on Form 8-K, pursuant to which the Company is required to indemnify such individual to the fullest extent permitted under Delaware law against liability that may arise by reason of such individual’s service to the Company, and to advance expenses incurred as a result of any proceeding against such individual as to which he could be indemnified. The foregoing description is qualified in its entirety by reference to the full text of the indemnification agreements attached as Exhibits 10.2 and 10.3 to this Current Report on Form 8-K and incorporated herein by reference.

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

On June 30, 2017, the Company filed a Certificate of Designations (the “Certificate”) with the Delaware Secretary of State, which amended the Company’s amended and restated Certificate of Incorporation to create the Preferred Stock issued by the Company in connection with the Closing and is attached to this Current Report on Form 8-K as Exhibit 3.1.

 

4


The Preferred Stock ranks senior to our common stock with respect to dividend rights and with respect to rights on liquidation, winding-up and dissolution. The Preferred Stock has an initial Accreted Value (as defined in the Certificate) of $1,000 per share and is entitled to a dividend at a rate of 6% per annum on the Accreted Value payable in cash if, as and when declared by our board of directors. If a cash dividend is not declared and paid in respect of any dividend payment period, then the Accreted Value of each outstanding share of Preferred Stock will automatically be increased by the amount of the dividend otherwise payable for such dividend payment period. Any increase in the Accreted Value will, among other things, increase the number of shares of common stock issuable upon conversion of each share of Preferred Stock. The Preferred Stock also participates in dividends and distributions on our common stock on an as-converted basis. If at any time following December 30, 2019, the closing sale price of our common stock equals or exceeds 130% of the Accreted Value of such share of Preferred Stock (which will increase over time if and as dividends are not paid in cash on the Preferred Stock) divided by a conversion price of $13.90 per share of common stock (the “Conversion Price”) for at least 25 consecutive trading days, our obligation to pay dividends on the Preferred Stock shall terminate permanently.

The Preferred Stock is convertible at the option of the holders at any time after June 30, 2018 into the amount of shares of common stock per share of Preferred Stock (such rate, the “Conversion Rate”) equal to the quotient of (i) the Accreted Value in effect on the conversion date divided by (ii) the Conversion Price, subject to customary anti-dilution adjustments and customary provisions related to partial dividend periods. The holders of Preferred Stock may also convert their Preferred Stock at the Conversion Rate prior to June 30, 2018 in connection with certain change of control transactions and in connection with sales of common stock by certain of our existing shareholders.

Following June 30, 2021, the Company may cause the conversion of the Preferred Stock at the Conversion Rate, provided the closing sale price of the common stock equals or exceeds 140% of the Conversion Price for the 20 trading days ending on the date immediately prior to the date of delivery of the Company’s notice to convert and subject to certain other requirements regarding registration of the shares issuable upon conversion. Notwithstanding the foregoing, the Company shall only be permitted to deliver one conversion notice during any 180 day period and the number of shares of common stock issued upon conversion of the Preferred Stock for which such automatic conversion notice is given shall be limited to 25 times the average daily trading volume of our common stock during the 20 trading days ending on the date immediately prior to the date of delivery of the Company’s notice to convert.

If the Company undergoes certain change of control transactions, the holders of the Preferred Stock are entitled to cause the Company to redeem the Preferred Stock for cash in an amount equal to the Accreted Value, plus the net present value of dividend payments that would have been accrued as payable to the holders following the date of the consummation of such change of control and through December 30, 2019, in the case of any change of control occurring prior to December 30, 2019 (the “COC Redemption Price”). In addition, the Company has the right in connection with any such change of control transaction (i) to elect to redeem any Preferred Stock contingent upon and contemporaneously with the consummation of such change of control or (ii) to redeem any Preferred Stock following the consummation of such control that is not otherwise converted or redeemed as described in the preceding sentence and clause (i) of this sentence for cash at the COC Redemption Price.

At any time after June 30, 2022, the Company may redeem the Preferred Stock, in whole or in part, for an amount in cash equal to, per each share of Preferred Stock, (i) on or prior to the June 30, 2023, the Accreted Value multiplied by 112%, (ii) on or prior to June 30, 2024, the Accreted Value multiplied by 109% or (ii) after June 30, 2024, the Accreted Value multiplied by 106%.

Until conversion, the holders of the Preferred Stock vote together with our common stock on an as-converted basis and also have rights to vote as a separate class on certain customary matters impacting the Preferred Stock. However, the Preferred Stock is not entitled to vote with the common stock on an as-converted basis, is not convertible into our common stock and is not entitled to the board election rights described below until the Requisite Approvals Notice Date.

In addition, from and after the Requisite Approvals Notice Date, the Carlyle Investor as a holder of Preferred Stock will be entitled to elect (i) two directors to our board of directors for so long as the Carlyle Investor or its affiliates hold Preferred Stock and shares of our common stock, including shares of common stock issuable upon the conversion of Preferred Stock, representing at least 10% of our outstanding common stock on an as-converted basis and (ii) one board seat for so long as the Carlyle Investor or its affiliates hold Preferred Stock and shares of our common stock, including shares of common stock issuable upon the conversion of Preferred Stock, representing 5% or more of our outstanding common stock on an as-converted basis.

 

5


The foregoing description of the Certificate is qualified in its entirety by reference to the full text of the Certificate, which is attached as Exhibit 3.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 7.01 Regulation FD Disclosure.

On June 30, 2017, the Company issued a press release announcing among other things, the Closing. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

The information in Item 7.01 of this Current Report on Form 8-K, including the attached Exhibit 99.1, is being “furnished” pursuant to General Instruction B.2 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, and is not incorporated by reference into any Company filing, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

This Current Report on Form 8-K contains certain “forward-looking statements.” All statements, other than statements of historical facts, included in this Current Report on Form 8-K that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, are forward-looking statements. These statements are based on certain assumptions made by the Company based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause the Company’s actual results to differ materially from those implied or expressed by the forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

6


Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

The unaudited statements of revenues and direct operating expenses for APC’s interest in the Eaglebine and Northstars oil and gas properties for the three months ended March 31, 2017 and 2016, and the audited statements of revenues and direct operating expenses for years ended December 31, 2016, 2015 and 2014, including the related notes thereto, and the independent auditors’ report related thereto, are attached hereto as Exhibit 99.2 and incorporated herein by reference.

The unaudited statements of revenues and direct operating expenses for KKR’s interest in the Eaglebine oil and gas properties for the three months ended March 31, 2017 and 2016, and the audited statements of revenues and direct operating expenses for the years ended December 31, 2016 and 2015 and the period from September 11, 2014 to December 31, 2014, including the related notes thereto, and the independent auditors’ report related thereto, are attached hereto as Exhibit 99.3 and incorporated herein by reference.

(b) Pro Forma Financial Information.

The unaudited pro forma combined balance sheet of the Company as of March 31, 2017 and the unaudited combined pro forma statements of operations for the three months ended March 31, 2017 and for the year ended December 31, 2016, including notes thereto, which gives effect to the Acquisition, related financing transactions and a prior significant consummated acquisition that closed in December 2016, are attached hereto as Exhibit 99.4 and incorporated herein by reference.

(d) Exhibits .

Exhibits.

 

Exhibit
No.

  

Description

  3.1    Certificate of Designations, 6.00% Series A Perpetual Convertible Preferred Stock
  4.1    Registration Rights Agreement dated June 30, 2017 by and between WildHorse Resource Development Corporation and WHR Holdings, LLC, Esquisto Holdings, LLC, WHE AcqCo Holdings, LLC, NGP XI US Holdings, L.P., Jay C. Graham, Anthony Bahr, CP VI Eagle Holdings, L.P., EIGF Aggregator LLC, TE Drilling Aggregator LLC and Aurora C-1 Holding L.P.
10.1    Second Amendment to Credit Agreement, dated June 30, 2017, by and among WildHorse Resource Development Corporation, as Borrower, each of WildHorse Resources II, LLC, Esquisto Resources II, LLC, WHE AcqCo., LLC, WHR Eagle Ford LLC, WildHorse Resources Management Company, LLC, Oakfield Energy LLC, Petromax E&P Burleson, LLC and Burleson Water Resources, LLC (each as a guarantor), Wells Fargo Bank, National Association, as Administrative Agent, BMO Harris Bank, N.A., as Syndication Agent, the Lenders party thereto and the other parties party thereto
10.2    Indemnification Agreement (Brian A. Bernasek)
10.3    Indemnification Agreement (Martin W. Sumner)
23.1    Consent of KPMG LLP
23.2    Consent of Deloitte & Touche LLP
99.1    Press release dated June 30, 2017
99.2    Statements of Revenues and Direct Operating Expenses for the years ended December 31, 2016, 2015 and 2014 (audited) and the three months ended March 31, 2017 and 2016 (unaudited)
99.3    Statements of Revenues and Direct Operating Expenses for the years ended December 31, 2016 and 2015 (audited), the period from September 11, 2014 to December 31, 2014 (audited) and the three months ended March 31, 2017 and 2016 (unaudited)
99.4    WildHorse Resource Development Corporation’s Unaudited Pro Forma Combined Financial Statements as of March 31, 2017 and for the three months ended March 31, 2017 and year ended December 31, 2016

 

7


SIGNATURE

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

 

WILDHORSE RESOURCE DEVELOPMENT CORPORATION
By:  

/s/ Kyle N. Roane

Name:   Kyle N. Roane
Title:   Executive Vice President, General Counsel and Corporate Secretary

July 7, 2017

 

8


EXHIBIT INDEX

 

Exhibit
No.

  

Description

  3.1    Certificate of Designations, 6.00% Series A Perpetual Convertible Preferred Stock
  4.1    Registration Rights Agreement dated June 30, 2017 by and between WildHorse Resource Development Corporation and WHR Holdings, LLC, Esquisto Holdings, LLC, WHE AcqCo Holdings, LLC, NGP XI US Holdings, L.P., Jay C. Graham, Anthony Bahr, CP VI Eagle Holdings, L.P., EIGF Aggregator LLC, TE Drilling Aggregator LLC and Aurora C-1 Holding L.P.
10.1    Second Amendment to Credit Agreement, dated June 30, 2017, by and among WildHorse Resource Development Corporation, as Borrower, each of WildHorse Resources II, LLC, Esquisto Resources II, LLC, WHE AcqCo., LLC, WHR Eagle Ford LLC, WildHorse Resources Management Company, LLC, Oakfield Energy LLC, Petromax E&P Burleson, LLC and Burleson Water Resources, LLC (each as a guarantor), Wells Fargo Bank, National Association, as Administrative Agent, BMO Harris Bank, N.A., as Syndication Agent, the Lenders party thereto and the other parties party thereto
10.2    Indemnification Agreement (Brian A. Bernasek)
10.3    Indemnification Agreement (Martin W. Sumner)
23.1    Consent of KPMG LLP
23.2    Consent of Deloitte & Touche LLP
99.1    Press release dated June 30, 2017
99.2    Statements of Revenues and Direct Operating Expenses for the years ended December 31, 2016, 2015 and 2014 (audited) and the three months ended March 31, 2017 and 2016 (unaudited)
99.3    Statements of Revenues and Direct Operating Expenses for the years ended December 31, 2016 and 2015 (audited), the period from September 11, 2014 to December 31, 2014 (audited) and the three months ended March 31, 2017 and 2016 (unaudited)
99.4    WildHorse Resource Development Corporation’s Unaudited Pro Forma Combined Financial Statements as of March 31, 2017 and for the three months ended March 31, 2017 and year ended December 31, 2016

 

9

Exhibit 3.1

WILDHORSE RESOURCE DEVELOPMENT CORPORATION

 

 

CERTIFICATE OF DESIGNATIONS

Pursuant to Section 151 of the General

Corporation Law of the State of Delaware

 

 

6.00% SERIES A PERPETUAL CONVERTIBLE PREFERRED STOCK

(Par Value $0.01 Per Share)

WildHorse Resource Development Corporation (the “ Corporation ”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “ DGCL ”), hereby certifies that, pursuant to the authority expressly granted to and vested in the Board by the Amended and Restated Certificate of Incorporation of the Corporation (as so amended and as further amended from time to time in accordance with its terms and the DGCL, the “ Certificate of Incorporation ”), which authorizes the Board, by resolution, to set forth the designation, powers, preferences and relative, participating, optional and other special rights, if any, and the qualifications, limitations and restrictions thereof, in one or more series of up to 50,000,000 shares of preferred stock, par value $0.01 per share (the “ Preferred Stock ”), and in accordance with the provisions of Section 151 of the DGCL, the Board duly adopted on June 30, 2017 the following resolution, which resolution remains in full force and effect on the date hereof:

RESOLVED , that pursuant to the authority granted to and vested in it, the Board hereby creates a new series consisting of 500,000 shares of Preferred Stock, designated 6.00% Series A Perpetual Convertible Preferred Stock, and hereby fixes the powers, preferences and relative, participating, optional and other special rights, if any, and the qualifications, limitations and restrictions thereof, of such series of Preferred Stock as set forth in this certificate of designations (this “ Certificate of Designations ”):

 

1. General .

(a) There shall be created from the 50,000,000 shares of Preferred Stock of the Corporation authorized to be issued pursuant to the Certificate of Incorporation, a series of Preferred Stock designated as “6.00% Series A Perpetual Convertible Preferred Stock” par value $0.01 per share (the “ Series A Preferred Stock ”), and the authorized number of shares of Series A Preferred Stock shall be 500,000. Shares of Series A Preferred Stock that are purchased or otherwise acquired by the Corporation, or that are converted into shares of Common Stock, shall be cancelled and shall revert to authorized but unissued shares of Series A Preferred Stock.

(b) The Series A Preferred Stock, with respect to dividend rights and rights upon the liquidation, winding-up or dissolution of the Corporation, ranks: (i) senior to all Junior Stock; (ii) on a parity with all Parity Stock; (iii) junior to all Senior Stock; and (iv) junior to existing and future indebtedness and liabilities of the Corporation.


(c) The Series A Preferred Stock has no maturity date and (except as provided in Section 4 in connection with a Change of Control) is not mandatorily redeemable (pursuant to a sinking fund obligation or otherwise) or redeemable at the option of the Holders.

 

2. Definitions . As used herein, the following terms shall have the following meanings:

(a) “ 10% Entity ” means any Person that, together with its Affiliates, after giving effect to a proposed Transfer, would own greater than 10% of the then outstanding Common Stock, on an as-converted basis.

(b) “ 14C Expiration Date ” shall mean the date immediately following the expiration of the 20 calendar day period commencing on the stated date of distribution to the Corporation’s stockholders in accordance with Rule 14c-2 of Regulation 14C promulgated under the Exchange Act of a definitive Information Statement on Schedule 14C filed by the Corporation with the SEC relating to the issuance of the Series A Preferred Stock.

(c) “Accreted Value” shall mean, with respect to each share of Series A Preferred Stock, the Initial Liquidation Value as the same may be increased pursuant to Section 3 .

(d) “ Affiliate ” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with, such other Person; provided , however , that the Corporation, any of its Subsidiaries, or any of the Corporation’s other controlled Affiliates, will not be deemed to be Affiliates of any Holder for purposes of this Certificate of Designations. For purposes of this Certificate of Designations, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such person, whether through the ownership of voting securities, by contract or otherwise. For the avoidance of doubt, none of NGP, the Corporation or any of their respective Affiliates shall be deemed Affiliates of Carlyle or any of its Affiliates.

(e) “ as-converted basis ” means, with respect to the outstanding shares of Common Stock, all outstanding shares of Common Stock calculated on a basis in which all shares of Common Stock issuable at the time of determination upon conversion of the Series A Preferred Stock that is then outstanding, whether or not the Series A Preferred Stock is then convertible, exchangeable or exercisable by the holder thereof, are assumed to be then outstanding.

(f) “ Beneficial Ownership ” or “ Beneficially Own ” shall have the meaning given such term in Rule 13d-3 under the Exchange Act and a Person’s Beneficial Ownership of securities shall be calculated in accordance with the provisions of such Rule; provided , however , that for purposes of determining any Person’s Beneficial Ownership, such Person shall be deemed to be the Beneficial Owner of any Equity Securities that may be acquired by such Person, whether within sixty (60) days or thereafter, upon the conversion, exchange, redemption or exercise of any warrants, options, rights or other securities issued by the Corporation or any of its Subsidiaries.

 

2


(g) “ Board ” shall mean the Board of Directors of the Corporation or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.

(h) “ Business Day ” shall mean any day other than Saturday, Sunday or a day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.

(i) “ Capital Stock ” shall mean, for any entity, any and all shares, equity interests, rights to purchase, warrants, options, equity participations or other equity equivalents of or equity interests in (however designated) capital stock issued by that entity; provided that , “Capital Stock” of the Corporation shall not include any convertible or exchangeable debt securities that, prior to conversion or exchange, will rank senior in right of payment to the Series A Preferred Stock.

(j) “ Carlyle ” means CP VI Eagle Holdings, L.P.

(k) “ Certificate of Designations ” shall have the meaning specified in the recitals.

(l) “ Certificate of Incorporation ” shall have the meaning specified in the recitals.

(m) A “ Change of Control ” shall be deemed to have occurred at any time after the Series A Preferred Stock is originally issued if any of the following occurs:

(i) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Corporation and its Subsidiaries taken as a whole to any Person (including any “person” (as that term is used in Section 13(d)(3) of the Exchange Act)) other than any Permitted Holder;

(ii) the adoption of a plan relating to the liquidation or dissolution of the Corporation; or

(iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as defined above), other than any Permitted Holder, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the voting stock of the Corporation, measured by voting power rather than number of shares, units or the like; pro vided that a transaction in which the Corporation becomes a Subsidiary of another Person shall not constitute a Change of Control if, immediately following such transaction, the “persons” (as defined above) who were Beneficial Owners of the voting stock of the Corporation immediately prior to such transaction Beneficially Own, directly or indirectly through one or more intermediaries, 50% or more of the total voting power of the voting stock of such other Person of whom the Corporation has become a Subsidiary.

 

3


(n) “ Change of Control Call ” shall have the meaning specified in Section 4(b) .

(o) “ Change of Control Cash Price ” shall mean, as of the date of any redemption in connection with a Change of Control Put or Change of Control Call, an amount per share of Series A Preferred Stock equal to (x) the Accreted Value of such share of Series A Preferred Stock as of such date plus (y) if the applicable redemption date is prior to December 30, 2019, the amount equal to the net present value (computed using a discount rate of the Treasury Rate plus fifty (50) basis points) of the sum of all dividends that would otherwise be payable on such share of Series A Preferred Stock on each of the Dividend Payment Dates occurring during the period on and after the applicable redemption date to and including December 30, 2019 (which date for purposes of this calculation, shall be assumed to be an additional Dividend Payment Date) and assuming the Corporation elected to pay such dividends in cash pursuant to Section 3(a) ; provided, however , that in the event of a Change of Control described in subsection (i) or (ii) of the definition thereof that is in connection with a liquidation, winding up or dissolution of the Corporation, the Change of Control Cash Price shall mean the greater of (a) the amount described above and (b) the amount that would be distributed in the liquidation, winding up or dissolution of the Corporation with respect to such share if such share of Series A Preferred Stock was converted into Common Stock (at the Conversion Rate then in effect) immediately prior to such liquidation, winding up or dissolution of the Corporation (regardless of whether the Series A Preferred Stock is then convertible pursuant to the terms hereof).

(p) “ Change of Control Effective Date ” shall have the meaning specified in Section 4(c) .

(q) “ Change of Control Purchase Date ” shall mean, with respect to each share of Series A Preferred Stock, the date on which the Corporation makes the payment in full in cash of the Change of Control Cash Price for such share to the Holder thereof.

(r) “ Change of Control Put ” shall have the meaning specified in Section 4(a) .

(s) “ Change of Control Put Deadline ” shall have the meaning specified in Section 4(c)(i) .

(t) “ Close of Business ” shall mean 5:00 p.m., New York City time.

(u) “ Closing Sale Price ” of the Common Stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock is traded or, if the Common Stock is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the last quoted bid price for the Common Stock in the over-the-counter market on the relevant date, as reported by OTC Markets Group Inc. or a similar organization, or, if that bid price is not available, the fair market price of the Common Stock (or other relevant capital stock or equity interest) on that date as determined by a nationally recognized independent investment banking firm retained by the Corporation for this purpose with the prior consent of holders of a majority of the outstanding Series A Preferred Stock. The Closing Sale Price of any other security shall be determined in the same manner as set forth in this Section 2(u) for the determination of the Closing Sale Price of the Common Stock.

 

4


(v) “ Code ” shall mean Internal Revenue Code of 1986, as amended.

(w) “ Common Stock ” shall mean the Common Stock, par value $0.01 per share, of the Corporation, subject to Section 8(e) .

(x) “ Conversion Agent ” shall mean the Transfer Agent acting in its capacity as conversion agent for the Series A Preferred Stock, and its successors and assigns.

(y) “ Conversion Date ” shall have the meaning specified in Section 7(a)(iii) .

(z) “ Conversion Price ” shall initially be $13.90 per share of Common Stock and shall be subject to adjustment pursuant to Section 8 hereof.

(aa) “ Conversion Rate ” shall mean, with respect to each share of Series A Preferred Stock subject to conversion, a number of shares of Common Stock equal to its Accreted Value divided by the then applicable Conversion Price.

(bb) “ Corporation ” shall have the meaning specified in the recitals.

(cc) “ Corporation Competitor ” shall mean (i) any Upstream Competitor identified in writing to the Holders by the Corporation prior to the Initial Issue Date, and (ii) on and after the Initial Issue Date, any Upstream Competitor identified in writing to the Holders at the direction of the Board of Directors acting in good faith. “ Upstream Competitor ” shall mean (i) any Person whose primary business is oil and gas exploration and production activities and who owns or operates upstream oil and gas properties that are located within 100 miles of any oil and gas properties owned or operated by the Corporation and (ii) any private equity fund that controls any Upstream Competitor.

(dd) “ DGCL ” shall have the meaning specified in the recitals.

(ee) “ Dividend Payment Date ” shall mean January 31, April 30, July 31 and October 31 of each year, commencing on July 31, 2017.

(ff) “ Dividend Rate ” shall mean the rate per quarterly dividend period of 1.50% (6.00% per annum) per share of Series A Preferred Stock.

(gg) “ Dividend Record Date ” shall mean, with respect to any Dividend Payment Date, the January 15, April 15, July 15 and October 15, as the case may be, immediately preceding such Dividend Payment Date.

(hh) “ Equity Securities ” means the equity securities of the Corporation, including shares of Common Stock and Series A Preferred Stock.

(ii) “ Event ” shall have the meaning specified in Section 5(a)(ii)(B) .

 

5


(jj) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(kk) “ Ex-Date ,” when used with respect to any issuance, dividend or distribution of Common Stock, shall mean the first date on which the Common Stock trades on the applicable exchange or in the applicable market, regular way, without the right to receive such issuance, dividend or distribution from the Corporation or, if applicable, from the seller of the Common Stock on such exchange or market (in the form of due bills or otherwise), as determined by such exchange or market.

(ll) “ Expiration Date ” shall have the meaning specified in Section 8(a)(iv) .

(mm) “ Final Accrual Period ” shall have the meaning specified in Section 3(d) .

(nn) “ Hedge ” shall have the meaning specified in Section 10(a)(i) .

(oo) “ Holder ” shall mean a holder of shares of Series A Preferred Stock.

(pp) “ HSR Expiration Date ” shall mean the date on which all applicable approvals and waiting periods under the Hart-Scott Rodino Antitrust Improvements Act of 1976 that are required with respect to the conversion and voting rights of the Series A Preferred Stock set forth in this Certificate of Designations shall have been obtained or expired, as applicable, in each case as the shares of Series A Preferred Stock are held as of the Initial Issue Date.

(qq) “ Indebtedness ” means (a) all obligations of the Corporation or any of its Subsidiaries for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of the Corporation or any of its Subsidiaries evidenced by bonds, debentures, notes or similar instruments, (c) all letters of credit and letters of guaranty in respect of which the Corporation or any of its Subsidiaries is an account party, (d) all securitization or similar facilities of the Corporation or any of its Subsidiaries and (e) all guarantees by the Corporation or any of its Subsidiaries of any of the foregoing.

(rr) “ Indebtedness Agreement ” means any agreement, document or instrument governing or evidencing any Indebtedness of the Corporation or its Subsidiaries (including (A) that certain Indenture, dated February 1, 2017 among the Corporation, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (as the same may be amended and/or restated from time to time) or (B) that certain credit agreement, dated December 19, 2016, among the Corporation, the lenders and financial institutions party thereto and Wells Fargo Bank, National Association (as the same may be amended and/or restated from time to time).

(ss) Initial Issue Date ” shall mean the first date of original issuance of shares of the Series A Preferred Stock.

(tt) “ Initial Liquidation Value ” shall mean, with respect to each share of Series A Preferred Stock, $1,000.00.

 

6


(uu) “ Junior Stock ” shall mean (i) the Common Stock and (ii) each other class or series of the Corporation’s Capital Stock established after the Initial Issue Date, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the Series A Preferred Stock as to dividend rights or distribution rights upon the liquidation, winding-up or dissolution of the Corporation.

(vv) “ Mandatory Conversion Date ” shall have the meaning specified in Section 7(b)(ii) .

(ww) “ NGP ” means collectively, WHR Holdings, LLC, a Delaware limited liability company, Esquisto Holdings, LLC, a Delaware limited liability company, WHE AcqCo Holdings, LLC, a Delaware limited liability company, and NGP XI US Holdings, L.P., a Delaware limited partnership, and any of their respective Affiliates that own Capital Stock of the Company.

(xx) “ Officer ” shall mean the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Corporation.

(yy) “ Open of Business ” shall mean 9:00 a.m., New York City time.

(zz) “ Ownership Notice ” shall mean the notice of ownership of Capital Stock of the Corporation containing the information required to be set forth or stated on certificates pursuant to the DGCL and, in the case of an issuance of Capital Stock by the Corporation (including the Series A Preferred Stock), in substantially the form attached hereto as Exhibit A .

(aaa) “ Parity Stock ” shall mean any class or series of the Corporation’s Capital Stock established after the Initial Issue Date, the terms of which expressly provide that such class or series will rank on parity with the Series A Preferred Stock as to dividend rights or distribution rights upon the liquidation, winding up or dissolution of the Corporation.

(bbb) “ Permitted Holder ” shall mean (i) any Person that is a “Permitted Holder” under (A) that certain Indenture, dated February 1, 2017 among the Corporation, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (as the same may be amended and/or restated from time to time) or (B) that certain credit agreement, dated December 19, 2016, among the Corporation, the lenders and financial institutions party thereto and Wells Fargo Bank, National Association (as the same may be amended and/or restated from time to time), (ii) Carlyle and its Affiliates and (iii) any Person who, together with its Affiliates, holds more than 50% of the outstanding shares of Series A Preferred Stock.

(ccc) “ Permitted Transferee ” shall have the meaning specified in Section 10(a)(ii)(A) .

(ddd) “ Person ” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.

 

7


(eee) “ Preferred Purchase Agreement ” shall mean that certain Preferred Stock Purchase Agreement dated as of May 10, 2017 by and among the Holders as of the Initial Issue Date and the Corporation.

(fff) “ Preferred Stock ” shall have the meaning specified in the recitals.

(ggg) “ Record Date ” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock (or other applicable security) have the right to receive any cash, securities or other property or in which Common Stock (or such other security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of the holders of Common Stock (or such other security) entitled to receive such cash, securities or other property (whether such date is fixed by the Board, statute, contract or otherwise).

(hhh) “ Reference Property ” shall have the meaning specified in Section 8(e) .

(iii) “ Registrable Securities ” shall have the meaning set forth in the Registration Rights Agreement.

(jjj) “ Registration Rights Agreement ” means that certain Amended and Restated Registration Rights Agreement dated as of the Initial Issue Date by and among the Corporation and the others party thereto.

(kkk) “ Reorganization Event ” shall have the meaning specified in Section 8(e) .

(lll) “ Required Number of Shares ” shall have the meaning specified in Section 4(g) .

(mmm) “ Requisite Approvals Notice Date ” shall have the meaning specified in Section 11(e) .

(nnn) “ Satisfaction of the Indebtedness Obligations ” means, in connection with any Change of Control, (i) the payment in full in cash of all principal, interest, fees and all other amounts due or payable in connection with any Indebtedness of the Corporation or any of its Subsidiaries (including in respect of any penalty or premium) that is required to be prepaid, repaid, redeemed, repurchased or otherwise retired as a result of or in connection with such Change of Control or in order for the Series A Preferred Stock not to constitute or be deemed as “indebtedness”, “disqualified stock”, “disqualified capital stock”, “disqualified equity interests”, or similar instruments, however denominated, under the terms of any Indebtedness Agreement, (ii) the cancellation or termination, or if permitted by the terms of such Indebtedness, cash collateralization, of any letters of credit or letters of guaranty that are required to be cancelled or terminated or cash collateralized as a result of or in connection with such Change of Control or in order for the Series A Preferred Stock not to constitute or be deemed as “indebtedness”, “disqualified stock”, “disqualified capital stock”, “disqualified equity interests”, or similar instruments, however denominated, under the terms of any Indebtedness Agreement, (iii) compliance with any requirement to effect an offer to purchase any bonds, debentures, notes or other instruments of Indebtedness as a result of or in connection with such Change of Control

 

8


or in order for the Series A Preferred Stock not to constitute or be deemed as “indebtedness”, “disqualified stock”, “disqualified capital stock”, “disqualified equity interests”, or similar instruments, however denominated, under the terms of any Indebtedness Agreement, and the purchase of any such instruments tendered in such offer and the payment in full of any other amounts due or payable in connection with such purchase and (iv) the termination of any lending commitments required to be terminated as a result of or in connection with such Change of Control or in order for the Series A Preferred Stock not to constitute or be deemed as “indebtedness”, “disqualified stock”, “disqualified capital stock”, “disqualified equity interests”, or similar instruments, however denominated, under the terms of any Indebtedness Agreement.

(ooo) “ SEC ” shall mean the Securities and Exchange Commission.

(ppp) “ Securities Act ” shall mean the Securities Act of 1933, as amended.

(qqq) “ Senior Stock ” shall mean any class or series of the Corporation’s Capital Stock established after the Initial Issue Date, the terms of which expressly provide that such class or series will rank senior to the Series A Preferred Stock as to dividend rights or distribution rights upon the liquidation, winding up or dissolution of the Corporation.

(rrr) “ Series A Director ” shall have the meaning specified in Section 5(b)(i) .

(sss) “ Series A Preferred Stock ” shall have the meaning specified in Section 1(a) .

(ttt) “ Specified Contract Terms ” means the covenants, terms and provisions of any indenture, credit agreement or any other Indebtedness Agreement governing the rights of the holders of or otherwise relating to any Indebtedness of the Corporation or any of its Subsidiaries.

(uuu) “ Spin-Off ” shall have the meaning specified in Section 8(a)(iii) .

(vvv) “ Subsidiary ” shall mean, with respect to any Person, any corporation, association, partnership, limited liability company or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership or limited liability company interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person.

(www) “ Trading Day ” shall mean a day during which trading in the Common Stock generally occurs on the New York Stock Exchange or, if the Common Stock is not listed on the New York Stock Exchange, on the principal other U.S. national or regional securities exchanges on which the Common Stock is then listed or, if the Common Stock is not listed on a U.S. national or regional securities exchange, on the principal other market on which the Common Stock is then listed or admitted for trading. If the Common Stock is not so listed or admitted for trading, Trading Day means a Business Day.

 

9


(xxx) “ Transfer ” by any person means directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, for value or without value, or to enter into any written or oral contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Equity Securities Beneficially Owned by such person or of any interest (including any voting interest) in any Equity Securities Beneficially Owned by such person. For the avoidance of doubt, a transfer of control of the direct or indirect Beneficial Owner of Equity Securities is a Transfer of such Equity Securities for purposes of this Certificate of Designations; provided , however , that, notwithstanding anything to the contrary in this Certificate of Designations, a Transfer shall not include (i) the conversion of one or more shares of Series A Preferred Stock into Common Stock pursuant to the terms of this Certificate of Designations, (ii) the redemption or other acquisition of Common Stock or Preferred Stock by the Corporation or (iii) the transfer (other than by a Holder or an Affiliate of a Holder) of any limited partnership or limited liability company interests or other equity interests in a Holder (or any direct or indirect parent entity of a Holder), in each case, unless the transferor or transferee were formed for the purpose of holding any Equity Securities; provided that , if any transferor or transferee referred to in this clause (iii) ceases to be controlled by the Person controlling such Person immediately prior to such transfer, such event shall be deemed to constitute a “Transfer”.

(yyy) “ Transfer Agent ” shall mean Wells Fargo Shareowner Services, acting as the Corporation’s duly appointed transfer agent, registrar, redemption, conversion and dividend disbursing agent for the Series A Preferred Stock and the Common Stock. The Corporation may, in its sole discretion, remove the Transfer Agent with 10 days’ prior notice to the Transfer Agent and Holders; provided that the Corporation shall appoint a successor Transfer Agent who shall accept such appointment prior to the effectiveness of such removal.

(zzz) “ Treasury Rate ” shall mean the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least five Business Days prior to the date fixed for redemption (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the Average Assumed Dividend Period; provided , however , that if such Average Assumed Dividend Period is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Corporation shall obtain the Treasury Rate by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the Average Assumed Dividend Period is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used; and, provided further , that the Treasury Rate shall not in any event be less than zero. For purposes of this definition, “ Average Assumed Dividend Period ” shall mean the average number of months (weighted based on the amount of the assumed dividends) from the applicable redemption date to the applicable Dividend Payment Date for each dividend assumed to be paid for purposes of the calculation.

 

10


(aaaa) “ Underwritten Offering ” shall have the meaning set forth in the Registration Rights Agreement.

 

3. Dividends.

(a) Subject to Section3(c) , from and after the Initial Issue Date, dividends shall, with respect to each outstanding share of Series A Preferred Stock, accrue on the Accreted Value at the Dividend Rate for each Dividend Period (as defined below) to and including the next Dividend Payment Date. Dividends on the Series A Preferred Stock shall be non-cumulative and shall accrue on a daily basis, whether or not declared. Such dividends shall be payable only when, as and if declared by the Board, and when so declared and paid, such dividends shall be paid in cash out of funds legally available therefor and shall be payable on the next Dividend Payment Date following such declaration by the Board to the Holders as they appear on the Corporation’s stock register at the Close of Business on the relevant Dividend Record Date. If any Dividend Payment Date falls on a day that is not a Business Day, payment of dividends declared under this Section 3(a) with respect to such Dividend Payment Date will be made on the next succeeding Business Day and no interest or dividends on such payment will accrue or accumulate, as the case may be, in respect of the delay. The period from the Initial Issue Date to and including July 31, 2017 and each period from but excluding a Dividend Payment Date to and including the following Dividend Payment Date is herein referred to as a “ Dividend Period .”

(b) If a cash dividend is not declared and paid in accordance with Section 3(a) on a Dividend Payment Date, then in full discharge of any accrual of dividends for such Dividend Period, the Accreted Value of each outstanding share of Series A Preferred Stock, regardless of its date of issue, shall automatically increase on such Dividend Payment Date by an amount equal to the Dividend Rate multiplied by the Accreted Value in effect immediately after the immediately prior Dividend Payment Date (or the Initial Issue Date in respect of the first Dividend Period).

