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): February 14 (February 8, 2018)
ALTA MESA HOLDINGS, LP
(Exact name of registrant as specified in its charter)
| Texas | 333-173751 | 20-3565150 | ||
|
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
15021 Katy Freeway, Suite 400
Houston, Texas, 77094
(Address of principal executive offices)
(281) 530-0991
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | 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)) |
Indicated by check mark whether the registrant is an emerging growth company 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. ☐
Item 1.01. Entry into a Material Definitive Agreement.
Contribution Agreement
As previously reported, on August 16, 2017, Alta Mesa Holdings, LP, a Texas limited partnership (“ Alta Mesa ”), entered into a Contribution Agreement (the “ AM Contribution Agreement ”) with Alta Mesa Resources, Inc. (formerly Silver Run Acquisition Corporation II, a Delaware corporation (“ AMR ”)), High Mesa Holdings, LP, a Delaware limited partnership (the “ AM Contributor ”), High Mesa Holdings GP, LLC, a Texas limited liability company and the sole general partner of the AM Contributor, Alta Mesa Holdings GP, LLC, a Texas limited liability company and the sole general partner of Alta Mesa (“ Alta Mesa GP ”), and, solely for certain provisions therein, the equity owners of the AM Contributor. Simultaneous with the execution of the AM Contribution Agreement, AMR entered into (i) a Contribution Agreement (the “ KFM Contribution Agreement ”) with KFM Holdco, LLC, a Delaware limited liability company (the “ KFM Contributor ”), Kingfisher Midstream, LLC, a Delaware limited liability company (“ Kingfisher ”), and, solely for certain provisions therein, the equity owners of the KFM Contributor; and (ii) a Contribution Agreement (the “ Riverstone Contribution Agreement ” and, together with the AM Contribution Agreement and the KFM Contribution Agreement, the “ Contribution Agreements ”) with Riverstone VI Alta Mesa Holdings, L.P., a Delaware limited partnership (the “ Riverstone Contributor ”).
On February 9, 2018, the parties consummated the transactions contemplated by the Contribution Agreements and SRII Opco, LP, a Delaware limited partnership (“ SRII Opco ”) acquired (a) (i) all of the limited partner interests in Alta Mesa and (ii) 100% of the economic interests and 90% of the voting interests in Alta Mesa GP (with (i) and (ii) collectively, the “ AM Contribution ”) and (b) 100% of the economic interests in Kingfisher (the “ Kingfisher Contribution ”). The acquisition of Alta Mesa and Kingfisher pursuant to the Contribution Agreements is referred to herein as the “ business combination ” and the transactions contemplated by the Contribution Agreements are referred to herein as the “ Transactions .”
SRII Opco GP, LLC, a Delaware limited liability company (“ SRII Opco GP ”), the sole general partner of SRII Opco, is a wholly owned subsidiary of AMR. The limited partners of SRII Opco are the AM Contributor, the KFM Contributor and the Riverstone Contributor (collectively, the “ Contributors ”) and AMR. As a result of the Transactions, AMR has obtained control over the management of Alta Mesa GP and, consequently, Alta Mesa. AMR is a publicly traded corporation that is not under the control of any person. Prior to the closing of the Transactions, Alta Mesa GP, and consequently, Alta Mesa, was controlled by High Mesa Inc. and indirectly by Michael E. Ellis.
Harlan H. Chappelle, our Chief Executive Officer and a director, Michael Ellis, our Chief Operating Officer and a director and certain affiliates of Bayou City Energy Management, LLC, a Delaware limited liability company (“ Bayou City ”), and HPS Investment Partners, LLC, a Delaware limited liability company (“ Highbridge ”), continue to own an aggregate 10% voting interest in Alta Mesa GP following the closing. These existing owners were a party to a voting agreement with the Alta Mesa Contributor and Alta Mesa GP, pursuant to which they agreed to vote their interests in Alta Mesa GP as directed by the Alta Mesa Contributor. In connection with the closing of the Transactions, the parties amended and restated the voting agreement to include SRII Opco as a party and the existing owners agreed to vote their interests in Alta Mesa GP as directed by SRII Opco and appoint SRII Opco as their respective proxy and attorney-in-fact with respect to any voting matters related to their respective interests in Alta Mesa GP. The amended and restated voting agreement will continue in force until SRII Opco elects to terminate the agreement or, with respect to each existing owner individually, such existing owner no longer owns a voting interest in Alta Mesa GP. The closing of the business combination is not expected to constitute a change of control under the indenture governing Alta Mesa’s 7.875% senior unsecured notes due December 15, 2024 (the “ 2024 Notes ”)
Consideration
Pursuant to the AM Contribution Agreement, at the closing of the Transactions (the “ Closing ”), the AM Contributor received 138,402,398 common units representing limited partner interests (the “ Common Units ”) in SRII Opco. The AM Contributor also acquired from AMR a number of newly issued shares of non-economic capital stock of AMR, designated as Class C common stock, par value $0.0001 per share (the “ Class C Common Stock ”), corresponding to the number of Common Units received by the AM Contributor at the Closing.
In addition to the above, for a period of seven years following the Closing, the AM Contributor will be entitled to receive an aggregate of up to $800 million in earn-out consideration to be paid in the form of Common Units (and acquire a corresponding number of shares of Class C Common Stock) as specified below if the 20-day volume-weighted average price (“ 20-Day VWAP ”) of the Class A Common Stock equals or exceeds the following prices (each such payment, an “ Earn-Out Payment ”):
|
20-Day VWAP |
Earn-Out Consideration | |||
|
$14.00 |
10,714,285 Common Units | |||
|
$16.00 |
9,375,000 Common Units | |||
|
$18.00 |
13,888,889 Common Units | |||
|
$20.00 |
12,500,000 Common Units | |||
The AM Contributor will not be entitled to receive a particular Earn-Out Payment on more than one occasion and, if, on a particular date, the 20-Day VWAP entitles the AM Contributor to more than one Earn-Out Payment (each of which has not been previously paid), the AM Contributor will be entitled to receive each such Earn-Out Payment. The AM Contributor will be entitled to the earn-out consideration described above in connection with certain liquidity events of AMR, including a merger or sale of all or substantially all of AMR’s assets, if the consideration paid to holders of Class A Common Stock in connection with such liquidity event is greater than any of the above-specified 20-Day VWAP hurdles.
AMR also contributed $400 million in cash to Alta Mesa at the Closing. AMR’s source for these funds was from the sale of its securities to investors in a public offering and in private placements.
Exchange or Redemption of Common Units
Beginning 180 days after the Closing, the AM Contributor will have the right to exchange its Common Units for shares of AMR Class A Common Stock or cash (at AMR’s election). Upon any redemption of Common Units by the AM Contributor, a corresponding number of shares of Class C Common Stock owned by the AM Contributor will be cancelled.
Issuance of Preferred Stock
Pursuant to the Contribution Agreements, upon the Closing, AMR issued to each of Bayou City, Highbridge and AM Equity Holdings, LP, a Texas limited partnership (“ Management ”), one newly issued share of its Series A preferred stock, par value $0.0001 per share (the “ Series A Preferred Stock ”). In addition, AMR issued to the Riverstone Contributor one share of its Series B preferred stock, par value $0.0001 per share (the “ Series B Preferred Stock ” and, together with the Series A Preferred Stock, “ Preferred Stock ”). The shares of Preferred Stock will entitle Bayou City, Highbridge, Management and the Riverstone Contributor to nominate and elect directors to AMR’s Board of Directors (the “ Board ”) for a period of up to five years following the Closing based on their and their affiliates’ beneficial ownership of AMR Class A Common Stock as follows:
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|
Holder / Beneficial Ownership and Other Requirements |
Designation Right |
|
| Bayou City and its affiliates | ||
|
• at least 10% |
one director who must be independent for purposes of the listing rules of The NASDAQ Capital Markets (“ NASDAQ ”) (unless the director to be nominated is William W. McMullen who need not be independent) | |
| Highbridge and its affiliates | ||
|
• at least 10% |
one director who must be independent for purposes of the listing rules of NASDAQ | |
| Management and its affiliates | ||
|
• at least 10% |
two directors who need not be independent for purposes of the listing rules of NASDAQ | |
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• less than 10% but at least 5% and either Hal Chappelle or Michael Ellis is a member of AMR’s management |
one director who need not be independent for purposes of the listing rules of NASDAQ | |
| Riverstone Contributor and its affiliates | ||
|
• at least 15% |
three directors (one of whom will be the Chairman) | |
|
• less than 15% but at least 10% |
two directors (one of whom will be the Chairman) | |
|
• less than 10% but at least 5% |
one director (who may be the Chairman if such person is Jim Hackett) | |
Management Services Agreement-High Mesa
In connection with the Closing, Alta Mesa entered into a management services agreement (the “ High Mesa Agreement ”) with High Mesa Inc. (“ High Mesa ”) with respect to the non-STACK assets of Alta Mesa that were distributed to High Mesa’s subsidiary in connection with the business combination. Under the High Mesa Agreement, during the 180-day period following the Closing (the “ Initial Term ”), Alta Mesa will provide certain administrative, management and operational services necessary to manage the business of High Mesa and its subsidiaries (the “ Services ”), in each case, subject to and in accordance with an approved budget. Thereafter, the High Mesa Agreement shall automatically renew for additional consecutive 180-day periods (each a “ Renewal Term ”), unless terminated by either party upon at least 90-days written notice to the other party prior to the end of the Initial Term or any Renewal Term. For a period of 60 days following the expiration of the term, Alta Mesa is obligated to assist High Mesa with the transition of the Services from Alta Mesa to a successor service provider. As compensation for the Services, including during any transition to a successor service provider, High Mesa will pay Alta Mesa each month (i) a management fee of $10,000, (ii) an amount equal to our costs and expenses incurred in connection with providing the Services as provided for in the approved budget and (iii) an amount equal to our costs and expenses incurred in connection with any emergency.
Alta Mesa is obligated to provide the Services in accordance with reasonable and prudent practices, as relevant to the Services, of the oil and gas industry, and in material compliance with all applicable laws; provided that Alta Mesa will only be liable under the High Mesa Agreement for its own gross negligence, willful misconduct and/or fraud. Alta Mesa is only obligated to provide the Services under the High Mesa Agreement to the extent that High Mesa has provided the funds necessary to undertake such Services.
Under the High Mesa Agreement, High Mesa will have customary audit rights that will survive the termination or expiration of the High Mesa Agreement. High Mesa and Alta Mesa will each have the right to terminate the High Mesa Agreement prior to the expiration of the term (i) in the event of a sale or change of control of the other party, (ii) following an event related to bankruptcy of either party or (iii) following the other party’s material breach. In addition, High Mesa will have the right to terminate the High Mesa Agreement prior to the expiration of the term upon a sale or change of control of High Mesa.
Management Services Agreement-Kingfisher
In connection with the Closing, Alta Mesa entered into a management services agreement (the “ Kingfisher Agreement ”) with Kingfisher. Under the Kingfisher Agreement, Alta Mesa will provide certain administrative, management and operational services necessary to manage the business of Kingfisher and its subsidiaries (the “ Services ”). As compensation for the Services, Kingfisher will pay Alta Mesa each month (i) a management fee of $10,000 and (ii) an amount equal to our costs and expenses incurred in connection with providing the Services.
Alta Mesa is obligated to provide the Services in accordance with reasonable and prudent practices, as relevant to the Services, of the oil and gas industry, and in material compliance with all applicable laws; provided that Alta Mesa will only be liable under the Kingfisher Agreement for its own gross negligence, willful misconduct and/or fraud. Under the Kingfisher Agreement, Kingfisher will have customary audit rights that will survive the termination or expiration of the Kingfisher Agreement.
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The foregoing descriptions of the High Mesa Agreement and the Kingfisher Agreement are summaries only and are qualified in their entirety by reference to the High Mesa Agreement and the Kingfisher Agreement, copies of which are attached as Exhibits 10.2 and 10.10 to this Current Report on Form 8-K and are incorporated herein by reference.
Item 2.01. Completion of Acquisition or Disposition of Assets.
In connection with the closing of the business combination, we have completed our transition from a diversified asset base composed of a portfolio of conventional assets to an oil and liquids-rich resource play in the eastern portion of the Anadarko Basin in Oklahoma (the “ STACK ”) with an extensive inventory of drilling opportunities. The STACK is an acronym describing both its location—Sooner Trend Anadarko Basin Canadian and Kingfisher County—and the multiple, stacked productive formations present in the area. The STACK is a prolific hydrocarbon system with high oil and liquids-rich natural gas content, multiple horizontal target horizons, extensive production history and high drilling success rates. As of September 30, 2017, we have assembled a highly contiguous position of approximately 130,000 net acres largely in the up-dip, naturally-fractured oil portion of the STACK in eastern Kingfisher County, Oklahoma. As of September 30, 2017, we have over 4,196 identified gross horizontal drilling locations in the STACK, over 2,075 of which we expect to operate. These drilling locations are in our primary target formations comprised of the Osage, Meramec and Oswego.
Just prior to the closing of the business combination, we completed the disposition of all of our oil and gas assets that were not located in the STACK. On December 30, 2017, we sold our assets located in the Weeks Island field to Texas Petroleum Investment Company for initial net proceeds of $22.6 million. The Weeks Island field, located in Iberia Parish, Louisiana, is a historically-prolific oil field with 55 potential pay zones that are structurally and stratigraphically trapped around a piercement salt dome.
On February 8, 2018, we distributed the remainder of our non-STACK assets to High Mesa Holdings, LP, our parent company as a dividend. At the time of the disposition, management estimated the carrying value of Alta Mesa’s remaining non-STACK assets to be $42.8 million with liabilities of $52.5 million, which liabilities include $44.6 million of asset retirement obligations.
Pro forma financial statements showing the effect of the disposition of the non-STACK assets, including the Weeks Island Assets, are included as Exhibit 99.2 to this Form 8-K.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under and Off-Balance Sheet Arrangement of a Registrant.
Senior Secured Revolving Credit Facility
On February 9, 2018, Alta Mesa entered into an amended and restated senior secured revolving credit facility with Wells Fargo Bank, National Association, as the administrative agent (the “ Alta Mesa Credit Facility ”). The Alta Mesa Credit Facility is for an aggregate of $1.0 billion with an initial $350.0 million borrowing base limit. The Alta Mesa Credit Facility does not permit Alta Mesa to borrow funds if at the time of such borrowing it is not in pro forma compliance with its financial covenants. As of February 9, 2018, Alta Mesa has no borrowings under the Alta Mesa Credit Facility and no letters of credit reimbursement obligations.
Principal amounts borrowed are payable on the maturity date. Alta Mesa has a choice of borrowing in Eurodollars or at the base rate, with such borrowings bearing interest, payable quarterly for base rate loans and one month, three month or six month periods for Eurodollar loans. Eurodollar loans bear interest at a rate per annum equal to the rate appearing on the Reuters Reference LIBOR01 page as the London Interbank Offered Rate (“ LIBOR ”), for deposits in dollars at 11:00 a.m. (London, England time) for one, three, or six months plus an applicable margin ranging from 200 to 300 basis points. Base rate loans bear interest at a rate per annum equal to the greatest of (i) the agent bank’s reference rate, (ii) the federal funds effective rate plus 50 basis points and (iii) the
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rate for one month Eurodollar loans plus 1%, plus an applicable margin ranging from 100 to 200 basis points. The next scheduled redetermination of Alta Mesa’s borrowing base is on April 1, 2018. Alta Mesa’s borrowing base may be reduced in connection with the next redetermination of its borrowing base. The amounts outstanding under the Alta Mesa Credit Facility are secured by first priority liens on substantially all of Alta Mesa’s and its material operating subsidiaries’ oil and natural gas properties and associated assets and all of the stock of Alta Mesa’s material operating subsidiaries that are guarantors of the Alta Mesa Credit Facility. Additionally, SRII Opco and Alta Mesa GP will pledge their respective limited partner interests in Alta Mesa as security for Alta Mesa’s obligations. If an event of default occurs under the Alta Mesa Credit Facility, the administrative agent will have the right to proceed against the pledged capital stock and take control of substantially all of the assets of Alta Mesa and its material operating subsidiaries that are guarantors.
The Alta Mesa Credit Facility contains restrictive covenants that may limit Alta Mesa’s ability to, among other things, incur additional indebtedness, sell assets, guaranty or make loans to others, make investments, enter into mergers, make certain payments and distributions, enter into or be party to hedge agreements, amend its organizational documents, incur liens and engage in certain other transactions without the prior consent of the lenders. The Alta Mesa Credit Facility permits Alta Mesa to make distributions to any parent entity (i) to pay for reimbursement of third party costs and expenses that are general and administrative expenses incurred in the ordinary course of business by such parent entity or (ii) in order to permit such parent entity to (x) make permitted tax distributions and (y) pay the obligations under the Tax Receivable Agreement (as defined below).