(c) Dividends payable under Section 3(a) (or future dividends calculated in determining Change of Control Cash Price) and any increase in Accreted Value under Section 3(b) (or deemed increase in Accreted Value under Section 3(e) ) for any period less than a full quarterly dividend or accretion period (based upon the number of days elapsed during the period) shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

(d) Notwithstanding anything to the contrary in this Certificate of Designations, if at any time on or after December 30, 2019 the Closing Sale Price of the Common Stock equals or exceeds 130% of the Conversion Price then in effect for at least 25 consecutive Trading Days, all shares of Series A Preferred Stock will permanently cease to be entitled to any dividends pursuant to Section 3(a) or any further accretion of Accreted Value pursuant to Section 3(b) (the “ Dividend Termination Date ”); provided, however , that with respect to the period commencing on the day following the last Dividend Payment Date prior to the Dividend Termination Date and ending on, and including, the Dividend Termination Date (the “ Final Accrual Period ”), a cash dividend may be declared and paid in such amount accrued with respect to the Final Accrual Period payable on the next Dividend Payment Date following the Final Accrual Period as determined and paid otherwise in accordance with Section 3(a) , or if not declared and paid in accordance with the foregoing, the Accreted Value shall accrete in an amount accrued with respect to the Final Accrual Period on the next Dividend Payment Date following the Final Accrual Period as determined and accreted otherwise in accordance with Section 3(b) .

 

11


(e) Under this Certificate of Designations, in calculating either the (A) number of shares of Common Stock issued upon conversion of a share of Series A Preferred Stock or (B) redemption price per share of Series A Preferred Stock, the Accreted Value of each share of Series A Preferred Stock shall be increased by the amount of accrued and unpaid dividends during the then-current Dividend Period regardless of whether, at the time of such conversion or redemption, a dividend payable on the immediately succeeding Dividend Payment Date has been declared pursuant to Section 3(a) . Holders of shares of Series A Preferred Stock subject to conversion or redemption shall not be entitled to receive any payment of dividends declared pursuant to Section 3(a) in respect of the Dividend Period in which the conversion or redemption occurs notwithstanding that a Dividend Record Date may have been fixed for the payment of such dividends prior to such conversion or redemption.

(f) The Series A Preferred Stock shall fully participate, on an as-converted basis, in any dividend declared and paid or distribution on the Common Stock (other than any dividend paid or distribution on the Common Stock in connection with the liquidation, winding up or dissolution of the Corporation) as if the Preferred Stock were converted into shares of Common Stock on the Record Date for such dividend or distribution, at the Conversion Rate in effect on such Record Date.

(g) Holders of shares of Series A Preferred Stock shall not be entitled to any dividend other than as set forth in this Section 3 .

 

4. Special Rights Upon a Change of Control .

(a) Repurchase at the Option of the Holder . Subject to the application of Section 4(b) , upon the occurrence of a Change of Control, each Holder of outstanding shares of Series A Preferred Stock shall have the option to require the Corporation to purchase (a “ Change of Control Put ”) any or all of its shares of Series A Preferred Stock for cash at a purchase price per share of Series A Preferred Stock equal to the Change of Control Cash Price; provided that the Corporation shall only be required to pay the Change of Control Cash Price (i) after the Satisfaction of the Indebtedness Obligations, (ii) to the extent permitted by the Specified Contract Terms and (iii) to the extent such purchase can be made under applicable law and out of funds legally available therefor.

(b) Initial Change of Control Notice . On or before the twentieth (20th) Business Day prior to the date on which the Corporation anticipates consummating a Change of Control (or, if later, promptly after the Corporation discovers that a Change of Control may occur or has occurred), a written notice shall be sent by or on behalf of the Corporation to the Holders as they appear in the records of the Corporation, which notice shall contain the date on which the Change of Control is anticipated to be effected (or, if applicable, (x) the date on which a Schedule TO or other schedule, form or report disclosing a Change of Control was filed or (y) the date on which the Change of Control occurred). In connection with the delivery of such

 

12


notice, the Corporation may elect to redeem (the “ Change of Control Call ”), contingent upon and contemporaneously with the consummation of the Change of Control, but subject to the right of the Holders to convert the Series A Preferred Stock pursuant to Section 7(a) prior to any such redemption, any or all of the shares of Series A Preferred Stock for cash at a redemption price per share equal to Change of Control Cash Price.

(c) Final Change of Control Notice.  To the extent the Change of Control Call has not been previously exercised by the Corporation, within two days following the effective date of the Change of Control (the “ Change of Control Effective Date ”) (or if the Corporation discovers later than such date that a Change of Control has occurred, promptly following the date of such discovery), a final written notice shall be sent by or on behalf of the Corporation to the Holders as they appear in the records of the Corporation, which notice shall contain:

(i) the date by which the Holder must elect to exercise a Change of Control Put (which shall be no less than 20 days after the Change of Control Effective Date) (the “ Change of Control Put Deadline ”);

(ii) the amount of cash payable per share of Series A Preferred Stock, if such Holder elects to exercise a Change of Control Put;

(iii) a description of the payments and other actions required to be made or taken in order to effect the Satisfaction of the Indebtedness Obligations;

(iv) the consideration, if any, received in respect of each share of Common Stock in the Change of Control;

(v) the purchase date for such shares (which shall be no later than three Trading Days after the Satisfaction of the Indebtedness Obligations has occurred); and

(vi) the instructions a Holder must follow to exercise a Change of Control Put in connection with such Change of Control.

(d) Change of Control Put Procedure . To exercise a Change of Control Put, a Holder must, no later than 5:00 p.m., New York City time, on the Change of Control Put Deadline, surrender to the Conversion Agent the certificates, if any, representing the shares of Series A Preferred Stock to be repurchased by the Corporation (or if such certificate or certificates have been lost, stolen, or destroyed, a lost certificate affidavit and indemnity in form and substance reasonably acceptable to the Corporation and the Conversion Agent) or otherwise instruct the Conversion Agent to surrender such Holder’s uncertificated book-entry shares.

(e) Delivery upon Change of Control Put . Upon a Change of Control Put, after the Satisfaction of the Indebtedness Obligations and subject to Section 4(g) below, the Corporation (or its successor) shall deliver or cause to be delivered to the Holder by wire transfer the Change of Control Cash Price in consideration for the amount of such Holder’s shares of Series A Preferred Stock redeemed.

 

13


(f) Redemption by the Corporation.  In the case of a Change of Control, any shares of Series A Preferred Stock as to which a Change of Control Put or Change of Control Call was not exercised and that are otherwise outstanding following such Change of Control may be redeemed, at the option of the Corporation, upon not less than thirty (30) nor more than sixty (60) days’ notice, which notice must be received by the affected Holders within thirty (30) days of the Change of Control Put Deadline, at a redemption price per share equal to the Change of Control Cash Price.

(g) If the Corporation (A) shall not have sufficient funds legally available under applicable law to purchase all shares of Series A Preferred Stock that Holders have requested to be purchased under  Section 4(a)  (the “ Required Number of Shares ”) after the Satisfaction of the Indebtedness Obligations or (B) will be in violation of Specified Contract Terms if it purchases the Required Number of Shares, the Corporation shall (I) purchase, pro rata among the Holders that have requested their shares be purchased pursuant to  Section 4(a) , a number of shares of Series A Preferred Stock with an aggregate Change of Control Cash Price equal to the lesser of (1) the amount legally available for the purchase of shares of Series A Preferred Stock under applicable law and (2) the largest amount that can be used for such purchase not prohibited by Specified Contract Terms and (II) purchase any shares of Series A Preferred Stock not purchased because of the foregoing limitations at the applicable Change of Control Cash Price as soon as practicable after the Corporation is able to make such purchase out of assets legally available for the purchase of such share of Series A Preferred Stock and without violation of Specified Contract Terms. The inability of the Corporation to make a purchase payment for any reason shall not relieve the Corporation from its obligation to effect any required purchase when, as and if permitted by applicable law and Specified Contract Terms.

(h) Upon full payment for any shares of Series A Preferred Stock subject to a Change of Control Put or Change of Control Call, such shares will cease to be entitled to any dividends that may thereafter be payable on the Series A Preferred Stock; such shares of Series A Preferred Stock will no longer be deemed to be outstanding for any purpose; and all rights (except the right to receive the Change of Control Cash Price) of the Holder of such shares of Series A Preferred Stock shall cease and terminate with respect to such shares.

 

5. Voting; Directors.

(a) Voting . The shares of Series A Preferred Stock shall not have voting rights other than those set forth below or as otherwise required by Delaware law or the Certificate of Incorporation:

(i) From and after the Requisite Approvals Notice Date, Holders of shares of Series A Preferred Stock shall be entitled to vote as a single class with the holders of the Common Stock and the holders of any other class or series of Capital Stock of the Corporation then entitled to vote with the Common Stock on all matters submitted to a vote of the holders of Common Stock. Each Holder shall be entitled to the number of votes equal to the largest number of whole shares of Common Stock into which all shares of Series A Preferred Stock held of record by such Holder could then be converted pursuant to  Section 7  (ignoring for purposes of such determination the limitation on

 

14


conversion prior to the one year anniversary of the Initial Issue Date) at the record date for the determination of stockholders entitled to vote or consent on such matters. The Holders shall be entitled to notice of any meeting of holders of Common Stock in accordance with the bylaws of the Corporation.

(ii) So long as any shares of Series A Preferred Stock remain outstanding, the Corporation shall not, without the affirmative vote or consent of the Holders of at least a majority in voting power of the shares of Series A Preferred Stock outstanding at the time, voting together as a single class, given in person or by proxy, either in writing or at a meeting:

(A) authorize or create, or increase the authorized amount of, or issue any class or series of Senior Stock or Parity Stock or reclassify any of the authorized capital stock of the Corporation into shares of Senior Stock or Parity Stock, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any shares of Senior Stock or Parity Stock; or

(B) amend, alter or repeal the provisions of the Certificate of Incorporation or this Certificate of Designations, whether by merger, consolidation or otherwise (an “ Event ”) so as to adversely affect any right, preference, privilege or power of the shares of Series A Preferred Stock.

provided , however , with respect to the occurrence of any Event set forth in (B) above, so long as any shares of the Series A Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent with the same rights and preferences in all material respects as the Series A Preferred Stock (other than with respect to board election rights set forth in Section 5(b) ), the occurrence of any such Event shall not be deemed to adversely affect such rights, preferences, privileges or power of the Series A Preferred Stock; provided, further , that any increase in the amount of the authorized Junior Stock, or the creation or issuance of any additional shares of Junior Stock, shall not be deemed to adversely affect such rights, preferences, privileges or powers.

(iii) Whether a plurality, majority or other portion of the Series A Preferred Stock or any other series of voting Preferred Stock have been voted in favor of any matter shall be determined by reference to the respective aggregate liquidation preferences of the Series A Preferred Stock or such other series of voting Preferred Stock, as applicable.

 

  (b) Directors.

(i) From and after the Requisite Approvals Notice Date, (i) at any time that Carlyle or its Affiliates hold both (A) any shares of Series A Preferred Stock and (B) shares of Common Stock and Series A Preferred Stock representing, on an as-converted basis, at least 10% of the total number of issued and outstanding shares of Common

 

15


Stock (assuming, only for the purposes of determining such threshold amount of shares, all shares of Series A Preferred Stock were converted at the Conversion Rate in effect on such date), the Holders of a majority of the then outstanding shares of Series A Preferred Stock shall have the exclusive right, voting separately as a class, to appoint and elect two directors to the Board (any director elected by the Holders pursuant to this Section 5(b), herein referred to as a “ Series A Director ”) and (ii) at any time that Carlyle or its Affiliates holds both (A) any shares of Series A Preferred Stock and (B) shares of Common Stock and Series A Preferred Stock representing, on an as-converted basis, more than 5% but less than 10% of the total number of issued and outstanding shares of Common Stock (assuming, only for the purposes of determining such threshold amount of shares, all shares of Series A Preferred Stock were converted at the Conversion Rate in effect on such date), the Holders of a majority of the then outstanding shares of Series A Preferred Stock shall have the exclusive right, voting separately as a class, to appoint and elect one Series A Director, in each case subject to any Series A Director satisfying all requirements regarding service as a director of the Corporation under applicable law or stock exchange rule regarding service as a director of the Corporation and such other reasonable criteria and qualifications required to be satisfied for service as a director applicable to all directors of the Corporation.

(ii) Each Series A Director so elected shall serve until his or her successor is elected and qualified or his or her earlier death, resignation, retirement, disqualification or removal; any vacancy or newly created directorship in the position of a Series A Director may be filled only by the Holders of a majority of the then outstanding shares of Series A Preferred Stock; and each Series A Director may, during his or her term of office, be removed at any time, with or without cause, by and only by the Holders of a majority of the then outstanding shares of Series A Preferred Stock. Notwithstanding the foregoing, at such time as the Holders of a majority of the then outstanding shares of Series A Preferred Stock cease to be entitled to appoint and elect any Series A Director pursuant to this Section 5(b) (as a result of Carlyle or its Affiliates either ceasing to hold (i) any shares of Series A Preferred Stock or (ii) at least 10% or more than 5%, as applicable, of the total number of issued and outstanding shares of Common Stock, assuming, only for the purposes of determining such threshold amount of shares, all shares of Series A Preferred Stock were converted at the Conversion Rate in effect on such date), (x) the right of the Holders of Series A Preferred Stock to appoint and elect one or two directors to the Board, as applicable, shall permanently terminate and (y) from and after such time, one or both of the Series A Directors, as applicable, shall cease to be qualified to serve as a director and such directorship shall terminate, and the size of the Board shall automatically be reduced.

(iii) Notwithstanding anything to the contrary in this Certificate of Designations, solely for purposes of voting with respect to Series A Directors pursuant to this Section 5(b) , the issued and outstanding shares of Series A Preferred Stock held by Carlyle and its Affiliates at any time shall be entitled to a number of votes equal to 50.1% of all votes entitled to be cast by the Holders of the then outstanding shares of Series A Preferred Stock.

 

16


6. Liquidation Preference.

(a) In the event of any liquidation, winding up or dissolution of the Corporation, whether voluntary or involuntary, each Holder shall be entitled to receive in respect of its shares of Series A Preferred Stock and to be paid out of the assets of the Corporation legally available for distribution to its stockholders, after satisfaction of liabilities to the Corporation’s creditors and holders of shares of Senior Stock and before any payment or distribution is made to holders of Junior Stock (including the Common Stock), an amount equal to the greater of (x) the Accreted Value per share of Series A Preferred Stock plus an amount equal to all accrued and unpaid dividends on such share of Series A Preferred Stock for the then-current Dividend Period to, and including, the date fixed for liquidation, winding up or dissolution assuming the Corporation elected to pay such dividends in cash pursuant to Section 3(a) but only to the extent such dividends otherwise would have been payable under Section 3(d) and (y) the amount that such Holder would have been entitled to receive if all of such Holder’s shares of Series A Preferred Stock were converted into Common Stock (at the Conversion Rate then in effect) immediately prior to such liquidation, winding up or dissolution of the Corporation (regardless of whether the Series A Preferred Stock is then convertible pursuant to the terms hereof).

(b) Neither the sale, conveyance, exchange or transfer of all or substantially all the assets or business of the Corporation (other than in connection with the liquidation, winding up or dissolution of the Corporation), nor the merger or consolidation of the Corporation into or with any other Person, nor any share exchange or division involving the Corporation pursuant to applicable statutes providing for the consolidation, merger, share exchange or division, shall be deemed to be a liquidation, winding up or dissolution, whether voluntary or involuntary, for the purposes of this Section 6 , notwithstanding that, for other purposes, such as for tax purposes, such an event may constitute a liquidation, dissolution or winding up.

(c) After the payment to the Holders of the shares of Series A Preferred Stock of full preferential amounts provided for in this Section 6 , the Holders of Series A Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

(d) In the event the assets of the Corporation available for distribution to the Holders and holders of shares of Parity Stock upon any liquidation, winding up or dissolution of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to this Section 6 , such Holders and such holders of shares of Parity Stock shall share, equally and ratably in proportion to the respective full amounts to which such holders are entitled pursuant to this Section 6 , in any distribution of the assets of the Corporation.

 

17


7. Conversion; Redemption.

 

  (a) Holder Conversion .

(i) Each Holder shall have the right, at any time following June 30, 2018 to convert each share of such Holder’s Series A Preferred Stock into (i) that number of whole shares of Common Stock equal to the quotient of (A) the Accreted Value divided by (B) the Conversion Price as of the applicable Conversion Date plus (ii) cash in lieu of fractional shares as set out in Section 9 . The foregoing right of conversion may be exercised as to all or any portion of such Holder’s Series A Preferred Stock from time to time; provided that, in each case, no right of conversion may be exercised by a Holder in respect of fewer than 1,000 shares of Series A Preferred Stock (unless such conversion relates to all shares of Series A Preferred Stock held by such Holder).

(ii) Notwithstanding anything to the contrary in Section 7(a)(i) , a Holder shall have the right to convert, prior to June 30, 2018, (i) all or any portion of such Holder’s Series A Preferred Stock following the delivery by the Corporation of the notice contemplated by Section 4(b) and prior to the consummation of the applicable Change of Control and (ii) in connection with an Underwritten Offering that the Holder then has a right to participate in under the Registration Rights Agreement, such number of shares of Series A Preferred Stock that will, upon conversion, result in the issuance to the Holder of the maximum number of shares of Common Stock the Holder is permitted to include for sale in such Underwritten Offering.

(iii) In order to convert shares of Series A Preferred Stock into shares of Common Stock pursuant to this Section 7(a) , the Holder must (i) deliver a notice of conversion to the Corporation in the form attached hereto as Exhibit B and (ii) surrender the certificates, if any, representing such shares of Series A Preferred Stock (or, if such certificate or certificates have been lost, stolen, or destroyed, a lost certificate affidavit and indemnity in form and substance reasonably acceptable to the Corporation), accompanied by transfer instruments reasonably satisfactory to the Corporation (including instructions to the Transfer Agent in the case of uncertificated book-entry shares), at the principal office of the Corporation (or such other place mutually acceptable to the Holder and the Corporation), together with written notice that such Holder elects to convert all or such lesser number of shares represented by such certificates as specified therein. With respect to a conversion pursuant to this Section 7(a) , the date of receipt of such certificates, if any, together with such notice, by the Corporation or (in accordance with the immediately preceding sentence) its authorized agent will be the “ Conversion Date ”.

(iv) Notwithstanding anything herein to the contrary, the Series A Preferred Stock shall not be convertible into Common Stock under Sections 7(a) or 7(b) until the Requisite Approvals Notice Date.

 

  (b) Mandatory Conversion .

(i) At any time on or after June 30, 2021, the Corporation shall have the right, at its option, to elect to cause all or any portion of the outstanding shares of Series A Preferred Stock to be automatically converted into (i) that number of shares of Common Stock for each share of Series A Preferred Stock equal to the quotient of (A) the Accreted Value divided by (B) the Conversion Price as of the applicable Mandatory Conversion Date plus (ii) cash in lieu of fractional shares as set out in Section 9 , subject to the satisfaction of the following conditions with respect to each such mandatory conversion:

 

18


(I) the Closing Sale Price of the Common Stock equals or exceeds 140% of the Conversion Price then in effect for at least 20 consecutive Trading Days ending on the date immediately prior to the date the notice described in Section 7(b)(ii) is delivered by the Corporation; (II) the number of shares of Common Stock into which such shares of Series A Preferred Stock will convert shall not exceed 25 times the average daily trading volume of the Common Stock on the New York Stock Exchange (or other principal stock exchange on which the Common Stock is then traded) during the 20 consecutive Trading Day period set forth in clause (I); (III) with respect to any Holder, if the shares of Common Stock issuable upon conversion of the Holder’s Series A Preferred Stock are Registrable Securities and the Holder thereof previously requested that all or any portion of such Registrable Securities be registered for resale by the Holder, such Registrable Securities have been so registered for resale pursuant to a resale registration statement and the Corporation is not then in breach of any its obligations under the Registration Rights Agreement with respect to such registration or requirements to maintain the effectiveness of such registration statement registering the resale of such Registrable Securities; and (IV) the Corporation shall only be entitled to deliver one notice to the Holders pursuant to this Section 7(b)(ii) in any one hundred and eighty day period.

(ii) To exercise the mandatory conversion right described in Section 7(b)(i) , the Corporation must deliver to the Holders a notice setting forth: (i) the date on which the mandatory conversion will occur (the “ Mandatory Conversion Date ”), which shall be no earlier than the date that is three (3) Trading days after the notice described in this Section 7(a)(ii) is delivered; (ii) calculations supporting the satisfaction of the condition in clause (II) in the preceding Section 7(b)(i); and (iii) with respect to each Holder, the number of shares of Preferred Stock to be converted. Effective as of such Mandatory Conversion Date, all such Holder’s shares of Series A Preferred Stock shall automatically convert into shares of Common Stock as set forth in Section 7(a)(i) .

(iii) If the Corporation elects to cause less than all the shares of the Series A Preferred Stock to be converted, the Corporation shall select the Series A Preferred Stock to be converted from each Holder on a pro rata basis.

(iv) Notwithstanding the foregoing, the Corporation shall not be entitled to convert the last share of Series A Preferred Stock held by Carlyle or its Affiliates into Common Stock pursuant to this Section 7(b) at any time that such share on an as-converted basis, together with any shares of Common Stock held or to be held by Carlyle or its Affiliates immediately following such conversion, would represent more than 5% of the total number of issued and outstanding shares of Common Stock as of such date.

 

  (c) Redemption .

(i) At any time on or after June 30, 2022, the Corporation shall have the right, at its option, to elect to cause all or any portion of the outstanding shares of Series A Preferred Stock to be redeemed for cash at a redemption price per share equal to (i) if the Redemption Date is on or prior to June 30, 2023, the Accreted Value multiplied by 112%, (ii) if the Redemption Date is after June 30, 2023 and on or prior to June 30, 2024, the Accreted Value multiplied by 109% and (iii) if the Redemption Date is after June 30, 2024, the Accreted Value multiplied by 106%.

 

19


(ii) To exercise the redemption right described in Section 7(c) , the Corporation must deliver to the Holders a notice setting forth: (i) the date on which the redemption will occur (the “ Redemption Date ”), which shall be no earlier than ten (10) Business Days after the date such notice is given; and (ii) with respect to each Holder, the number of shares of Preferred Stock subject to redemption and the price to be paid to such Holder in respect thereof.

 

  (d) Conversion and Redemption Procedures .

(i) In connection with any mandatory conversion pursuant to Section 7(b) or redemption in accordance with Section 7(c) , the Holder must surrender the certificates, if any, representing such shares of Series A Preferred Stock (or, if such certificate or certificates have been lost, stolen, or destroyed, a lost certificate affidavit and indemnity in form and substance reasonably acceptable to the Corporation), and deliver transfer instruments reasonably satisfactory to the Corporation (including instructions to the Transfer Agent in the case of uncertificated book-entry shares), at the principal office of the Corporation (or such other place mutually acceptable to the Holder and the Corporation).

(ii) On the Conversion Date, Redemption Date or the Mandatory Conversion Date, as applicable, with respect to any share of Series A Preferred Stock, certificates or uncertificated book-entry shares representing the number of shares of Common Stock into which the applicable shares of Series A Preferred Stock are converted shall be promptly issued and delivered to the Holder thereof or such Holder’s designee (or cash shall be paid to an account designated by such Person) upon presentation and surrender of the certificate, if any, evidencing the Series A Preferred Stock (or, if such certificate or certificates have been lost, stolen, or destroyed, a lost certificate affidavit and indemnity in form and substance reasonably acceptable to the Corporation) or the instructions to the Transfer Agent in the case of uncertificated book-entry shares, to the Corporation and, if required, the furnishing of appropriate endorsements and transfer documents and the payment of all transfer and similar taxes, if any, allocable to the Holder. For the avoidance of doubt, (i) a Holder of Series A Preferred Stock shall have the right to affect a conversion pursuant to Section 7(a) up to and including the date of a redemption and (ii) the satisfaction of the obligations set forth in Section 7(d)(i) shall be conditions to the issuance of share of Common Stock or the payment of the cash redemption price, as applicable, but shall not impact the conversion or redemption of the Series A Preferred Stock, as applicable.

 

20


(iii) From and after the Conversion Date, the Redemption Date or the Mandatory Conversion Date, as applicable, the shares of Series A Preferred Stock to be converted on such Conversion Date or the Mandatory Conversion Date, as applicable, or redeemed on such Redemption Date will cease to be entitled to any dividends that may thereafter accrue on the Series A Preferred Stock; such shares of Series A Preferred Stock will no longer be deemed to be outstanding for any purpose; and all rights (except (i) in the case of conversion, the right to receive from the Corporation the Common Stock and cash payable in lieu of fractional shares in respect of such shares of Series A Preferred Stock, or (ii) in the case of redemption, the right to receive from the Corporation the cash payable in respect of such shares of Series A Preferred Stock ) of the Holder of such shares of Series A Preferred Stock to be converted or redeemed shall cease and terminate with respect to such shares.

(iv) The Person or Persons entitled to receive the Common Stock and/or other securities issuable upon conversion of Series A Preferred Stock shall be treated for all purposes as the record holder(s) of such shares of Common Stock and/or securities as of the Close of Business on the Conversion Date or the Mandatory Conversion Date, as applicable, with respect thereto. In the event that a Holder shall not by written notice designate the name in which shares of Common Stock and/or securities to be issued or upon conversion of shares of Series A Preferred Stock should be registered, the Corporation shall be entitled to register and deliver such shares in the name of the Holder.

 

8. Conversion Price Adjustments; Reorganization Event .

(a) The Conversion Price shall be adjusted, without duplication, upon the occurrence of any of the following events:

(i) If the Corporation issues shares of Common Stock as a dividend or distribution on all shares of Common Stock, or if the Corporation effects a share subdivision or share combination, then the Conversion Price in effect immediately following the Record Date for such dividend, distribution, share subdivision or share combination shall be divided by the following fraction:

 

  OS 1 / OS 0  
      where,
  OS 0   =   the number of shares of Common Stock outstanding immediately prior to the Close of Business on the Record Date for such dividend or distribution, or immediately prior to the Open of Business on the effective date of such share subdivision or share combination, as the case may be; and
  OS 1   =   the number of shares of Common Stock outstanding immediately after, and solely as a result of, giving effect to such dividend or distribution, or such share subdivision or share combination, as the case may be.

Any adjustment made under this Section 8(a)(i)  shall become effective immediately after the Close of Business on the Record Date for such dividend or distribution, or immediately after the Open of Business on the effective date for such share subdivision or share combination, as the case may be. If any dividend, distribution,

 

21


share subdivision or share combination of the type described in this Section 8(a)(i)  is declared but not so paid or made, the Conversion Price shall be immediately readjusted, effective as of the earlier of (A) the date the Board determines not to pay or make such dividend, distribution, subdivision or combination and (B) the date the dividend or distribution was to be paid or the date the subdivision or combination was to have been effective, to the Conversion Price that would then be in effect if such dividend, distribution, subdivision or combination had not been declared.

The Corporation shall not pay any dividend or make any distribution on shares of Common Stock held in treasury.

(ii) If the Corporation distributes to all holders of its Common Stock any rights, options or warrants entitling them to purchase or subscribe for shares of Common Stock at a price per share that is less than the average of the Closing Sale Prices of Common Stock over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Date of such distribution, the Conversion Price in effect immediately following the close of business on the Record Date for such distribution shall be divided by the following fraction:

        OS 0 + X            

OS 0 + Y

 

       where,
  OS 0   =    the number of shares of Common Stock outstanding immediately prior to the Close of Business on the Record Date for such distribution;
  X   =    the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and
  Y   =    the number of shares of Common Stock equal to the quotient of (A) the aggregate price payable to exercise such rights, options or warrants and (B) the average of the Closing Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Date of such distribution.

Any decrease to the Conversion Rate made under this Section 8(a)(ii) shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the Close of Business on the Record Date for such distribution. To the extent that shares of Common Stock are not issued prior to the expiration or termination of such rights, options or warrants, the Conversion Price shall be increased, effective as of the date of such expiration, to the Conversion Price that would then be in effect had the increase with respect to the distribution of such rights, options or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such rights, options or warrants are not so distributed, the Conversion Price shall be increased, effective as of the earlier of (A) the

 

22


date the Board determines not to make such distribution and (B) the date such rights, options or warrants were to have been issued, to be the Conversion Price that would then be in effect if such Record Date for such distribution had not occurred. If such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the Conversion Price shall not be adjusted until the triggering events occur.

For purposes of this Section 8(a)(ii) , in determining the aggregate price payable to exercise any such rights, options or warrants there shall be taken into account any consideration received by the Corporation for such rights, options or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board.

(iii) If the Corporation distributes shares of its Capital Stock, evidences of its indebtedness or other assets, securities or property of the Corporation or rights, options or warrants to acquire its Capital Stock or other securities, to all holders of Common Stock, excluding (A) dividends, distributions, rights, options, warrants or other issuances as to which an adjustment was effected pursuant to Section 8(a)(i) or Section 8(a)(ii) , (B) rights issued to all holders of Common Stock pursuant to a rights plan, where such rights are not presently exercisable, trade with Common Stock and the plan provides that Holders will receive such rights along with any Common Stock received upon conversion of the Series A Preferred Stock, (C) dividends or distributions paid exclusively in cash as to which the Holders participated in accordance with Section 3(g) , (D) any dividends and distributions in connection with any recapitalization, reclassification, change, consolidation, merger or other combination, share exchange, or sale, lease or other transfer or disposition resulting in the change in the conversion consideration as described in Section 8(e) and (E) Spin-Offs as to which the provisions set forth below in the last two paragraphs of this Section 8(a)(iii) shall apply, then the Conversion Price in effect immediately following the close of business on the Record Date for such distribution shall be divided by the following fraction:

            SP 0              

SP 0 – FMV

 

       where,
  SP 0   =    Closing Sale Price per share of the Common Stock on the Trading Day immediately preceding the Ex-Date for such distribution; and
  FMV   =    the fair market value as of the Record Date for such distribution (as determined in good faith by the Board) of the shares of the Corporation’s Capital Stock (other than Common Stock), evidences of indebtedness, assets, securities, property, rights, options or warrants distributed with respect to each outstanding share of Common Stock.

 

23


Any decrease to the Conversion Price made under the portion of this Section 8(a)(iii)  above shall become effective immediately after the Close of Business on the Record Date for such distribution. If such distribution is not so paid or made, the Conversion Price shall be increased, effective as of the earlier of (A) the date the Board determines not to pay the distribution and (B) the date such dividend or distribution was to have been paid, to be the Conversion Price that would then be in effect if such distribution had not been declared.

Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP 0 ” (as defined above), or if the difference is less than $1.00, in lieu of the foregoing increase, each Holder shall receive, for each share of Series A Preferred Stock held by it, at the same time and upon the same terms as holders of the Common Stock, the amount and kind of the Corporation’s Capital Stock (other than Common Stock), evidences of indebtedness, or other assets, securities or property of the Corporation, or rights, options or warrants to acquire the Corporation’s Capital Stock or other securities that such Holder would have received if such Holder converted all of its shares of Series A Preferred Stock at the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for the distribution.

With respect to an adjustment pursuant to this Section 8(a)(iii)  where there has been a payment of a dividend or other distribution on the Common Stock consisting solely of shares of Capital Stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit of the Corporation where such Capital Stock or similar equity interest is, or will be when issued, listed or admitted for trading on a U.S. national securities exchange (a “ Spin-Off ”), the Conversion Price shall be adjusted immediately after the Close of Business on the 10th Trading Day immediately following, and including, the Ex-Date for the Spin-off by dividing the Conversion Price in effect immediately prior to the Close of Business on such 10th Trading Day by the following fraction:

    FMV + MP 0     

MP 0

 

        where,
  FMV    =    the average of the Closing Sale Prices of the Capital Stock or similar equity interest distributed to holders of the Common Stock applicable to one share of Common Stock over the 10 consecutive Trading Day period immediately following, and including, the Ex-Date for the Spin-Off; and
  MP 0    =    the average of the Closing Sale Prices of the Common Stock over the 10 consecutive Trading Day period immediately following, and including, the Ex-Date for the Spin-Off.

The adjustment to the Conversion Price under the preceding paragraph shall become effective at the Close of Business on the 10th Trading Day immediately following, and including, the Ex-Date for the Spin-Off; provided that, for purposes of determining the Conversion Price in respect of any conversion during the 10 Trading Days following, and including, the Ex-Date of any Spin-Off, references to “10 consecutive Trading Days” within the portion of this Section 8(a)(iii) related to Spin-Offs shall be deemed to be replaced with such lesser number of consecutive Trading Days as have elapsed between the Ex-Date of such Spin-Off and the relevant Conversion Date.

 

24


(iv) If the Corporation or any of its Subsidiaries make a payment in respect of a tender or exchange offer for Common Stock to the extent that the cash and value of any other consideration included in the payment per share of Common Stock exceeds the average of the Closing Sale Prices of the Common Stock over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (the “ Expiration Date ”), the Conversion Price shall be adjusted immediately after the Close of Business on the last Trading Day of the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the Expiration Date by dividing the Conversion Price in effect immediately prior to the Close of Business on such last Trading Day of the 10 consecutive Trading Day period by the following fraction:

    AC + (SP1 x OS1)        

SP 1 x OS 0

 

       where,
  AC   =    the aggregate value of all cash and any other consideration (as determined in good faith by the Board) paid or payable for shares of Common Stock purchased in such tender or exchange offer;
  OS 0   =    the number of shares of Common Stock outstanding immediately prior to the Expiration Date (prior to giving effect to the purchase of all shares of Common Stock accepted for purchase or exchange in such tender or exchange offer);
  OS 1   =    the number of shares of Common Stock outstanding immediately after the Expiration Date (after giving effect to the purchase of all shares of Common Stock accepted for purchase or exchange in such tender or exchange offer); and
  SP 1   =    the average of the Closing Sale Prices of the Common Stock over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the Expiration Date.

Any decrease to the Conversion Price made under this Section 8(a)(iv) shall become effective at the Close of Business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the Expiration Date; provided that, for purposes of determining the Conversion Price in respect of any conversion during the 10 Trading Days immediately following, and including, the Trading Day next succeeding the Expiration Date, references to “10 consecutive Trading Days” within this Section 8(a)(iv) shall be deemed to be replaced with such lesser number of consecutive Trading Days as have elapsed between the Expiration Date for such tender or exchange offer and the relevant Conversion Date.

 

25


In the event that the Corporation or one of its Subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Corporation or such Subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Price shall be readjusted to be such Conversion Price that would then be in effect if such tender offer or exchange offer had not been made.

(v) All calculations and other determinations under this Section 8(a) shall be made by the Corporation and shall be made to the nearest one-ten thousandth (1/10,000th) of a share. Notwithstanding anything herein to the contrary, no adjustment under this Section 8(a) shall be made to the Conversion Price unless such adjustment would result in a change of at least 1% in the Conversion Price then in effect. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, if any, which, together with any adjustment or adjustments so carried forward, shall amount to a change of at least 1% in such Conversion Price; provided , however , that the Corporation shall make all such carried-forward adjustments, regardless of whether the aggregate adjustment is less than 1%, (A) on December 31 of each calendar year, (B) on the Conversion Date for any conversions of Series A Preferred Stock, (C) upon the occurrence of a Change of Control and (D) in the event that the Corporation exercises its mandatory conversion right pursuant to Section 7(b) . No adjustment to the Conversion Price shall be made if it results in a Conversion Price that is less than the par value (if any) of the Common Stock. The Corporation shall not take any action that would result in the Conversion Price being less than the par value (if any) of the Common Stock pursuant to this Certificate of Designations and without giving effect to the previous sentence.

(vi) In addition to those adjustments required by clauses (i) , (ii) , (iii)  and (iv)  of this Section 8(a) , and to the extent permitted by applicable law and subject to the applicable rules of the New York Stock Exchange, the Corporation, from time to time, may decrease the Conversion Price by any amount for a period of at least twenty (20) Business Days or any longer period permitted or required by law, so long as the decrease is irrevocable during that period and the Board determines that such decrease would be in the Corporation’s best interest. Whenever the Conversion Price is decreased pursuant to the preceding sentence, the Corporation shall send to each Holder at its last address appearing on the stock register of the Corporation a notice of the decrease at least 15 calendar days prior to the date the decreased Conversion Price takes effect, and such notice shall state the decreased Conversion Price and the period during which it will be in effect.

(vii) Notwithstanding the foregoing in this Section 8(a) and for the avoidance of doubt, the Conversion Price shall not be adjusted for: (A) the issuance of Common Stock pursuant to any present or future plan broadly available to holders of its Common Stock providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in shares of Common Stock under any plan; (B) the issuance of Common Stock, options, restricted stock,

 

26


restricted stock units, performance units or rights to purchase those shares or similar equity instruments as compensation pursuant to any present or future employee, director or consultant benefit plan, employee agreement or arrangement or program of the Corporation or any of its Subsidiaries, in each case approved by the Corporation’s stockholders; (C) the issuance of Common Stock pursuant to any option, warrant, right or excisable, exchangeable or convertible security outstanding as of the Initial Issue Date; (D) a change in the par value of Common Stock; (E) a sale of Common Stock, or securities convertible or exercisable for Common Stock, for cash, other than in a transaction described in Section 8(a)(i) through Section 8(a)(iv) ; (F) ordinary course of business stock repurchases that are not tender offers referred to in Section 8(a)(iv) , including structured or derivative transactions or pursuant to a stock repurchase program approved by the Board; (G) a third-party tender or exchange offer, other than a tender or exchange offer by one of the Corporation’s Subsidiaries as described in Section 8(a)(iv) ; (H) accrued and unpaid dividends or distributions, except as provided in Section 4 , Section 7 , and Section 8; and (I) any dividends, distributions or other transactions in which the holders of Series A Preferred Stock participate pursuant to Section 3(f) .

(b) Notwithstanding Section 8(a)(ii) and Section 8(a)(iii) , if the Corporation has a rights plan (including the distribution of rights pursuant thereto to all holders of Common Stock) in effect while any shares of Series A Preferred Stock remain outstanding, Holders will receive, upon conversion of shares of Series A Preferred Stock, in addition to shares of Common Stock to which each such Holder is entitled, a corresponding number of rights in accordance with such rights plan. If, prior to any conversion of shares of Series A Preferred Stock, such rights have separated from the shares of Common Stock in accordance with the provisions of the applicable rights plan, the Conversion Price will be adjusted at the time of separation as if the Corporation had distributed to all or substantially all holders of Common Stock, shares of Capital Stock, evidences of indebtedness, assets, securities, property, rights, options or warrants as described in Section 8(a)(iii) above, subject to readjustment in the event of the expiration, termination or redemption of such rights. Any distribution of rights, options or warrants pursuant to a rights plan that would allow a Holder to receive, upon conversion of shares of Series A Preferred Stock, in addition to any shares of Common Stock to which such Holder is entitled, the rights described therein (unless such rights, options or warrants have separated from the Common Stock (in which case the Conversion Price will be adjusted at the time of separation as if the Corporation made a distribution to all holders of Common Stock as described in Section 8(a)(iii) , subject to readjustment in the event of the expiration, termination or redemption of such rights)) shall not constitute a distribution of rights, options or warrants that would entitle such Holder to an adjustment to the Conversion Rate.

(c) The Corporation may also (but is not required to) decrease each Conversion Price to avoid or diminish any income tax to holders of Common Stock or rights to purchase shares of Common Stock in connection with a dividend or distribution of shares (or rights to acquire shares) or similar event. However, in either case, the Corporation may only make such a discretionary adjustment if it makes the same proportionate adjustment to each Conversion Price.

 

27


(d) Upon any decrease in the Conversion Price, the Corporation promptly shall deliver to each Holder a certificate signed by an Officer of the Corporation, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated, and specifying the increased Conversion Price then in effect following such adjustment.

(e) In the case of:

(i) any recapitalization, reclassification or change in 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 changes resulting from a subdivision or combination),

(ii) any consolidation, merger or other combination involving the Corporation,

(iii) any sale, lease or other transfer or disposition to a third party of the consolidated assets of the Corporation and the Corporation’s Subsidiaries substantially as an entirety, or

(iv) any statutory share exchange of the Corporation’s securities with another person (other than in connection with a merger or acquisition),

in each case, as a result of which Common Stock (but not the Series A Preferred Stock) would be converted into, or exchanged for, stock, other securities or other property or assets (including cash or any combination thereof) (any such transaction or event, a “ Reorganization Event ”), then, at and after the effective time of such Reorganization Event, the right to convert each share of Series A Preferred Stock into shares of Common Stock shall be changed into a right to convert such share of Series A Preferred Stock into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that the Holder would have received if it had converted all of its shares of Series A Preferred Stock at the Conversion Rate immediately prior to such Reorganization Event would have been entitled to receive upon such Reorganization Event (such stock, securities or other property or assets, the “ Reference Property ”). In the event that, in connection with any such Reorganization Event, the holders of Common Stock have the opportunity to elect the form of all or any portion of the consideration to be received by such holders in such Reorganization Event, the Reference Property into which shares of Series A Preferred Stock will be convertible shall be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such election (or of all holders of Common Stock if no holders of Common Stock make such election). Notwithstanding Section 8(a) , no adjustment to the Conversion Price shall be made for any Reorganization Event to the extent stock, securities or other property or assets become the Reference Property receivable upon conversion of Series A Preferred Stock.

The provisions of this Section 8(e)  shall apply to successive Reorganization Events.

None of the foregoing provisions of this Section 8(e) shall affect the right of a Holder to convert its Series A Preferred Stock into shares of Common Stock as set forth in Section 7(a) prior to the effective time of such Reorganization Event. The Corporation shall not become party to a Reorganization Event unless its terms are consistent with this Section 8(e) .

 

28


In this Certificate of Designations, if Common Stock has been replaced by Reference Property as a result of any such Reorganization Event, references to “ Common Stock ” are intended to refer to such Reference Property.

(f) A converting Holder is not required to pay any transfer or similar taxes due upon conversion of such Holder’s shares of Series A Preferred Stock, except that such Holder shall pay such transfer or similar taxes payable relating to any transfer involved in the issuance or delivery of shares of Common Stock, if any, due upon conversion of such shares of Series A Preferred Stock in a name other than that of the converting Holder. The Corporation may require that such converting Holder establish to the reasonable satisfaction of the Corporation, that such converting Holder has paid in full all applicable transfer or similar taxes, if any, payable by such converting Holder prior to issuing and delivered the shares of Common Stock due upon conversion of such converting Holder’s shares of Series A Preferred Stock.

9. No Fractional Shares . No fractional shares of Common Stock will be delivered to the Holders upon conversion. In lieu of fractional shares otherwise issuable, the Holders will be entitled to receive an amount in cash equal to the fraction of a share of Common Stock multiplied by the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the applicable Conversion Date or Mandatory Conversion Date, as applicable. In order to determine whether the number of shares of Common Stock to be delivered to a Holder upon the conversion of such Holder’s shares of Series A Preferred Stock will include a fractional share, such determination shall be based on the aggregate number of shares of Series A Preferred Stock of such Holder that are being converted on any single Conversion Date or Mandatory Conversion Date, as applicable.

10. Transfer Restrictions; Certificates.

 

  (a) Transfer Restrictions.

(i) Except as otherwise permitted in this Certificate of Designations, including Section 10(a)(ii) , until June 30, 2018, the Holders will not (i) Transfer any Series A Preferred Stock or (ii) make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a short sale of or the purpose of which is to offset the loss which results from a decline in the market price of, any shares of Series A Preferred Stock or Common Stock, or otherwise establish or increase, directly or indirectly, a put equivalent position, as defined in Rule 16a-1(h) under the Exchange Act, with respect to any of the Series A Preferred Stock, the Common Stock or any other Capital Stock of the Corporation (any such action, a “ Hedge ”).

 

29


(ii) Notwithstanding Section 10(a)(i) , the Holders shall be permitted to Transfer any portion or all of their Series A Preferred Stock or Common Stock at any time under the following circumstances:

(A) Transfers to any Affiliate of such Holder (the recipient of the shares so Transferred, a “ Permitted Transferee ”), but only if the transferee agrees in writing prior to such Transfer for the express benefit of the Corporation (in form and substance reasonably satisfactory to the Corporation and with a copy thereof to be furnished to the Corporation) to be bound by the terms of this Certificate of Designations and if the transferee and the transferor agree for the express benefit of the Corporation that the transferee shall Transfer the Series A Preferred Stock (or any Equity Securities issued in respect thereof) so Transferred back to the transferor at or before such time as the transferee ceases to be a Permitted Transferee of the transferor); and

(B) Transfers pursuant to a Change of Control which has been approved by the Board, has not been initiated by such Holder (or its Affiliates) and pursuant to which the Series A Preferred Stock is converted into cash or equity securities; and

(iii) Notwithstanding Sections 10(a)(i) and 10(a)(ii) , the Holders will not at any time, directly or knowingly indirectly (without the prior written consent of the Board which, in the case of any 10% Entity, shall not be unreasonably withheld) Transfer any Series A Preferred Stock or Common Stock issued upon conversion of the Series A Preferred Stock to a Corporation Competitor or a 10% Entity.

(iv) Notwithstanding Sections 10(a)(i) , 10(a)(ii) or 10(a)(iii) , (i) nothing therein shall prohibit any Holder from Transferring all or any portion of its Series A Preferred Stock or Common Stock issued upon conversion thereof (A) to NGP or any of its Subsidiaries or (B) as approved in writing by the Board, (ii) nothing in Sections 10(a)(ii) or 10(a)(iii) shall restrict any Transfer of Common Stock into the public market pursuant to an Underwritten Offering or otherwise in an open market transaction and (iii) nothing in Sections 10(a)(i) or 10(a)(iii) shall restrict any Transfer of Common Stock in connection with, and to the extent of, the exercise of such Holder’s rights to participate in any Underwritten Offering that it is then eligible to participate in pursuant to the Registration Rights Agreement or to exercise their rights to demand registration not involving a sale pursuant to the Registration Rights Agreement.

(v) Notwithstanding anything to the contrary in this Section 10(a) , no Holder shall Transfer all or any portion of its Series A Preferred stock (i) to any Person that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code or (ii) prior to the HSR Expiration Date.

(vi) In the event that a Holder Transfers shares of Series A Preferred Stock, other than in connection with a Transfer permitted by and in accordance with this Certificate of Designations, such Transfer shall be null and void and of no force or effect, and the Corporation shall not recognize or be bound by any such purported Transfer.

 

30


  (b) Uncertificated Shares .

(i) Form . The shares of Series A Preferred Stock shall be in uncertificated, book entry form as permitted by the bylaws of the Corporation and the DGCL. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall, or shall cause the Transfer Agent to, send to the registered owner thereof an Ownership Notice.

(ii) Transfer . Transfers of Series A Preferred Stock held in uncertificated, book-entry form shall be made only upon the transfer books of the Corporation kept at an office of the Transfer Agent upon receipt of proper transfer instructions from the registered owner of such uncertificated shares, or from a duly authorized attorney or from an individual presenting proper evidence of succession, assignment or authority to transfer the stock. The Corporation may refuse any requested Transfer until furnished evidence reasonably satisfactory to it that such Transfer is made in accordance with the terms of this Certificate of Designation.

11. Other Provisions.

(a) At any time that any Series A Preferred Stock is outstanding, the Corporation shall from time to time take all lawful action within its control to cause the authorized capital stock of the Corporation to include (i) through the fifth anniversary of the Initial Issue Date, a sufficient number of authorized but unissued shares of Common Stock to satisfy the conversion requirements of all shares of Series A Preferred Stock then outstanding (assuming increases in the Accreted Value of the Series A Preferred Stock pursuant to this Certificate of Designations through the fifth anniversary of the Initial Issue Date and no other increase to the Accreted Value) and (ii) following the fifth anniversary of the Issue Date, a sufficient number of authorized but unissued shares of Common Stock to satisfy the conversion requirements of all shares of Series A Preferred Stock then outstanding (assuming increases in the Accreted Value of the Series A Preferred Stock pursuant to this Certificate of Designations through the next anniversary of the Initial Issue Date and no other increase to the Accreted Value).

(b) With respect to any notice to a Holder required to be provided hereunder, neither failure to send such notice, nor any defect therein or in the sending thereof, to any particular Holder shall affect the sufficiency of the notice or the validity of the proceedings referred to in such notice with respect to the other Holders or affect the legality or validity of any distribution, rights, warrant, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up, or the vote upon any such action . Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Holder receives the notice.

(c) All notice periods referred to herein shall commence: (i) when made, if made by hand delivery, and upon confirmation of receipt, if made by facsimile; (ii) one Business Day after being deposited with a nationally recognized next-day courier, postage prepaid; or (iii) three Business Days after being by first-class mail, postage prepaid. Notice to any Holder shall be given to the registered address set forth in the Corporation’s records for such Holder. Any payment required to be made hereunder on any day that is not a Business Day shall be made on the next succeeding Business Day and no interest or dividends on such payment will accrue or accumulate, as the case may be, in respect of such delay.

 

31


(d) Holders of shares of Series A Preferred Stock shall not be entitled to any preemptive rights to acquire additional Capital Stock of the Corporation, except as set forth in the Preferred Purchase Agreement.

(e) As promptly as practicable following the occurrence of both the 14C Expiration Date and the HSR Expiration Date, the Corporation shall give written notice thereof to the Holders (the date of delivery of such notice, the “ Requisite Approvals Notice Date ”).

[The Remainder of this Page Intentionally Left Blank]

 

32


IN WITNESS WHEREOF , the undersigned has caused this Certificate of Designations to be duly executed this 30th day of June, 2017.

 

WILDHORSE RESOURCE DEVELOPMENT CORPORATION
By:  

/s/ Jay C. Graham

  Name: Jay C. Graham
  Title: Chief Executive Officer

[ Signature Page to Certificate of Designations of WildHorse Resource Development Corporation ]

 


EXHIBIT A

OWNERSHIP NOTICE

THE SECURITIES IDENTIFIED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

THE FOREGOING LEGEND WILL BE REMOVED AND A NEW OWNERSHIP NOTICE PROVIDED WITH RESPECT TO THE SECURITIES IDENTIFIED HEREIN UPON THE REQUEST OF THE HOLDER AFTER THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT.

SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE CERTIFICATE OF INCORPORATION OF WILDHORSE RESOURCE DEVELOPMENT CORPORATION (THE “ CORPORATION ”), INCLUDING ANY CERTIFICATES OF DESIGNATIONS (AS FURTHER AMENDED AND/OR RESTATED FROM TIME TO TIME, THE “ CHARTER ”), THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK OR MORE THAN ONE SERIES OF ANY CLASS AND THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. THE SHARES EVIDENCED BY THIS NOTICE ARE SUBJECT TO THE OBLIGATIONS AND RESTRICTIONS STATED IN, AND ARE TRANSFERABLE ONLY IN ACCORDANCE WITH, THE PROVISIONS OF THE CHARTER AND THAT CERTAIN PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF MAY 10, 2017 (THE “ PPA ”), COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE CORPORATION AND WILL BE PROVIDED, WITHOUT COST, UPON WRITTEN REQUEST TO THE SECRETARY. THE TERMS OF THE CHARTER AND THE PPA ARE HEREBY INCORPORATED INTO THIS NOTICE BY REFERENCE.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

This letter confirms and acknowledges that you are the registered owner of the number and the class or series of shares of capital stock of the Corporation listed on Schedule A to this letter.

 

Exhibit A-1


In addition, please be advised that the Corporation will furnish without charge to each stockholder of the Corporation who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock, or series thereof, of the Corporation and the qualifications, limitations or restrictions of such preferences and/or rights, which are fixed by the Charter. Any such request should be directed to the Secretary of the Corporation.

The shares of capital stock of the Corporation have been not been registered under the Securities Act and, accordingly, may not be offered, sold, pledged or otherwise transferred within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an effective registration statement under the Act or an exemption from the registration requirements of the Act.

Dated:                     

 

WILDHORSE RESOURCE DEVELOPMENT CORPORATION
By:  

 

  Name:
  Title:

 

Exhibit A-2


EXHIBIT B

FORM OF NOTICE OF CONVERSION

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert the Series A Preferred Stock)

The undersigned hereby irrevocably elects to convert (the “ Conversion ”) shares of 6.00% Series A Perpetual Convertible Preferred Stock (the “ Series A Preferred Stock ”) of WildHorse Resource Development Corporation (the “ Corporation ”), into shares of common stock, par value $0.01 per share, of the Corporation (“ Common Stock ”) according to the conditions of the Certificate of Designations of the Series A Preferred Stock (the “ Certificate of Designations ”). The Corporation will pay any documentary, stamp or similar issue or tax on the issuance of shares of Common Stock upon conversion of the Series A Preferred Stock, unless the tax is due because the undersigned requests such shares of Common Stock to be issued in a name other than the undersigned’s name, in which case the undersigned will pay the tax.

Capitalized terms used but not defined herein shall have the meaning given to them in the Certificate of Designations.

Number of shares of Series A Preferred Stock to be converted:

Name(s) (with address(es)) in which the certificate(s), if any, for any shares of Common Stock are to be registered: 1

Signature:                                                          

Name of registered Holder:                               

Fax No.:                                                             

Telephone No.:                                                  

 

1   The Corporation is not required to issue shares of Common Stock until you satisfy the remainder of the conditions set forth in the Certificate of Designations.

 

Exhibit B-1

Exhibit 4.1

AMENDED AND RESTATED

REGISTRATION RIGHTS AGREEMENT

This Amended and Restated Registration Rights Agreement (this “ Agreement ”), dated as of June 30, 2017, is entered into by and among WildHorse Resource Development Corporation, a Delaware corporation (the “ Company ”), and each of the other parties listed on the signature pages hereto (the “ Initial Holders ” and, together with the Company, the “ Parties ”).

WHEREAS, in connection with the Company’s initial public offering, the Company entered into that certain Registration Rights Agreement, dated as of December 19, 2016, by and among the Company and the IPO Holders (as defined below) (the “ Initial RRA ”);

WHEREAS, the Company and Carlyle are parties to that certain Preferred Stock Purchase Agreement, dated as of May 10, 2017, pursuant to which the Company has issued and sold certain shares of Convertible Preferred Stock (as defined below) to Carlyle (the “ Preferred Purchase Agreement ”);

WHEREAS, the Company, Admiral A Holding L.P., TE Admiral A Holding L.P. and Aurora C-I Holding L.P. (collectively, the “ KKR SIA Parties ”) are parties to that certain Stock Issuance Agreement, dated as of May 10, 2017, pursuant to which the Company has issued and sold certain shares of Common Stock (as defined below) to the KKR Holders (the “ Stock Issuance Agreement ”).

WHEREAS, as a condition to the closing of the transactions contemplated by the Preferred Purchase Agreement, the Company and Carlyle agreed to execute and deliver this Agreement in order for the Company to grant certain registration and other rights to Carlyle by amending the Initial RRA on the terms and subject to the conditions set forth in this Agreement.

WHEREAS, as a condition to the closing of the transactions contemplated by the Stock Issuance Agreement, the Company and the KKR SIA Parties agreed to execute and deliver this Agreement in order for the Company to grant certain registration and other rights to the KKR Holders by amending the Initial RRA on the terms and subject to the conditions set forth in this Agreement.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party hereto, the Parties hereby agree as follows:

1. Definitions . As used in this Agreement, the following terms have the meanings indicated:

Acquisition Co. Holdings ” means WHE AcqCo Holdings, LLC, a Delaware limited liability company.

Affiliate ” means, with respect to any specified Person, a Person that directly or indirectly Controls or is Controlled by, or is under common Control with, such specified Person; provided, however , that (i) the Company shall not be considered an Affiliate of any Holder for purposes of this Agreement and (ii) the Preferred Holders and the Sponsoring Holders shall not be considered Affiliates of each other for purposes of this Agreement.

 

1


Automatic Shelf Registration Statement ” means an “automatic shelf registration statement” as defined under Rule 405.

Board ” means the board of directors of the Company.

Business Day ” means any day other than a Saturday, Sunday, any federal holiday or any other day on which banking institutions in the State of Texas or the State of New York are authorized or required to be closed by law or governmental action.

Carlyle ” means CP VI Eagle Holdings, L.P.

Certificate ” means the Certificate of Designations establishing the terms of the Convertible Preferred Stock filed with the Secretary of State of the State of Delaware on June 30, 2017.

Commission ” means the Securities and Exchange Commission or any other federal agency then administering the Securities Act or Exchange Act.

Common Stock ” means the common stock, par value $0.01 per share, of the Company.

“Company Securities” means any equity interest of any class or series in the Company.

Control ” (including the terms “ Controls ,” “ Controlled by ” and “ under common Control with ”) means the possession, direct or indirect, of the power to (a) direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise or (b) vote 10% or more of the securities having ordinary voting power for the election of directors of a Person.

Convertible Preferred Stock ” means the shares of Series A Perpetual Convertible Preferred Stock of the Company issued to Carlyle pursuant to the Preferred Purchase Agreement.

Effective Date ” means the time and date that a Registration Statement is first declared effective by the Commission or otherwise becomes effective.

Esquisto Holdings ” means Esquisto Holdings, LLC, a Delaware limited liability company.

Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

 

2


Holder” means (a) WildHorse Holdings unless and until WildHorse Holdings ceases to hold any Registrable Securities; (b) Esquisto Holdings unless and until Esquisto Holdings ceases to hold any Registrable Securities; (c) Acquisition Co. Holdings unless and until Acquisition Co. Holdings ceases to hold any Registrable Securities, (d) Jay Graham unless and until Jay Graham ceases to hold any Registrable Securities, (e) Anthony Bahr unless and until Anthony Bahr ceases to hold any Registrable Securities, (f) NGP unless and until NGP ceases to hold any Registrable Securities, (g) each Preferred Holder unless and until such Preferred Holder ceases to hold any Registrable Securities; (h) each KKR Holder unless and until such KKR Holder ceases to hold any Registrable Securities; and (i) any holder of Registrable Securities to whom registration rights conferred by this Agreement have been transferred in compliance with Section 8(e) hereof; provided that any Person referenced in clause (i) shall be a Holder only if such Person agrees in writing to be bound by and subject to the terms set forth in this Agreement.

Initiating Holder ” means the Sponsoring Holder or Preferred Holder delivering the Demand Notice or the Underwritten Offering Notice, as applicable.

IPO Holders ” means WildHorse Holdings, Esquisto Holdings, Acquisition Co. Holdings, Jay Graham, Anthony Bahr and NGP.

KKR Holders ” means EIGF Aggregator LLC, a Delaware limited partnership, TE Admiral A Holding L.P., a Delaware limited liability company, TE Drilling Aggregator LLC, a Delaware limited liability company, and Aurora C-I Holding L.P., a Delaware limited partnership.

Lock-Up Period ” (i) with respect to the Preferred Holders, means the first anniversary of the date of this Agreement and (ii) with respect to all other Holders, has the meaning set forth in the underwriting agreement entered into by the Company in connection with the initial underwritten public offering of shares of Common Stock.

Material Adverse Change ” means (a) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States; (b) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States; (c) a material outbreak or escalation of armed hostilities or other international or national calamity involving the United States or the declaration by the United States of a national emergency or war or a change in national or international financial, political or economic conditions; or (d) any event, change, circumstance or effect that is or is reasonably likely to be materially adverse to the business, properties, assets, liabilities, condition (financial or otherwise), operations, results of operations or prospects of the Company and its subsidiaries taken as a whole.

NGP ” means NGP XI US Holdings, L.P., a Delaware limited partnership.

Person ” means an individual, corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, estate, trust, government (or an agency or subdivision thereof) or other entity of any kind.

 

3


Preferred Holder ” means (a) Carlyle unless and until Carlyle ceases to hold any Convertible Preferred Stock or Registrable Securities and (b) any holder of Convertible Preferred Stock or Registrable Securities to whom registration rights of a “Preferred Holder” conferred by this Agreement have been transferred in compliance with Section 8(e) hereof; provided that any Person referenced in clause (b) shall be a Preferred Holder only if such Person agrees in writing to be bound by and subject to the terms set forth in this Agreement.

Preferred No-Blocking Period ” is defined in Section 3(o) .

Proceeding ” means any action, claim, suit, proceeding or investigation (including a preliminary investigation or partial proceeding, such as a deposition) pending or, to the knowledge of the Company, to be threatened.

Prospectus ” means the prospectus included in a Registration Statement (including a prospectus that includes any information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A, Rule 430B or Rule 430C promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

Registrable Securities ” means the Shares; provided, however, that Registrable Securities shall not include: (a) any Shares that have been registered under the Securities Act and disposed of pursuant to an effective Registration Statement or otherwise transferred to a Person who is not entitled to the registration and other rights hereunder; (b) any Shares that have been sold or transferred by the Holder thereof pursuant to Rule 144 (or any similar provision then in force under the Securities Act) and the transferee thereof does not receive “restricted securities” as defined in Rule 144; and (c) any Shares that cease to be outstanding (whether as a result of repurchase and cancellation, conversion or otherwise); provided, however , that any Registrable Security shall cease to be a Registrable Security at such time that (a) the holder thereof (together with its Affiliates) ceases to hold at least 2.5% of the outstanding Common Stock (on an as-converted basis with respect to any Convertible Preferred Stock outstanding); (b) such Registrable Security may be sold pursuant to any section of Rule 144 under the Securities Act (or any successor or similar provision adopted by the SEC then in effect) without any volume or manner of sale restrictions or information requirements thereunder; and (c) at least two years have elapsed since the date of this Agreement.

Registration Statement ” means a registration statement of the Company in the form required to register under the Securities Act and other applicable law for the resale of the Registrable Securities in accordance with the intended plan of distribution of each Holder included therein, and including any Prospectus, amendments and supplements to each such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

 

4


Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act.

Rule 405 ” means Rule 405 promulgated by the Commission pursuant to the Securities Act.

Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act.

Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act.

Securities Act ” means the Securities Act of 1933, as amended.

Selling Expenses ” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder.

Shares ” means (i) with respect to the Preferred Holders, any shares of Common Stock issued or issuable upon conversion of the Convertible Preferred Stock, (ii) with respect to all other Holders, the shares of Common Stock held by the IPO Holders as of the date hereof and (iii) any other equity interests of the Company or equity interests in any successor of the Company issued in respect of such shares referenced in clauses (i) and (ii) by reason of or in connection with any stock dividend, stock split, combination, reorganization recapitalization, conversion to another type of entity or similar event involving a change in the capital structure of the Company.

Shelf Registration Statement ” means a Registration Statement of the Company filed with the Commission on Form S-3 (or any successor form or other appropriate form under the Securities Act) for an offering to be made on a continuous or delayed basis pursuant to Rule 415 (or any similar rule that may be adopted by the Commission) covering the Registrable Securities, as applicable.

Sponsoring Holder ” means (a) WildHorse Holdings unless and until WildHorse Holdings ceases to hold any Registrable Securities; (b) Esquisto Holdings unless and until Esquisto Holdings ceases to hold any Registrable Securities; (c) Acquisition Co. Holdings unless and until Acquisition Co. Holdings ceases to hold any Registrable Securities; and (d) any holder of Registrable Securities to whom registration rights of a “Sponsoring Holder” conferred by this Agreement have been transferred in compliance with Section 8(e) hereof; provided that any Person referenced in clause (d) shall be a Sponsoring Holder only if such Person agrees in writing to be bound by and subject to the terms set forth in this Agreement.

Stockholders Agreement ” means that certain Stockholders Agreement, dated as of December 19, 2016, by and among the Company, Wildhorse Holdings, Esquisto Holdings and Acquisition Co. Holdings.

Trading Market ” means the principal national securities exchange on which Registrable Securities are listed.

 

5


Underwritten Offering ” means an underwritten offering of Common Stock for cash (whether a Requested Underwritten Offering or in connection with a public offering of Common Stock by the Company, stockholders or both), excluding an offering relating solely to an employee benefit plan, or an offering relating to a transaction on Form S-4 or S-8.

VWAP ” means, as of a specified date and in respect of Registrable Securities, the volume weighted average price for such security on the Trading Market for the five trading days immediately preceding, but excluding, such date.

WildHorse Holdings ” means WHR Holdings LLC, a Delaware limited liability company.

WKSI ” means a “well known seasoned issuer” as defined under Rule 405.

Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms; (b) references to Sections refer to sections of this Agreement; (c) the terms “include,” “includes,” “including” and words of like import shall be deemed to be followed by the words “without limitation”; (d) the terms “hereof,” “hereto,” “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; (e) unless the context otherwise requires, the term “or” is not exclusive and shall have the inclusive meaning of “and/or”; (f) defined terms herein will apply equally to both the singular and plural forms and derivative forms of defined terms will have correlative meanings; (g) references to any law or statute shall include all rules and regulations promulgated thereunder, and references to any law or statute shall be construed as including any legal and statutory provisions consolidating, amending, succeeding or replacing the applicable law or statute; (h) references to any Person include such Person’s successors and permitted assigns; and (i) references to “days” are to calendar days unless otherwise indicated.

2. Registration .

(a) Demand Registration .

(i) At any time after the expiration of the applicable Lock-Up Period, any Preferred Holder and Sponsoring Holder shall severally have the option and right, exercisable by delivering a written notice to the Company (a “ Demand Notice ”), to require the Company to, pursuant to the terms of and subject to the limitations contained in this Agreement, prepare and file with the Commission a Registration Statement registering the offering and sale of the number and type of Registrable Securities on the terms and conditions specified in the Demand Notice, which may include sales on a delayed or continuous basis pursuant to Rule 415 pursuant to a Shelf Registration Statement (a “ Demand Registration ”). The Demand Notice must set forth the number of Registrable Securities that the Initiating Holder intends to include in such Demand Registration and the intended methods of disposition thereof. Notwithstanding anything

 

6


to the contrary herein, in no event shall the Company be required to effectuate a Demand Registration unless the Registrable Securities of the Holders to be included therein after compliance with Section 2(a)(ii) have an aggregate value of at least $75 million based on the VWAP (the “ Minimum Amount ”) as of the date of the Demand Notice; provided, however, that the Minimum Amount shall not apply in the event that, as the result of Cutback Shares being removed from such Registration Statement pursuant to this Section 2(a)(i) , the Registrable Securities of the Holders to be included therein after compliance with Section 2(a)(ii) have an aggregate value of less than $75 million. If at any time the Commission takes the position that some or all of the Registrable Securities proposed to be included in a Registration Statement filed pursuant to a Demand Registration must be removed from such Registration Statement (such portion of the Registrable Securities, the “ Cut Back Shares ”) in order for all of the Registrable Securities in such Registration Statement filed pursuant to a Demand Registration to be eligible to be made on a delayed or continuous basis under the provisions of Rule 415 or for the Initiating Holder to not be named as an “underwriter” in such Registration Statement, then if the Initiating Holder so elects, the Company shall remove the Cutback Shares from such Registration Statement. Any Cut Back Shares so removed pursuant to this Section 2(a)(i) shall be allocated among the Holders including Registrable Securities for resale on such Registration Statement on a pro rata basis. Further, a Demand Registration shall not constitute a Demand Registration of the Initiating Holder for purposes of Section 2(a)(iii) if, as a result of the cutback provisions in this Section 2(a)(i) or Registrable Securities of Holders other than the Initiating Holder included in such Demand Registration pursuant to Section 2(a)(ii) , there is included in the Demand Registration less than the lesser of (x) Registrable Securities of the Initiating Holder having a VWAP measured on the effective date of the related Registration Statement of $75 million and (y) two-thirds of the number of Registrable Securities the Initiating Holder set forth in the applicable Demand Notice.

(ii) Within five Business Days (or if the Registration Statement will be a Shelf Registration Statement, within two Business Days) after the receipt of the Demand Notice, the Company shall give written notice of such Demand Notice to all Holders and, within 30 days after receipt of the Demand Notice (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case, within 90 days thereof), shall, subject to the limitations of this Section 2(a) , file a Registration Statement in accordance with the terms and conditions of the Demand Notice, which Registration Statement shall cover all of the Registrable Securities that the Holders shall in writing request to be included in the Demand Registration (such request to be given to the Company within three Business Days (or if the Registration Statement will be a Shelf Registration Statement, within one Business Day) after receipt of notice of the Demand Notice given by the Company pursuant to this Section 2(a)(ii) ). The Company shall use reasonable best efforts to cause such Registration Statement to become and remain effective (including using reasonable best efforts to file a Registration Statement including Registrable Securities included on any previous Registration Statement that ceases to be effective, which, for the avoidance of doubt shall not be considered an additional Demand Registration for any Holder pursuant to Section 2(a)(iii) ) under the Securities Act until all such securities registered for resale thereunder cease to be Registrable Securities (the “ Effectiveness Period ”).

 

7


(iii) Subject to the other limitations contained in this Agreement, the Company is not obligated hereunder to effect (A) a Demand Registration within 90 days after the closing of any Underwritten Offering (or such shorter time as the Company may notify the Holders in writing) (any such time period, a “ No Demand Period ”), unless any Preferred No-Blocking Period exists during such No Demand Period, in which case the Company shall nevertheless be required to effect a Demand Registration initiated by any Preferred Holder that is then otherwise entitled to initiate a Demand Registration during such Preferred No-Blocking Period, (B) more than a total of four Demand Registrations for which WildHorse Holdings (or any transferee thereof in accordance with Section 8(e) ) is the Initiating Holder, (C) more than a total of four Demand Registrations for which Esquisto Holdings (or any transferee thereof in accordance with Section 8(e) ) is the Initiating Holder, (D) more than a total of four Demand Registrations for which Acquisition Co. Holdings (or any transferee thereof in accordance with Section 8(e) ) is the Initiating Holder, (E) more than a total of six Demand Registrations for which any Preferred Holder is the Initiating Holder; and (F) a subsequent Demand Registration pursuant to a Demand Notice if a Registration Statement covering all of the Registrable Securities held by the Initiating Holder shall have become and remains effective under the Securities Act and is sufficient to permit offers and sales of the number and type of Registrable Securities on the terms and conditions specified in the Demand Notice in accordance with the intended timing and method or methods of distribution thereof specified in the Demand Notice. No Demand Registration shall be deemed to have occurred for purposes of this Section 2(a)(iii) if the Registration Statement relating thereto does not become effective or is not maintained effective for its entire Effectiveness Period, in which case the Initiating Holder shall be entitled to an additional Demand Registration in lieu thereof.

(iv) A Holder may withdraw all or any portion of its Registrable Securities included in a Demand Registration from such Demand Registration at any time prior to the effectiveness of the applicable Registration Statement. Upon receipt of a notice from the Initiating Holder that the Initiating Holder is withdrawing all of its Registrable Securities from the Demand Registration or a notice from a Holder to the effect that the Holder is withdrawing an amount of its Registrable Securities such that the remaining amount of Registrable Securities to be included in the Demand Registration is below the Minimum Amount, the Company may cease all efforts to secure effectiveness of the applicable Registration Statement, unless one or more Holders other than the withdrawing Holder(s) shall promptly request the Company in writing to include additional Registrable Securities in the Demand Registration such that amount of Registrable Shares to be included in the Demand Registration satisfies the Minimum Amount (a “ Requisite Holder Substitution ”). In the absence of a Requisite Holder Substitution, such registration nonetheless shall be deemed a Demand Registration with respect to the Initiating Holder for purposes of Section 2(a)(iii) unless (A) the Initiating Holder shall have paid or reimbursed the Company for its pro rata share of all reasonable and documented out-of-pocket fees and expenses incurred by the Company in connection with the withdrawn registration of such Registrable Securities (based on the number of securities the Initiating Holder sought to register, as compared to the total number of securities included in such Demand Registration) or (B) the withdrawal is made following the occurrence of a Material Adverse Change or pursuant to the Company’s request for suspension pursuant to Section 3(o) .

 

8


(v) The Company may include in any such Demand Registration other Company Securities for sale for its own account or for the account of any other Person, subject to Section 2(c)(iii) .