The Alta Mesa Credit Facility also requires Alta Mesa to maintain the following two financial ratios:
| • | a current ratio, tested quarterly, commencing with the fiscal quarter ending June 30, 2018, of Alta Mesa’s consolidated current assets to its consolidated current liabilities of not less than 1.0 to 1.0 as of the end of each fiscal quarter; and |
| • | a leverage ratio, tested quarterly, commencing with the fiscal quarter ending June 30, 2018, of Alta Mesa’s consolidated debt (other than obligations under hedge agreements) as of the end of such fiscal quarter to its consolidated EBITDAX annualized by multiplying EBITDAX for the period of (A) the fiscal quarter ending June 30, 2018 times 4, (B) the two fiscal quarter periods ending September 30, 2018 times 2 and (C) the three fiscal quarter periods ending December 31, 2018 times 4/3rds and (D) for each fiscal quarter on or after March 31, 2019, EBITDAX times 4/4, of not greater than 4.0 to 1.0. |
The foregoing description of the Alta Mesa Credit Facility is a summary only and is qualified in its entirety by reference to the Alta Mesa Credit Facility, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 3.03. Material Modification to Rights of Security Holders.
In connection with the closing of the business combination described in Item 1.01 above, on February 9, 2018, Alta Mesa GP and SRII Opco entered into a Seventh Amended and Restated Agreement of Limited Partnership of Alta Mesa (the “ Amended Partnership Agreement ”). The Amended Partnership Agreement reflects, among other things, that SRII Opco is now the sole limited partner of Alta Mesa.
In addition, on February 9, 2018, the owners of Alta Mesa GP entered into a Sixth Amended and Restated Limited Liability Company Agreement of Alta Mesa GP (the “ Amended LLC Agreement ”), which was amended to, reflect that SRII Opco, now the holder of all of the Class A Units (as defined therein) is entitled to 100% of the economic rights with respect to Alta Mesa GP, and that SRII Opco is now the holder of 90% of the Class B Units (as defined therein) which are entitled to 100% of the voting rights with respect to Alta Mesa GP.
As described in Item 1.01 above, on February 9, 2018, all of the owners of Alta Mesa GP entered into an amended and restated voting agreement (the “ Voting Agreement ”) regarding the voting of their interests in Alta Mesa GP.
The foregoing descriptions of the Amended Partnership Agreement, the Amended LLC Agreement and the Voting Agreement are summaries only and are qualified in their entirety by reference to the Amended Partnership Agreement, the Amended LLC Agreement and the Voting Agreement, copies of which are attached as Exhibits 3.1, 3.2 and 10.3 to this Current Report on Form 8-K and are incorporated herein by reference.
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Item 5.01. Changes in Control of Registrant
See the information under Items 1.01, 3.03 and 5.02.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In connection with the business combination, Michael A. McCabe, Homer “Gene” Cole, Mickey Ellis, Don Dimitrievich, William W. McMullen and Mark Stoner resigned from the board of Alta Mesa GP. In connection with the business combination, James T. Hackett was appointed to the board of Alta Mesa GP. Our executive management team remains the same, except that Mr. Hackett is now Executive Chairman of the Board.
Set forth below are the names, ages and positions of each of our directors:
|
Name |
Age |
Position |
||
| James T. Hackett | 63 | Executive Chairman of the Board | ||
| Harlan H. Chappelle | 61 | Chief Executive Officer and Director | ||
| Michael E. Ellis | 61 | Chief Operating Officer and Director | ||
Set forth below is the biographical data for our new and director.
James T. Hackett became our executive chairman of the board of directors immediately following the Closing. He has previously served as Chief Executive Officer and director of AMR since March 2017. Mr. Hackett is a partner at Riverstone. Prior to joining Riverstone in 2013, Mr. Hackett served as the Chairman of the Board from 2006 to 2013 and the Chief Executive Officer from 2003 to 2012 of Anadarko Petroleum Corporation. Before joining Anadarko, Mr. Hackett served as President and Chief Operating Officer of Devon Energy Corporation, following its merger with Ocean Energy, where he had served as Chairman, President, and Chief Executive Officer. Mr. Hackett has held senior positions at Seagull, Duke Energy, and Pan Energy. He also held positions in engineering, finance and marketing in the midstream, oil field services, and power sectors of the energy industry. Mr. Hackett serves on the Board of Directors of Enterprise Products Holdings, LLC, Fluor Corporation (NYSE: FLR), National Oilwell Varco, Inc. (NYSE: NOV), Sierra Oil and Gas and Talen Energy Corporation and Crimson Resources. Mr. Hackett is a former Chairman of the Board of the Federal Reserve Bank of Dallas. Mr. Hackett received a Bachelor of Science degree from the University of Illinois in 1975 and an MBA and MTS from Harvard Business School in 1979 and 2016, respectively. Mr. Hackett was selected to serve on the board of directors due to his significant leadership experience and his extensive experience in the energy industry.
The Board approved an annual base salary for Mr. Hackett of $450,000, effective on the Closing Date, and a target annual bonus amount under an annual performance bonus program for 2018 of 95% of his annual base salary.
In connection with the closing of the business combination, Ronald J. Smith was appointed as Vice President and Chief Accounting Officer.
Ronald J. Smith . Mr. Smith has been appointed to service as Alta Mesa’s Vice President and Chief Accounting Officer effective upon the Closing. Mr. Smith has over 35 years of accounting experience, primarily in the energy industry. Mr. Smith served as the Chief Accounting Officer of Alta Mesa from 2015 to the Closing. Mr. Smith has served in numerous senior level management positions including positions with Calpine Corporation and Mariner Energy. Mr. Smith began working for Alta Mesa in 2008 as the Controller. Mr. Smith holds a Bachelor of Science in Accounting from Robert Morris University, an MBA in Finance from the University of Houston and is a Certified Public Accountant.
Mr. Smith has entered into an employment agreement with Alta Mesa. The material terms of the employment agreement are described in this Form 8-K.
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There are no arrangements or understandings between any of Messrs. Hackett or Smith and any other persons pursuant to which such individual was appointed as a director or an executive officer of Alta Mesa. There are no family relationships between any of Messrs. Hackett or Smith and any director, executive officer or any person nominated or chosen by Alta Mesa to become a director or executive officer. No information is required to be disclosed with respect to Messrs. Hackett or Smith pursuant to Item 404(a) of Regulation S-K.
Employment agreements
On the Closing Date, Alta Mesa entered into new employment agreements with each of Messrs. Chappelle, Ellis, McCabe, Cole, Murrell and Smith. The employment agreements supersede each executive’s previous employment agreement with Alta Mesa and are for terms of three years (or two years for Mr. Smith).
Mr. Chappelle’s employment agreement entitles him to receive an annual base salary of $830,000 and to participate in an annual performance bonus program with a target bonus award determined by the board of directors of AMR (the “ Board ”). For 2018, Mr. Chappelle’s target annual bonus amount under this program will be 125% of his annual base salary. Mr. Chappelle is also entitled to receive an annual physical and reimbursement of up to $5,000 per year for tax planning services. If Alta Mesa terminates Mr. Chappelle’s employment without cause or he resigns for good reason, within the meaning of and under his employment agreement, Mr. Chappelle will be entitled to receive (i) a prorated annual bonus for the year of termination, determined based on satisfaction of performance criteria prorated for the partial performance period, (ii) full accelerated vesting of all AMR equity awards that are subject to time-based vesting, accelerated vesting of any AMR equity awards that are subject to performance-based vesting at the target level of performance and full accelerated vesting of any nonqualified deferred compensation account balance or benefit, (iii) a lump-sum payment equal to the sum of $40,000 for outplacement services, two years of his annual base salary and two times the greater of his target annual bonus and the annual bonus paid to him for the prior year and (iv) payment for up to 18 months of his premiums for continued coverage in Alta Mesa’s group health plans and, thereafter, continued participation in Alta Mesa’s group health plans at his cost for up to an additional 18 months. Mr. Chappelle is also entitled to receive the amounts under clauses (i), (iii) and (iv) of the preceding sentence if his employment terminates due to his death or disability, under and within the meaning of his employment agreement. If Mr. Chappelle’s qualifying employment termination occurs during the twenty-one months following a change in control (within the meaning of the employment agreement) or, only in the case of termination without cause or resignation for good reason, during the three months prior to a change in control and is demonstrated to be in connection with the change in control, then in addition to the foregoing payments and benefits, Mr. Chappelle will be entitled to an additional lump-sum payment equal to the sum of one year of his annual base salary and one times the greater of his target annual bonus and the annual bonus paid to him for the prior year. Mr. Chappelle’s right to receive termination payments and benefits, other than a prorated annual bonus for the year of termination, is conditioned upon his executing a general release of claims in our favor. Mr. Chappelle has also agreed to refrain from competing with Alta Mesa or soliciting its customers or employees during and for a period of 12 months following his employment with Alta Mesa.