(vi) Subject to the limitations contained in this Agreement, the Company shall effect any Demand Registration on such appropriate registration form of the Commission (A) as shall be selected by the Company and (B) subject to applicable law and the requirements of the Commission, as shall permit the disposition of the Registrable Securities in accordance with the intended method or methods of disposition specified in the Demand Notice; provided that, subject to Section 3(o) , (X) if the Registration Statement is on Form S-1, the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission (provided that Form S-1 is then available for sales on a delayed or continuous basis under the provisions of Rule 415 in respect of such Demand Registration), and (Y) if the Company becomes, and is at the time of its receipt of a Demand Notice eligible to use Form S-3, the Demand Registration for any offering and selling of Registrable Securities shall be registered on Form S-3 (or any equivalent or successor form under the Securities Act (if available to the Company) and (Z) if at the time of its receipt of a Demand Notice, the Company is a WKSI, the Demand Registration for any offering and selling of Registrable Securities shall be registered on an Automatic Shelf Registration Statement on Form S-3 or any equivalent or successor form under the Securities Act (if available to the Company). If at any time a Registration Statement on Form S-3 is effective and a Holder provides written notice to the Company that it intends to effect an offering of all or part of the Registrable Securities included on such Registration Statement, the Company will amend or supplement such Registration Statement as may be necessary in order to enable such offering to take place.

(vii) Without limiting Section 3 , in connection with any Demand Registration pursuant to and in accordance with this Section 2(a) , the Company shall (A) promptly prepare and file or cause to be prepared and filed (1) such additional forms, amendments, supplements, prospectuses, certificates, letters, opinions and other documents, as may be necessary or advisable to register or qualify the securities subject to such Demand Registration, including under the securities laws of such jurisdictions as the Holders shall reasonably request; provided, however, that no such qualification shall be required in any jurisdiction where, as a result thereof, the Company would become subject to general service of process or to taxation or qualification to do business in such jurisdiction solely as a result of registration and (2) such forms, amendments, supplements, prospectuses, certificates, letters, opinions and other documents as may be necessary to apply for listing or to list the Registrable Securities subject to such Demand Registration on the Trading Market and (B) do any and all other acts and things that may be reasonably necessary or appropriate or reasonably requested by the Holders to enable the Holders to consummate a public sale of such Registrable Securities in accordance with the intended timing and method or methods of distribution thereof.

 

9


(viii) In the event a Holder transfers Registrable Securities included on a Registration Statement and such Registrable Securities remain Registrable Securities following such transfer, at the request of such Holder, the Company shall amend or supplement such Registration Statement as may be necessary in order to enable such transferee to offer and sell such Registrable Securities pursuant to such Registration Statement; provided that in no event shall the Company be required to file a post-effective amendment to the Registration Statement unless (A) such Registration Statement includes only Registrable Securities held by the Holder, Affiliates of the Holder or transferees of the Holder or (B) the Company has received written consent therefor from a Person for whom Registrable Securities have been registered on (but not yet sold under) such Registration Statement, other than the Holder, Affiliates of the Holder or transferees of the Holder.

(ix) Notwithstanding the foregoing restrictions of this Section 2(a) , but subject to any applicable No Demand Periods, the Preferred Holders shall be permitted to deliver a Demand Notice for a Demand Registration during the Lock-Up Period so long as (A) the Company is then-eligible to use Form S-3 to register the resale of Registrable Securities and (B) the Preferred Holders do not dispose of any Registrable Securities pursuant to the applicable Registration Statement for the duration of the Lock-Up Period. Further, and for the avoidance of doubt, nothing in this Agreement shall prohibit a Preferred Holder from exercising its rights as a Holder during the Lock-Up Period, including, but not limited to, a Preferred Holder’s participation in a Demand Registration, Underwritten Offering and/or Underwritten Piggyback Offering, other than with respect to (Y) except as provided in the immediately preceding sentence, delivering a Demand Notice as an Initiating Holder during its Lock-Up Period pursuant to Section 2(a)(i) and (Z) exercising its right to receive a Piggyback Notice or to participate in any Piggyback Registration during its Lock-Up Period with respect to the filing of a registration statement for the sale of securities solely for the account of the Company, which registration statement, for the avoidance of doubt, does not include Registrable Securities of any Holder.

(b) Requested Underwritten Offering . Any Holder then able to effectuate a Demand Registration pursuant to the terms of Section 2(a) (or who has previously effectuated a Demand Registration pursuant to Section 2(a) but has not engaged in an Underwritten Offering in respect of such Demand Registration) shall have the option and right, exercisable by delivering written notice to the Company of its intention to distribute Registrable Securities by means of an Underwritten Offering (an “ Underwritten Offering Notice ”), to require the Company, pursuant to the terms of and subject to the limitations of this Agreement, to effectuate a distribution of any or all of its Registrable Securities by means of an Underwritten Offering pursuant to a new Demand Registration or pursuant to an effective Registration Statement covering such Registrable Securities (a “ Requested Underwritten Offering ”); provided, that the Registrable Securities of such Initiating Holder requested to be included in such Requested Underwritten Offering have an aggregate value of at least equal to the Minimum Amount as of the date of such Underwritten Offering Notice. The Underwritten Offering Notice must set forth the number of Registrable Securities that the Initiating Holder intends to include in such Requested Underwritten Offering. The managing underwriter or managing underwriters of a Requested Underwritten Offering shall be designated by the Company; provided, however, that

 

10


such designated managing underwriter or managing underwriters shall be reasonably acceptable to the Initiating Holder; provided, further, however that no later than 9:00 A.M., New York Time, on the day of a proposed block trade or bought deal pursuant to an Initiating Holder’s Requested Underwritten Offering (an “ Initiating Holder Block ”), the Initiating Holder thereof may deliver to the Company in writing a list of one or more proposed managing underwriters of the Initiating Holder Block (each a “ Bidding Bank ” and collectively, the “ Bidding Banks ”) and, unless the Company reasonably objects to any Bidding Bank in writing to the Initiating Holder by Noon, New York Time on the same day, any one or more of such Bidding Banks to which the Company does not so timely reasonably object (the “ Approved Bidding Banks ”), shall be deemed to be designated by the Company as a managing underwriter for the purposes of this Section 2(b) , and the Initiating Holder of the Initiating Holder Block may select, without any additional prior consent by or approval from the Company, one or more Approved Bidding Bank as a managing underwriter or the managing underwriters for such Initiating Holder Block as if it as if it had assumed the Company’s the right of designation pursuant to this Section 2(b) . In connection with any Initiating Holder Block, the Initiating Holder thereof shall take commercially reasonable efforts to advise the Company with respect to its obligations thereunder and related schedule thereto. Notwithstanding the foregoing, the Company is not obligated to effect a Requested Underwritten Offering within 90 days after the closing of an Underwritten Offering (or such shorter time as the Company may notify the Holders in writing) (any such time period, a “ No Requested Underwritten Offering Period ”), unless any Preferred No-Blocking Period exists during such No Requested Underwritten Offering Period, in which case the Company shall nevertheless be required to effect a Requested Underwritten Offering initiated by any Preferred Holder that is then otherwise entitled to initiate a Requested Underwritten Offering during such Preferred No-Blocking Period. Any Requested Underwritten Offering (other than the first Requested Underwritten Offering made in respect of a prior Demand Registration) shall constitute a Demand Registration of the Initiating Holder for purposes of Section 2(a)(iii) (it being understood that if requested concurrently with a Demand Registration then, together, such Demand Registration and Requested Underwritten Offering shall count as one Demand Registration); provided, however, that a Requested Underwritten Offering shall not constitute a Demand Registration of the Initiating Holder for purposes of Section 2(a)(iii) if, as a result of Section 2(c)(iii)(A) , the Requested Underwritten Offering includes less than the lesser of (i) Registrable Securities of the Initiating Holder having a VWAP measured on date of the applicable Underwritten Offering Notice of $75 million and (ii) two-thirds of the number of Registrable Securities the Initiating Holder set forth in the applicable Underwritten Offering Notice.

(c) Piggyback Registration and Piggyback Underwritten Offering .

(i) If the Company shall at any time propose to file a registration statement under the Securities Act with respect to an offering of Common Stock (other than a registration statement on Form S-4, Form S-8 or any successor forms thereto or filed solely in connection with an exchange offer or any employee benefit or dividend reinvestment plan and other than a Demand Registration), whether or not for its own account, then the Company shall promptly notify all Holders of such proposal reasonably in advance of (and in any event at least five Business Days, except if the registration statement will be a Shelf Registration Statement, at least two Business Days, before) the anticipated filing date (the “ Piggyback Registration Notice ”). The Piggyback

 

11


Registration Notice shall offer Holders the opportunity to include for registration in such registration statement the number of Registrable Securities as they may request in writing (a “ Piggyback Registration ”). The Company shall use commercially reasonable efforts to include in each such Piggyback Registration such Registrable Securities for which the Company has received written requests for inclusion therein (“ Piggyback Registration Request ”) within three Business Days or, if the Piggyback Registration will be on a Shelf Registration Statement, within one Business Day, after sending the Piggyback Registration Notice. Each Holder shall be permitted to withdraw all or part of such Holder’s Registrable Securities from a Piggyback Registration by giving written notice to the Company of its request to withdraw; provided that (A) such request must be made in writing prior to the effectiveness of such registration statement and (B) such withdrawal shall be irrevocable and, after making such withdrawal, a Holder shall no longer have any right to include Registrable Securities in the Piggyback Registration as to which such withdrawal was made. Any withdrawing Holder shall continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of Common Stock, all upon the terms and conditions set forth herein. Notwithstanding anything to the contrary in this Section 2(c)(i) , the Preferred Holders shall not have the right to receive any Piggyback Notice or to participate in any Piggyback Registration, in each case with respect to the filing of a registration statement for the sale of securities solely for the account of the Company, which registration statement, for the avoidance of doubt, does not include Registrable Securities of any Holder, until the expiration of the Lock-Up Period applicable to the Preferred Holders.

(ii) If the Company shall at any time propose to conduct an Underwritten Offering (including a Requested Underwritten Offering), whether or not for its own account, then the Company shall promptly notify all Holders of such proposal reasonably in advance of (and in any event at least five Business Days, except if the Underwritten Offering will be made pursuant to a Shelf Registration Statement, at least two Business Days, before) the commencement of the offering, which notice shall set forth the principal terms and conditions of the issuance, including the proposed offering price or range of offering prices (if known), the anticipated filing date of the related registration statement (if applicable) and the number of shares of Common Stock that are proposed to be registered (the “ Underwritten Offering Piggyback Notice ”). The Underwritten Offering Piggyback Notice shall offer Holders the opportunity to include in such Underwritten Offering (and any related registration, if applicable) the number of Registrable Securities as they may request in writing (an “ Underwritten Piggyback Offering ”); provided, however, that in the event that the Company proposes to effectuate the subject Underwritten Offering pursuant to an effective Shelf Registration Statement other than an Automatic Shelf Registration Statement, only Registrable Securities of Holders which are subject to an effective Shelf Registration Statement may be included in such Underwritten Piggyback Offering. The Company shall use commercially reasonable efforts to include in each such Underwritten Piggyback Offering such Registrable Securities for which the Company has received written requests for inclusion therein (“ Underwritten Offering Piggyback Request ”) within three Business Days or, if such Underwritten Piggyback Offering will be made pursuant to a Shelf Registration Statement, within one Business Day after sending the Underwritten Offering Piggyback

 

12


Notice. Each Holder shall be permitted to withdraw all or part of such Holder’s Registrable Securities from an Underwritten Piggyback Offering at any time prior to the effectiveness of the applicable registration statement, and such Holder shall continue to have the right to include any Registrable Securities in any subsequent Underwritten Offerings, all upon the terms and conditions set forth herein. Notwithstanding anything to the contrary in this Section 2(c)(ii) , the Preferred Holders shall not have the right to receive any Underwritten Offering Piggyback Notice or to participate in any Underwritten Piggyback Offering, in each case with respect to an Underwritten Offering of securities solely for account of the Company (and not including Registrable Securities of any other Holder), until the expiration of the Lock-Up Period applicable to the Preferred Holders.

(iii) If the managing underwriter or managing underwriters of an Underwritten Offering advise the Company and the Holders that in their reasonable opinion that the inclusion of all of the Holders’ Registrable Securities requested for inclusion in the subject Underwritten Offering (and any related registration, if applicable) (and any other Common Stock proposed to be included in such offering) exceeds the number that can be included without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, the Company shall include in such Underwritten Offering (and any related registration, if applicable) only that number of shares of Common Stock proposed to be included in such Underwritten Offering (and any related registration, if applicable) that, in the reasonable opinion of the managing underwriter or managing underwriters, will not have such adverse effect, with such number to be allocated as follows: (A) in the case of a Requested Underwritten Offering, (1) first, pro-rata among all Holders (including the Initiating Holder) that have requested to include Registrable Securities in such Underwritten Offering based on the relative number of Registrable Securities then held by each such Holder, (2) second, if there remains availability for additional shares of Common Stock to be included in such Underwritten Offering, the Company, and (3) third, if there remains availability for additional shares of Common Stock to be included in such Underwritten Offering, any other holders entitled to participate in such Underwritten Offering, if applicable, based on the relative number of shares of Common Stock then held by each such holder; and (B) in the case of any other Underwritten Offerings, (x) first, to the Company, (y) second, if there remains availability for additional shares of Common Stock to be included in such Underwritten Offering, pro-rata among all Holders desiring to include Registrable Securities in such Underwritten Offering based on the relative number of Registrable Securities then held by each such Holder, and (z) third, if there remains availability for additional shares of Common Stock to be included in such registration, pro-rata among any other holders entitled to participate in such Underwritten Offering, if applicable, based on the relative number of Common Stock then held by each such holder. If any Holder disapproves of the terms of any such Underwritten Offering, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter(s) delivered on or prior to the time of the commencement of such offering. Any Registrable Securities withdrawn from such underwriting shall be excluded and withdrawn from the registration. In making any determination of the relative number of Registrable Securities then held by each Holder for purposes of Section 2(a)(iv) and this Section 2(c)(iii) , each Holder of Convertible

 

13


Preferred Stock shall be deemed for purposes of such determination to hold a number of shares of Common Stock equal to the number of shares of Common Stock issuable in respect of such Holder’s Convertible Preferred Stock in the event such Holder converted all of its shares of Convertible Preferred Stock into shares of Common Stock as of such time of determination.

(iv) The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2(c) at any time in its sole discretion whether or not any Holder has elected to include Registrable Securities in such Registration Statement. The registration expenses of such withdrawn registration shall be borne by the Company in accordance with Section 4 hereof.

(v) Each Holder agrees that, following receipt of any Piggyback Registration Notice, Underwritten Offering Piggyback Notice or any notice pursuant to Section 2(a)(ii) , such Holder will keep confidential and will not disclose, divulge, or use for any purpose (other than as necessary to exercise its rights pursuant to this Agreement, including, but not limited to, disclosure to its advisors and Affiliates) the fact that such Piggyback Registration Notice, Underwritten Offering Piggyback Notice or any notice pursuant to Section 2(a)(ii) exists or was received by such Holder or the contents of any such Piggyback Registration Notice, Underwritten Offering Piggyback Notice or any notice pursuant to Section 2(a)(ii) , until the earlier of (a) the date that is 30 days following receipt of such notice, (b) such time as the registration or Underwritten Offering that is the subject of such notice is known or becomes known to the public in general (other than as a result of a breach of this Section 2(c)(v) ) and (c) the date the Company notifies the Holder that the proposed Underwritten Piggyback offering has been abandoned.

3. Registration and Underwritten Offering Procedures . The procedures to be followed by the Company and each Holder electing to sell Registrable Securities in a Registration Statement pursuant to this Agreement, and the respective rights and obligations of the Company and such Holders, with respect to the preparation, filing and effectiveness of such Registration Statement and the effectuation of any Underwritten Offering, are as follows:

(a) In connection with a Demand Registration, the Company will, at least three Business Days prior to the anticipated filing of the Registration Statement and any related Prospectus or any amendment or supplement thereto (other than, after effectiveness of the Registration Statement, any filing made under the Exchange Act that is incorporated by reference into the Registration Statement), (i) furnish to such Holders copies of all such documents prior to filing and (ii) use commercially reasonable efforts to address in each such document when so filed with the Commission such comments as such Holders reasonably shall propose prior to the filing thereof.

(b) In connection with a Piggyback Registration, Underwritten Piggyback Offering or a Requested Underwritten Offering, the Company will, at least three Business Days (or in the case of a Shelf Registration Statement or an offering that will be made pursuant to a Shelf Registration Statement, at least one Business Day) prior to the anticipated filing of any initial Registration Statement that identifies the Holders and any related Prospectus or any

 

14


amendment or supplement thereto (other than amendments and supplements that do not materially alter the previous disclosure or do nothing more than name Holders and provide information with respect thereto), as applicable, furnish to such Holders copies of any such Registration Statement or related Prospectus or amendment or supplement thereto that identify the Holders and any related Prospectus or any amendment or supplement thereto (other than amendments and supplements that do not materially alter the previous disclosure or do nothing more than name Holders and provide information with respect thereto). The Company will also use commercially reasonable efforts to address in each such document when so filed with the Commission such comments as such Holders reasonably shall propose prior to the filing thereof.

(c) The Company will use commercially reasonable efforts to as promptly as reasonably practicable (i) prepare and file with the Commission such amendments, including post-effective amendments, and supplements to each Registration Statement and the Prospectus used in connection therewith as may be necessary under applicable law to keep such Registration Statement continuously effective with respect to the disposition of all Registrable Securities covered thereby for its Effectiveness Period and, subject to the limitations contained in this Agreement, applicable law and the requirements of the Commission, prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities held by the Holders; (ii) cause the related Prospectus to be amended or supplemented by any required prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; and (iii) respond to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably practicable provide such Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to such Holders as selling stockholders but not any comments that would result in the disclosure to such Holders of material and non-public information concerning the Company.

(d) The Company will comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement.

(e) The Company will notify such Holders who are included in a Registration Statement as promptly as reasonably practicable: (i)(A) when a Prospectus or any prospectus supplement or post-effective amendment to a Registration Statement in which such Holder is included has been filed; (B) when the Commission notifies the Company whether there will be a “review” of the applicable Registration Statement and whenever the Commission comments in writing on such Registration Statement (in which case the Company shall provide true and complete copies thereof and all written responses thereto to each of such Holders that pertain to such Holders as selling stockholders); and (C) with respect to each applicable Registration Statement or any post-effective amendment thereto, when the same has been declared effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to such Registration Statement or Prospectus or for additional information that pertains to such Holders as sellers of Registrable Securities; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable

 

15


Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that makes any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice by the Company shall be required pursuant to this clause (v) in the event that the Company either promptly files a prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which in either case, contains the requisite information that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading).

(f) The Company will use commercially reasonable efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as promptly as reasonably practicable, or if any such order or suspension is made effective during any Blackout Period or Suspension Period, as promptly as reasonably practicable after such Blackout Period or Suspension Period is over.

(g) During the Effectiveness Period, the Company will furnish to each such Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Holder (including those incorporated by reference) promptly after the filing of such documents with the Commission; provided, that the Company will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system.

(h) The Company will promptly deliver to each Holder, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) authorized by the Company for use and each amendment or supplement thereto as such Holder may reasonably request during the Effectiveness Period. Subject to the terms of this Agreement, including Section 8(b) , the Company consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

(i) The Company will cooperate with such Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free of all restrictive legends indicating that the Registrable Securities are unregistered or unqualified for resale under the Securities Act, Exchange Act or other applicable securities laws, and to enable such Registrable Securities to be in such denominations and registered in such names as any such

 

16


Holder may request in writing. In connection therewith, if required by the Company’s transfer agent, the Company will promptly, after the Effective Date of the Registration Statement, cause an opinion of counsel as to the effectiveness of the Registration Statement to be delivered to and maintained with its transfer agent, together with any other authorizations, certificates and directions required by the transfer agent which authorize and direct the transfer agent to issue such Registrable Securities without any such legend upon sale by the Holder of such Registrable Securities under the Registration Statement.

(j) Upon the occurrence of any event contemplated by Section 3(e)(v) , as promptly as reasonably practicable, the Company will prepare a supplement or amendment, including a post-effective amendment, if required by applicable law, to the affected Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will 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, in the light of the circumstances under which they were made, not misleading.

(k) With respect to Underwritten Offerings, (i) the right of any Holder to include such Holder’s Registrable Securities in an Underwritten Offering shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein, (ii) each Holder participating in such Underwritten Offering agrees to enter into an underwriting agreement in customary form and sell such Holder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled to select the managing underwriter or managing underwriters hereunder and (iii) each Holder participating in such Underwritten Offering agrees to complete and execute all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents customarily and reasonably required under the terms of such underwriting arrangements. The Company hereby agrees with each Holder that, in connection with any Underwritten Offering in accordance with the terms hereof, it will negotiate in good faith and execute all indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, including using all commercially reasonable efforts to procure customary legal opinions, auditor “comfort” letters and reports of the independent petroleum engineers of the Company relating to the oil and gas reserves of the Company included in the Registration Statement if the Company has had its reserves prepared, audited or reviewed by an independent petroleum engineer.

(l) For a reasonable period prior to the filing of any Registration Statement and throughout the Effectiveness Period, the Company will make available, upon reasonable notice at the Company’s principal place of business or such other reasonable place, for inspection during normal business hours by a representative or representatives of the selling Holders, the managing underwriter or managing underwriters and any attorneys or accountants retained by such selling Holders or underwriters, all such financial and other information and books and records of the Company, and cause the officers, employees, counsel and independent certified public accountants of the Company to respond to such inquiries, as shall be reasonably necessary (and in the case of counsel, not violate an attorney-client privilege in such counsel’s reasonable belief) to conduct a reasonable investigation within the meaning of Section 11 of the

 

17


Securities Act; provided, however, that any information that is not generally publicly available at the time of delivery of such information shall be kept confidential by such Persons unless disclosure of such information is required by court or administrative order or, in the opinion of counsel to such Person, law, in which case, such Person shall be required to give the Company written notice of the proposed disclosure prior to such disclosure and, if requested by the Company, assist the Company in seeking to prevent or limit the proposed disclosure.

(m) In connection with any Requested Underwritten Offering, the Company will use commercially reasonable efforts to cause appropriate officers and employees to be available, on a customary basis and upon reasonable notice, to meet with prospective investors in presentations, meetings and road shows.

(n) Each Holder agrees to furnish to the Company any other information regarding the Holder and the distribution of such securities as the Company reasonably determines is required to be included in any Registration Statement or any Prospectus or prospectus supplement relating to an Underwritten Offering.

(o) Notwithstanding any other provision of this Agreement, the Company shall not be required to file a Registration Statement (or any amendment thereto) or effect a Requested Underwritten Offering (or, if the Company has filed a Shelf Registration Statement and has included Registrable Securities therein, the Company shall be entitled to suspend the offer and sale of Registrable Securities pursuant to such Registration Statement) for a period of up to 60 days if (i) the Board determines that a postponement is in the best interest of the Company and its stockholders generally due to a pending transaction involving the Company (including a pending securities offering by the Company), (ii) the Board determines such registration would render the Company unable to comply with applicable securities laws or (iii) the Board determines such registration would require disclosure of material information that the Company has a bona fide business purpose for preserving as confidential (any such period, a “ Blackout Period ”); provided , however, that in no event shall any Blackout Period together with any Suspension Period, any No Demand Period (but only if such No Demand Period relates to a an Underwritten Offering other than a Requested Underwritten Offering in which the Preferred Holders participated) and any No Requested Underwritten Offering Period (but only if such No Demand Period relates to a an Underwritten Offering other than a Requested Underwritten Offering in which the Preferred Holders participated) collectively exceed an aggregate of 120 days in any 12-month period; provided, further, that nothing in this Section 3(o) shall (i) relieve the Company of any obligation it may otherwise have pursuant to this Agreement to file a Registration Statement (or any amendment thereto) or effect a Requested Underwritten Offering or (ii) permit the Company to suspend the offer and sale of Registrable Securities pursuant to a Shelf Registration Statement that has been previously filed pursuant to this Agreement, in each case at the request of or with respect to a Preferred Holder or with respect to Registrable Securities of any such Preferred Holder, within any 45-day period following the date upon which any Convertible Preferred Stock of such Preferred Holder is converted into shares of Common Stock pursuant to Section 7(b) of the Certificate (any such 45-day period, a “ Preferred No-Blocking Period ”).

 

18


(p) In connection with an Underwritten Offering, the Company shall use all commercially reasonable efforts to provide to each Holder named as a selling securityholder in any Registration Statement a copy of any auditor “comfort” letters, customary legal opinions or reports of the independent petroleum engineers of the Company relating to the oil and gas reserves of the Company, in each case that have been provided to the managing underwriter or managing underwriters in connection with the Underwritten Offering, not later than the Business Day prior to the effective date of such Registration Statement.

(q) In connection with any Underwritten Offering (including any Requested Underwritten Offering), any Holder that (i) together with its Affiliates owns five percent (5%) or more of the outstanding Common Stock (assuming all Convertible Preferred Stock held by any Holder has been converted to Common Stock) or (ii) is entitled (or any of its Affiliates is entitled) to designate a director to the Company’s board of directors pursuant to the Stockholders Agreement or to elect a director to the Company’s board of directors pursuant to the Certificate, shall execute a customary “lock-up” agreement with the underwriters of such Underwritten Offering containing a lock-up period equal to the shorter of (A) the shortest number of days that a director of the Company, “executive officer” (as defined under Section 16 of the Exchange Act) of the Company or any stockholder of the Company (other than a Holder or director or employee of, or consultant to, the Company) who owns five percent (5%) or more of the outstanding Common Stock contractually agrees to with the underwriters of such Underwritten Offering not to sell any securities of the Company following such Underwritten Offering and (B) 45 days from the date of the execution of the underwriting agreement with respect to such Underwritten Offering.

(r) In connection with any Requested Underwritten Offering, the Company will, and will use its commercially reasonable efforts to cause the members of the Board of Directors of the Company and the officers of the Company that are “executive officers” as defined under Section 16 of the Exchange Act to, execute a customary “lock-up” agreement with the underwriters of such Requested Underwritten Offering containing a lock-up period equal to the shorter of (A) the number of days that the Initiating Holder in such Requested Underwritten Offering contractually agrees with the underwriters of such Requested Underwritten Offering not to sell securities of the Company following such Requested Underwritten Offering and (B) 45 days from the date of the execution of the underwriting agreement with respect to such Requested Underwritten Offering.

4. No Inconsistent Agreements; Additional Rights. The Company shall not hereafter enter into, and is not currently a party to, any agreement with respect to its securities that is inconsistent in any material respect with the rights granted to the Holders by this Agreement.

5. Registration Expenses. All Registration Expenses incident to the Parties’ performance of or compliance with their respective obligations under this Agreement or otherwise in connection with any Demand Registration, Requested Underwritten Offering, Piggyback Registration or Underwritten Piggyback Offering (in each case, excluding any Selling Expenses) shall be borne by the Company, whether or not any Registrable Securities are sold pursuant to a Registration Statement. “ Registration Expenses ” shall include, without limitation, (i) all registration and filing fees (including fees and expenses (A) with respect to filings required to be made with the Trading Market, (B) in compliance with applicable state securities or “Blue Sky” laws and (C) FINRA fees and expenses associated with any Registration Statement and the

 

19


FINRA filing obligations of any underwriter related thereto), (ii) printing expenses (including expenses of printing certificates for Company Securities and of printing Prospectuses if the printing of Prospectuses is reasonably requested by a Holder of Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel, auditors, accountants and independent petroleum engineers for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, and (vii) all expenses relating to marketing the sale of the Registrable Securities, including expenses related to conducting a “road show.” In addition, the Company shall be responsible for all of its expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including expenses payable to third parties and including all salaries and expenses of their officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on the Trading Market.

6. Indemnification .

(a) The Company shall indemnify and hold harmless each Holder, its Affiliates and each of their respective officers and directors and any agent thereof (collectively, “ Holder Indemnified Persons ”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, joint or several, costs (including reasonable costs of preparation and reasonable attorneys’ fees) and expenses, judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Holder Indemnified Person may be involved, or is threatened to be involved, as a party or otherwise, under the Securities Act or otherwise (collectively, “ Losses ”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which any Registrable Securities were registered, in any preliminary prospectus (if the Company authorized the use of such preliminary prospectus prior to the Effective Date), or in any summary or final prospectus or free writing prospectus (if such free writing prospectus was authorized for use by the Company) or in any amendment or supplement thereto (if used during the period the Company is required to keep the Registration Statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading; provided , however, that the Company shall not be liable to any Holder Indemnified Person to the extent that any such claim arises out of, is based upon or results from an untrue or alleged untrue statement or omission or alleged omission made in such Registration Statement, such preliminary, summary or final prospectus or free writing prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder Indemnified Person or any underwriter specifically for use therein, it being understood and agreed that the only such information so furnished by any Holder to the Company consists of (A) the legal name and address of the Holder set forth in its footnote that appears under the caption “Principal and Selling Stockholders” of any such Registration Statement, such preliminary, summary or final prospectus and (B) the number of shares of Common Stock or Convertible Preferred Stock, as applicable, owned by the Holder

 

20


before and after the offering (excluding percentages) that appears in the table (and corresponding footnotes) under the caption “Principal and Selling Stockholders” of any such Registration Statement, such preliminary, summary or final prospectus (the “ Selling Stockholder Information ”). The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. This indemnity shall be in addition to any liability the Company may otherwise have and shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder Indemnified Person or any indemnified party and shall survive the transfer of such securities by such Holder. Notwithstanding anything to the contrary herein, this Section 6 shall survive any termination or expiration of this Agreement indefinitely.

(b) In connection with any Registration Statement in which a Holder participates, such Holder shall, severally and not jointly, indemnify and hold harmless the Company, its Affiliates and each of their respective officers, directors and any agent thereof, to the fullest extent permitted by applicable law, from and against any and all Losses as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any such Registration Statement, in any preliminary prospectus (if used prior to the Effective Date of such Registration Statement), or in any summary or final prospectus or free writing prospectus or in any amendment or supplement thereto (if used during the period the Company is required to keep the Registration Statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading, but only to the extent that any such claim arises out of, is based upon or results from an untrue or alleged untrue statement or omission or alleged omission made in such Registration Statement, such preliminary, summary or final prospectus or free writing prospectus or such amendment or supplement, in reliance upon and in conformity with such Holder’s Selling Stockholder Information. This indemnity shall be in addition to any liability such Holder may otherwise have and shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any indemnified party. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder from the sale of the Registrable Securities giving rise to such indemnification obligation.

(c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification 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 or there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, 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 will 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 (in addition to any local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party there may

 

21


be one or more legal or equitable defenses available to such indemnified party that are in addition to or may conflict with those available to another indemnified party with respect to such claim. Failure to give prompt written notice shall not release the indemnifying party from its obligations hereunder.

(d) If the indemnification provided for in this Section 6 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any Losses referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other, in connection with the untrue or alleged untrue statement of a material fact or the omission to state a material fact that resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder.

7. Facilitation of Sales Pursuant to Rule 144 . To the extent it shall be required to do so under the Exchange Act, the Company shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144), and shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable the Holders to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144. Upon the request of any Holder in connection with that Holder’s sale pursuant to Rule 144, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements.

8. Miscellaneous .

(a) Remedies . In the event of actual or potential breach by the Company of any of its obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

(b) Discontinued Disposition . Each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in clauses (ii) through (v) of Section 3(e) , such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder’s receipt of the copies of the supplemental Prospectus or amended Registration Statement as contemplated by Section

 

22


3(j) or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement (a “ Suspension Period ”). The Company may provide appropriate stop orders to enforce the provisions of this Section 8(b).

(c) Amendments and Waivers . No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and Holders that hold a majority of the Registrable Securities (counting Convertible Preferred Stock held by any Preferred Holder as Registrable Securities on an as-converted basis to Common Stock as provided in the Certificate) as of the date of such waiver or amendment; provided, that any waiver or amendment that would have a disproportionate adverse effect on a Holder relative to the other Holders shall require the consent of such Holder. The Company shall provide prior notice to all Holders of any proposed waiver or amendment. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.

(d) Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Section 8(d) prior to 5:00 p.m. in the time zone of the receiving party on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Agreement later than 5:00 p.m. in the time zone of the receiving party on any date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) upon actual receipt by the Party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

 

If to the Company:    WildHorse Resource Development Corporation
  

Attention: General Counsel

9805 Katy Freeway, Suite 400

Houston, TX 77024

E-mail: KRoane@wildhorserd.com

  

With copy to:

 

Vinson & Elkins L.L.P.

Attention: Douglas E. McWilliams

1001 Fannin Street, Suite 2500

Houston, Texas 77002

E-mail: dmcwilliams@velaw.com

If to any Person who is then the registered Holder:    To the address of such Holder as indicated on the signature page of this Agreement or, if different, as it appears in the applicable register for the Registrable Securities or as may be designated in writing by such Holder in accordance with this Section 8(d) .

 

23


(e) Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns. Except as provided in this Section 8(e) , this Agreement, and any rights or obligations hereunder, may not be assigned or directly or indirectly transferred without the prior written consent of the Company and the Holders. Notwithstanding anything in the foregoing to the contrary, the rights of a Holder pursuant to this Agreement with respect to all or any portion of its Registrable Securities may be assigned or transferred without such consent (but only with all related obligations) with respect to such Registrable Securities (and any Registrable Securities issued as a dividend or other distribution with respect to, in exchange for or in replacement of such Registrable Securities) by such Holder in connection with an assignment or transfer of (i) Registrable Securities to an Affiliate of such Holder, (ii) Registrable Securities with an aggregate VWAP (assuming any Convertible Preferred Stock that is the subject of such transfer has been converted to Common Stock pursuant to the Certificate and the Registrable Securities being transferred consist of such Common Stock) of at least $75 million, or (iii) in the case of the KKR Holders, in connection with the transfer of all of the Registrable Securities held by the KKR Holders and all other Holders that are Affiliates of the KKR Holders, provided such transfer consists of at least two-thirds of the Registrable Securities held by the KKR Holders as of the date of this Agreement, in each case provided that (A) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned and (B) such transferee or assignee agrees in writing to be bound by and subject to the terms set forth in this Agreement. The Company may not assign its rights or obligations hereunder without the prior written consent of the Holders.

(f) No Third Party Beneficiaries . Nothing in this Agreement, whether express or implied, shall be construed to give any Person, other than the parties hereto or their respective successors and permitted assigns, any legal or equitable right, remedy, claim or benefit under or in respect of this Agreement.

(g) Execution and Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile or electronic mail transmission, such signature shall create a valid binding obligation of the Party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such signature delivered by facsimile or electronic mail transmission were the original thereof.

(h) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial . This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York. Each of the Parties irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in in the Borough of Manhattan in the City of New York and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the

 

24


transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each Party anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the Parties irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

(i) Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

(j) Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the Parties shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the Parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(k) Entire Agreement . This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior contracts or agreements with respect to the subject matter hereof and the matters addressed or governed hereby, whether oral or written.

(l) Transfers of Common Stock by Sponsoring Holders and NGP . From the date hereof until the date that both (i) the Schedule 14C Waiting Period (as defined in the Preferred Purchase Agreement) has expired and (ii) the earlier of (A) 60 days following the date of this Agreement and (B) the date on which all approvals and authorizations of, filings and registrations with, and notifications to, or expiration or termination of any applicable waiting period, under the HSR Act (as defined in the Preferred Purchase Agreement) required with respect to the Preferred Voting and Conversion Features (as defined in the Preferred Purchase Agreement) of the Convertible Preferred Stock held by Carlyle have been obtained, made, expired or terminated, as applicable, the Sponsoring Holders and NGP shall not, without the prior written consent of Carlyle, (A) sell, transfer, assign, or otherwise dispose of, directly or indirectly (collectively, a “ Transfer ”), any shares of the Company’s capital stock held or beneficially owned by such Sponsoring Holder or NGP, as applicable, except that any Sponsoring Holder or NGP may Transfer any shares of Common Stock held by it to an Affiliate, provided such Affiliate agrees in writing to be bound by and subject to the terms set forth in this Agreement or (B) make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a short sale of or the purpose of which is to offset the loss which results from a decline in the market price of, any shares of the Company’s capital stock, or otherwise establish or increase, directly or indirectly, a put equivalent position, as defined in Rule 16a-1(h) under the Exchange Act, with respect to any of the Company’s capital stock.

 

25


(m) Termination . Except for Section 6 and Section 8(m) , this Agreement shall terminate as to any Holder, when all Registrable Securities held by such Holder no longer constitute Registrable Securities.

[Signature page follows.]

 

26


IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

 

COMPANY:
W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION
By:  

/s/ Jay C. Graham

Name:   Jay C. Graham
Title:   Chief Executive Officer
HOLDERS:
WHR H OLDINGS , LLC
By:  

/s/ Anthony Bahr

Name:   Anthony Bahr
Title:   Manager
Address for notice:
9805 Katy Freeway, Suite 400
Houston, Texas 77024
Attention: General Counsel
E-mail: KRoane@wildhorserd.com
With a copy to:
Natural Gas Partners
5221 N. O’Connor Boulevard, Suite 1100
Irving, Texas 75039
Fax: (972) 432-1441
Attention: General Counsel
E-mail: jzlotky@ngptrs.com

Signature Page to Registration Rights Agreement


E SQUISTO H OLDINGS , LLC
By:  

/s/ Anthony Bahr

Name:   Anthony Bahr
Title:   Manager
Address for notice:
9805 Katy Freeway, Suite 400
Houston, Texas 77024
Attention: General Counsel
E-mail: KRoane@wildhorserd.com
With a copy to:
Natural Gas Partners
5221 N. O’Connor Boulevard, Suite 1100
Irving, Texas 75039
Fax: (972) 432-1441
Attention: General Counsel
E-mail: jzlotky@ngptrs.com
WHE A CQ C O H OLDINGS , LLC
By:  

/s/ Anthony Bahr

Name:   Anthony Bahr
Title:   Manager
Address for notice:
9805 Katy Freeway, Suite 400
Houston, Texas 77024
Attention: General Counsel
E-mail: KRoane@wildhorserd.com
With a copy to:
Natural Gas Partners
5221 N. O’Connor Boulevard, Suite 1100
Irving, Texas 75039
Fax: (972) 432-1441
Attention: General Counsel
E-mail: jzlotky@ngptrs.com

Signature Page to Registration Rights Agreement


NGP XI US H OLDINGS , L.P.
By: NGP XI Holdings GP, L.L.C., general partner
By:  

/s/ Tony R. Weber

Name:   Tony R. Weber
Title:   Authorized Person
Address for notice:
Natural Gas Partners
5221 N. O’Connor Boulevard, Suite 1100
Irving, Texas 75039
Fax: (972) 432-1441
Attention: General Counsel
E-mail: jzlotky@ngptrs.com

Signature Page to Registration Rights Agreement


J AY C. G RAHAM

/s/ Jay C. Graham

Address for notice:
9805 Katy Freeway, Suite 400
Houston, Texas 77024
Attention: General Counsel
E-mail: jay.graham@wildhorseresources.com

Signature Page to Registration Rights Agreement


A NTHONY B AHR

/s/ Anthony Bahr

Address for notice:
9805 Katy Freeway, Suite 400
Houston, Texas 77024
Attention: General Counsel
E-mail: anthony.bahr@wildhorseresources.com

Signature Page to Registration Rights Agreement


CP VI EAGLE HOLDINGS, L.P.
By: TC Group VI S1, L.P., its general partner
By:  

/s/ Martin Sumner

Name:   Martin Sumner
Title:   Authorized Person

Address for notice:

 

The Carlyle Group

1001 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

Attention: Martin Sumner and Gregory Nikodem

Fax: (202) 347-1818

 

With a copy to:

 

Latham & Watkins LLP

555 Eleventh Street, N.W.

Suite 1000

Washington, D.C. 20004

Attention: David Dantzic and Brandon Bortner

Signature Page to Registration Rights Agreement


EIGF A GGREGATOR LLC
By:  

/s/ Thomas Dashiell Lane

Name:   Thomas Dashiell Lane
Title:   Vice President
Address for notice:
600 Travis Street, Suite 7200
Houston, Texas 77002
Attention: Dash Lane
Fax: (713) 583-9430
TE D RILLING A GGREGATOR LLC
By:  

/s/ Thomas Dashiell Lane

Name:   Thomas Dashiell Lane
Title:   Vice President
Address for notice:
600 Travis Street, Suite 7200
Houston, Texas 77002
Attention: Dash Lane
Fax: (713) 583-9430

Signature Page to Registration Rights Agreement


A URORA C-1 H OLDING L.P.
B Y :   A URORA H OLDING GP LLC,
  I TS G ENERAL P ARTNER
By:  

/s/ Thomas Dashiell Lane

Name:   Thomas Dashiell Lane
Title:   Vice President
Address for notice:
600 Travis Street, Suite 7200
Houston, Texas 77002
Attention: Dash Lane
Fax: (713) 583-9430

Signature Page to Registration Rights Agreement

Exhibit 10.1

S ECOND A MENDMENT TO C REDIT A GREEMENT

This S ECOND A MENDMENT TO C REDIT A GREEMENT (this “ Second Amendment ”), dated as of June 30, 2017 (the “ Second Amendment Effective Date ”), is among WildHorse Resource Development Corporation, a Delaware corporation (the “ Borrower ”); each of the Guarantors party hereto (the “ Guarantors ” and collectively with the Borrower, the “ Credit Parties ”); each of the Lenders party hereto; and Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “ Administrative Agent ”).

R E C I T A L S:

A. The Borrower, the Administrative Agent and the Lenders are parties to that certain Credit Agreement dated as of December 19, 2016 (as amended or otherwise modified from time to time to date pursuant to the terms thereof, 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 the Borrower has entered into (i) that certain Purchase and Sale Agreement, dated as of May 10, 2017, among WHR Eagle Ford LLC, a Delaware limited liability company and Wholly-Owned Subsidiary of the Borrower (“ WHREF ”), as purchaser, and Anadarko E&P Onshore LLC (“ AEPO ”), Admiral A Holding L.P., TE Admiral A Holding L.P. and Aurora C-I Holding L.P., as sellers (the “ First Purchase Agreement ”), and (ii) that certain Purchase and Sale Agreement, dated as of May 10, 2017, among WHREF, as purchaser, and AEPO and Anadarko Energy Services Company, as sellers (the “ Second Purchase Agreement ”, and together with the First Purchase Agreement, the “ Purchase Agreements ”), and pursuant to which WHREF will acquire certain “Assets” as defined in each Purchase Agreement (such acquisition, the “ Eagle Ford Acquisition ”, and such Assets, the “ Eagle Ford Assets ”).

C. In connection with the Eagle Ford Acquisition, the Borrower has requested, among other things, to amend certain terms of the Credit Agreement as set forth herein, to be effective as of the Second Amendment Effective Date.

D. In connection with the Eagle Ford Acquisition, the Lenders have agreed to redetermine and increase the Borrowing Base to $650,000,000 effective as of the Second Amendment Effective Date.

E. The Borrower has requested that U.S. Bank (the “ New Lender ”), become Lenders under the Credit Agreement with a Maximum Credit Amount and an Elected Commitment in the amount as shown on Annex I to the Credit Agreement (as amended hereby).

F. Raymond James Bank, N.A. (the “ Exiting Lender ”), by its execution of this Second Amendment, will cease to be a Lender for all purposes under the Credit Agreement and the other Loan Documents.

G. Subject to and upon the terms and conditions set forth herein, the undersigned Lenders have agreed to enter into this Second Amendment to amend certain provisions of the Credit Agreement as more specifically provided for herein.


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 to such term in the Credit Agreement, as amended hereby. Unless otherwise indicated, all section references in this Second Amendment refer to the Credit Agreement, as amended hereby.

Section 2. Amendments to Credit Agreement . 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 6 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 Amendments to Section 1.02 .

(a) The definition of “Total Debt” is hereby deleted in its entirety.

(b) The definition of “Excluded Cash” is hereby amended by adding the following language at the end of such definition:

“For clarity, cash in any Account that is subject to an Account Control Agreement shall be deemed held by the Administrative Agent pursuant to this Loan Agreement.”

(c) The following definitions are hereby amended and restated as follows:

Agreement ” means this Credit Agreement, as amended by the First Amendment, the Second Amendment and as the same may be further amended, modified, supplemented or restated from time to time.

Change in Control ” means the occurrence of any of the following: (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), other than any NGP Party, of Equity Interests representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower; (b) the members of the board of directors of the Borrower that are not Appointed Directors shall constitute a majority of the board of directors of the Borrower; or (c) the Borrower or a Guarantor ceases to own 100% of the Equity Interests of each Restricted Subsidiary. For the avoidance of doubt, the consent rights and other rights and privileges of the holders of the 2017 Preferred Units in the 2017 Preferred Documents as in effect on the Second Amendment Effective Date do not constitute “ordinary voting power” for purposes of this definition.

 

Page 2


Disqualified Capital Stock ” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise (except as a result of any change of control or asset sale so long as (A) any rights of the holders of such Equity Interests upon the change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Indebtedness (other than (i) contingent indemnification obligations as to which no claim has been asserted, (ii) Indebtedness to any Secured Swap Provider under Swap Agreement and (iii) Indebtedness to any Bank Products Provider in respect of Bank Products) and (B) in the case of an asset sale, such terms are no more restrictive to the Borrower than those in the 2017 Preferred Documents), or is convertible or exchangeable for Debt or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof (except as a result of any change of control or asset sale so long as (A) any rights of the holders of such Equity Interests upon the change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Indebtedness (other than (i) contingent indemnification obligations as to which no claim has been asserted, (ii) Indebtedness to any Secured Swap Provider under Swap Agreement and (iii) Indebtedness to any Bank Products Provider in respect of Bank Products) and (B) in the case of an asset sale, such terms are no more restrictive to the Borrower than those in the 2017 Preferred Documents), in whole or in part, on or prior to the date that is one year after the earlier of (a) the Maturity Date and (b) the date on which there are no Loans, LC Exposure or other obligations hereunder outstanding and all of the Commitments are terminated; provided that, in no event shall the 2017 Preferred Units issued pursuant to the 2017 Preferred Documents in effect as of the Second Amendment Effective Date constitute Disqualified Capital Stock.

Guarantors ” means all Restricted Subsidiaries and each other Person that guarantees the Indebtedness pursuant to Section 8.14(b). As of the Second Amendment Effective Date, the Guarantors are WildHorse, Esquisto, WHE, WHREF, WildHorse Resources Management Company, LLC, a Delaware limited liability company, Oakfield Energy LLC, a Delaware limited liability company, Petromax E&P Burleson, LLC, a Texas limited liability company, and Burleson Water Resources, LLC, a Texas limited liability company.

Net Debt ” means, at any time, (a) Total Funded Debt, minus (b) the aggregate amount of cash and Cash Equivalents (other than Excluded Cash, except to the extent such Excluded Cash consists of cash collateral held or deemed held by the Administrative Agent pursuant to this Agreement or any other Loan Document, in each case, excluding any cash and Cash Equivalents being held to cash collateralize or otherwise backstop a Letter of Credit) of the Borrower and the Consolidated Restricted Subsidiaries.

 

Page 3


(c) The following definitions are hereby added where alphabetically appropriate to read as follows:

2017 Preferred Documents ” means (a) the Preferred Stock Purchase Agreement, dated as of May 10, 2017, by and between the Borrower and CP VI Eagle Holdings, L.P., (b) the WildHorse Resource Development Corporation 6% Series A Perpetual Convertible Preferred Stock Certificate of Designation, and (c) the Amended and Restated Registration Rights Agreement dated as of June 30, 2017, by and among the Borrower, WHR Holdings, LLC, Esquisto Holdings, LLC, WHE AcqCo Holdings, LLC, NGP XI US Holdings, L.P., Jay C. Graham, Anthony Bahr, CP VI Eagle Holdings, L.P., Admiral Holding L.P., TE Admiral A Holding L.P. and Aurora C-1 Holding L.P., in each case, as such documents are in effect as of the Second Amendment Effective Date, each as may be amended, modified, restated or supplemented in a manner not prohibited by this Agreement.

2017 Preferred Units ” means, collectively, (a) the preferred units of the Borrower in an aggregate principal amount of $435,000,000 issued and sold on the Second Amendment Effective Date pursuant to the 2017 Preferred Documents and (b) additional preferred units of the Borrower constituting distributions paid in kind in accordance with the terms and conditions of the 2017 Preferred Documents.

Second Amendment ” means that certain Second Amendment to Credit Agreement, dated as of June 30, 2017, among the Borrower, the Guarantors, the Administrative Agent and the Lenders party thereto.

Second Amendment Effective Date ” means June 30, 2017.

Total Funded Debt ” means, at any date, all Debt of the Borrower and the Consolidated Restricted Subsidiaries on a consolidated basis other than (i) contingent obligations in respect of Debt described in clause (b) of the definition of “Debt”, (ii) Debt described in clauses (c), (i), (j), (k), (l) and (m) of the definition of “Debt” and (iii) Debt described in clauses (f) or (g) of the definition of “Debt” in respect of Debt of others described in clauses (i), (ii) or (iii) of this definition.

WHREF ” means WHR Eagle Ford LLC, a Delaware limited liability company.

2.2 Amendment to Article VII of the Credit Agreement . Article VII of the Credit Agreement is hereby amended by adding new Section 7.27 immediately after existing Section 7.26 of such article to read in full as follows:

“Section 7.27 2017 Preferred Units . The 2017 Preferred Units are not classified as a “debt” or a “liability” under GAAP as in effect on the Second Amendment Effective Date.”

 

Page 4


2.3 Amendment to Section 8.12(a) . The last sentence in Section 8.12(a) is hereby amended to read in in its entirely as follows:

“The Reserve Report as of January 1 of each year shall be audited by one or more Approved Petroleum Engineers; provided that, at the election of the Borrower, so long as no Default has occurred and is continuing, the Reserve Report as of January 1 may be audited or prepared by one or more Approved Petroleum Engineers.”

2.4 Amendment to Section 9.01(a) . Section 9.01(a) is hereby amended by replacing the reference to “Total Debt” with “Total Funded Debt”.

2.5 Amendment to Section 9.04(a)(i) of the Credit Agreement . Section 9.04(a)(i) of the Credit Agreement is hereby amended and restated to read in full as follows:

“(i) the Borrower may (A) declare and pay dividends with respect to any of its Equity Interests payable solely in additional shares of its Equity Interests (other than Disqualified Capital Stock), and (B) declare and make dividends or distributions in respect of 2017 Preferred Units in the form of additional 2017 Preferred Units constituting payments in kind;”

2.6 Amendment to Section 9.04(a)(iv) . Section 9.04(a)(iv) is hereby amended by replacing the reference to “$50,000,000” with “$75,000,000”.

2.7 Amendment to Section 9.12 of the Credit Agreement . The last sentence of Section 9.12 of the Credit Agreement is hereby amended and restated to read in full as follows:

“Notwithstanding anything to the contrary in this Section 9.12 , none of (x) the forfeiture of all or any portion of any lease as the result of a decision by any Loan Party not to drill any well or take any other action necessary to maintain such lease in full force and effect, (y) the sale or other disposition by any Loan Party of any Equity Interest in any Unrestricted Subsidiary, or (z) the sale or other disposition by the Borrower of any Equity Interest in the Borrower, is a sale or other disposition which is subject to this Section 9.12 .

2.8 Amendment to Section 9.22(a) of the Credit Agreement . Section 9.22(a) of the Credit Agreement is hereby amended and restated to read in full as follows:

“(a) The Borrower shall not, and shall not permit any other Loan Party to, amend, supplement or otherwise modify (or permit to be amended, supplemented or modified) its Organizational Documents or the 2017 Preferred Documents in any manner that would be adverse to the Lenders in any material respect; provided that any increase or acceleration of any mandatory payment or redemption obligations to any holders of any preferred equity of the Borrower shall be deemed to be materially adverse (it being understood and agreed that additional issuances of preferred units as described in the definition of 2017 Preferred Units shall not be deemed to be an increase to any such mandatory payment or redemption obligations).”

 

Page 5


2.9 Replacement of Annex I .

(a) 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. After giving effect to this Second Amendment and any Borrowings made on the Second Amendment Effective Date, (i) the Revolving Credit Exposure and the principal amount of Loans held by the Exiting Lender shall be $0.00, (ii) each Lender (including the New Lender) who holds Loans in an aggregate amount less than its Applicable Percentage (after giving effect to this Second Amendment) of all Loans shall advance new Loans which shall be disbursed to the Administrative Agent and used to repay Loans outstanding to each Lender who holds Loans in an aggregate amount greater than its Applicable Percentage of all Loans (or in the case of the Exiting Lender, in an amount greater than $0.00), (iii) each Lender’s participation in each Letter of Credit (after giving effect to this Second Amendment), if any, shall be automatically adjusted to equal its Applicable Percentage (or in the case of the Exiting Lender, adjusted to equal $0.00) and (iv) such other adjustments shall be made as the Administrative Agent shall specify so that the Revolving Credit Exposure applicable to each Lender equals its Applicable Percentage (after giving effect to this Second Amendment) of the aggregate Revolving Credit Exposure of all Lenders (or in the case of the Exiting Lender, adjusted to equal $0.00).

(b) The Administrative Agent, the Issuing Banks and the Borrower hereby consent to the reallocations and assignments pursuant to this Section 2.9 and waive the delivery of an Assignment and Assumption and any other condition (other than the delivery by the New Lender of an Administrative Questionnaire) to the effectiveness of the foregoing reallocations and assignments. The Administrative Agent hereby consents to a one-time waiver of the $3,500 processing and recordation fee that would otherwise be payable pursuant to Section 12.04(b)(ii)(C) as a result of the assignment provided for herein. Each existing Lender waives any break-funding payments otherwise payable under Section 5.02 in connection with the repayment of any Loans in accordance with this Section 2.9 .

Section 3. Aggregate Elected Commitment Amounts . Pursuant to Section 2.06(c), the Aggregate Elected Commitment Amounts shall be increased to $650,000,000, effective as of the Second Amendment Effective Date, and the Borrower and the Lenders agree and acknowledge that the Elected Commitment of each Lender shall be as more particularly set forth on Annex I attached hereto and that the New Lender shall be deemed to have executed and delivered Exhibit H attached to the Credit Agreement pursuant to the terms thereof.

Section 4. Borrowing Base Redetermination . Pursuant to Section 2.07, the Administrative Agent and the Lenders agree that for the period from and including the Second Amendment Effective Date to but excluding the next Redetermination Date, effective contemporaneous with the consummation of the Eagle Ford Acquisition, the amount of the Borrowing Base shall be equal to $650,000,000. Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments from time to time pursuant to Section 2.07(e), Section 2.07(f) or Section 8.12(c). For the avoidance of doubt, the redetermination herein shall constitute an Interim Redetermination as set forth in Section 2.07(b).

 

Page 6


Section 5. New Lender . The New Lender hereby joins in, becomes a party to, and agrees to comply with and be bound by the terms and conditions of the Credit Agreement as amended hereby as a Lender thereunder and under each and every other Loan Document to which any Lender is required to be bound by the Credit Agreement as amended hereby, to the same extent as if the New Lender were an original signatory thereto. The New Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as amended hereby as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto. The New Lender represents and warrants that (a) it has full power and authority, and has taken all action necessary, to execute and deliver this Second Amendment, to consummate the transactions contemplated hereby and to become a party to, and a Lender under, the Credit Agreement as amended hereby, (b) it has received a copy of the Credit Agreement and copies of the most recent financial statements delivered pursuant to Section 8.01, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Second Amendment and to become a Lender on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (c) from and after the Second Amendment Effective Date, it shall be a party to and be bound by the provisions of the Credit Agreement as amended hereby and the other Loan Documents and have the rights and obligations of a Lender thereunder.

Section 6. Conditions Precedent . The effectiveness of this Second Amendment is subject to the following:

6.1 The Administrative Agent shall have received counterparts (in such number as may be requested by the Administrative Agent) of this Second Amendment from the Borrower, each Guarantor and each Lender (including the Exiting Lender).

6.2 The Administrative Agent shall have received an Administrative Questionnaire from the New Lender.

6.3 In connection with the Eagle Ford Acquisition, the Administrative Agent shall have received from the relevant Loan Parties duly executed and notarized mortgages and/or mortgage supplements in form and substance reasonably satisfactory to the Administrative Agent so that, after giving effect to the recording of such mortgages and/or mortgage supplements, the Administrative Agent shall be reasonably satisfied that, after giving pro forma effect to the Eagle Ford Acquisition and this Second Amendment, it has first priority, perfected Liens (subject only to Excepted Liens identified in clauses (a) to (d) and (f) of the definition thereof, but subject to the provisos at the end of such definition) on at least 85% of the total value (as determined by the Administrative Agent based on the present value of the Proved Reserves attributable thereto using a 9% discount rate) of the Oil and Gas Properties evaluated in the Reserve Report most recently delivered pursuant to Section 8.12(a) and including the Eagle Ford Assets.

6.4 The Administrative Agent shall have received from the Borrower title information setting forth, after giving pro forma effect to the Eagle Ford Acquisition and this Second Amendment, the status of title to at least 85% of the total value (as determined by the Administrative Agent based on the present value of the Proved Reserves attributable thereto using a 9% discount rate) of the Oil and Gas Properties evaluated in the Reserve Report most recently delivered pursuant to Section 8.12(a) and including the Eagle Ford Assets.

 

Page 7


6.5 The Administrative Agent shall have received evidence reasonably satisfactory to it that on the Second Amendment Effective Date, the sale of $435,000,000 of 2017 Preferred Units pursuant to the 2017 Preferred Documents has been or will be consummated.

6.6 The Administrative Agent shall have received evidence reasonably satisfactory to it that on the Second Amendment Effective Date, all Liens on the Eagle Ford Assets (other than Liens permitted by Section 9.03) have been or will be released or terminated, subject only to the filing of applicable terminations and releases.

6.7 The Administrative Agent shall be reasonably satisfied with the environmental condition of the Eagle Ford Assets.

6.8 The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying:

(a) true, accurate and complete copies of (i) the Purchase Agreements and (ii) all assignments executed and delivered in connection therewith, and all amendments thereto, which amendments shall contain terms and conditions reasonably acceptable to the Administrative Agent (collectively, the “ Related Documents ”);

(b) true, accurate and complete copies of the 2017 Preferred Documents (collectively, with the Related Documents, the “ 2017 Acquisition Documents ”) which documents shall be in form and substance reasonably acceptable to the Administrative Agent;

(c) that, on the Second Amendment Effective Date, the applicable Loan Parties have (i) executed the 2017 Acquisition Documents, in accordance with the terms of the 2017 Acquisition Documents without waiver or amendment of any term or condition thereof which would be adverse to the interests of the Loan Parties or the Lenders (provided that, for the avoidance of doubt, any waiver or amendment of the Purchase Agreements or any other Related Document that (A) results in the exclusion of Assets (as defined in each Purchase Agreement) representing five percent (5%) or more of the total value of the Assets that were included in the Purchase Agreements evaluated by the Administrative Agent from the Eagle Ford Assets being acquired by the Borrower or (B) results in the exclusion of five percent (5%) or more of the proved, developed, producing reserves represented by Eagle Ford Assets evaluated by the Administrative Agent in its determination of the Borrowing Base established pursuant to Section 4 hereof, in each case, shall be deemed to be materially adverse to the interest of the Loan Parties and the Lenders) and (ii) acquired all of the Eagle Ford Assets other than those expressly identified on such certificate; and

(d) as to the final purchase price for the Eagle Ford Assets including any portion thereof being deposited into an escrow account after giving effect to all adjustments as of the Second Amendment Effective Date contemplated by the Purchase Agreements.

6.9 No Default or Borrowing Base Deficiency shall have occurred and be continuing as of the date hereof after giving effect to the terms of this Second Amendment.

6.10 The Administrative Agent shall have received all fees and other amounts due and payable to the Administrative Agent or any Lenders in connection with this Second Amendment.

 

Page 8


6.11 The Administrative Agent shall have received duly executed Notes payable to each Lender requesting a Note in a principal amount equal to its Maximum Credit Amount (as amended by Section 3 hereof) dated as of the date hereof.

6.12 The Administrative Agent shall have received such other documents as the Administrative Agent or its special counsel may reasonably require.

The Administrative Agent is hereby authorized and directed to declare this Second Amendment to be effective when it has received documents confirming or certifying, to the satisfaction of the Administrative Agent, compliance with the conditions set forth in this Section 6 or the waiver of such conditions as permitted hereby. Such declaration shall be final, conclusive and binding upon all parties to the Credit Agreement for all purposes.

Section 7. Return of Promissory Notes . Promptly upon receipt of any replacement Note under Section 6.11 hereof, each Lender shall return to the Administrative Agent (for delivery to the Borrower for cancellation) any other Note in such Lender’s possession that was previously delivered to such Lender under the Credit Agreement.

Section 8. Miscellaneous .

8.1 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 Second Amendment Effective Date, 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.

8.2 No Waiver . Neither the execution by the Administrative Agent or the Lenders of this Second Amendment, nor any other act or omission by the Administrative Agent or the Lenders or their officers in connection herewith, shall be deemed a waiver by the Administrative Agent or the Lenders of any Defaults or Events of Default which may exist, which may have occurred prior to the date of the effectiveness of this Second Amendment or which may occur in the future under the Credit Agreement and/or the other Loan Documents. Similarly, nothing contained in this Second Amendment shall directly or indirectly in any way whatsoever either: (a) impair, prejudice or otherwise adversely affect the Administrative Agent’s or the Lenders’ right at any time to exercise any right, privilege or remedy in connection with the Loan Documents with respect to any Default or Event of Default, (b) except as expressly provided herein, amend or alter any provision of the Credit Agreement, the other Loan Documents, or any other contract or instrument, or (c) constitute any course of dealing or other basis for altering any obligation of the Borrower or any right, privilege or remedy of the Administrative Agent or the Lenders under the Credit Agreement, the other Loan Documents, or any other contract or instrument.

 

Page 9


8.3 Ratification and Affirmation of Credit Parties . Each Credit Party hereby expressly (i) acknowledges the terms of this Second Amendment, (ii) ratifies and affirms its obligations under the Guaranty Agreement, the Security Agreement and the other Loan Documents to which it is a party, (iii) acknowledges, renews and extends its continued liability under the Guaranty Agreement, the Security Agreement and the other Loan Documents to which it is a party, (iv) agrees that its guarantee under the Guaranty Agreement and its pledge of collateral under the Security Agreement and any of its obligations under the other Loan Documents to which it is a party remain in full force and effect with respect to the Indebtedness as amended hereby, (v) represents and warrants to the Lenders and the Administrative Agent that each representation and warranty of such Person contained in the Credit Agreement (as amended by this Second Amendment) 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 this Second Amendment except (A) to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties shall continue to be true and correct as of such specified earlier date, and (B) to the extent that any such representation and warranty is expressly qualified by reference to materiality, a Material Adverse Effect or similar qualification, in which case such representations and warranties shall be true and correct in all respects, (vi) represents and warrants to the Lenders and the Administrative Agent that the execution, delivery and performance by such Person of this Second Amendment are within such Person’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 Person enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law, and (vii) represents and warrants to the Lenders and the Administrative Agent that, after giving effect to this Second Amendment, no Default or Event of Default exists.

8.4 Counterparts . This Second Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Second Amendment by facsimile or other electronic transmission (e.g., .pdf) shall be effective as delivery of a manually executed counterpart of this Second Amendment.

8.5 No Oral Agreement . T HIS WRITTEN S ECOND A MENDMENT , THE C REDIT A GREEMENT AND THE OTHER L OAN D OCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR , CONTEMPORANEOUS , OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES . T HERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES .

8.6 Governing Law . T HIS S ECOND A MENDMENT SHALL BE GOVERNED BY , AND CONSTRUED IN ACCORDANCE WITH , THE LAWS OF THE S TATE OF N EW Y ORK .

 

Page 10


8.7 Payment of Expenses . The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable and documented out-of-pocket costs and expenses incurred in connection with this Second Amendment in accordance with Section 12.03.

8.8 Severability . Any provision of this Second Amendment or any other Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

8.9 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 (in each case, as permitted by Section 12.04).

8.10 Loan Document . This Second Amendment shall constitute a “Loan Document” under and as defined in Section 1.02.

8.11 Exiting Lender . The Exiting Lender hereby (a) consents to this Second Amendment as required under Section 12.02(b) of the Credit Agreement and (b) acknowledges and agrees to Section 2.9 hereof. Each of the parties hereto hereby agrees and confirms that immediately after giving effect to Section 2.9 hereof, the Exiting Lender’s Maximum Credit Amount shall be $0.00, the Exiting Lender’s Commitments to lend and all obligations under the Credit Agreement shall be terminated, and the Exiting Lender shall cease to be a Lender for all purposes under the Loan Documents.

[Signature Pages Follow]

 

Page 11


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

BORROWER:

WILDHORSE RESOURCE DEVELOPMENT CORPORATION , a Delaware corporation
By:  

/s/ Andrew J. Cozby

Name:   Andrew J. Cozby
Title:   Executive Vice President and Chief
  Financial Officer

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION

 


GUARANTORS:

 

WILDHORSE RESOURCES II, LLC, a Delaware limited liability company

By: WildHorse Resource Development Corporation, its sole member

ESQUISTO RESOURCES II, LLC , a Texas limited liability company

By: WildHorse Resource Development Corporation, its sole member

WHE ACQCO., LLC , a Delaware limited liability company

By: WildHorse Resource Development Corporation, its sole member

WHR EAGLE FORD LLC , a Delaware limited liability company

By: WildHorse Resource Development Corporation, its sole member

By:  

/s/ Andrew J. Cozby

Name:   Andrew J. Cozby
Title:   Executive Vice President and Chief
  Financial Officer
WILDHORSE RESOURCES MANAGEMENT COMPANY, LLC , a Delaware limited liability company

By: WildHorse Resources II, LLC, its sole member,

By: WildHorse Resource Development Corporation, its sole member

OAKFIELD ENERGY LLC , a Delaware limited liability company

By: WildHorse Resources II, LLC, its sole member,

By: WildHorse Resource Development Corporation, its sole member

By:  

/s/ Andrew J. Cozby

Name:   Andrew J. Cozby
Title:   Executive Vice President and Chief
  Financial Officer

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


PETROMAX E&P BURLESON, LLC , a Texas limited liability company

By: Esquisto Resources II, LLC, its sole member,

By: WildHorse Resource Development Corporation, its sole member

By:  

/s/ Andrew J. Cozby

Name:   Andrew J. Cozby
Title:   Executive Vice President and Chief
  Financial Officer
BURLESON WATER RESOURCES, LLC , a Texas limited liability company

By: Esquisto Resources II, LLC, its sole member,

By: WildHorse Resource Development Corporation, its sole member

By:  

/s/ Andrew J. Cozby

Name:   Andrew J. Cozby
Title:   Executive Vice President and Chief
  Financial Officer

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


ADMINISTRATIVE AGENT AND LENDERS:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and a Lender
By:  

/s/ Russell Otts

Name:   Russell Otts
Title:   Director

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


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

/s/ Kevin Utsey

Name:   Kevin Utsey
Title:   Director

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


BANK OF AMERICA, N.A., as a Lender
By:  

/s/ Raza Jaffen

Name:   Raza Jaffen
Title:   Vice President

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


BARCLAYS BANK PLC, as a Lender
By:  

/s/ May Huang

Name:   May Huang
Title:   Assistant Vice President

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


CITIBANK, N.A., as a Lender
By:  

/s/ Cliff Vaz

Name:   Cliff Vaz
Title:   Vice President

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


COMERICA BANK, as a Lender
By:  

/s/ William B. Robinson

Name:   William B. Robinson
Title:   Senior Vice President

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


ING CAPITAL LLC, as a Lender
By:  

/s/ Josh Strong

Name:   Josh Strong
Title:   Director
By:  

/s/ Charles Hall

Name:   Charles Hall
Title:   Managing Director

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


BOKF, N.A. DBA BANK OF TEXAS, as a Lender
By:  

/s/ Martin Wilson

Name:   Martin Wilson
Title:   SVP – Energy Lending

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


CAPITAL ONE NATIONAL ASSOCIATION, as a Lender
By:  

/s/ Michael Higgins

Name:   Michael Higgins
Title:   Senior Director

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


JPMORGAN CHASE BANK, N.A., as a Lender
By:  

/s/ Justin Crawford

Name:   Justin Crawford
Title:   Authorized Signatory

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


ASSOCIATED BANK, N.A., as a Lender
By:  

/s/ Kyle Lewis

Name:   Kyle Lewis
Title:   Vice President

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION

 


COMPASS BANK, as a Lender
By:  

/s/ Kari McDaniel

Name:   Kari McDaniel
Title:   Vice President

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION

 


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

/s/ Richard Antl

Name:   Richard Antl
Title:   Authorized Signatory
By:  

/s/ Trudy Nelson

Name:   Trudy Nelson
Title:   Authorized Signatory

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION

 


FIFTH THIRD BANK, as a Lender
By:  

/s/ Justin Bellamy

Name:   Justin Bellamy
Title:   Director

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION

 


U.S. BANK, as a Lender
By:  

/s/ John C. Lozano

Name:   John C. Lozano
Title:   Vice President

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION

 


RAYMOND JAMES BANK, N.A., as the Exiting Lender
By:  

/s/ Scott G. Axelrod

Name:   Scott G. Axelrod
Title:   Senior Vice President

S IGNATURE P AGE TO S ECOND A MENDMENT TO C REDIT A GREEMENT

W ILD H ORSE R ESOURCE D EVELOPMENT C ORPORATION


ANNEX I

LIST OF MAXIMUM CREDIT AMOUNTS AND ELECTED COMMITMENTS

 

Name of Lender

   Applicable
Percentage
    Maximum Credit
Amount
     Elected
Commitment
 

Wells Fargo Bank, National Association

     9.2308   $ 92,308,000.00      $ 60,000,000.00  

BMO Harris Bank N.A.

     9.2308   $ 92,308,000.00      $ 60,000,000.00  

Bank of America, N.A.

     7.6923   $ 76,923,000.00      $ 50,000,000.00  

Barclays Bank PLC

     7.6923   $ 76,923,000.00      $ 50,000,000.00  

Citibank, N.A.

     7.6923   $ 76,923,000.00      $ 50,000,000.00  

Comerica Bank

     7.6923   $ 76,923,000.00      $ 50,000,000.00  

ING Capital LLC

     7.6923   $ 76,923,000.00      $ 50,000,000.00  

BOKF, N. A. DBA Bank of Texas

     6.3846   $ 63,846,000.00      $ 41,500,000.00  

Capital One National Association

     6.3846   $ 63,846,000.00      $ 41,500,000.00  

JPMorgan Chase Bank, N.A.

     6.3846   $ 63,846,000.00      $ 41,500,000.00  

Canadian Imperial Bank of Commerce, New York Branch

     5.7692   $ 57,692,000.00      $ 37,500,000.00  

Compass Bank

     5.7692   $ 57,692,000.00      $ 37,500,000.00  

Fifth Third Bank

     5.7692   $ 57,692,000.00      $ 37,500,000.00  

Associated Bank, N.A.

     3.3077   $ 33,077,000.00      $ 21,500,000.00  

U.S. Bank

     3.3077   $ 33,077,000.00      $ 21,500,000.00  
  

 

 

   

 

 

    

 

 

 

TOTAL

     100.00000000   $ 1,000,000,000.00      $ 650,000,000.00  
  

 

 

   

 

 

    

 

 

 

A NNEX I

Exhibit 10.2

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“ Agreement ”) is made as of June 30, 2017 by and between WildHorse Resource Development Corporation, a Delaware corporation (the “ Company ”), and Brian A. Bernasek (“ Indemnitee ”).