The employment agreements for Messrs. Ellis, McCabe, Cole, Murrell and Smith entitle them to receive annual base salaries of $520,000, $450,000, $450,000, $360,000, and $270,000, respectively, and to participate in an annual performance bonus program with a target bonus award determined by the Board. For 2018, Mr. Ellis’s, Mr. McCabe’s and Mr. Cole’s target annual bonus amounts under this program will be 95% of their respective annual base salaries, and Mr. Murrell’s and Mr. Smith’s target annual bonus amounts under this program will be 65% of their respective annual base salaries. Each of Messrs. Ellis, McCabe, Cole, Murrell and Smith is also entitled to receive an annual physical and reimbursement of up to $5,000 per year for tax planning services. If Alta Mesa terminates Mr. Ellis’s, Mr. McCabe’s, Mr. Cole’s, Mr. Murrell’s or Mr. Smith’s employment without cause or he resigns for good reason, within the meaning of and under his employment agreement, he will be entitled to receive (i) a prorated annual bonus for the year of termination, determined based on satisfaction of performance criteria prorated for the partial performance period, (ii) full accelerated vesting of all AMR equity awards that are subject to time-based vesting, accelerated vesting of any AMR equity awards that are subject to performance-based vesting at the target level of performance and full accelerated vesting of any nonqualified deferred compensation account balance or benefit, (iii) a lump-sum payment equal to the sum of $24,000 (or $20,000 for Mr. Smith) for outplacement services, 18 months (or 12 months for Mr. Smith) of his annual base salary and 1.5 times (or one times for Mr. Smith) the greater of his target annual bonus and the annual bonus paid to him for the prior year and (iv)
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payment for up to 18 months of his premiums for continued coverage in Alta Mesa’s group health plans and, thereafter, for Messrs. Ellis, McCabe, Cole and Murrell, continued participation in Alta Mesa’s group health plans at his cost for up to an additional 6 months. Messrs. Ellis, McCabe, Cole, Murrell and Smith would each also be entitled to receive the amounts under clauses (i), (iii) and (iv) of the preceding sentence if his employment terminates due to death or disability, under and within the meaning of his employment agreement. If Mr. Ellis’s, Mr. McCabe’s, Mr. Cole’s, Mr. Murrell’s or Mr. Smith’s qualifying termination of employment occurs during the fifteen months following a change in control (within the meaning of his employment agreement) or, only in the case of termination without cause or resignation for good reason, during the three months prior to a change in control and is demonstrated to be in connection with the change in control, then in addition to the foregoing payments and benefits, he will be entitled to an additional lump-sum payment equal to the sum of six months of his annual base salary and 0.5 times the greater of his target annual bonus and the annual bonus paid to him for the prior year. Mr. Ellis’s, Mr. McCabe’s, Mr. Cole’s, Mr. Murrell’s and Mr. Smith’s rights to receive termination payments and benefits, other than a prorated annual bonus for the year of termination, are conditioned upon executing a general release of claims in our favor. Each of Messrs. Ellis, McCabe, Cole, Murrell and Smith has also agreed to refrain from competing with Alta Mesa or soliciting its customers or employees during and for a period of 12 months following his employment with Alta Mesa.
The employment agreements for Messrs. Chappelle, Ellis, McCabe, Cole, Murrell and Smith further entitle them, if a termination of employment occurs during the three years (or two years for Mr. Smith) following the Closing Date, to payment for any excise taxes imposed under Section 4999 of the Internal Revenue Code as a result of a change in control (within the meaning of their respective employment agreements) other than the business combination plus an additional amount that puts the executive in the same after-tax position he would have been absent the imposition of excise taxes under Section 4999 of the Internal Revenue Code.
The foregoing descriptions of the employment agreements are summaries only and are qualified in their entirety by reference to the employment agreements, copies of which are attached as Exhibits 10.4 through 10.9 to this Current Report on Form 8-K and are incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
On February 9, 2018, Alta Mesa issued a press release announcing the closing of the business combination, a copy of which is furnished as Exhibit 99.1 hereto.
The information referenced under Item 7.01 (including Exhibit 99.1) of this Current Report on Form 8-K is being “furnished” and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement, report or other document filed by Alta Mesa pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
The unaudited pro forma condensed consolidated combined financial information of Alta Mesa as of and for the nine months ended September 30, 2017 and for the years ended December 31, 2016, 2015 and 2014, included in Exhibit 99.2 is incorporated herein by reference.
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(d) Exhibits
9
Legend Information
Forward-Looking Statements
This communication includes certain statements that may constitute “forward-looking statements” for purposes of the federal securities laws. Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements may include, for example, the benefits of the business combination; the future financial performance of AMR following the business combination; changes in Alta Mesa’s strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management. These forward-looking statements are based on information available as of the date of this Current Report on Form 8-K, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing Alta Mesa’s views as of any subsequent date, and Alta Mesa does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not place undue reliance on these forward-looking statements. As a result of a number of known and unknown risks and uncertainties, Alta Mesa’s actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include: (i) the ability of the combined company to realize the anticipated benefits of the business combination, which may be affected by, among other things, competition and the ability of the combined company to grow and manage growth profitably following the business combination; (ii) costs related to the business combination; (iii) changes in applicable laws or regulations; and (iv) the possibility that AMR or Alta Mesa may be adversely affected by other economic, business, and/or competitive factors.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ALTA MESA HOLDINGS, LP | ||||||
| February 14, 2018 | By | /s/ Michael A. McCabe | ||||
| . | Michael A. McCabe, Vice President and Chief Financial Officer of Alta Mesa Holdings GP, LLC, general partner of Alta Mesa Holdings, LP | |||||
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Exhibit 3.1
SEVENTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ALTA MESA HOLDINGS, LP
(A Texas Limited Partnership)
THE UNITS REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. WITHOUT REGISTRATION, THESE UNITS MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT ON DELIVERY TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNER OF THE PARTNERSHIP THAT REGISTRATION IS NOT REQUIRED FOR THE TRANSFER, OR THE SUBMISSION TO THE GENERAL PARTNER OF THE PARTNERSHIP OF OTHER EVIDENCE SATISFACTORY TO THE GENERAL PARTNER TO THE EFFECT THAT ANY TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATIONS PROMULGATED THEREUNDER. ADDITIONALLY, ANY SALE, PLEDGE OR OTHER TRANSFER OF THESE UNITS IS SUBJECT TO CERTAIN RESTRICTIONS THAT ARE SET FORTH IN THE SEVENTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF THE PARTNERSHIP.
SEVENTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ALTA MESA HOLDINGS, LP
(A Texas Limited Partnership)
TABLE OF CONTENTS
| Page | ||||||
|
ARTICLE 1 |
GENERAL |
1 | ||||
|
1.1. |
Formation | 1 | ||||
|
1.2. |
Name and Certificate | 2 | ||||
|
1.3. |
Office and Agent | 2 | ||||
|
1.4. |
Term | 2 | ||||
|
1.5. |
Purposes | 2 | ||||
|
1.6. |
Limits | 2 | ||||
|
ARTICLE 2 |
DEFINITIONS |
2 | ||||
|
2.1. |
Definitions | 2 | ||||
|
2.2. |
Other Definitions | 5 | ||||
|
ARTICLE 3 |
CONTRIBUTIONS AND UNITS |
6 | ||||
|
3.1. |
Identification | 6 | ||||
|
3.2. |
Units | 6 | ||||
|
3.3. |
Additional Capital Contributions | 6 | ||||
|
3.4. |
Limitation on Liability | 6 | ||||
|
3.5. |
Representations, Warranties and Covenants | 6 | ||||
|
ARTICLE 4 |
DISTRIBUTIONS AND ALLOCATIONS |
7 | ||||
|
4.1. |
Distributions of Net Cash Flow | 7 | ||||
|
ARTICLE 5 |
STATUS OF LIMITED PARTNERS |
7 | ||||
|
5.1. |
General | 7 | ||||
|
5.2. |
Limitation on Liability | 7 | ||||
|
5.3. |
Bankruptcy; Death | 7 | ||||
|
ARTICLE 6 |
MANAGEMENT |
8 | ||||
|
6.1. |
Rights | 8 | ||||
|
6.2. |
Duties | 8 | ||||
|
6.3. |
Compensation and Reimbursement | 8 | ||||
|
6.4. |
Appointment and Replacement | 8 | ||||
|
6.5. |
Approval and Meetings | 9 | ||||
|
6.6. |
Execution of Documents | 9 | ||||
|
6.7. |
Indemnification | 9 | ||||
|
6.8. |
Investment Opportunities | 9 | ||||
|
6.9. |
GP Units | 10 | ||||
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|
ARTICLE 7 |
BOOKS AND ACCOUNTS |
10 | ||||
|
7.1. |
Books and Records | 10 | ||||
|
7.2. |
Reports | 11 | ||||
|
7.3. |
Taxation as a Disregarded Entity | 11 | ||||
|
7.4. |
Depositories | 11 | ||||
|
ARTICLE 8 |
ADMISSION OF NEW PARTNERS; TRANSFER OR PLEDGE OF UNITS |
11 | ||||
|
8.1. |
Admission of New Partners | 11 | ||||
|
8.2. |
Transfers and Pledges | 11 | ||||
|
8.3. |
Substitute Partner | 11 | ||||
|
8.4. |
Assignee’s Rights | 12 | ||||
|
ARTICLE 9 |
WINDING-UP |
12 | ||||
|
9.1. |
Causes | 12 | ||||
|
9.2. |
Reconstitution | 12 | ||||
|
9.3. |
Interim Manager | 13 | ||||
|
ARTICLE 10 |
LIQUIDATION AND TERMINATION |
13 | ||||
|
10.1. |
General | 13 | ||||
|
10.2. |
Liquidation | 14 | ||||
|
10.3. |
Creation of Reserves | 14 | ||||
|
10.4. |
Final Accounting | 14 | ||||
|
ARTICLE 11 |
MISCELLANEOUS |
14 | ||||
|
11.1. |
Notices | 14 | ||||
|
11.2. |
Interpretation | 15 | ||||
|
11.3. |
Terms | 15 | ||||
|
11.4. |
Amendment | 15 | ||||
|
11.5. |
Severability | 15 | ||||
|
11.6. |
No Third-Party Beneficiary | 15 | ||||
|
11.7. |
Sole and Absolute Discretion | 15 | ||||
|
11.8. |
Binding Effect | 15 | ||||
|
11.9. |
Complete Agreement | 15 | ||||
|
11.10. |
Title to Partnership Property | 15 | ||||
|
11.11. |
Reliance on Authority of Persons Signing Agreement | 15 | ||||
|
11.12. |
Other Business | 16 | ||||
|
11.13. |
Partition Rights | 16 | ||||
|
11.14. |
Agreement in Counterparts | 16 | ||||
|
Attachments: |
Exhibit A | |||||
ii
SEVENTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ALTA MESA HOLDINGS, LP
(A Texas Limited Partnership)
THIS SEVENTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this “ Agreement ”) is made as of the 9 th day of February, 2018, by and among Alta Mesa Holdings GP, LLC, a Texas limited liability company (the “ General Partner ”), and those Persons (hereinafter defined) who execute this Agreement as limited partners (collectively, the “ Limited Partners ”), and they together hereby form a limited partnership (the “ Partnership ”) pursuant to TBOC (hereinafter defined).
RECITALS
WHEREAS, the Partnership was formed as a limited partnership under the Texas Business Organizations Code (as amended from time to time, the “ TBOC ”) pursuant to the filing of a Certificate of Formation of Alta Mesa Holdings, LP (the “ Certificate ”) filed with the Secretary of State of Texas on September 26, 2005;
WHEREAS, pursuant to (i) that certain Contribution Agreement by and among the Partnership, the General Partner, High Mesa Holdings, LP, a Delaware limited partnership (“ HMH LP ”), High Mesa Holdings GP, LLC, a Delaware limited liability company, Alta Mesa Resources, and the other parties thereto, dated as of August 16, 2017 and (ii) that certain Contribution Agreement by and between Riverstone VI Alta Mesa L.P., a Delaware limited partnership (“ Riverstone ”), and Alta Mesa Resources, dated as of August 16, 2017 (collectively, the “ Contribution Agreements ”), Riverstone and HMH LP contributed one hundred percent (100%) of their Class A Units and Class B Units (each as defined under the Sixth Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of August 16, 2017 (the “ Prior Agreement ”)) in the Partnership and one hundred percent (100%) of their Units in the General Partner to SRII Opco, LP, a Delaware limited partnership (“ SRII ”), in exchange for Common Units (as such term is defined in the Amended and Restated Agreement of Limited Partnership of SRII) in SRII and Class C Common Stock in Alta Mesa Resources; and
WHEREAS, the Partnership and the Partners now wish to amend and restate the Prior Agreement, in its entirety in order to reflect (i) the changes in ownership pursuant to the Contribution Agreements, and, in connection therewith, the admission of SRII as a Limited Partner, (ii) a single class of limited partner Units and (iii) the rights and obligations of the Partners that are enumerated and agreed upon in this Agreement, in each case, effective as of the date of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto, each intending to be legally bound, agree as follows:
ARTICLE 1
GENERAL
1.1. Formation . The Partnership was formed pursuant to TBOC on September 26, 2005. Except as otherwise provided in this Agreement, the rights and liabilities of the Partners are governed by TBOC.
1.2. Name and Certificate . The name of the Partnership is “Alta Mesa Holdings, LP.” The General Partner caused to be prepared and filed the Certificate to satisfy the requirements of TBOC on September 26, 2005, and shall promptly cause to be prepared and filed any assumed name certificates required by Applicable Laws.
1.3. Office and Agent . The registered agent, registered office, and principal place of business of the Partnership are set forth on Exhibit A . The registered agent, registered office, or principal place of business may be changed by the General Partner after the General Partner delivers a written notice about such change to the Partners.
1.4. Term . The Partnership was formed as a limited partnership on the date that the Certificate was filed with the Secretary of State of the State of Texas and shall continue until terminated pursuant to this Agreement.
1.5. Purposes . The purpose for which the Partnership is organized is to transact any or all lawful business for which limited partnerships may be organized under TBOC. The Partnership shall have any and all powers that are necessary or desirable to carry out the purposes and business of the Partnership, to the extent the same may be legally exercised by limited partnerships under TBOC. The Partnership shall carry out the foregoing activities pursuant to the arrangements set forth in the Certificate and this Agreement.
1.6. Limits . The relationship between and among the Partners is limited to the carrying on of the business of the Partnership in accordance with this Agreement. That relationship shall be construed and deemed to be a limited partnership for the sole and limited purpose of carrying on that business. This Agreement does not create a general partnership between the parties or authorize any party to act as general agent for any other party.
ARTICLE 2
DEFINITIONS
2.1. Definitions . In this Agreement, the following terms, unless the context otherwise requires, have the meanings indicated:
“ Accountant ” means the certified public accountant or firm of certified public accountants, if any, selected by the General Partner to perform accounting functions on behalf of the Partnership.
“ Accredited Investor ” has the meaning set forth in Regulation D promulgated under the Securities Act.
“ Affiliate ” means, with respect to a specified Person, each other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. As used in this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities or by contract or other agreement).
“ Agreement ” means this Seventh Amended and Restated Agreement of Limited Partnership, as amended, from time to time. Words, such as “herein,” “hereinafter,” “hereof,” “hereto,” and “hereunder” refer to this Agreement as a whole, unless the context otherwise requires.
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“ Alta Mesa Resources ” means Alta Mesa Resources, Inc. (f/k/a Silver Run Acquisition Corporation II), a Delaware corporation.
“ Anti-Corruption Laws ” means laws, regulations, or orders relating to anti-bribery or anti-corruption (governmental or commercial), including, without limitation, the U.S. Foreign Corrupt Practices Act of 1977, as amended; the federal prohibitions on bribes and gratuities (18 U.S.C. § 201), theft or bribery concerning programs receiving federal funds (18 U.S.C. § 1347), and honest services fraud (18 U.S.C. § 1346); the UK Bribery Act 2010; national and international laws enacted to implement the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions; and laws that prohibit the corrupt payment, offer, promise, or authorization of the payment or transfer of anything of value (including gifts or entertainment), directly or indirectly, to a Public Official, commercial entity, or any other Person to obtain or retain an improper business advantage or to induce or reward a Public Official to take (or for taking) an official act, including but not limited to state, local, or municipal laws addressing anti-corruption or anti-bribery.
“ Applicable Laws ” means any applicable law, statute, ordinance, rule, regulation, decision, order, or determination of any governmental authority.
“ Approval of the Partners ” or “ Approved by the Partners” means the affirmative approval, determined under Section 6.5 , of Partners then entitled to vote who hold in the aggregate more than fifty percent (50%) of the LP Units.