RECITALS :

WHEREAS, directors, officers and other persons in service to corporations or business enterprises are subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself;

WHEREAS, highly competent persons have become more reluctant to serve as directors, officers or in other capacities unless they are provided with adequate protection through insurance and adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (the “ Board ”) has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, (i) the Amended and Restated Bylaws of the Company (as may be amended, the “ Bylaws ”) requires indemnification of the officers and directors of the Company (ii) Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“ DGCL ”) and (iii) the Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws and the Amended and Restated Certificate of Incorporation of the Company (as may be amended, the “ Certificate of Incorporation ”) and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefore, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, (i) Indemnitee does not regard the protection available under the Bylaws and insurance as adequate in the present circumstances, (ii) Indemnitee may not be willing to serve or continue to serve as a director or officer of the Company without adequate protection, (iii) the Company desires Indemnitee to serve in such capacity, and (iv) Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified.


AGREEMENT :

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Definitions . (a) As used in this Agreement:

Affiliate ” of any specified Person shall mean any other Person directly or indirectly controlling, controlled by or under common control with such specified Person.

Corporate Status ” describes the status of a person who is or was a director, officer, employee or agent of (i) the Company or (ii) any other corporation, limited liability company, partnership or joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company.

Disinterested Director ” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

Enterprise ” shall mean the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary.

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

Expenses ” shall mean all reasonable costs, expenses, fees and charges, including, without limitation, attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include, without limitation, (i) expenses incurred in connection with any appeal resulting from, incurred by Indemnitee in connection with, arising out of, or in respect of or relating to, any Proceeding, including, without limitation, the premium, security for, and other costs relating to any cost bond, supersedes bond, or other appeal bond or its equivalent, (ii) for purposes of Section 12(d) hereof only, expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise, (iii) any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, and (iv) any interest, assessments or other charges in respect of the foregoing. “Expenses” shall not include “Liabilities.”

Indemnity Obligations ” shall mean all obligations of the Company to Indemnitee under this Agreement, including the Company’s obligations to provide indemnification to Indemnitee and advance Expenses to Indemnitee under this Agreement.

Independent Counsel ” shall mean a law firm of fifty (50) or more attorneys, or a member of a law firm of fifty (50) or more attorneys, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder; provided, however, that the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

2


Liabilities ” shall mean all claims, liabilities, damages, losses, judgments, orders, fines, penalties and other amounts payable in connection with, arising out of, or in respect of or relating to any Proceeding, including, without limitation, amounts paid in settlement in any Proceeding and all costs and expenses in complying with any judgment, order or decree issued or entered in connection with any Proceeding or any settlement agreement, stipulation or consent decree entered into or issued in settlement of any Proceeding.

Person ” shall mean any individual, corporation, partnership, limited partnership, limited liability company, trust, governmental agency or body or any other legal entity.

Proceeding ” shall mean any threatened, pending or completed action, claim, suit, arbitration, alternate dispute resolution mechanism, formal or informal hearing, inquiry or investigation, litigation, inquiry, administrative hearing or any other actual, threatened or completed judicial, administrative or arbitration proceeding (including, without limitation, any such proceeding under the Securities Act of 1933, as amended, or the Exchange Act or any other federal law, state law, statute or regulation), whether brought in the right of the Company or otherwise, and whether of a civil, criminal, administrative or investigative nature, in each case, in which Indemnitee was, is or will be, or is threatened to be, involved as a party, witness or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any actual or alleged action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or inaction) on Indemnitee’s part while acting as director or officer of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, trustee, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement can be provided under this Agreement.

Sponsor Entities ” means (i) WHR Holdings, LLC, Esquisto Holdings, LLC, WHE AcqCo Holdings, LLC, WildHorse Investment Holdings, LLC, Esquisto Investment Holdings, LLC, NGP IX Holdings, L.P., NGP X US Holdings, L.P., NGP XI Holdings, L.P., and CP VI Eagle Holdings, L.P. and (ii) any of their respective Affiliates and any investment fund or other Person advised or managed by any Sponsor Entity, in each case, which owns or owned a direct or indirect interest in the Company; provided, however, that neither the Company nor any of its subsidiaries shall be considered Sponsor Entities hereunder.

(b) For the purpose hereof, references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a Person who acted in good faith and in a manner such Person reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

 

3


Section 2. Indemnity in Third-Party Proceedings . The Company shall indemnify and hold harmless Indemnitee, to the fullest extent permitted by applicable law, from and against all Liabilities and Expenses suffered or reasonably incurred (and, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding (other than any Proceeding brought by or in the right of the Company to procure a judgment in its favor, which is provided for in Section 3 below), or any claim, issue or matter therein.

Section 3. Indemnity in Proceedings by or in the Right of the Company . The Company shall indemnify and hold harmless Indemnitee, to the fullest extent permitted by applicable law, from and against all Liabilities and Expenses suffered or incurred (and, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding brought by or in the right of the Company to procure a judgment in its favor, or any claim, issue or matter therein. No indemnification for Expenses shall be made under this Section 3 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

Section 4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful . Notwithstanding any other provisions of this Agreement, and without limiting the rights of Indemnitee under any other provision hereof, including any rights to indemnification pursuant to Sections 2 or 3 hereof, to the fullest extent permitted by applicable law, to the extent that Indemnitee is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred (and, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved Proceeding, claim, issue or matter. For purposes of this Section 4 and without limitation, the termination of any Proceeding or claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 5. Indemnification For Expenses of a Witness . Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status or in its capacity as a representative of the Sponsor Entities with respect to their ownership interests in the Company, a witness or otherwise a participant, including by receipt of a subpoena, in any Proceeding to which Indemnitee is not a party and is not threatened to be made a party, Indemnitee shall be indemnified against all Expenses suffered or incurred (or, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection therewith.

Section 6. Additional Indemnification . Notwithstanding any limitation in Sections 2 , 3 or 4 hereof, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Liabilities and Expenses suffered or reasonably incurred (and, in the case of retainers, reasonably expected to be incurred) by Indemnitee in connection with such Proceeding, including but not limited to:

 

4


(a) the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL; and

(b) the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

Section 7. Exclusions . Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to indemnify or hold harmless Indemnitee, or, in the case of (a) and (c), to advance Expenses to Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy obtained by the Company except with respect to any excess beyond the amount paid under such insurance policy;

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law;

(c) except as provided in Section 12(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee or, if Indemnitee was nominated to the Board by one of more of the Sponsor Entities, such Sponsor Entity, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee or, if Indemnitee was nominated to the Board by one or more of the Sponsor Entities, such Sponsor Entity, against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation, (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law or (iii) such Proceeding is being brought by Indemnitee to assert, interpret or enforce Indemnitee’s rights under this Agreement (for the avoidance of doubt, Indemnitee shall not be deemed, for purposes of this subsection, to have initiated or brought any claim by reason of (A) having asserted any affirmative defenses in connection with a claim not initiated by Indemnitee or (B) having made any counterclaim (whether permissive or mandatory) in connection with any claim not initiated by Indemnitee); or

(d) if a final decision by a court having jurisdiction in the matter that is not subject to appeal shall determine that such indemnification is not lawful.

Section 8. Advancement . In accordance with the pre-existing requirements of the Bylaws, and notwithstanding any provision of this Agreement to the contrary, the Company shall advance, to the extent not prohibited by applicable law, the Expenses and Liabilities reasonably incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to

 

5


Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all Expenses reasonably incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that Indemnitee undertakes to repay the amounts advanced to the extent that it is ultimately determined by final judicial decision from which there is no further right to appeal that the Indemnitee is not entitled to be indemnified by the Company. Nothing in this Section 8 shall limit Indemnitee’s right to advancement pursuant to Section 12(d) of this Agreement. This Section 8 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Sections 7(a) or (c)  hereof.

Section 9. Procedure for Notification and Defense of Claim .

(a) Indemnitee shall promptly notify the Company in writing of any Proceeding with respect to which Indemnitee intends to seek indemnification or advancement hereunder following the receipt by Indemnitee of written notice thereof (the date of such notification, the “ Submission Date ”). The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding, including any appeal therein. Any delay or failure by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay or failure in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) In the event Indemnitee is entitled to indemnification and/or advancement with respect to any Proceeding, Indemnitee may, at Indemnitee’s option, (i) retain counsel (including local counsel) selected by Indemnitee and approved by the Company to defend Indemnitee in such Proceeding, at the sole expense of the Company (which approval shall not be unreasonably withheld, conditioned or delayed), or (ii) have the Company assume the defense of Indemnitee in such Proceeding, in which case the Company shall assume the defense of such Proceeding with counsel selected by the Company and approved by Indemnitee (which approval shall not be unreasonably withheld, conditioned or delayed) within ten (10) days of the Company’s receipt of written notice of Indemnitee’s election to cause the Company to do so. If the Company is required to assume the defense of any such Proceeding, it shall engage legal counsel for such defense, and the Company shall be solely responsible for all fees and expenses of such legal counsel and otherwise of such defense. Such legal counsel may represent both Indemnitee and the Company (and any other party or parties entitled to be indemnified by the Company with respect to such matter) unless, in the reasonable opinion of legal counsel to Indemnitee, there is a conflict of interest between Indemnitee and the Company (or any other such party or parties) or there are legal defenses available to Indemnitee that are not available to

 

6


the Company (or any such other party or parties). Notwithstanding either party’s assumption of responsibility for defense of a Proceeding, each party shall have the right to engage separate counsel at its own expense. If the Company has responsibility for defense of a Proceeding, the Company shall provide the Indemnitee and its counsel with all copies of pleadings and material correspondence relating to the Proceeding. Indemnitee and the Company shall reasonably cooperate in the defense of any Proceeding with respect to which indemnification is sought hereunder, regardless of whether the Company or Indemnitee assumes the defense thereof. Indemnitee may not settle or compromise any Proceeding without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed. The Company may not settle or compromise any Proceeding without the prior written consent of Indemnitee.

Section 10. Procedure Upon Application for Indemnification .

(a) Upon written request by Indemnitee for indemnification pursuant to Section 9(a) hereof, if any determination by the Company is required by applicable law with respect to Indemnitee’s entitlement thereto, such determination shall be made (i) if Indemnitee shall request such determination be made by Independent Counsel, by Independent Counsel, and (ii) in all other circumstances, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (D) if so directed by the Board, by the stockholders of the Company holding a majority of the securities of the Company entitled to vote; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall, to the fullest extent permitted by law, be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company will not deny any written request for indemnification hereunder made in good faith by Indemnitee unless a determination as to Indemnitee’s entitlement to such indemnification described in this Section 10(a) has been made. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Liabilities and Expenses arising out of or relating to this Agreement or its engagement pursuant hereto.

(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(a) hereof, (i) the Independent Counsel shall be selected by the Company within ten (10) days of the Submission Date (the cost of such Independent Counsel to be paid by the Company), (ii) the Company shall give written notice to Indemnitee advising it of the identity of the Independent Counsel so selected and (iii) Indemnitee

 

7


may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company Indemnitee’s written objection to such selection. Such objection by Indemnitee may be asserted only on the ground that the Independent Counsel selected does not meet the requirements of “Independent Counsel” as defined in this Agreement. If such written objection is made and substantiated, the Independent Counsel selected shall not serve as Independent Counsel unless and until Indemnitee withdraws the objection or a court has determined that such objection is without merit. Absent a timely objection, the person so selected shall act as Independent Counsel. If no Independent Counsel shall have been selected and not objected to before the later of (A) thirty (30) days after the Submission Date and (B) ten (10) days after the final disposition of the Proceeding, including any appeal therein, each of the Company and Indemnitee shall select a law firm or member of a law firm meeting the qualifications to serve as Independent Counsel, and such law firms or members of law firms shall select the Independent Counsel.

Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 12(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

Section 11. Presumptions and Effect of Certain Proceedings .

(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall, to the fullest extent not prohibited by applicable law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by applicable law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) Subject to Section 12(e) hereof, if the person, persons or entity empowered or selected under Section 10 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefore, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by applicable law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if (i) the determination is to be made by Independent Counsel and Indemnitee objects to the Company’s selection of Independent Counsel and (ii) the Independent Counsel ultimately selected requires such additional time for the obtaining or evaluating of documentation or information relating thereto; provided further, however, that such 60-day period may also be extended for a reasonable time, not to exceed an additional sixty (60) days, if the determination of entitlement to indemnification is to be made by the stockholders of the Company.

 

8


(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d) Reliance as Safe Harbor . For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Enterprise. The provisions of this Section 11(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) Actions of Others . The knowledge or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

Section 12. Remedies of Indemnitee .

(a) Subject to Section 12(e) hereof, in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been timely made pursuant to Section 10(a) of this Agreement within sixty (60) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 4 or 5 or the third to the last sentence of Section 10(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Sections 2 , 3 or 6 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other Person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of Indemnitee’s entitlement to such indemnification or advancement. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

 

9


(b) In the event that a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.

(c) If a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12 , absent a prohibition of such indemnification under applicable law.

(d) The Company shall, to the fullest extent not prohibited by applicable law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that Indemnitee not be required to incur Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to Indemnitee hereunder. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by applicable law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement from the Company under this Agreement or the Bylaws, or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement or insurance recovery, as the case may be.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding, including any appeal therein; provided that, in absence of any such determination with respect to such Proceeding, the Company shall advance Expenses with respect to such Proceeding.

Section 13. Non-Exclusivity; Survival of Rights; Insurance; Subrogation .

(a) The rights of indemnification and to receive advancement as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee

 

10


in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. The Company shall not adopt any amendment or alteration to, or repeal of, the Certificate of Incorporation or the Bylaws, the effect of which would be to deny, diminish or encumber the Indemnitee’s rights to indemnification pursuant to this Agreement, the Certificate of Incorporation, the Bylaws or applicable law relative to such rights prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement than would be afforded currently under the Bylaws or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement and insurance provided by one or more Persons with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity). The Company hereby acknowledges and agrees that (i) the Company shall be the indemnitor of first resort with respect to any Proceeding, Expense, Liability or matter that is the subject of the Indemnity Obligations, (ii) the Company shall be primarily liable for all Indemnity Obligations and any indemnification afforded to Indemnitee in respect of any Proceeding, Expense, Liability or matter that is the subject of Indemnity Obligations, whether created by applicable law, organizational or constituent documents, contract (including this Agreement) or otherwise, (iii) any obligation of any other Persons with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) to indemnify Indemnitee or advance Expenses or Liabilities to Indemnitee in respect of any Proceeding shall be secondary to the obligations of the Company hereunder, (iv) the Company shall be required to indemnify Indemnitee and advance Expenses or Liabilities to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) or insurer of any such Person and (v) the Company irrevocably waives, relinquishes and releases any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) from any claim of contribution, subrogation or any other recovery of any kind in respect of amounts paid by the Company hereunder. In the event any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) or their insurers advances or extinguishes any liability or loss which is the subject of any Indemnity Obligation owed by the Company or payable under any Company insurance policy, the payor shall have a right of subrogation against the Company or its insurer or insurers for all amounts so paid which would otherwise be payable by the Company or its insurer or insurers under this Agreement. In no event will payment of an Indemnity Obligation by any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) or their insurers affect the obligations of the Company hereunder or shift primary liability for any Indemnity Obligation to any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity). Any indemnification, insurance or advancement provided by any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) with respect to

 

11


any liability arising as a result of Indemnitee’s Corporate Status or capacity as an officer or director of any Person is specifically in excess over any Indemnity Obligation of the Company or valid and any collectible insurance (including but not limited to any malpractice insurance or professional errors and omissions insurance) provided by the Company under this Agreement.

(c) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, trustees, or agents of any Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, trustee or agent under such policy or policies and such policies shall provide for and recognize that the insurance policies are primary to any rights to indemnification, advancement or insurance proceeds to which Indemnitee may be entitled from one or more Persons with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) to the same extent as the Company’s indemnification and advancement obligations set forth in this Agreement. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(d) In the event of any payment under this Agreement, the Company shall be subrogated to the rights of recovery of Indemnitee, including rights of indemnification provided to Indemnitee from any other person or entity with whom Indemnitee may be associated; provided, however, that the Company shall not be subrogated to the extent of any such payment of all rights of recovery of Indemnitee with respect to any Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity).

(e) The indemnification and contribution provided for in this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of Indemnitee.

Section 14. Duration of Agreement; Not Employment Contract . This Agreement shall continue until and terminate upon the latest of: (i) ten (10) years after the date that Indemnitee shall have ceased to serve as director, officer, employee or agent of the Company or any other Enterprise and (ii) one (1) year after the date of final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement hereunder and of any proceeding, including any appeal, commenced by Indemnitee pursuant to Section 12 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors and administrators. The Company shall require and cause any successor, and any direct or indirect parent of any successor, whether direct or indirect by purchase, merger, consolidation or otherwise, to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall not be deemed an employment contract

 

12


between the Company (or any of its subsidiaries or any other Enterprise) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment with the Company (or any of its subsidiaries or any other Enterprise), if any, is at will, and Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries or any other Enterprise), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director of the Company, by the Certificate of Incorporation, the Bylaws or the DGCL.

Section 15. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by applicable law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 16. Enforcement .

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director, officer, employee or agent of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer, employee or agent of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws and applicable law, and shall not be deemed a substitute therefore, nor diminish or abrogate any rights of Indemnitee thereunder.

Section 17. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provision of this Agreement nor shall any waiver constitute a continuing waiver.

Section 18. Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

 

13


  (i) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.

 

  (ii) If to the Company to

WildHorse Resource Development Corporation

9805 Katy Freeway, Suite 400

Houston, Texas 77024

Attention: Board of Directors

or to any other address as may have been furnished to Indemnitee by the Company.

Section 19. Contribution . To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for Liabilities or for Expenses, in connection with any Proceeding, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (a) the relative benefits received by the Company and Indemnitee as a result of the event(s) and transaction(s) giving cause to such Proceeding; and (b) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and transaction(s).

Section 20. Applicable Law and Consent to Jurisdiction . This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “ Delaware Court ”), and not in any other state or federal court in the United States of America or any court in any other country, (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (c) consent to service of process at the address set forth in Section 18 of this Agreement with the same legal force and validity as if served upon such party personally within the State of Delaware; (d) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (e) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

Section 21. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

 

14


Section 22. Third-Party Beneficiaries . The Sponsor Entities are intended third-party beneficiaries of this Agreement and shall have all of the rights afforded to Indemnitee under this Agreement.

Section 23. Miscellaneous . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

15


IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

 

WILDHORSE RESOURCE DEVELOPMENT CORPORATION       INDEMNITEE
By:   

/s/ Jay C. Graham

      By:   

/s/ Brian A. Bernasek

Name:    Jay C. Graham       Name:    Brian A. Bernasek
Title:    CEO       Title:    Director

S IGNATURE P AGE TO I NDEMNIFICATION A GREEMENT

 

Exhibit 10.3

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“ Agreement ”) is made as of June 30, 2017 by and between WildHorse Resource Development Corporation, a Delaware corporation (the “ Company ”), and Martin W. Sumner (“ Indemnitee ”).

RECITALS :

WHEREAS, directors, officers and other persons in service to corporations or business enterprises are subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself;

WHEREAS, highly competent persons have become more reluctant to serve as directors, officers or in other capacities unless they are provided with adequate protection through insurance and adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (the “ Board ”) has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, (i) the Amended and Restated Bylaws of the Company (as may be amended, the “ Bylaws ”) requires indemnification of the officers and directors of the Company (ii) Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“ DGCL ”) and (iii) the Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws and the Amended and Restated Certificate of Incorporation of the Company (as may be amended, the “ Certificate of Incorporation ”) and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefore, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, (i) Indemnitee does not regard the protection available under the Bylaws and insurance as adequate in the present circumstances, (ii) Indemnitee may not be willing to serve or continue to serve as a director or officer of the Company without adequate protection, (iii) the Company desires Indemnitee to serve in such capacity, and (iv) Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified.


AGREEMENT :

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Definitions . (a) As used in this Agreement:

Affiliate ” of any specified Person shall mean any other Person directly or indirectly controlling, controlled by or under common control with such specified Person.

Corporate Status ” describes the status of a person who is or was a director, officer, employee or agent of (i) the Company or (ii) any other corporation, limited liability company, partnership or joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company.

Disinterested Director ” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

Enterprise ” shall mean the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary.

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

Expenses ” shall mean all reasonable costs, expenses, fees and charges, including, without limitation, attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include, without limitation, (i) expenses incurred in connection with any appeal resulting from, incurred by Indemnitee in connection with, arising out of, or in respect of or relating to, any Proceeding, including, without limitation, the premium, security for, and other costs relating to any cost bond, supersedes bond, or other appeal bond or its equivalent, (ii) for purposes of Section 12(d) hereof only, expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise, (iii) any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, and (iv) any interest, assessments or other charges in respect of the foregoing. “Expenses” shall not include “Liabilities.”

Indemnity Obligations ” shall mean all obligations of the Company to Indemnitee under this Agreement, including the Company’s obligations to provide indemnification to Indemnitee and advance Expenses to Indemnitee under this Agreement.

Independent Counsel ” shall mean a law firm of fifty (50) or more attorneys, or a member of a law firm of fifty (50) or more attorneys, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder; provided, however, that the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

2


Liabilities ” shall mean all claims, liabilities, damages, losses, judgments, orders, fines, penalties and other amounts payable in connection with, arising out of, or in respect of or relating to any Proceeding, including, without limitation, amounts paid in settlement in any Proceeding and all costs and expenses in complying with any judgment, order or decree issued or entered in connection with any Proceeding or any settlement agreement, stipulation or consent decree entered into or issued in settlement of any Proceeding.

Person ” shall mean any individual, corporation, partnership, limited partnership, limited liability company, trust, governmental agency or body or any other legal entity.

Proceeding ” shall mean any threatened, pending or completed action, claim, suit, arbitration, alternate dispute resolution mechanism, formal or informal hearing, inquiry or investigation, litigation, inquiry, administrative hearing or any other actual, threatened or completed judicial, administrative or arbitration proceeding (including, without limitation, any such proceeding under the Securities Act of 1933, as amended, or the Exchange Act or any other federal law, state law, statute or regulation), whether brought in the right of the Company or otherwise, and whether of a civil, criminal, administrative or investigative nature, in each case, in which Indemnitee was, is or will be, or is threatened to be, involved as a party, witness or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any actual or alleged action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or inaction) on Indemnitee’s part while acting as director or officer of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, trustee, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement can be provided under this Agreement.

Sponsor Entities ” means (i) WHR Holdings, LLC, Esquisto Holdings, LLC, WHE AcqCo Holdings, LLC, WildHorse Investment Holdings, LLC, Esquisto Investment Holdings, LLC, NGP IX Holdings, L.P., NGP X US Holdings, L.P., NGP XI Holdings, L.P., and CP VI Eagle Holdings, L.P. and (ii) any of their respective Affiliates and any investment fund or other Person advised or managed by any Sponsor Entity, in each case, which owns or owned a direct or indirect interest in the Company; provided, however, that neither the Company nor any of its subsidiaries shall be considered Sponsor Entities hereunder.

(b) For the purpose hereof, references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a Person who acted in good faith and in a manner such Person reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

 

3


Section 2. Indemnity in Third-Party Proceedings . The Company shall indemnify and hold harmless Indemnitee, to the fullest extent permitted by applicable law, from and against all Liabilities and Expenses suffered or reasonably incurred (and, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding (other than any Proceeding brought by or in the right of the Company to procure a judgment in its favor, which is provided for in Section 3 below), or any claim, issue or matter therein.

Section 3. Indemnity in Proceedings by or in the Right of the Company . The Company shall indemnify and hold harmless Indemnitee, to the fullest extent permitted by applicable law, from and against all Liabilities and Expenses suffered or incurred (and, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding brought by or in the right of the Company to procure a judgment in its favor, or any claim, issue or matter therein. No indemnification for Expenses shall be made under this Section 3 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

Section 4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful . Notwithstanding any other provisions of this Agreement, and without limiting the rights of Indemnitee under any other provision hereof, including any rights to indemnification pursuant to Sections 2 or 3 hereof, to the fullest extent permitted by applicable law, to the extent that Indemnitee is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred (and, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved Proceeding, claim, issue or matter. For purposes of this Section 4 and without limitation, the termination of any Proceeding or claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 5. Indemnification For Expenses of a Witness . Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status or in its capacity as a representative of the Sponsor Entities with respect to their ownership interests in the Company, a witness or otherwise a participant, including by receipt of a subpoena, in any Proceeding to which Indemnitee is not a party and is not threatened to be made a party, Indemnitee shall be indemnified against all Expenses suffered or incurred (or, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection therewith.

Section 6. Additional Indemnification . Notwithstanding any limitation in Sections 2 , 3 or 4 hereof, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Liabilities and Expenses suffered or reasonably incurred (and, in the case of retainers, reasonably expected to be incurred) by Indemnitee in connection with such Proceeding, including but not limited to:

 

4


(a) the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL; and

(b) the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

Section 7. Exclusions . Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to indemnify or hold harmless Indemnitee, or, in the case of (a) and (c), to advance Expenses to Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy obtained by the Company except with respect to any excess beyond the amount paid under such insurance policy;

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law;

(c) except as provided in Section 12(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee or, if Indemnitee was nominated to the Board by one of more of the Sponsor Entities, such Sponsor Entity, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee or, if Indemnitee was nominated to the Board by one or more of the Sponsor Entities, such Sponsor Entity, against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation, (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law or (iii) such Proceeding is being brought by Indemnitee to assert, interpret or enforce Indemnitee’s rights under this Agreement (for the avoidance of doubt, Indemnitee shall not be deemed, for purposes of this subsection, to have initiated or brought any claim by reason of (A) having asserted any affirmative defenses in connection with a claim not initiated by Indemnitee or (B) having made any counterclaim (whether permissive or mandatory) in connection with any claim not initiated by Indemnitee); or

(d) if a final decision by a court having jurisdiction in the matter that is not subject to appeal shall determine that such indemnification is not lawful.

Section 8. Advancement . In accordance with the pre-existing requirements of the Bylaws, and notwithstanding any provision of this Agreement to the contrary, the Company shall advance, to the extent not prohibited by applicable law, the Expenses and Liabilities reasonably incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to

 

5


Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all Expenses reasonably incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that Indemnitee undertakes to repay the amounts advanced to the extent that it is ultimately determined by final judicial decision from which there is no further right to appeal that the Indemnitee is not entitled to be indemnified by the Company. Nothing in this Section 8 shall limit Indemnitee’s right to advancement pursuant to Section 12(d) of this Agreement. This Section 8 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Sections 7(a) or (c)  hereof.

Section 9. Procedure for Notification and Defense of Claim .

(a) Indemnitee shall promptly notify the Company in writing of any Proceeding with respect to which Indemnitee intends to seek indemnification or advancement hereunder following the receipt by Indemnitee of written notice thereof (the date of such notification, the “ Submission Date ”). The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding, including any appeal therein. Any delay or failure by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay or failure in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) In the event Indemnitee is entitled to indemnification and/or advancement with respect to any Proceeding, Indemnitee may, at Indemnitee’s option, (i) retain counsel (including local counsel) selected by Indemnitee and approved by the Company to defend Indemnitee in such Proceeding, at the sole expense of the Company (which approval shall not be unreasonably withheld, conditioned or delayed), or (ii) have the Company assume the defense of Indemnitee in such Proceeding, in which case the Company shall assume the defense of such Proceeding with counsel selected by the Company and approved by Indemnitee (which approval shall not be unreasonably withheld, conditioned or delayed) within ten (10) days of the Company’s receipt of written notice of Indemnitee’s election to cause the Company to do so. If the Company is required to assume the defense of any such Proceeding, it shall engage legal counsel for such defense, and the Company shall be solely responsible for all fees and expenses of such legal counsel and otherwise of such defense. Such legal counsel may represent both Indemnitee and the Company (and any other party or parties entitled to be indemnified by the Company with respect to such matter) unless, in the reasonable opinion of legal counsel to Indemnitee, there is a conflict of interest between Indemnitee and the Company (or any other such party or parties) or there are legal defenses available to Indemnitee that are not available to

 

6


the Company (or any such other party or parties). Notwithstanding either party’s assumption of responsibility for defense of a Proceeding, each party shall have the right to engage separate counsel at its own expense. If the Company has responsibility for defense of a Proceeding, the Company shall provide the Indemnitee and its counsel with all copies of pleadings and material correspondence relating to the Proceeding. Indemnitee and the Company shall reasonably cooperate in the defense of any Proceeding with respect to which indemnification is sought hereunder, regardless of whether the Company or Indemnitee assumes the defense thereof. Indemnitee may not settle or compromise any Proceeding without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed. The Company may not settle or compromise any Proceeding without the prior written consent of Indemnitee.

Section 10. Procedure Upon Application for Indemnification .

(a) Upon written request by Indemnitee for indemnification pursuant to Section 9(a) hereof, if any determination by the Company is required by applicable law with respect to Indemnitee’s entitlement thereto, such determination shall be made (i) if Indemnitee shall request such determination be made by Independent Counsel, by Independent Counsel, and (ii) in all other circumstances, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (D) if so directed by the Board, by the stockholders of the Company holding a majority of the securities of the Company entitled to vote; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall, to the fullest extent permitted by law, be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company will not deny any written request for indemnification hereunder made in good faith by Indemnitee unless a determination as to Indemnitee’s entitlement to such indemnification described in this Section 10(a) has been made. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Liabilities and Expenses arising out of or relating to this Agreement or its engagement pursuant hereto.

(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(a) hereof, (i) the Independent Counsel shall be selected by the Company within ten (10) days of the Submission Date (the cost of such Independent Counsel to be paid by the Company), (ii) the Company shall give written notice to Indemnitee advising it of the identity of the Independent Counsel so selected and (iii) Indemnitee

 

7


may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company Indemnitee’s written objection to such selection. Such objection by Indemnitee may be asserted only on the ground that the Independent Counsel selected does not meet the requirements of “Independent Counsel” as defined in this Agreement. If such written objection is made and substantiated, the Independent Counsel selected shall not serve as Independent Counsel unless and until Indemnitee withdraws the objection or a court has determined that such objection is without merit. Absent a timely objection, the person so selected shall act as Independent Counsel. If no Independent Counsel shall have been selected and not objected to before the later of (A) thirty (30) days after the Submission Date and (B) ten (10) days after the final disposition of the Proceeding, including any appeal therein, each of the Company and Indemnitee shall select a law firm or member of a law firm meeting the qualifications to serve as Independent Counsel, and such law firms or members of law firms shall select the Independent Counsel.

Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 12(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

Section 11. Presumptions and Effect of Certain Proceedings .

(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall, to the fullest extent not prohibited by applicable law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by applicable law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) Subject to Section 12(e) hereof, if the person, persons or entity empowered or selected under Section 10 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefore, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by applicable law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if (i) the determination is to be made by Independent Counsel and Indemnitee objects to the Company’s selection of Independent Counsel and (ii) the Independent Counsel ultimately selected requires such additional time for the obtaining or evaluating of documentation or information relating thereto; provided further, however, that such 60-day period may also be extended for a reasonable time, not to exceed an additional sixty (60) days, if the determination of entitlement to indemnification is to be made by the stockholders of the Company.

 

8


(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d) Reliance as Safe Harbor . For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Enterprise. The provisions of this Section 11(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) Actions of Others . The knowledge or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

Section 12. Remedies of Indemnitee .

(a) Subject to Section 12(e) hereof, in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been timely made pursuant to Section 10(a) of this Agreement within sixty (60) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 4 or 5 or the third to the last sentence of Section 10(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Sections 2 , 3 or 6 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other Person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of Indemnitee’s entitlement to such indemnification or advancement. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

 

9


(b) In the event that a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.

(c) If a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12 , absent a prohibition of such indemnification under applicable law.

(d) The Company shall, to the fullest extent not prohibited by applicable law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that Indemnitee not be required to incur Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to Indemnitee hereunder. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by applicable law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement from the Company under this Agreement or the Bylaws, or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement or insurance recovery, as the case may be.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding, including any appeal therein; provided that, in absence of any such determination with respect to such Proceeding, the Company shall advance Expenses with respect to such Proceeding.

Section 13. Non-Exclusivity; Survival of Rights; Insurance; Subrogation .

(a) The rights of indemnification and to receive advancement as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee

 

10


in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. The Company shall not adopt any amendment or alteration to, or repeal of, the Certificate of Incorporation or the Bylaws, the effect of which would be to deny, diminish or encumber the Indemnitee’s rights to indemnification pursuant to this Agreement, the Certificate of Incorporation, the Bylaws or applicable law relative to such rights prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement than would be afforded currently under the Bylaws or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement and insurance provided by one or more Persons with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity). The Company hereby acknowledges and agrees that (i) the Company shall be the indemnitor of first resort with respect to any Proceeding, Expense, Liability or matter that is the subject of the Indemnity Obligations, (ii) the Company shall be primarily liable for all Indemnity Obligations and any indemnification afforded to Indemnitee in respect of any Proceeding, Expense, Liability or matter that is the subject of Indemnity Obligations, whether created by applicable law, organizational or constituent documents, contract (including this Agreement) or otherwise, (iii) any obligation of any other Persons with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) to indemnify Indemnitee or advance Expenses or Liabilities to Indemnitee in respect of any Proceeding shall be secondary to the obligations of the Company hereunder, (iv) the Company shall be required to indemnify Indemnitee and advance Expenses or Liabilities to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) or insurer of any such Person and (v) the Company irrevocably waives, relinquishes and releases any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) from any claim of contribution, subrogation or any other recovery of any kind in respect of amounts paid by the Company hereunder. In the event any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) or their insurers advances or extinguishes any liability or loss which is the subject of any Indemnity Obligation owed by the Company or payable under any Company insurance policy, the payor shall have a right of subrogation against the Company or its insurer or insurers for all amounts so paid which would otherwise be payable by the Company or its insurer or insurers under this Agreement. In no event will payment of an Indemnity Obligation by any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) or their insurers affect the obligations of the Company hereunder or shift primary liability for any Indemnity Obligation to any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity). Any indemnification, insurance or advancement provided by any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) with respect to

 

11


any liability arising as a result of Indemnitee’s Corporate Status or capacity as an officer or director of any Person is specifically in excess over any Indemnity Obligation of the Company or valid and any collectible insurance (including but not limited to any malpractice insurance or professional errors and omissions insurance) provided by the Company under this Agreement.

(c) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, trustees, or agents of any Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, trustee or agent under such policy or policies and such policies shall provide for and recognize that the insurance policies are primary to any rights to indemnification, advancement or insurance proceeds to which Indemnitee may be entitled from one or more Persons with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) to the same extent as the Company’s indemnification and advancement obligations set forth in this Agreement. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(d) In the event of any payment under this Agreement, the Company shall be subrogated to the rights of recovery of Indemnitee, including rights of indemnification provided to Indemnitee from any other person or entity with whom Indemnitee may be associated; provided, however, that the Company shall not be subrogated to the extent of any such payment of all rights of recovery of Indemnitee with respect to any Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity).

(e) The indemnification and contribution provided for in this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of Indemnitee.

Section 14. Duration of Agreement; Not Employment Contract . This Agreement shall continue until and terminate upon the latest of: (i) ten (10) years after the date that Indemnitee shall have ceased to serve as director, officer, employee or agent of the Company or any other Enterprise and (ii) one (1) year after the date of final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement hereunder and of any proceeding, including any appeal, commenced by Indemnitee pursuant to Section 12 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors and administrators. The Company shall require and cause any successor, and any direct or indirect parent of any successor, whether direct or indirect by purchase, merger, consolidation or otherwise, to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall not be deemed an employment contract

 

12


between the Company (or any of its subsidiaries or any other Enterprise) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment with the Company (or any of its subsidiaries or any other Enterprise), if any, is at will, and Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries or any other Enterprise), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director of the Company, by the Certificate of Incorporation, the Bylaws or the DGCL.

Section 15. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by applicable law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 16. Enforcement .

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director, officer, employee or agent of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer, employee or agent of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws and applicable law, and shall not be deemed a substitute therefore, nor diminish or abrogate any rights of Indemnitee thereunder.

Section 17. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provision of this Agreement nor shall any waiver constitute a continuing waiver.

Section 18. Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

 

13


  (i) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.

 

  (ii) If to the Company to

WildHorse Resource Development Corporation

9805 Katy Freeway, Suite 400

Houston, Texas 77024

Attention: Board of Directors

or to any other address as may have been furnished to Indemnitee by the Company.