“ Assignee ” means a transferee of all or any portion of a Partner’s or any other transferor’s Units.
“ Bankruptcy ” means, for any Partner, that Partner’s taking or acquiescing in the taking of an action seeking relief under, or advantage of, any applicable debtor relief, liquidation, receivership, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar law affecting the rights or remedies of creditors generally, as in effect from time to time.
“ Business Day ” means a day other than a Saturday, Sunday, or other day that is a nationally recognized holiday.
“ Business Opportunities Exempt Party ” has the meaning set forth in Section 6.8 .
“ Capital Contribution ” means, with respect to any Partner, the amount of money or the value of property contributed to the Partnership with respect to the interest in the Partnership held by that Person.
“ Certificate ” has the meaning set forth in the recitals.
“ Code ” means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law).
“ Contribution Agreements ” has the meaning set forth in the recitals.
“ Equity Securities ” means (i) any Unit, (ii) any security convertible, with or without consideration, into any Unit (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Unit or (iv) any such warrant or right.
“ Fiscal Year ” means the Partnership’s fiscal year, which shall be the calendar year.
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“ General Partner ” means any Person who (i) is referred to as such in the first paragraph of this Agreement, or has become a General Partner pursuant to the terms of this Agreement, and (ii) has not ceased to be a General Partner pursuant to the terms of this Agreement.
“ Governmental Authority ” means (a) any U.S. or non-U.S. national, federal, state, county, municipal, or local government or any entity exercising executive, legislative, judicial, regulatory, military, taxing or administrative functions of or pertaining to government, (b) any public international organization, (c) any agency, division, bureau, department or other political subdivision of any government, entity or organization described in the foregoing clauses (a) or (b) of this definition, or (d) any company, business, enterprise or other entity owned, in whole or in part, or controlled by any government, entity, organization or other Person described in the foregoing clauses (a), (b) or (c) of this definition.
“ GP Units ” has the meaning set forth in Section 3.2 .
“ HMH LP ” has the meaning set forth in the recitals.
“ Indemnitee ” means (a) the General Partner, the Limited Partners and their respective partners, members, officers, directors, managers, employees, agents, owners, and stockholders, (b) each Person not identified in clause (a) of this definition who is a director or officer of any subsidiary of the Partnership and (c) any other Person the General Partner designates as an “Indemnitee” for purposes of this Agreement.
“ Limited Partner ” means any Person who (i) is referred to as such in the first paragraph of this Agreement, or has become a Limited Partner pursuant to the terms of this Agreement, and (ii) has not ceased to be a Limited Partner pursuant to the terms of this Agreement.
“ LP Units ” has the meaning set forth in Section 3.2 .
“ Net Cash Flow ” means all cash flow, receipts and revenues generated by the Partnership minus amounts necessary for (i) Operating Expenses, (ii) a reserve fund for future Operating Expenses, (iii) debt service of the Partnership, or (iv) any other expenses of the Partnership.
“ OFAC ” has the meaning set forth in Section 3.5(e) .
“ OFAC Regulations ” has the meaning set forth in Section 3.5(f) .
“ Operating Expenses ” means the costs, expenses, or charges incurred by the Partnership, including, without limitation, management fees or salaries, professional fees, wages, all other expenses incurred in the day-to-day operation of any business similar to the business of the Partnership and any fees or expenses paid in accordance with Section 6.3 .
“ Partners ” means all General Partners and all Limited Partners, where no distinction is required by the context in which the term is used herein.
“ Partnership ” has the meaning set forth in the preamble.
“ Person ” means any corporation, limited liability company, partnership, joint venture, co-tenancy, trust, or any other legal entity or natural person, whether or not a party to this Agreement.
“ Pledge ” or any derivation thereof, means, as the context may require, a pledge, encumbrance, lien, mortgage, hypothecation, or similar disposition (other than a Transfer) with respect to the applicable property in connection with the granting of a lien or security interest to secure an obligation of the pledgor.
4
“ Prior Agreement ” has the meaning set forth in the recitals.
“ Property ” means all the assets of the Partnership.
“ Pro Rata ” means the ratio determined by dividing the number of LP Units of Partners to whom that particular provision of this Agreement is stated to apply, by the aggregate number of LP Units of all Partners to whom that provision is stated to apply.
“ Public Official ” means (a) any official, officer, employee or representative of, or any Person acting in an official capacity for or on behalf of, any Governmental Authority, whether elected or not and regardless of rank or title, (b) any political party or party official or candidate for political office or (c) any official, officer, employee or representative of any company, business, corporation, enterprise or other entity owned, in whole or in part, or controlled by any government, entity, organization or other Person described in the foregoing clauses (a) or (b) or that was formed by, or for the benefit of, a Public Official.
“ Riverstone ” has the meaning set forth in the recitals.
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder as in effect from time to time.
“ Substitute Partner ” has the meaning set forth in Section 8.3 .
“ SRII ” has the meaning set forth in the recitals.
“ TBOC ” has the meaning set forth in the recitals.
“ Transfer ,” or derivations thereof, of a Unit means, as a noun, the transfer, sale, assignment, exchange or other disposition (excluding a Pledge) of a Unit, or any part thereof, directly or indirectly, and as a verb, voluntarily to transfer, sell, assign, exchange or otherwise dispose of(other than pursuant to a Pledge). In the case of a Partner or an Affiliate thereof, “Transfer” shall also include any assignment, sale, transfer, conveyance, pledge, grant of an option or other disposition or act of alienation of the Equity Securities of such Partner of Affiliate thereof, as the case may be, or of any interest therein, whether direct or indirect through any number of intermediaries or whether voluntary or involuntary or by operation of law. For the avoidance of doubt, for purposes of this Agreement, the term “Transfer” shall include any foreclosure or similar action taken by a lender or other party exercising its rights with respect to a Pledge of any Unit in accordance with the terms of this Agreement.
“ Units ” means the GP Units and LP Units, collectively, representing ownership interest of a Partner in the Partnership, and includes any and all rights, benefits and privileges to which such Partner is entitled in his capacity as a Partner of the Partnership as provided in this Agreement, the TBOC, the Certificate or otherwise, together with all obligations, duties and liabilities imposed on such Partner in his capacity as a Partner of the Partnership as provided in this Agreement, the TBOC, the Certificate or otherwise and any “ Unit ” shall refer to any one of the foregoing.
2.2. Other Definitions . All terms used in this Agreement that are not defined in this Article 2 have the meanings contained elsewhere in this Agreement.
5
ARTICLE 3
CONTRIBUTIONS AND UNITS
3.1. Identification . The name, address and Units of each Partner as of the date of this Agreement are set forth on Exhibit A . The Capital Contributions of the Partners shall be set forth on the books and records of the Partnership. Subject to the terms and conditions of this Agreement, the General Partner is hereby authorized to modify or amend Exhibit A to reflect any changes in the information set forth thereon (including to reflect Transfers of Units, the admission of Substitute Partners and the issuance of additional Units) after the date of this Agreement.
3.2. Units . The Units in the Partnership shall be divided into non-economic general partner interests owned by the General Partner (the “ GP Units ”) and economic units held by the Partners referred to as “ LP Units ” with the relative rights and obligations specified in this Agreement. For the avoidance of doubt, the LP Units held by the General Partner shall be held by the General Partner in its capacity as a Limited Partner.
3.3. Additional Capital Contributions . At any time the General Partner determines that additional funds are required to operate the Partnership, the General Partner may request that the Partners additional Capital Contributions and, in such case, shall issue in exchange therefor additional LP Units; provided , however , no Limited Partner shall be obligated or permitted to make any additional Capital Contributions. The terms and conditions of any additional Capital Contribution shall be determined by the General Partner.
3.4. Limitation on Liability . Except as otherwise provided in this Agreement, no Limited Partner shall be liable for the debts, liabilities, contracts, or any other obligations of the Partnership. Except as otherwise provided herein, a Limited Partner shall be liable to make only any additional Capital Contributions required in this Agreement and shall not be required to lend any funds to the Partnership.
3.5. Representations, Warranties and Covenants . Each Partner hereby represents, warrants and covenants to the Partnership and each other Partner that:
(a) such Partner has full power and authority to enter into this Agreement and to perform its obligations hereunder;
(b) the execution, delivery and performance of this Agreement do not conflict with any other agreement or arrangement to which such Partner is a party or by which it is or its assets are bound;
(c) such Partner is and will be acquiring its interest in the Partnership for investment purposes only for its own account and not with a view to the distribution, reoffer, resale, or other disposition not in compliance with the Securities Act and applicable state securities laws;
(d) in connection with this Agreement, neither such Partner, nor any of its Affiliates, officers, directors, employees, or any Person acting on behalf of such Partner: (i) has violated or will violate any applicable Anti-Corruption Laws; or (ii) offered, paid, promised to pay, authorized the payment of, received, or solicited - or will offer, pay, promise to pay, authorize the payment of, receive or solicit - anything of value under circumstances such that all or a portion of such thing of value would be offered, given, or promised, directly or indirectly, to any Person to obtain any improper advantage or to induce or reward a Public Official to take or for taking an official act;
(e) neither such Partner, nor any of its Affiliates, direct or indirect beneficial owners, officers, directors or employees, (i) appears on the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control of the U.S. Department of the Treasury (“ OFAC ”), nor are they otherwise a party with which the Partnership is prohibited from dealing under the laws of the United States, (ii) is a Person identified as a terrorist organization or otherwise the subject or target of restrictions or prohibitions pursuant to applicable non-U.S. laws and regulations, or (iii) unless otherwise disclosed in writing to the Partners prior to the date hereof, is a Public Official, or any immediate family member or close associate of a Public Official; and
6
(f) the monies used to fund the investment in the Units by such Partner are not derived from, invested for the benefit of, or related in any way to, (i) the government of any country designated by the U.S. government as a country supporting international terrorism, (ii) property that is blocked under any laws, orders or regulations administered by OFAC (“ OFAC Regulations ”), or that would be blocked under OFAC Regulations if it were in the custody of a U.S. national, (iii) Persons to whom U.S. nationals cannot lawfully export services, or with whom U.S. nationals cannot lawfully engage in transactions, under OFAC Regulations, or (iv) the governments of any country that has been designated as a “non-cooperative country or territory” by the Financial Action Task Force on Money Laundering or a country or financial institution designated as a “primary money laundering concern” by the U.S. Secretary of the Treasury.
ARTICLE 4
DISTRIBUTIONS
4.1. Distributions of Net Cash Flow . When the General Partner so directs, the Partnership shall make distributions of Net Cash Flow to the Limited Partners Pro Rata.
ARTICLE 5
STATUS OF LIMITED PARTNERS
5.1. General . Each Limited Partner has all of the rights, and is afforded the status, of a limited partner under TBOC. No Limited Partner shall participate in the management or control of the business of the Partnership, transact any business for the Partnership, or have any power to act for or bind the Partnership.
5.2. Limitation on Liability . No Limited Partner has any personal liability whatsoever, whether to the Partnership, the General Partner or any creditor of the Partnership, for the debts, expenses, liabilities, or obligations of the Partnership (but each Partner does have personal liability for its obligations under Article 3 ), unless that Limited Partner otherwise agrees in a separate writing with a third party creditor of the Partnership.
5.3. Bankruptcy; Death . None of the Bankruptcy, death, disability, or declaration of incompetence of a Limited Partner shall cause a dissolution of the Partnership. However, the rights of that Limited Partner to share in the profits and losses of the Partnership and to receive distributions of the funds of the Partnership shall, on the happening of one of these events, devolve on that estate, legal representative, or successors in interest, as the case may be, of that Limited Partner subject to the terms and conditions of this Agreement. The estate, representative, or successors in interest of that Limited Partner are liable for all of the unsatisfied obligations, if any, of that Limited Partner. However, the estate, representative, or successors in interest may become a limited partner in the Partnership only with the consent of the General Partner and in accordance with Section 8.3 .
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ARTICLE 6
MANAGEMENT
6.1. Rights .
(a) General . The General Partner shall have the exclusive right, power, and authority to take any action on behalf of the Partnership, other than actions specifically restricted herein.
(b) Necessary Approvals . Any action taken by the General Partner pursuant to this Agreement shall be subject to the necessary approval of the board of managers of the General Partner as and to the extent required by this Agreement and the Sixth Amended and Restated Limited Liability Company Agreement of the General Partner dated February 9, 2018, as may be amended from time to time. All matters material to the affairs and business of the Partnership shall be determined by the board of managers of the General Partner.
(c) Fiduciary Duties .
(i) Subject to, and as limited by the provisions of this Agreement, the General Partner shall owe to the Partnership and the Limited Partners duties of loyalty and due care of the type owed by a general partner to a limited partnership under the Act. The Partners agree that the provisions of this Agreement control over such non-contractual duties and liabilities of the General Partner (including fiduciary duties of any kind, whether formal, informal, or based on any pre-existing relationship) to the extent that they permit certain activities or restrict, modify, define or eliminate such duties or liabilities otherwise existing at law or in equity or by operation of the preceding sentence. For the avoidance of doubt, the parties agree that the standards set forth in this Agreement related to the existence of and performance of any duties, and the identification of activities or categories of activities that do not violate any duties or are permitted by this Agreement, are not manifestly unreasonable.
(ii) To the fullest extent permitted by applicable law, no Limited Partner, in its capacity as a Limited Partner, shall have any duty, fiduciary or otherwise to the Partnership or any other Limited Partner in connection with the business and affairs of the Partnership or any consent or approval given or withheld pursuant to this Agreement. The Limited Partners, as such, shall have no vote on any matters except if and to the extent provided pursuant to this Agreement or voting is required by the applicable provisions of the Act and such voting rights cannot be extinguished by agreement of the Partners.
6.2. Duties . The General Partner shall manage and control the Partnership and its business and affairs in accordance with the standards of the industry, and shall use reasonable, good faith efforts to carry out the business of the Partnership. The General Partner shall devote itself to the business of the Partnership to the extent required to carry out the business of the Partnership, but shall not be precluded from being involved in other businesses or activities. The General Partner shall perform its duties under this Agreement with ordinary prudence and in a manner characteristic of a businessman in similar circumstances.
6.3. Compensation and Reimbursement . The General Partner shall not be reimbursed for its overhead allocable to the business of the Partnership; provided, however , the General Partner shall be reimbursed by the Partnership for any and all reasonable out-of-pocket expenses, fees, and costs incurred in connection with the organization, business, and affairs of the Partnership.
6.4. Appointment and Replacement . Each General Partner shall serve in such capacity unless and until replaced pursuant to this Agreement. In the event of the death, liquidation, dissolution, Bankruptcy, withdrawal, or disability of any Person herein or hereafter named as General Partner, the Limited Partners shall appoint a successor General Partner who must be Approved by the Partners, excluding in such computation the Unit(s) of the then General Partner.
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6.5. Approval and Meetings .
(a) Actions and decisions requiring Approval of the Partners may be authorized or made either by vote of the required Partners taken at a meeting of the required Partners or by written consent of same without a meeting. For the purpose of determining the Partners entitled to vote on, or to vote at, any meeting of the Partners or on a request for written consent, the record date for any such determination shall be the day before a General Partner delivers notice of the meeting or its request for written consent.
(b) The General Partner may call a meeting to obtain Approval of the Partners for an action or decision under this Agreement by delivering to the other Partners notice of the time and purpose of the meeting at least seven (7) days before the day of the meeting. Each meeting of Partners shall be conducted by the General Partner. Meetings may be held by telephone conference and participation by a Partner in a meeting by telephone conference shall constitute presence of that Partner.
(c) The General Partner may propose that actions or decisions requiring Approval of the Partners be approved by written consent of the required Partners in lieu of a meeting by delivering to the required Partners notice of the proposal of the General Partner. The written consent of a Partner to that proposal may be evidenced by its signature on a counterpart of the proposal or by a separate writing (including a facsimile, telegram, etc.) that identifies the proposal with reasonable specificity and states that it consents to that proposal. For purposes of obtaining a written consent, the General Partner may require the response of the requisite Partners within a specified time (the “ Response Date ”) provided the Response Date is not less than five (5) days from the date of the notice.
6.6. Execution of Documents . All Partners shall, on the request of the General Partner, promptly execute all documents and instruments necessary or helpful in carrying out actions of the Partnership that have been properly authorized.
6.7. Indemnification . Each Indemnitee shall be indemnified and held harmless by the Partnership, including advancement of expenses, but only to the extent that the assets of the Partnership are sufficient therefor, from and against all claims, liabilities, and expenses arising out of any management of the affairs of the Partnership, but excluding those caused by the gross negligence or willful misconduct of such Indemnitee, subject to all limitations and requirements imposed by TBOC. These indemnification rights are in addition to any rights that any Indemnitee may have against third parties. THE AGREEMENT SET FORTH IN THIS SECTION IS AN INDEMNITY BY THE PARTNERSHIP INDEMNIFYING EACH INDEMNITEE AGAINST ITS OWN NEGLIGENCE. THE GENERAL PARTNER AND THE LIMITED PARTNERS WOULD NOT HAVE ENTERED THIS AGREEMENT IF THIS PROVISION WAS NOT INCLUDED IN THE AGREEMENT.