Section 19. Contribution . To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for Liabilities or for Expenses, in connection with any Proceeding, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (a) the relative benefits received by the Company and Indemnitee as a result of the event(s) and transaction(s) giving cause to such Proceeding; and (b) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and transaction(s).

Section 20. Applicable Law and Consent to Jurisdiction . This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “ Delaware Court ”), and not in any other state or federal court in the United States of America or any court in any other country, (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (c) consent to service of process at the address set forth in Section 18 of this Agreement with the same legal force and validity as if served upon such party personally within the State of Delaware; (d) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (e) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

Section 21. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

 

14


Section 22. Third-Party Beneficiaries . The Sponsor Entities are intended third-party beneficiaries of this Agreement and shall have all of the rights afforded to Indemnitee under this Agreement.

Section 23. Miscellaneous . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

15


IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

 

WILDHORSE RESOURCE DEVELOPMENT CORPORATION       INDEMNITEE
By:   

/s/ Jay C. Graham

      By:   

/s/ Martin W. Sumner

Name:    Jay C. Graham       Name:    Martin W. Sumner
Title:    CEO       Title:    Director

 

S IGNATURE P AGE TO I NDEMNIFICATION A GREEMENT

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

WildHorse Resource Development Corporation:

We consent to the incorporation by reference in the registration statement (No. 333-215124) on Form S-8 of WildHorse Resource Development Corporation of our report dated June 9, 2017, with respect to Anadarko Petroleum Corporation’s Statements of Revenues and Direct Operating Expenses for the Eaglebine and Northstars Properties for the years ended December 31, 2016, 2015, and 2014, which report appears in the Form 8-K of WildHorse Resource Development Corporation Company dated July 7, 2017.

(signed) KPMG LLP

Houston, Texas

July 7, 2017

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in Registration Statement No. 333-215124 on Form S-8 of WildHorse Resource Development Corporation (“WildHorse”) of our report dated June 27, 2017 (which report expresses an unmodified opinion and includes an emphasis-of-matter paragraph relating to financial presentation and an other matter paragraph relating to required supplemental information) relating to the statements of revenues and direct operating expenses of the oil and natural gas properties of Admiral A. Holding, L.P., TE Admiral A. Holding L.P., and Aurora C-I Holding L.P., under common control of KKR EIGF LLC, for the period from September 11, 2014 through December 31, 2014, and for the years ended December 31, 2015 and 2016, appearing in this Current Report on Form 8-K of WildHorse dated July 7, 2017.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

July 7, 2017

Exhibit 99.1

 

LOGO   

News

For Immediate Release

WildHorse Resource Development Corporation Announces Closing of the Eagle Ford

Acquisition, Borrowing Base Increase to $650 Million, and Election of Board Members

HOUSTON, June 30, 2017 – WildHorse Resource Development Corporation (NYSE:WRD), today announced the closing of the previously announced acquisition of approximately 111,000 net acres in the East Texas Eagle Ford from the Anadarko Petroleum Corporation (“APC”) and affiliates of Kohlberg Kravis Roberts & Co. L.P. (“KKR”). After customary purchase price adjustments, WRD paid $594.4 million to close the transaction, consisting of $533.6 million in cash and approximately 5.5 million shares of WRD common stock valued at $60.8 million.

“With the closing of this strategic acquisition, WildHorse is now the second largest operator in the Eagle Ford trend with approximately 385,000 net acres. The acquisition acreage almost perfectly overlaps our existing position and is 95% held by production. Furthermore, we have added 711 net locations at our 91 boe per foot type curve which gives us over 8 years of additional drilling inventory at our current pace,” said Jay Graham, Chairman and Chief Executive Officer of WRD. “We are very excited about getting to work on the consolidated position. In the second quarter of 2017, we have already brought online 6 wells adjacent to the acquired acreage, and we plan to drill several wells directly on the new acreage in the third quarter. In addition, with an increase of our borrowing base to $650 million and the closing of our preferred stock issuance, our balance sheet remains strong, enabling us to develop this tremendous asset,” added Jay Graham.

Borrowing Base Increased to $650 million from $450 million

WRD also announced today that the borrowing base under its $1.0 billion multi-year revolving credit facility was increased by its 15-lender bank group to $650 million from $450 million in connection with the closing of the acquisition. WRD’s revolving credit facility matures in December 2021. The financial covenants remain unchanged.

Closing of Transaction Financing

In conjunction with the closing of the acquisition, WRD closed the previously announced transaction financing of $435 million in Series A Perpetual Convertible Preferred Stock (“Preferred Stock”) issued to The Carlyle Group (“Carlyle”), through its U.S. buyout fund Carlyle Partners VI. The preferred stock’s dividend of 6% is payable either in cash, preferred stock, or a


combination thereof at WRD’s option. The dividend will terminate permanently after two and a half years if WRD’s share price is equal to or greater than 130% of the conversion price, or $18.07. Carlyle has a right to convert at conversion price of $13.90 in one year, and WRD has the right to force conversion after four years of issuance at a 140% premium to the conversion price, or $19.46.

Election of Brian A. Bernasek and Martin W. Sumner to the Board of Directors

In connection with the closing of the transaction, WRD’s Board of Directors has elected two representatives from The Carlyle Group to the Board of Directors, Brian A. Bernasek and Martin W. Sumner.

Brian A. Bernasek is a Managing Director of The Carlyle Group and head of the firm’s Global Industrial and Transportation team. Prior to joining Carlyle in 2000, Mr. Bernasek held positions in New York with Investcorp International, a private equity firm, and Morgan Stanley & Co., in its Investment Banking Division. Mr. Bernasek is a graduate of the University of Notre Dame and received his M.B.A. from the Harvard Business School. He is currently also a member of the Board of Directors of Accudyne Industries, Atotech BV, Novolex Holdings, Inc., and Signode Industrial Group. He previously served on the Board of Directors of Allison Transmission, Inc. (NYSE: ALSN), HD Supply, Inc. (NYSE:HDS) and The Hertz Corporation (NYSE:HTZ), among others.

Martin W. Sumner is a Managing Director of The Carlyle Group where he focuses on investment opportunities in the industrial and transportation sectors. Mr. Sumner has been at The Carlyle Group since 2003 and has led or been a key contributor to the firm’s energy and chemical related investments. Prior to joining Carlyle, he held positions with Thayer Capital Partners, a private equity firm and the strategy consulting group of Mercer Management Consulting. Mr. Sumner received his M.B.A. from Stanford University, where he was an Arjay Miller Scholar and a B.S. in Economics, magna cum laude, from the Wharton School of the University of Pennsylvania. He is currently also a member of the Board of Directors of Atotech BV and AxleTech International. He previously served on the Board of Directors of Axalta Coating Systems (NYSE: AXTA) and Centennial Resource Production, among others.


Expanded 2018-19 Oil Hedge Positions in the Second Quarter of 2017

As previously noted in the company’s June presentation, WRD has significantly increased its 2018-19 oil hedge positions in the second quarter of 2017. WRD hedged over 4.0 million barrels of oil with a combination of swaps and puts and now has a weighted average price of $52.95 per barrel on approximately 5.6 million barrels of oil in 2018 and a weighted average price of $53.38 per barrel on approximately 3.7 million barrels of oil in 2019.

Based on the mid-point of 2017 guidance, WRD is hedged on approximately 62% of 2017 production for the last nine months of the year at a total weighted average price of $53.64 per barrel of crude and $3.09 per MMBtu of natural gas. The 2017 hedges utilize a combination of fixed price swaps, collar contracts and put contracts which together establish improved downside price protection, while providing upside price participation in an improving commodity price environment.

About WildHorse Resource Development Corporation

WildHorse Resource Development Corporation is an independent oil and natural gas company focused on the acquisition, exploration, development and production of oil, natural gas and NGL properties primarily in the Eagle Ford Shale in East Texas and the Over-Pressured Cotton Valley in North Louisiana. For more information, please visit our website at www.wildhorserd.com.

Cautionary Statements and Additional Disclosures

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “will,” “plans,” “seeks,” “believes,” “estimates,” “could,” “expects” and similar references to future periods. Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond WRD’s control. All statements, other than historical facts included in this press release, that address activities, events or developments that WRD expects or anticipates will or may occur in the future, including such things as WRD’s future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, future drilling locations and inventory, competitive strengths,


goals, expansion and growth of WRD’s business and operations, plans, successful consummation and integration of acquisitions and other transactions, market conditions, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. All forward-looking statements speak only as of the date of this press release. Although WRD believes that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.

WRD cautions you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond WRD’s control, incident to the exploration for and development, production, gathering and sale of natural gas and oil. These risks include, but are not limited to: commodity price volatility; inflation; lack of availability of drilling and production equipment and services; environmental risks; drilling and other operating risks; regulatory changes; the uncertainty inherent in estimating natural gas and oil reserves and in projecting future rates of production, cash flow and access to capital; and the timing of development expenditures. Information concerning these and other factors can be found in WRD’s filings with the SEC, including its Forms 10-K, 10-Q and 8-K. Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by WRD will be realized, or even if realized, that they will have the expected consequences to or effects on WRD, its business or operations. WRD has no intention, and disclaims any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.

Contact:

WildHorse Resource Development Corporation

Pearce Hammond, CFA (713) 255-7094

Vice President, Investor Relations

ir@wildhorserd.com

Exhibit 99.2

INDEX TO FINANCIAL STATEMENTS

 

     Page  
Anadarko Eaglebine and Northstars Properties   

Audited and Unaudited Statements of Revenues and Direct Operating Expenses

  

Independent Auditors’ Report

     F-2  

Statements of Revenues and Direct Operating Expenses for the Years Ended December 31, 2016, 2015 and 2014 (audited) and the Three Months Ended March 31, 2017 and 2016 (unaudited)

     F-4  

Notes to Statements of Revenues and Direct Operating Expenses

     F-5  

 

F-1


Independent Auditors’ Report

The Board of Directors

Anadarko Petroleum Corporation:

Report on the Financial Statements

We have audited the accompanying Statements of Revenue and Direct Operating Expenses (the “Statements”) of Anadarko Petroleum Corporation’s Eaglebine and Northstars Properties (the “Properties”) for the years ended December 31, 2016, 2015, and 2014, and the related notes to the Statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these Statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of Statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these Statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Statements referred to above present fairly, in all material respects, the revenues and direct operating expenses of the Properties for the years ended December 31, 2016, 2015, and 2014, in accordance with U.S. generally accepted accounting principles.

Emphasis of Matter

As described in Note 2, the accompanying Statements of Revenues and Direct Operating Expenses were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the operations of the Properties. Our opinion is not modified with respect to this matter.

 

F-2


Accounting principles generally accepted in the United States of America require that the supplemental information relating to oil and natural gas producing activities be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the United States Financial Accounting Standards Board, who as described in Accounting Standards Codification Topic 932-235-50, considers the supplemental information to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

/s/ KPMG LLP

Houston, Texas

June 9, 2017

 

F-3


ANADARKO PETROLEUM CORPORATION’S EAGLEBINE AND NORTHSTARS PROPERTIES

STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

 

     Three Months Ended
March 31,
     Years Ended
December 31,
 
thousands    (unaudited)
2017
     (unaudited)
2016
     2016      2015      2014  

Revenues

              

Oil and condensate sales

   $ 16,741      $ 14,017      $ 66,585      $ 74,660      $ 132,697  

Natural-gas sales

     1,214        925        4,299        4,808        8,411  

Natural-gas liquids sales

     1,621        920        5,179        5,266        17,121  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     19,576        15,862        76,063        84,734        158,229  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Direct Operating Expenses

              

Lease operating expenses

     6,244        6,689        24,660        28,443        32,229  

Production and other taxes

     1,507        1,032        4,664        5,870        10,339  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total direct operating expenses

     7,751        7,721        29,324        34,313        42,568  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Excess of Revenues Over Direct Operating Expenses

   $ 11,825      $ 8,141      $ 46,739      $ 50,421      $ 115,661  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying notes to the Statements of Revenues and Direct Operating Expenses.

 

F-4


Anadarko Petroleum Corporation’s Eaglebine and Northstars Properties

Notes to the Statements of Revenues and Direct Operating Expenses

1. Background Information

Anadarko Petroleum Corporation (the “Company”) holds an interest in approximately 202,000 gross acres in Austin, Brazos, Burleson, Fayette, Lee, Milam, Robertson, and Washington Counties, Texas. The Company’s interest includes, among other formations, approximately 78,400 net acres in the Eagle Ford formation, and approximately 158,000 net acres among the Austin Chalk, Buda, Georgetown, and deeper formations. The Company participates in a total of 551 active wells, of which 80 are currently completed in the Eagle Ford formation (collectively with the net acres described above, the “Eaglebine and Northstars Properties”).

On May 10, 2017, the Company entered into a definitive agreement pursuant to two purchase and sale agreements to sell the Company’s interest in the Eaglebine and Northstars Properties to a third party.

2. Summary of Significant Accounting Policies

Basis of Presentation The accompanying Statements of Revenues and Direct Operating Expenses for the Eaglebine and Northstars Properties (the “Statements”) include revenues from the sale of oil, condensate, natural gas, and natural-gas liquids (NGLs) and direct operating expenses for the three months ended March 31, 2017 and 2016, and the years ended December 31, 2016, 2015, and 2014. Revenues and direct operating expenses included in the Statements represent the Company’s interest in the Eaglebine and Northstars Properties and are presented on the accrual basis of accounting. During the periods presented, the Eaglebine and Northstars Properties were not accounted for or operated as a separate division or entity by the Company. Accordingly, complete financial statements under U.S. generally accepted accounting principles are not available or practicable to produce for the Eaglebine and Northstars Properties. The Statements are not intended to be a complete presentation of the results of operations of the Eaglebine and Northstars Properties and may not be representative of future operations as they do not include indirect general and administrative expenses; interest expense; depreciation, depletion, and amortization; provision for income taxes; and certain other revenues and expenses not directly associated with revenues from the sale of oil, condensate, natural-gas, and NGLs.

Use of Estimates Accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the amounts reported in the Statements. These estimates and assumptions are based on management’s best estimates and judgment. Actual results may differ from those estimates.

Revenues The Company’s oil and condensate production from the Eaglebine and Northstars Properties is sold to third-party marketers, gatherers, and refiners. Natural-gas and NGLs production is primarily sold to the Company’s marketing affiliate. The Company recognizes sales revenues for oil and condensate, natural gas, and NGLs based on the amount of each product sold to purchasers when delivery to the purchaser has occurred and title has transferred.

Direct Operating Expenses Direct operating expenses are recognized when incurred and include (a) lease operating expenses, which consist of gathering and processing, salaries and wages, water costs, lease and well repairs and maintenance, utilities and other direct operating expenses; (b) production taxes; and (c) ad valorem taxes.

New Accounting Standards Issued but Not Yet Adopted The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes current revenue recognition requirements and industry-specific guidance. The codification was amended through additional ASUs and, as amended, requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company is required to adopt the new standard in the first quarter of 2018 using one of two retrospective application methods. The Company is continuing to evaluate the provisions of this ASU and is therefore unable to disclose the impact that adopting ASU 2014-09 may have on the Statements for the Eaglebine and Northstars Properties.

 

F-5


Anadarko Petroleum Corporation’s Eaglebine and Northstars Properties

Notes to the Statements of Revenues and Direct Operating Expenses

3. Related Party Transactions

A substantial majority of the Eaglebine and Northstars Properties’ natural gas and NGLs is sold to the Company’s marketing affiliate. Transactions with affiliates during the periods presented are as follows:

 

     Three Months Ended
March 31,
     Years Ended
December 31,
 
thousands    (unaudited)
2017
     (unaudited)
2016
     2016      2015      2014  

Natural-gas sales

   $ 1,098      $ 837      $ 3,874      $ 4,260      $ 7,255  

NGLs sales

     1,546        845        4,876        4,962        16,374  

4. Major Customers

Sales to individual customers that exceeded 10% of total revenues related to the Eaglebine and Northstars Properties in each of the periods presented are as follows:

 

     Three Months Ended
March 31,
     Years Ended
December 31,
    

 

 
thousands    (unaudited)
2017
     (unaudited)
2016
     2016      2015      2014  

Sales

              

Third-party purchaser

   $ 8,539      $ 8,003      $ 34,988      $ 38,188      $ 65,696  

Third-party purchaser

     4,487        3,613        16,905        23,942        52,227  

Third-party purchaser

     3,211        —          10,710        8,618        —    

Affiliate purchaser

     2,644        1,682        8,750        9,222        23,629  

There were no sales to other customers that exceeded 10% of total revenues in any of the periods presented.

5. Contingencies

The Company is subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business as well as various environmental-remediation and reclamation obligations arising from federal, state, and local laws and regulations. The Company does not believe that the liability with respect to these actions will have a material adverse effect on the operations or financial results related to the Company’s interest in the Eaglebine and Northstars Properties.

6. Subsequent Events

The Company has evaluated subsequent events through June 9, 2017, the date the Statements were available to be issued, and has concluded there are no material subsequent events that would require recognition or disclosure in these financial statements.

 

F-6


Anadarko Petroleum Corporation’s Eaglebine and Northstars Properties

Supplementary Oil and Gas Disclosures (Unaudited)

The unaudited supplemental information on oil and gas exploration and production activities related to the Eaglebine and Northstars Properties for 2016, 2015, and 2014 has been presented in accordance with FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas and the Securities and Exchange Commission’s final rule, Modernization of Oil and Gas Reporting . The Oil and Gas Reserves and the Standardized Measure of Discounted Future Net Cash Flows represent Anadarko’s interest in the Eaglebine and Northstars Properties.

Oil and Gas Reserves

The following reserves disclosures relate to the Eaglebine and Northstars Properties and reflect estimates of proved reserves, proved developed reserves, and proved undeveloped reserves, net of third-party royalty interests, of oil, condensate, natural gas, and NGLs owned at each year end and changes in proved reserves during each of the years presented. Oil, condensate, and NGLs volumes are presented in thousands of barrels (MBbls) and natural-gas volumes are presented in millions of cubic feet (MMcf) at a pressure base of 14.73 pounds per square inch. Total volumes are presented in thousands of barrels of oil equivalent (MBOE). For this computation, one barrel is the equivalent of 6,000 cubic feet of natural gas. Shrinkage associated with NGLs has been deducted from the natural-gas reserves volumes.

The Company’s estimates of proved reserves are made using available geological and reservoir data as well as production performance data. These estimates are reviewed annually by internal reservoir engineers and revised, either upward or downward, as warranted by additional data. The results of infill drilling are treated as positive revisions due to increases to expected recovery. Other revisions are due to changes in, among other things, development plans, reservoir performance, commodity prices, economic conditions, and governmental restrictions.

The prices below were used to compute the information presented in the following tables and are adjusted only for fixed and determinable amounts under provisions in existing contracts. Oil and condensate and NGLs prices are presented as price per barrel (Bbl). Gas prices are presented as price per million British thermal units (MMBtu).

 

     Oil and
Condensate
per Bbl
     Natural Gas
per MMBtu
     NGLs
per Bbl
 

December 31, 2016

   $ 42.75      $ 2.48      $ 19.74  

December 31, 2015

   $ 50.28      $ 2.59      $ 19.47  

December 31, 2014

   $ 94.99      $ 4.35      $ 45.25  

 

F-7


Anadarko Petroleum Corporation’s Eaglebine and Northstars Properties

Supplementary Oil and Gas Disclosures (Unaudited)

 

     Oil and
Condensate
(MBbls)
     Natural
Gas

(MMcf)
     NGLs
(MBbls)
     Total
(MBOE)
 

Proved Reserves

           

December 31, 2013

     7,693        14,528        4,684        14,798  

Revisions of prior estimates (1)

     (430      117        (314      (725

Extensions, discoveries, and other additions

     3,816        1,353        453        4,495  

Sales in place

     (1,636      (438      (148      (1,857

Production

     (1,480      (1,945      (493      (2,297
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2014

     7,963        13,615        4,182        14,414  

Revisions of prior estimates (1)

     (287      (3,073      (1,823      (2,622

Extensions, discoveries, and other additions

     2,163        582        130        2,390  

Sales in place

     (7      —          —          (7

Production

     (1,708      (1,966      (418      (2,454
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2015

     8,124        9,158        2,071        11,721  

Revisions of prior estimates (1)

     846        1,107        272        1,303  

Extensions, discoveries, and other additions

     156        55        12        177  

Sales in place

     (508      (450      (102      (685

Production

     (1,734      (1,852      (416      (2,459
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2016

     6,884        8,018        1,837        10,057  
  

 

 

    

 

 

    

 

 

    

 

 

 

Proved Developed Reserves

           

December 31, 2013

     6,871        14,384        4,627        13,895  

December 31, 2014

     7,388        13,447        4,125        13,754  

December 31, 2015

     7,291        9,000        2,035        10,826  

December 31, 2016

     6,884        8,018        1,837        10,057  

Proved Undeveloped Reserves

           

December 31, 2013

     822        144        57        903  

December 31, 2014

     575        168        57        660  

December 31, 2015

     833        158        36        895  

December 31, 2016

     —          —          —          —    

 

(1) Revisions of prior estimates include the effects of changes in commodity prices, changes in economic conditions, and changes in reservoir performance.

Standardized Measure of Discounted Future Net Cash Flows

Estimates of future net cash flows from proved reserves are computed based on the average beginning-of-the-month prices during the 12-month period for the year. Estimated future net cash flows for all periods presented are reduced by estimated future development, production, and abandonment and dismantlement costs based on existing costs, assuming continuation of existing economic conditions. These estimates also include assumptions about the timing of future production of proved reserves, and timing of future development, production costs, and abandonment and dismantlement.

The present value of future net cash flows is not an estimate of the fair value of the Eaglebine and Northstars Properties’ oil and gas properties. An estimate of fair value would also take into account, among other things, anticipated changes in future prices and costs, the expected recovery of reserves in excess of proved reserves, and a discount factor more representative of the time value of money and the risks inherent in producing oil and natural gas. Significant changes in estimated reserves volumes or commodity prices could have a material effect on the results of operations of the Eaglebine and Northstars Properties.

 

F-8


Anadarko Petroleum Corporation’s Eaglebine and Northstars Properties

Supplementary Oil and Gas Disclosures (Unaudited)

The standardized measure of discounted future net cash flows related to the proved oil and gas reserves of the Eaglebine and Northstars Properties is presented below and excludes income taxes as income tax expense is excluded from the Statements.

 

     Years Ended December 31,  
thousands    2016      2015      2014  

Future cash inflows

   $ 314,492      $ 447,285      $ 984,723  

Future production costs

     144,088        211,738        317,562  

Future development costs

     46,476        38,721        38,210  
  

 

 

    

 

 

    

 

 

 

Future net cash flows

     123,928        196,826        628,951  

Discounted at 10% per year

     32,357        57,823        240,134  
  

 

 

    

 

 

    

 

 

 

Standardized measure of discounted future net cash flows

   $ 91,571      $ 139,003      $ 388,817  
  

 

 

    

 

 

    

 

 

 

Changes in the standardized measure of discounted future net cash flows before income taxes related to the proved oil and gas reserves of the Eaglebine and Northstars Properties are as follows:

 

     Years Ended December 31,  
thousands    2016      2015      2014  

Balance, beginning of year

   $ 139,003      $ 388,817      $ 380,520  

Sales and transfers of oil and gas, net of production costs

     (46,739      (50,421      (115,661

Net changes in prices and production costs

     (39,583      (256,701      (20,465

Changes in estimated future development costs

     (1,352      (5,538      8,814  

Extensions, discoveries, and additions

     3,531        57,732        249,443  

Development costs incurred during the period

     —          58        18  

Revisions of previous quantity estimates

     27,593        (33,027      (30,109

Sales of minerals in place

     (7,741      (313      (88,104

Accretion of discount

     13,900        38,882        38,052  

Other

     2,959        (486      (33,691
  

 

 

    

 

 

    

 

 

 

Balance at December 31

   $ 91,571      $ 139,003      $ 388,817  
  

 

 

    

 

 

    

 

 

 

 

F-9

Exhibit 99.3

INDEX TO FINANCIAL STATEMENTS

 

     Page  

KKR Eaglebine Properties

  

Audited and Unaudited Statements of Revenues and Direct Operating Expenses

  

Independent Auditors’ Report

     F-2  

Statements of Revenues and Direct Operating Expenses for the Years Ended December 31, 2016 and 2015 (audited), the period from September 11, 2014 to December 31, 2014 (audited) and the Three Months Ended March 31, 2017 and 2016 (unaudited)

     F-4  

Notes to Statements of Revenues and Direct Operating Expenses

     F-5  

 

F-1


INDEPENDENT AUDITORS’ REPORT

To KKR Upstream Associates LLC, as the parent of KKR EIGF LLC:

We have audited the accompanying statements of revenue and direct operating expenses of the oil and natural gas properties (the “Properties”) expected to be acquired by WHR Eagle Ford LLC, a subsidiary of WildHorse Resource Development Corporation, from Admiral A. Holding, L.P., TE Admiral A. Holding L.P., and Aurora C-I Holding L.P. (collectively, the “Partnerships”), under common control of KKR EIGF LLC (the “Company”), in accordance with the definitive purchase and sale agreement dated May 10, 2017, for the period from September 11, 2014 through December 31, 2014, and for the years ended December 31, 2015 and 2016.

Management’s Responsibility for the Statements of Revenue and Direct Operating Expenses

Management is responsible for the preparation and fair presentation of the statements of revenue and direct operating expenses in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statements of revenue and direct operating expenses that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the statements of revenue and direct operating expenses based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statements of revenue and direct operating expenses are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statements of revenue and direct operating expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the statements of revenue and direct operating expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statements of revenue and direct operating expenses.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the statements of revenue and direct operating expenses referred to above present fairly, in all material respects, the revenues and direct operating expenses of the Properties for the period from September 11, 2014 to December 31, 2014, and for the years ended December 31, 2015 and 2016, in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Note 2 to the statements of revenue and direct operating expenses, the accompanying statements of revenue and direct operating expenses have been prepared for the purposes of presenting the revenues and direct operating expenses of the Properties, and are not intended to be a complete presentation of the financial position, results of operations or cash flows of the Properties. Our opinion is not modified with respect to this matter.

 

F-2


Other Matter

Accounting principles generally accepted in the United States of America require that the Supplemental Oil, Natural Gas, and NGL Information be presented to supplement the statements of revenue over direct operating expenses. Such information, although not a part of the statements of revenue over direct operating expenses, is required by the Financial Accounting Standards Board who considers it to be an essential part of financial reporting for placing the statements of revenue over direct operating expenses in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the statements of revenue over direct operating expenses, and other knowledge we obtained during our audit of the statements of revenue over direct operating expenses. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

June 27, 2017

 

F-3


STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE AURORA ACQUIRED PROPERTIES (as described in Note 1)

(In thousands)

 

     Three Months Ended
March 31,
     Years Ended
December 31,
     September 11,
2014

(Date of
Acquisition)

to December 31,
2014
 
     2017      2016      2016      2015     
     (unaudited)      (unaudited)                       

Revenues

              

Oil and condensate sales

   $ 4,975      $ 4,395      $ 21,746      $ 21,261      $ 9,742  

Natural-gas sales

     122        123        530        458        184  

Natural-gas liquids sales

     238        163        821        760        382  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     5,335        4,681        23,097        22,479        10,308  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Direct Operating Expenses

              

Lease operating expenses

     622        753        3,014        2,670        666  

Production and other taxes

     334        303        1,414        1,395        576  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total direct operating expenses

     956        1,056        4,428        4,065        1,242  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Excess of Revenues Over Direct Operating Expenses

   $ 4,379      $ 3,625      $ 18,669      $ 18,414      $ 9,066  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying notes to the Statements of Revenues and Direct Operating Expenses.

 

F-4


Notes to the Statements of Revenues and Direct Operating Expenses

of the Aurora Acquired Properties (as described in Note 1)

 

1. BACKGROUND INFORMATION

On September 11, 2014, Admiral A Holdings L.P., TE Admiral A Holdings L.P. and Aurora C-I Holding L.P. (together “Aurora”) acquired working interests in certain oil and natural gas properties located in the Eaglebine play in Texas. On May 10, 2017, WHR Eagle Ford LLC, a wholly-owned subsidiary of WildHorse Resource Development Corporation (“WildHorse”), entered into a purchase and sale agreement with Aurora to acquire all of Aurora’s working interests in the Eaglebine properties (the “Acquired Properties”).

 

2. ACCOUNTING POLICIES

Basis of Presentation — Aurora did not prepare separate stand-alone historical financial statements for the Acquired Properties during the periods presented. Accordingly, complete financial statements under U.S. generally accepted accounting principles are not available or practicable to produce for the Acquired Properties. The Statements of Revenues and Direct Operating Expenses are not intended to be a complete presentation of the results of operations of the Acquired Properties and may not be representative of future operations as they do not include indirect general and administrative expenses, interest expense, depreciation, depletion, and amortization, income taxes, effects of hedging transactions, impairment expenses, exploration expenses, and other income and expenses not directly attributable to oil, natural gas, and natural gas liquids (“NGL”) revenue.

Use of Estimates — Accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the amounts reported in the Statements. These estimates and assumptions are based on management’s best estimates and judgment. Actual results may differ from those estimates.

Revenue Recognition  — Oil, natural gas, and NGL revenues are recognized when production is sold to a purchaser at fixed or determinable prices, when delivery has occurred and title has transferred and collectability of the revenue is reasonably assured. Aurora follows the sales method of accounting for natural gas revenues. Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume which are entitled based on Aurora’s working interest. There were no material gas imbalances during the periods presented.

Direct Operating Expenses — Direct operating expenses are recognized when incurred and include (a) lease operating expenses, which consist of gathering and processing expenses, lifting costs, lease and well repairs and maintenance, and other field expenses; and (b) production and other taxes, which consist of severance and ad valorem taxes.

 

3. COMMITMENTS AND CONTINGENCIES

The activity of the Acquired Properties may become subject to potential claims and litigation in the normal course of operations. While the ultimate impact of any proceedings cannot be predicted with certainty, Aurora management is currently not aware of any legal or other contingencies that would have a material effect on the Statements of Revenues and Direct Operating Expenses.

 

4. SUBSEQUENT EVENTS

The Statements of Revenues and Direct Operating Expense were issued on June 27, 2017, and all subsequent events through June 27, 2017 were considered for purposes of analysis and disclosure.

 

F-5


Notes to the Statements of Revenues and Direct Operating Expenses

of the Aurora Acquired Properties (as described in Note 1)

SUPPLEMENTAL OIL, NATURAL GAS, AND NGL INFORMATION (UNAUDITED)

The following tables present the changes in estimated proved and estimated proved developed reserves, the standardized measure of discounted future net cash flows and changes therein relating to estimated proved oil, natural gas, and NGL reserves for the periods presented. We caution that there are many uncertainties inherent in estimating proved reserve quantities and in projecting future production rates and the timing of development. Accordingly, these estimates are expected to change as further information becomes available. Material revisions of reserve estimates may occur in the future, development and production of the oil, natural gas and NGL reserves may not occur in the periods assumed, and actual prices realized incurred may vary significantly from those used in these estimates. The estimates of our proved reserves for the periods presented have been prepared internally by qualified engineers.

The estimated proved and estimated proved developed reserves for the periods presented are as follows:

 

     Oil
(Mbbl)
     Natural Gas
(Mmcf)
     NGLs
(Mbbl)
     Total (1)
(Mboe)
 

Proved Reserves

           

September 11, 2014

     —          —          —          —    

Acquisition of reserves

     1,073        188        43        1,147  

Revisions of previous estimates

     (40      200        93        86  

Extensions and discoveries

     584        120        43        647  

Production

     (117      (44      (13      (137
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2014

     1,500        464        166        1,743  

Revisions of previous estimates

     238        219        46        321  

Extensions and discoveries

     2,085        573        176        2,357  

Production

     (467      (183      (58      (556
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2015

     3,356        1,073        330        3,865  

Revisions of previous estimates

     (1,136      (180      (58      (1,224

Extensions and discoveries

     105        26        8        117  

Production

     (549      (219      (67      (653
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2016

     1,776        700        213        2,105  

Proved developed reserves at:

           

December 31, 2014

     1,203        403        144        1,414  

December 31, 2015

     1,849        795        245        2,227  

December 31, 2016

     1,776        700        213        2,106  

Proved undeveloped reserves at:

           

December 31, 2014

     297        61        22        329  

December 31, 2015

     1,507        278        85        1,638  

December 31, 2016

     —          —          —          —    

 

(1) Total volumes are in thousands of barrels of oil equivalent (“MBOE”). For this computation, one barrel is the equivalent of six thousand cubic feet of natural gas.

 

F-6


Notes to the Statements of Revenues and Direct Operating Expenses

of the Aurora Acquired Properties (as described in Note 1)

As specified by the SEC, estimated future net cash flows utilize prices for oil, natural gas, and NGL that are the arithmetical average prices during the year determined using the price on the first day of each month.

The present value of future net cash flows does not purport to be an estimate of the fair market value of the Acquired Properties. An estimate of fair value would also take into account, among other things, anticipated changes in future prices and costs, the expected recovery of reserves in excess of proved reserves and a discount factor more representative of the time value of money and the risks inherent in producing oil and natural gas.

The standardized measure of discounted future net cash flows relating to estimated proved oil, natural gas, and NGL reserves for the periods presented are as follows:

 

     Years Ended December 31,      September 11, 2014
(Date of Acquisition) to
December 31, 2014
 
     2016      2015     

Future cash flows

   $ 71,045      $ 161,846      $ 144,395  

Future production costs

     (29,457      (46,289      (40,722

Future development costs

     (2,760      (39,679      (14,217
  

 

 

    

 

 

    

 

 

 

Future net cash flows

     38,828        75,878        89,456  

Discounted at 10% per year

     (10,113      (28,260      (27,216
  

 

 

    

 

 

    

 

 

 

Standardized measure of discounted future net cash flows

   $ 28,715      $ 47,618      $ 62,240  
  

 

 

    

 

 

    

 

 

 

The principal sources of changes in the standardized measure of discounted future net cash flows for the periods presented are as follows:

 

     Years Ended December 31,      September 11, 2014
(Date of Acquisition) to
December 31, 2014
 
     2016      2015     

Balance, beginning of period

   $ 47,618      $ 62,240      $ —    

Acquisition of reserves

     —          —          52,460  

Sales and transfers of oil and gas, net of production costs

     (18,668      (18,414      (9,066

Net changes in prices and production costs

     (13,616      (38,770      (5,944

Changes in estimated future development costs

     249        2,655        (1,108

Extensions, discoveries, and additions

     1,848        22,563        19,824  

Development costs incurred during the period

     11,756        6,149        —    

Revisions of previous quantity estimates

     (4,827      3,948        2,666  

Accretion of discount

     4,762        6,224        1,311  

Other

     (407      1,023        2,097  
  

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ 28,715      $ 47,618      $ 62,240  
  

 

 

    

 

 

    

 

 

 

 

F-7

Exhibit 99.4

INDEX TO FINANCIAL STATEMENTS

 

     Page  

WildHorse Resource Development Corporation

  

Unaudited Pro Forma Combined Financial Statements

  

Introduction

     F-2  

Unaudited Pro Forma Combined Balance Sheet as of March 31, 2017

     F-4  

Unaudited Pro Forma Combined Statement of Operations for the Year Ended December 31, 2016

     F-5  

Unaudited Pro Forma Combined Statement of Operations for the Three Months Ended March 31, 2017

     F-6  

Notes to Unaudited Pro Forma Combined Financial Statements

     F-7  

 

F-1


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Introduction

WildHorse Resource Development Corporation is a publicly traded Delaware corporation, the common shares of which are listed on the New York Stock Exchange (“NYSE”) under the symbol “WRD.” Unless the context requires otherwise, references to “we,” “us,” “our,” “WRD,” or “the Company” are intended to mean the business and operations of WildHorse Resource Development Corporation and its consolidated subsidiaries. We are an independent oil and natural gas company focused on the acquisition, exploitation, development and production of oil, natural gas and NGL resources.

Reference to “WHR II” or our “predecessor” refers to WildHorse Resources II, LLC, together with its consolidated subsidiaries. Reference to “Esquisto I” refers to Esquisto Resources, LLC. Reference to “Esquisto II” refers to Esquisto Resources II, LLC. Reference to “Acquisition Co.” refers to WHE AcqCo., LLC, an entity that acquired certain producing properties and undeveloped acreage from Clayton Williams Energy, Inc. (“Burleson North Acquisition”) on December 19, 2016.

Our predecessor’s financial statements were retrospectively recast due to common control considerations. Because WHR II, Esquisto I, Esquisto II and Acquisition Co. were under the common control of NGP, the sale and contribution of the respective ownership interests were accounted for as a combination of entities under common control, whereby the assets and liabilities sold and contributed were recorded based on historical cost.

On May 10, 2017, we, through our wholly owned subsidiary, WHR Eagle Ford LLC (“WHR EF”), entered into a Purchase and Sale Agreement (the “First Acquisition Agreement”) by and among WHR EF, as purchaser, and Anadarko E&P Onshore LLC (“APC”), Admiral A Holding L.P., TE Admiral A Holding L.P. and Aurora C-I Holding L.P. (collectively, “KKR” and, together with APC, the “First Sellers”), as sellers, to acquire certain acreage and associated production in Burleson, Brazos, Lee, Milam, Robertson, and Washington Counties, Texas (the “Purchase”). Also on May 10, 2017, WHR EF entered into a Purchase and Sale Agreement (together, with the First Acquisition Agreement, the “Acquisition Agreements”), by and among WHR EF, as purchaser, and APC and Anadarko Energy Services Company (together, with APC, the “APC Subs” and together, with the First Sellers, the “Sellers”), as sellers, to acquire certain acreage and associated production in Burleson, Brazos, Lee, Milam, Robertson, and Washington Counties, Texas (together, with the Purchase, the “Acquisition”).

Pursuant to the Acquisition Agreements, on June 30, 2017, we acquired oil and gas working interests covering approximately 111,000 aggregate net acres and the associated production therefrom. The aggregate purchase price for the assets, as described in the Acquisition Agreements, subject to customary adjustments as provided in the Acquisition Agreements, consisted of an aggregate of approximately $534 million of cash to the APC Subs and approximately 5.5 million shares of our common stock valued at approximately $61 million to KKR (in the aggregate, the “Adjusted Purchase Price”). The common stock consideration price payable to KKR issued pursuant to a Stock Issuance Agreement that was executed, on May 10, 2017 (the “Stock Issuance Agreement”), by and among us and KKR. We and KKR made customary representations, warranties and covenants in the Stock Issuance Agreement. The closing of the common stock issuance was conditioned upon and occurred simultaneous with the closing of the Acquisition. WHR EF and the Sellers made customary representations, warranties and covenants in the Acquisition Agreements. The Sellers made certain additional customary covenants, including, among others, covenants to conduct its business in the ordinary course between the execution of the Acquisition Agreements and the closing of the Acquisition and not to engage in certain kinds of transactions during that period, subject to certain exceptions. The Sellers agreed not to take certain specified actions without our consent during the time between execution of the Acquisition Agreements and the closing of the Acquisition.

An affiliate of The Carlyle Group, L.P. (“Carlyle”) agreed to purchase $435 million of Series A Perpetual Convertible Preferred Stock (the “Preferred Stock”) from WRD. The remainder of the acquisition price was funded by borrowings under WRD’s revolving credit facility. The unaudited pro forma combined statements of operations of the Company include pro forma adjustments to give effect to the following as if they had occurred on the dates indicated:

 

    for the year ended December 31, 2016, the Burleson North Acquisition as if it had been completed as of January 1, 2016;

 

    for the year ended December 31, 2016, the Acquisition as if it had been completed as of January 1, 2016; and

 

    for the three months ended March 31, 2017, the Acquisition as if it had been completed as of January 1, 2016.

The unaudited pro forma combined balance sheet of the Company was prepared as of March 31, 2017 and includes pro forma adjustments to give effect to the Acquisition as if it had been completed on March 31, 2017.

 

F-2


The unaudited pro forma combined statements of operations of the Company were prepared based on (i) the audited financial statements of the Company as of and for the year ended December 31, 2016; (ii) the unaudited financial statements of the Company as of and for the three months ended March 31, 2017; (iii) the audited historical statements of revenues and direct operating expenses of the Burleson North Acquisition for the nine months ended September 30, 2016; (iv) the audited and unaudited historical statements of revenues and direct operating expenses of the APC Acquisition for the year ended December 31, 2016 and the three months ended March 31, 2017; (v) the audited and unaudited historical statements of revenues and direct operating expenses of the KKR Acquisition for the year ended December 31, 2016 and the three months ended March 31, 2017; and (vi) certain pro forma adjustments reflected in the pro forma financial statements below.

The unaudited pro forma combined balance sheet of the Company as of March 31, 2017 was prepared based on the unaudited financial statements of the Company as of March 31, 2017 and certain pro forma adjustments reflected in the pro forma financial statements below.

The pro forma data presented reflects events directly attributable to the above described transactions and certain assumptions that the Company believes are reasonable. The pro forma adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual adjustments may differ from the pro forma adjustments. However, management believes that the pro forma assumptions provide a reasonable basis for presenting the significant effects of the transactions as contemplated and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma combined financial statements.

The unaudited pro forma combined financial statements and related notes are presented for illustrative purposes only. If the Burleson North Acquisition or the Acquisition and the related financing transactions contemplated herein had occurred in the past, the Company’s operating results might have been materially different from those presented in the unaudited pro forma combined financial statements. The unaudited pro forma combined financial statements should not be relied upon as an indication of operating results that the Company would have achieved if the acquisitions and other transactions contemplated herein had taken place on the specified date. In addition, future results may vary significantly from the results reflected in the unaudited pro forma statements of operations and should not be relied on as an indication of the future results of the Company.

The unaudited pro forma combined financial statements should be read in conjunction with the notes thereto and with the audited and unaudited historical financial statements and related notes of the Company, as well as the other audited and unaudited historical statements of revenues and direct operating expenses.

 

F-3


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF MARCH 31, 2017

(in thousands)

 

     WRD
Historical
    Financing
and Other
Adjustments
         WRD
Pro Forma
 

ASSETS

         

Current Assets:

         

Cash and cash equivalents

   $ 93,342     $ 103,290     a)    $ 93,342  
       (103,290   c)   
       435,000     b)   
       (435,000   c)   

Accounts receivable, net

     27,046       —            27,046  

Short-term derivative instruments

     5,674       —            5,674  

Prepaid expenses and other current assets

     2,310       254     c)      2,564  
  

 

 

   

 

 

      

 

 

 

Total current assets

     128,372       254          128,626  

Property and equipment:

         

Oil and gas properties

     1,666,340       533,610     c)      2,264,724  
       60,754     d)   
       3,085     e)   
       935     f)   

Other property and equipment

     36,893       —            36,893  

Accumulated depreciation, depletion and amortization

     (226,587     —            (226,587
  

 

 

   

 

 

      

 

 

 

Total property and equipment, net

     1,476,646       598,384          2,075,030  

Other noncurrent assets:

         

Restricted cash

     752       —            752  

Long-term derivative instruments

     8,393       —            8,393  

Debt issuance costs

     1,954       946     c)      2,900  

Other long-term assets

     1,319       —            1,319  
  

 

 

   

 

 

      

 

 

 

Total assets

   $ 1,617,436     $ 599,584        $ 2,217,020  
  

 

 

   

 

 

      

 

 

 

LIABILITIES AND EQUITY

         

Current liabilities:

         

Accounts payable

   $ 19,751     $ —          $ 19,751  

Accrued liabilities

     56,003       935     f)      56,938  

Short-term derivative instruments

     4,708       —            4,708  

Asset retirement obligations

     90       —            90  
  

 

 

   

 

 

      

 

 

 

Total current liabilities

     80,552       935          81,487  

Noncurrent liabilities:

         

Long-term debt

     338,783       103,290     a)      442,073  

Asset retirement obligations

     10,868       3,085     e)      13,953  

Deferred tax liabilities

     124,253       —            124,253  

Long-term derivative instruments

     367       —            367  

Other noncurrent liabilities

     1,393       —            1,393  
  

 

 

   

 

 

      

 

 

 

Total noncurrent liabilities

     475,664       106,375          582,039  
  

 

 

   

 

 

      

 

 

 

Total liabilities

     556,216       107,310          663,526  

Commitments and contingencies

         

Series A perpetual convertible preferred stock, $0.01 par value: 50,000,000 shares authorized; no shares (435,000 pro forma shares) issued and outstanding at March 31, 2017.

     —         435,000     b)      432,750  
       (2,250   c)   

Stockholders’ equity:

         

Common stock, $0.01 par value 500,000,000 shares authorized; 93,987,541 shares (99,505,666 pro forma shares) issued and outstanding at March 31, 2017.

     940       55     d)      995  

Additional paid-in capital

     1,050,425       60,699     d)      1,111,124  

Accumulated earnings (deficit)

     9,855       (1,230   c)      8,625  
  

 

 

   

 

 

      

 

 

 

Total stockholders’ equity

     1,061,220       59,524          1,120,744  
  

 

 

   

 

 

      

 

 

 

Total liabilities and equity

   $ 1,617,436     $ 599,584        $ 2,217,020  
  

 

 

   

 

 

      

 

 

 

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

 

F-4


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2016

(in thousands)

 

     WRD
Historical
    Burleson
North

Acquisition
Historical
(1)
     Burleson
North

Acquisition
Adjustments
(2)
    APC
Acquisition
Historical
     KKR
Acquisition
Historical
     Financing
and Other
Adjustments
        WRD
Pro
Forma
 

Revenues:

                   

Oil sales

   $ 75,938     $ 34,571      $ 10,583     $ 66,585      $ 21,746      $ —         $ 209,423  

Natural gas sales

     43,487       1,812        646       4,299        530        —           50,774  

NGL sales

     5,786       810        318       5,179        821        —           12,914  

Other income

     2,131       —          —         —          —          —           2,131  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Total operating revenues

     127,342       37,193        11,547       76,063        23,097        —           275,242  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Operating expenses:

                   

Lease operating expenses

     12,320       12,966        2,443       24,660        3,014        (10,178   l)     45,225  

Gathering, processing and transportation

     6,581       —          1,244       —          —          10,178     l)     18,003  

Gathering system operating expense

     99       —          —         —          —          —           99  

Taxes other than income tax

     6,814       3,546        (182     4,664        1,414        —           16,256  

Depreciation, depletion and amortization

     81,757       —          19,115       —          —          93,182     g)     194,054  

General and administrative

     23,973       —          —         —          —          —           23,973  

Exploration expense

     12,026       —          —         —          —          —           12,026  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Total operating expense

     143,570       16,512        22,620       29,324        4,428        93,182         309,636  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Income (loss) from operations

     (16,228     20,681        (11,073     46,739        18,669        (93,182       (34,394

Other income (expense):

                   

Interest expense, net

     (7,834     —          —         —          —          (3,636   h)     (11,724
                  (254   i)  

Debt extinguishment costs

     (1,667     —          —         —          —          —           (1,667

Gain (loss) on derivative instruments

     (26,771     —          —         —          —          —           (26,771

Other income (expense)

     (151     —          —         —          —          —           (151
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Total other income (expense)

     (36,423     —          —         —          —          (3,890       (40,313
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Income (loss) before income taxes

     (52,651     20,681        (11,073     46,739        18,669        (97,072       (74,707

Income tax benefit (expense)

     5,575       —          —         —          —          808     j)     6,383  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Net income (loss)

     (47,076     20,681        (11,073     46,739        18,669        (96,264       (68,324

Net income (loss) attributable to previous owners

     (2,681     20,681        (11,073     45,079        18,013        (92,926   k)     (22,907

Net income (loss) attributable to predecessor

     (33,998     —          —         —          —          —           (33,998
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Net income (loss) available to WildHorse Resources

   $ (10,397   $ —        $ —       $ 1,660      $ 656      $ (3,338     $ (11,419

Preferred stock dividends

     —         —          —         —          —          (19,870   m)     (19,870
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Net income (loss) available to common shareholders

   $ (10,397   $ —        $ —       $ 1,660      $ 656      $ (23,208     $ (31,289
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

     

 

 

 

Earnings per common share:

                   

Basic

   $ (0.11                  $ (0.32
  

 

 

                  

 

 

 

Diluted

   $ (0.11                  $ (0.32
  

 

 

                  

 

 

 

Weighted-average common shares outstanding:

                   

Basic

     91,327                      96,845  
  

 

 

                  

 

 

 

Diluted

     91,327                      96,845  
  

 

 

                  

 

 

 

 

(1) Represents the nine months ended September 30, 2016.
(2) Represents activity from the Burleson North Acquisition from October 1, 2016 through December 19, 2016, the date of acquisition.

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

 

F-5


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2017

(in thousands)

 

     WRD
Historical
    APC
Acquisition
Historical
     KKR
Acquisition
Historical
     Financing
and Other
Adjustments
         WRD
Pro Forma
 

Revenues:

               

Oil sales

   $ 39,077     $ 16,741      $ 4,975      $ —          $ 60,793  

Natural gas sales

     12,145       1,214        122        —            13,481  

NGL sales

     2,663       1,621        238        —            4,522  

Other income

     407       —             —          —            407  
  

 

 

   

 

 

    

 

 

    

 

 

      

 

 

 

Total operating revenues

     54,292       19,576        5,335        —            79,203  
  

 

 

   

 

 

    

 

 

    

 

 

      

 

 

 

Operating expenses:

               

Lease operating expenses

     6,928       6,244        622        (2,280   l)      11,514  

Gathering, processing and transportation

     1,700       —          —          2,280     l)      3,980  

Gathering system operating expense

     19       —          —          —            19  

Taxes other than income tax

     3,899       1,507        334        —            5,740  

Depreciation, depletion and amortization

     26,443       —          —          19,001     g)      45,444  

General and administrative

     7,482       —          —          —            7,482  

Exploration expense

     1,615       —          —          —            1,615  
  

 

 

   

 

 

    

 

 

    

 

 

      

 

 

 

Total operating expense

     48,086       7,751        956        19,001          75,794  
  

 

 

   

 

 

    

 

 

    

 

 

      

 

 

 

Income (loss) from operations

     6,206       11,825        4,379        (19,001        3,409  

Other income (expense):

               

Interest expense, net

     (5,571     —          —          (909   h)      (6,544
             (64   i)   

Debt extinguishment costs

     11       —          —          —            11  

Gain (loss) on derivative instruments

     31,291       —          —          —            31,291  

Other income (expense)

     15       —          —          —            15  
  

 

 

   

 

 

    

 

 

    

 

 

      

 

 

 

Total other income (expense)

     25,746       —          —          (973        24,773  
  

 

 

   

 

 

    

 

 

    

 

 

      

 

 

 

Income (loss) before income taxes

     31,952       11,825        4,379        (19,974        28,182  

Income tax benefit (expense)

     (11,700     —          —          1,338     j)      (10,362
  

 

 

   

 

 

    

 

 

    

 

 

      

 

 

 

Net income (loss) available to WildHorse Resources

   $ 20,252     $ 11,825      $ 4,379      $ (18,636      $ 17,820  

Preferred stock dividends

     —         —          —          (6,823   m)      (6,823

Undistributed earnings allocated to preferred stock

     —         —          —          (2,768   n)      (2,768
  

 

 

   

 

 

    

 

 

    

 

 

      

 

 

 

Net income (loss) available to common shareholders

   $ 20,252     $ 11,825      $ 4,379      $ (28,227      $ 8,229  
  

 

 

   

 

 

    

 

 

    

 

 

      

 

 

 

Earnings per common share:

               

Basic

   $ 0.22                $ 0.08  
  

 

 

              

 

 

 

Diluted

   $ 0.22                $ 0.08  
  

 

 

              

 

 

 

Weighted-average common shares outstanding:

               

Basic

     93,216                  98,734  
  

 

 

              

 

 

 

Diluted

     93,216                  98,734  
  

 

 

              

 

 

 

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

 

F-6


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

N OTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Note 1. Basis of Pro Forma Presentation

On May 10, 2017, we, through our wholly owned subsidiary, WHR Eagle Ford LLC (“WHR EF”), entered into a Purchase and Sale Agreement (the “First Acquisition Agreement”) by and among WHR EF, as purchaser, and Anadarko E&P Onshore LLC (“APC”), Admiral A Holding L.P., TE Admiral A Holding L.P. and Aurora C-I Holding L.P. (collectively, “KKR” and, together with APC, the “First Sellers”), as sellers, to acquire certain acres and associated production in Burleson, Brazos, Lee, Milam, Robertson, and Washington Counties, Texas (the “Purchase”). Also on May 10, 2017, WHR EF entered into a Purchase and Sale Agreement (together, with the First Acquisition Agreement, the “Acquisition Agreements”), by and among WHR EF, as purchaser, and APC and Anadarko Energy Services Company (together, with APC, the “APC Subs” and together, with the First Sellers, the “Sellers”), as sellers, to acquire certain acres and associated production in Burleson, Brazos, Lee, Milam, Robertson, and Washington Counties, Texas (together, with the Purchase, the “Acquisition”).

The unaudited pro forma combined financial information has been derived from the Company’s historical consolidated and combined financial statements. The unaudited pro forma combined balance sheet as of March 31, 2017 gives effect to the Acquisition as if it had been completed on March 31, 2017. The unaudited pro forma combined statements of operations for the three months ended March 31, 2017 and the year ended December 31, 2016 each give effect to the Acquisition as if it had been completed on January 1, 2016. The unaudited pro forma combined statement of operations for the year ended December 31, 2016 also gives effect to the Burleson North Acquisition as if it had been completed on January 1, 2016.

The unaudited pro forma combined financial statements reflect pro forma adjustments that are described in Note 3 below and are based on available and certain assumptions that the Company believes are reasonable. However, actual results may differ from those reflected in these statements. In our opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The following unaudited pro forma combined statements do not purport to represent what the financial position or results of operations would have been if the transaction had actually occurred on the dates indicated above, nor are they indicative of our future financial position or results of operations. These unaudited pro forma combined financial statements should be read in conjunction with the historical financial statements and our related notes for the periods presented.

Note 2. Preliminary Purchase Price Allocation

We account for third-party acquisitions, including the Acquisition, under the acquisition method. The assets acquired and the liabilities assumed in the Acquisition have been measured at fair value based on various estimates. These estimates are based on key assumptions related to the business combination, including reviews of publicly disclosed information for other acquisitions in the industry, historical experience of the companies, data that was available through the public domain and due diligence reviews of the acquiree businesses. Acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.

 

     APC
Acquisition
     KKR
Acquisition
     Total  

Consideration:

        

Cash

   $ 533,610      $ —        $ 533,610  

Common stock

     —          60,754        60,754  
  

 

 

    

 

 

    

 

 

 

Total consideration

   $ 533,610      $ 60,754      $ 594,364  
  

 

 

    

 

 

    

 

 

 

Proved oil and gas properties

   $ 414,317      $ 48,918      $ 463,235  

Unproved oil and gas properties

     123,133        12,016        135,149  

Asset retirement obligations

     (2,905      (180      (3,085

Accrued liabilities

     (935      —          (935
  

 

 

    

 

 

    

 

 

 

Total identifiable net assets

   $ 533,610      $ 60,754      $ 594,364  
  

 

 

    

 

 

    

 

 

 

The allocation of the preliminary purchase price to the fair values of assets acquired and liabilities assumed includes pro forma adjustments to reflect the fair values of the Acquisition’s assets and liabilities at the time of the completion of the Acquisition. The final allocation of the purchase price could differ materially from the preliminary allocation. As such, we expect to finalize the allocation of the purchase price as soon as practicable.

 

F-7


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Note 3. Pro Forma Adjustments and Assumptions

The following pro forma adjustments have been applied to the Company’s historical combined financial statements to depict the Company’s combined balance sheet as if the Acquisition had occurred on March 31, 2017 and combined statements of operations as if the Burleson North Acquisition and the Acquisition had occurred on January 1, 2016. The pro forma adjustments were based on then-available information and assumptions that management believed to be appropriate in the circumstances.

Unaudited Pro Forma Combined Balance Sheet

The following adjustments were made in the preparation of the unaudited pro forma combined balance sheet at March 31, 2017:

 

  a. Pro forma adjustment to reflect the cash proceeds related to borrowings under our revolving credit facility to fund the Acquisition, which includes $1.2 million of deferred financing costs related to the expected increase in the borrowing base upon closing of the Acquisition and $1.2 million of acquisition-related costs directly related to the Acquisition, such as legal, accounting and financial advisory fees, and $2.3 million of preferred stock issuance costs.

 

  b. Pro forma adjustment to reflect the $435.0 million in cash proceeds to fund the Acquisition related to the issuance of Series A Perpetual Convertible Preferred Stock.

 

  c. Pro forma adjustments to record the use of the cash proceeds from the borrowings under our revolving credit facility and the preferred stock issuance, including preferred stock issuance costs of $2.3 million, deferred financing costs of $1.2 million and acquisition-related costs of $1.2 million.

 

  d. Pro forma adjustment to record the issuance of 5.5 million common shares to KKR.

 

  e. Pro forma adjustment to reflect the assumption of asset retirement obligations.

 

  f. Pro forma adjustment to reflect the assumption of legal suspense associated with the properties acquired.

Unaudited Pro Forma Combined Statements of Operation

The following adjustments were made in the preparation of the unaudited pro forma combined statements of operations for the three months ended March 31, 2017 and year ended December 31, 2016:

 

  g. Pro forma adjustment to reflect the depletion and depreciation on property, plant and equipment and the accretion expense on asset retirement obligations. The table below represents the components of this adjustment (in thousands):

 

     APC
Acquisition
     KKR
Acquisition
     Total  

For the three months ended March 31, 2017

        

Depletion

   $ 16,812      $ 2,139      $ 18,951  

Accretion of asset retirement obligations

     47        3        50  
        

 

 

 
         $ 19,001  
        

 

 

 

For the year ended December 31, 2016

        

Depletion

   $ 81,400      $ 11,582      $ 92,982  

Accretion of asset retirement obligations

     188        12        200  
        

 

 

 
         $ 93,182  
        

 

 

 

 

  h. Pro forma adjustment to reflect the incurrence of interest expense on $103.4 million of additional borrowings under our revolving credit facility used to fund the Acquisition. For the three months ended March 31, 2017 and year ended December 31, 2016, pro forma interest expense was based on a weighted-average interest rate of 3.52%. The table below represents the effects of a one-eighth percentage point change in the interest rate on the pro forma interest associated with these additional borrowings (dollars in thousands):

 

     Interest Rate     Three Months Ended
March 31, 2017
     Year Ended
December 31,
2016
 

Weighted-average interest rate

     3.520   $ 909      $ 3,636  

Weighted-average interest rate - increase 0.125%

     3.645   $ 941      $ 3,765  

Weighted-average interest rate - decrease 0.125%

     3.395   $ 877      $ 3,507  

 

F-8


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

  i. Pro forma adjustment to reflect the amortization of deferred financing costs as if the borrowing costs associated with the Acquisition were incurred on January 1, 2016.

 

  j. Pro forma adjustment to reflect the estimated income tax effects of the Acquisition. The Texas Margins Tax (“TMT”) statutory rate of 0.75% was used for the periods prior to the closing of our initial public offering on December 19, 2016. For periods subsequent to our initial public offering, we are using a combined statutory rate of 35.49% for both federal taxes and the TMT.

 

  k. Pro forma adjustment reflecting allocation of net income (loss) prior to our initial public offering to previous owners.

 

  l. Adjustment to reclass gathering, processing and transportation from lease operating costs to conform to our presentation.

 

  m. Adjustment reflecting 6% dividend paid-in-kind for the year ended December 31, 2016 and the three months ended March 31, 2017, compounded quarterly.

 

  n. Adjustment reflecting the proportionate share of undistributed net income attributable to preferred stock.

Note 4. Earnings per share

The following sets forth the calculation of earnings (loss) per share (“EPS”), for the year ended December 31, 2016 and the three months ended March 31, 2017 (in thousands, except per share amounts). In the calculation of basic net income (loss) per share attributable to common stockholders, participating securities are allocated earnings based on actual dividend distributions received plus a proportionate share of undistributed net income attributable to common stockholders, if any, after recognizing distributed earnings. The Company’s participating securities do not participate in undistributed net losses because they are not contractually obligated to do so.

 

     For the Year Ended December 31, 2016  
     (Historical)     (Pro Forma)  

Numerator:

    

Net income (loss) available to WildHorse Resources

   $ (10,397   $ (11,419

Less: Preferred stock dividends

     —         19,870  
  

 

 

   

 

 

 

Net income (loss) available to common shareholders

   $ (10,397   $ (31,289

Denominator:

    

Weighted-average common shares outstanding (in thousands)(1)

     91,327       91,327  

Common shares issued to KKR

     —         5,518  
  

 

 

   

 

 

 

Common shares used in basic EPS

     91,327       96,845  

Basic EPS

   $ (0.11   $ (0.32
  

 

 

   

 

 

 

Diluted EPS (1)

   $ (0.11   $ (0.32
  

 

 

   

 

 

 

 

 

(1) The Company used the two-class method for both basic and diluted EPS. For the year ended December 31, 2016, 363 incremental shares were excluded from the calculation of diluted EPS under the treasury stock method due to their antidilutive effect as we were in a loss position and 32,725 shares were excluded in the calculation of diluted EPS due to their antidilutive effect under the if-converted method.

 

F-9


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

     For the Three Months Ended March 31, 2017  
     (Historical)      (Pro Forma)  

Numerator:

     

Net income (loss) available to WildHorse Resources

   $ 20,252      $ 17,820  

Less: Preferred stock dividends

     —          6,823  

Less: Undistributed earnings allocated to preferred stock

     —          2,768  
  

 

 

    

 

 

 

Net income (loss) available to common shareholders

   $ 20,252      $ 8,229  

Denominator:

     

Weighted-average common shares outstanding (in thousands)(1)

     93,216        93,216  

Common shares issued to KKR

     —          5,518  
  

 

 

    

 

 

 

Common shares used in basic EPS

     93,216        98,734  

Basic EPS

   $ 0.22      $ 0.08  
  

 

 

    

 

 

 

Diluted EPS (1)

   $ 0.22      $ 0.08  
  

 

 

    

 

 

 

 

 

(1) The Company used the two-class method for both basic and diluted EPS. For the three months ended March 31, 2017, 6 incremental shares were included in the calculation of diluted EPS under the treasury stock method and 33,215 shares were excluded in the calculation of diluted EPS due to their antidilutive effect under the if-converted method.

Note 5. Supplemental Oil and Gas Information

Oil and Natural Gas Reserves

Users of this information should be aware that the process of estimating quantities of “proved” and “proved developed” oil and natural gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. As a result, revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various reservoirs make these estimates generally less precise than other estimates included in the financial statement disclosures.

Proved reserves are those quantities of oil and natural gas that by analysis of geoscience and engineering data can be estimated with reasonable certainty to be economically producible — from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

Our consolidated historical proved reserves as of December 31, 2016 were prepared by our internal engineers and audited by Cawley, Gillespie and Associates, Inc. (“Cawley”), our independent reserve engineers. APC’s proved reserves as of December 31, 2016 were prepared by their internal reservoir engineers. KKR’s proved reserves as of December 31, 2016 were prepared by their internal reservoir engineers. All proved reserves are located in the United States and all prices were determined and held constant in accordance with SEC rules.

 

F-10


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following tables set forth estimates of the quantities of oil, natural gas and NGL reserves as of December 31, 2016:

 

     Proved Oil Reserves (MBbls)  
     WRD
Historical
     APC
Acquisition
Historical
     KKR
Acquisition
Historical
     WRD
Pro
Forma
 

Proved developed and undeveloped reserves:

           

Beginning of the year

     36,650        8,124        3,356        48,130  

Extensions, discoveries and additions

     18,870        156        105        19,131  

Purchase of minerals in place

     26,835        —          —          26,835  

Sales of minerals in place

     —          (508      —          (508

Production

     (1,848      (1,734      (549      (4,131

Revisions of previous estimates

     6,940        846        (1,136      6,650  
  

 

 

    

 

 

    

 

 

    

 

 

 

End of year

     87,447        6,884        1,776        96,107  
  

 

 

    

 

 

    

 

 

    

 

 

 

Proved developed reserves:

           

Beginning of year

     7,503        7,291        1,849        16,643  

End of year

     19,192        6,884        1,776        27,852  

Proved undeveloped reserves:

           

Beginning of year

     29,147        833        1,507        31,487  

End of year

     68,255        —          —          68,255  
     Proved Natural Gas Reserves (MMcf)  
     WRD
Historical
     APC
Acquisition
Historical
     KKR
Acquisition
Historical
     WRD
Pro
Forma
 

Proved developed and undeveloped reserves:

           

Beginning of the year

     344,959        9,158        1,073        355,190  

Extensions, discoveries and additions

     32,782        55        26        32,863  

Purchase of minerals in place

     13,545        —          —          13,545  

Sales of minerals in place

     —          (450      —          (450

Production

     (17,820      (1,852      (219      (19,891

Revisions of previous estimates

     (48,364      1,107        (180      (47,437
  

 

 

    

 

 

    

 

 

    

 

 

 

End of year

     325,102        8,018        700        333,820  
  

 

 

    

 

 

    

 

 

    

 

 

 

Proved developed reserves:

           

Beginning of year

     142,990        9,000        795        152,785  

End of year

     145,880        8,018        700        154,598  

Proved undeveloped reserves:

           

Beginning of year

     201,969        158        278        202,405  

End of year

     179,222        —          —          179,222  

 

F-11


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

     Proved Natural Gas Liquids Reserves (MBbls)  
     WRD
Historical
     APC
Acquisition
Historical
     KKR
Acquisition
Historical
     WRD
Pro
Forma
 

Proved developed and undeveloped reserves:

           

Beginning of the year

     8,897        2,071        330        11,298  

Extensions, discoveries and additions

     2,606        12        8        2,626  

Purchase of minerals in place

     1,823        —          —          1,823  

Sales of minerals in place

     —          (102      —          (102

Production

     (471      (416      (67      (954

Revisions of previous estimates

     (1,981      272        (58      (1,767
  

 

 

    

 

 

    

 

 

    

 

 

 

End of year

     10,874        1,837        213        12,924  
  

 

 

    

 

 

    

 

 

    

 

 

 

Proved developed reserves:

           

Beginning of year

     2,235        2,035        245        4,515  

End of year

     3,765        1,837        213        5,815  

Proved undeveloped reserves:

           

Beginning of year

     6,662        36        85        6,783  

End of year

     7,109        —          —          7,109  
     Oil
(MBbls)
     Natural
Gas

(MMcf)
     NGL
(MBbls)
     Equivalent
(MBoe) (1)
 

Proved developed and undeveloped reserves:

           

Beginning of the year

     48,130        355,190        11,298        118,626  

Extensions, discoveries and additions

     19,131        32,863        2,626        27,234  

Purchase of minerals in place

     26,835        13,545        1,823        30,916  

Sales in place

     (508      (450      (102      (685

Production

     (4,131      (19,891      (954      (8,400

Revisions of previous estimates

     6,650        (47,437      (1,767      (3,023
  

 

 

    

 

 

    

 

 

    

 

 

 

End of year

     96,107        333,820        12,924        164,668  
  

 

 

    

 

 

    

 

 

    

 

 

 

Proved developed reserves:

           

Beginning of year

     16,643        152,785        4,515        46,622  

End of year

     27,852        154,598        5,815        59,433  

Proved undeveloped reserves:

           

Beginning of year

     31,487        202,405        6,783        72,004  

End of year

     68,255        179,222        7,109        105,234  

 

(1) This information is presented in barrels of oil equivalents, which is calculated at a rate of six thousand cubic feet of gas per one barrel of oil equivalent.

Noteworthy amounts included in the categories of proved reserve changes in the above tables include:

 

    During 2016, extensions, discoveries and additions increased proved reserves by 4,131 MBoe and 22,809 MBoe related to drilling in the RCT field in Louisiana and Eagle Ford, respectively.

 

    During 2016, purchase of minerals in place of 30,916 MBoe was primarily attributable to the Burleson North Acquisition.

 

    During 2016, we had downward revisions of proved reserves of 3,102 MBoe, of which 711 MBoe related to commodity price changes and 2,391 MBoe was performance related.

 

F-12


WILDHORSE RESOURCE DEVELOPMENT CORPORATION

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

    During 2016, APC had downward revisions due to the effects of changes in commodity prices, changes in economic conditions and changes in reservoir performance.

 

    During 2016, KKR had downward revisions due to the effects of changes in commodity prices.

A variety of methodologies are used to determine our proved reserve estimates. The principal methodologies employed are reservoir simulation, decline curve analysis, volumetric, material balance, advance production type curve matching, petro-physics/log analysis and analogy. Some combination of these methods is used to determine reserve estimates in substantially all of our fields.

Standardized Measure of Discounted Future Net Cash Flows from Proved Reserves

As required by the Financial Accounting Standards Board and SEC, the standardized measure of discounted future net cash flows presented below is computed by applying first-day-of-the-month average prices, year-end costs and legislated tax rates and a discount factor of 10 percent to proved reserves. We do not believe the standardized measure provides a reliable estimate of the Company’s expected future cash flows to be obtained from the development and production of its oil and gas properties or of the value of its proved oil and gas reserves. The standardized measure is prepared on the basis of certain prescribed assumptions including first-day-of-the-month average prices, which represent discrete points in time and therefore may cause significant variability in cash flows from year to year as prices change.

The pro forma standard measure of discounted future net cash flows in as follows:

 

     For the Year Ended December 31, 2016  
     WRD
Historical
    APC
Acquisition
Historical
    KKR
Acquisition
Historical
    Adjustments     WRD
Pro Forma
 

Future cash inflows

   $ 4,434,117     $ 314,492     $ 71,045     $ —       $ 4,819,654  

Future production costs

     (1,220,067     (144,088     (29,457     —         (1,393,612

Future development costs

     (1,146,632     (46,476     (2,760     —         (1,195,868

Future income tax expense

     (442,285     —         —         (32,523     (474,808
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Future net cash flows for estimated timing of cash flows

     1,625,133       123,928       38,828       (32,523     1,755,366  

10% annual discount for estimated timing of cash flows

     (1,082,092     (32,357     (10,113     8,371       (1,116,191
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Standardized measure of discounted future net cash flows

   $ 543,041     $ 91,571     $ 28,715     $ (24,152   $ 639,175  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves

The following is a pro forma summary of the changes in the standardized measure of discounted future net cash flows for the proved oil and natural gas reserves during the year ended December 31, 2016:

 

     For the Year Ended December 31, 2016  
     WRD
Historical
    APC
Acquisition
Historical
    KKR
Acquisition
Historical
    Adjustments     WRD
Pro Forma
 

Beginning of year

   $ 451,930     $ 139,003     $ 47,618     $ —       $ 638,551  

Sale of oil and natural gas produced, net of production costs

     (104,596     (46,739     (18,668     —         (170,003

Purchase of minerals in place

     188,317       —         —         —         188,317  

Sales of minerals in place

     —         (7,741     —         —         (7,741

Extensions and discoveries

     168,796       3,531       1,848       —         174,175  

Changes in income taxes, net

     (206,817     —         —         (24,152     (230,969

Changes in prices and costs

     (57,034     (39,583     (13,616     —         (110,233

Previously estimated development costs incurred

     15,067       —         11,756       —         26,823  

Net changes in future development costs

     11,985       (1,352     249       —         10,882  

Revisions of previous quantities

     3,943       27,593       (4,827     —         26,709  

Accretion of discount

     103,000       13,900       4,762       —         121,662  

Change in production rates and other

     (31,550     2,959       (407     —         (28,998
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of year

   $ 543,041     $ 91,571     $ 28,715     $ (24,152   $ 639,175  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-13