6.8. Investment Opportunities . To the fullest extent permitted by applicable law, the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to the Limited Partners, the General Partner or any of their or such Affiliates’ respective officers, directors, agents, shareholders, members, partners, Affiliates, subsidiaries in their capacities as such (other than the Partnership and its subsidiaries) (each, a “ Business Opportunities Exempt Party ”). The Partnership renounces any interest or expectancy of the Partnership in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to any Business Opportunity Exempt Party. No Business Opportunity Exempt Party who acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for the Partnership shall have any duty to communicate or offer such opportunity to the Partnership. No amendment or repeal of this Section 6.8 shall apply to or have any effect on the liability or alleged liability of any Business Opportunities Exempt Party for or with respect to any opportunities of which any such Business Opportunities Exempt Party becomes aware prior to such amendment or repeal. Any Person purchasing or otherwise acquiring any interest in any shares of stock of Alta Mesa Resources or any Units shall be deemed to have notice of and consented to the provisions of this Section 6.8 . Neither the alteration, amendment or repeal of this Section 6.8 ,
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nor the adoption of any provision of the Second Amended and Restated Certificate of Incorporation of Alta Mesa Resources inconsistent with this Section 6.8 , shall eliminate or reduce the effect of this Section 6.8 in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Section 6.8 , would accrue or arise, prior to such alteration, amendment, repeal or adoption. Notwithstanding the foregoing, a Business Opportunity Exempt Party who is a manager or officer of the General Partner and who is offered a business opportunity of the General Partner reasonably determined by the party receiving the opportunity to be expressly in his or her capacity as a manager or officer of the General Partner shall be obligated to communicate and offer such business opportunity to the General Partner and the General Partner and the Partnership do not renounce any such opportunity. Nothing this Section 6.8 shall limit any fiduciary obligations of the managers of the General Partner.
6.9. GP Units . The General Partner’s interest in the Partnership as general partner shall be represented by GP Units. GP Units shall constitute a non-economic interest in the Partnership and shall not receive distributions pursuant to Section 4.1 . Except as set forth in Section 8.2(a) , the General Partner may not Transfer GP Units, either directly or indirectly, by assignment, merger, consolidation or otherwise. For the avoidance of doubt, the General Partner may hold LP Units its capacity as a Limited Partner of the Partnership.
ARTICLE 7
BOOKS AND ACCOUNTS
7.1. Books and Records .
(a) The books and records of the Partnership shall, at the cost and expense of the Partnership, be kept or caused to be kept at the principal place of business of the Partnership, and shall be available for inspection by any Partner. The books and records shall be kept on the basis of a calendar year, shall reflect all transactions of the Partnership, shall be appropriate and adequate for conducting the business of the Partnership and shall otherwise be in accordance with generally accepted accounting principles and procedures applied in a consistent manner. The Partnership shall initially use the method of accounting chosen by the Accountant with the approval of the General Partner. The General Partner shall maintain the records required to be kept pursuant to § 153.551 of TBOC.
(b) At a minimum, the Partnership shall keep at its principal place of business the following records:
(i) A current list that states: (A) the name and mailing address of each Partner and (B) the Units owned by each Partner;
(ii) Copies of the federal, state, and local information or income tax returns for each of the Partnership’s six (6) most recent tax years (or such shorter period that the Partnership has been in existence);
(iii) A copy of the Certificate and this Agreement, all amendments, or restatements thereof, and executed copies of any powers of attorney;
(iv) Correct and complete books and records of account of the Partnership; and
(v) Any other books, records, or documents required by this Agreement, TBOC, or other Applicable Law.
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7.2. Reports . At the expense of the Partnership, the General Partner shall maintain records and accounts of all operations and expenditures of the Partnership and submit annual reports regarding same to each Partner.
7.3. Taxation as a Disregarded Entity . Solely for federal income tax purposes, and other applicable tax purposes, the Partnership shall be disregarded as an entity separate from SRII. Unless otherwise determined by the General Partner, if the Partnership has more than one partner for federal income tax purposes and can no longer be classified as a disregarded entity, the Partnership’s new classification shall be a partnership for U.S. federal income tax purposes.
7.4. Depositories . One or more accounts may be maintained for the Partnership at any commercial financial institution or depository chosen by the General Partner. The funds of the Partnership shall not be commingled with the funds of any other Person unless otherwise Approved by the Partners. Checks may be drawn on the account or accounts of the Partnership only for the purposes of the Partnership and shall be signed by a duly authorized officer of the General Partner or such other Persons as designated by the General Partner.
ARTICLE 8
ADMISSION OF NEW PARTNERS; TRANSFER OR PLEDGE OF UNITS
8.1. Admission of New Partners . New Partners may be admitted to the Partnership upon the terms and conditions determined by the General Partner.
8.2. Transfers and Pledges . Notwithstanding any other provision of this Agreement, no Partner may Transfer or Pledge in any manner whatsoever all or any of its Units unless (i) such Partner has fully complied with the provisions of this Section 8.2 for the Transfer or Pledge, (ii) after giving effect thereto, such Transfer or Pledge would not otherwise terminate the Partnership for the purposes of Code Section 708 or cause the Partnership to be classified as other than a partnership for United States federal income tax purposes, and (iii) such Transfer or Pledge would not result in a violation of applicable law, including U.S. federal or state securities laws, or any term or condition of this Agreement; provided, however , notwithstanding the foregoing, both the General Partner and SRII shall have the unrestricted ability to pledge all or any portion of their respective LP Units in order for the Partnership to fully comply with the terms and conditions set forth in that certain Eighth Amended and Restated Credit Agreement dated as of February 9, 2018, among the Partnership, the lenders party thereto from time to time, and Wells Fargo Bank, National Association, as administrative agent for such lenders, and the security instruments executed in connection therewith.
(a) Transfers or Pledges by the General Partner . The General Partner may Transfer or Pledge its Units only upon the Approval of the Partners.
(b) Transfers or Pledges by a Limited Partner . Each Limited Partner may Transfer or Pledge all or any of its Units only with the consent of the General Partner.
8.3. Substitute Partner . Subject to Section 8.2(b) , no Assignee shall have the right to become a substitute Partner (a “ Substitute Partner ”) upon Transfer of any Units to it unless all the following conditions are satisfied:
(a) The Partner and the Assignee shall have executed and acknowledged such other instruments and taken such other action as the General Partner shall deem reasonably necessary or desirable to effect such substitution, including, without limitation, appropriate amendment to this Agreement;
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(b) The conditions set forth in Section 8.2 shall have been satisfied, and, if requested by the General Partner, the Partner or the Assignee shall have obtained an opinion of counsel reasonably satisfactory to the General Partner (which counsel may be a staff attorney employed by the Partner) as to the legal matters set forth in Section 8.2 ; and
(c) The Partner or the Assignee shall have paid to the Partnership such amount of money as is sufficient to cover all expenses reasonably incurred by or on behalf of the Partnership in connection with such substitution.
8.4. Assignee’s Rights .
(a) Unless an Assignee becomes a Substitute Partner in accordance with the provisions of Section 8.3 , it shall not be entitled to any of the rights (including voting rights) granted to a Partner hereunder or under TBOC, other than the right to receive the share of distributions and any other items attributable to a Partner’s Units to which its assignor would otherwise be entitled.
(b) Any Partner that Transfers all of its Units shall cease to be a Partner.
ARTICLE 9
WINDING-UP
9.1. Causes . The Partnership shall be required to wind-up on the first to occur of any of the following events, and each Partner hereby expressly waives any right that it might otherwise have to cause the winding-up of the Partnership:
(a) The Bankruptcy, death, disability, declaration of incompetence, or any other occurrence that would legally disqualify the last remaining General Partner from acting under this Agreement;
(b) The retirement, resignation, or withdrawal from the Partnership by the last remaining General Partner;
(c) The execution by all the Partners of an instrument requiring the winding-up of the Partnership; or
(d) An event requiring such action pursuant to TBOC.
Nothing contained in this Section 9.1 is intended to grant to a Partner the right to cause the winding-up of the Partnership at will (by retirement, resignation, withdrawal, or otherwise), or to exonerate a Partner from liability to the Partnership and the remaining Partners if that Partner causes the winding-up of the Partnership at will. A winding-up at will of the Partnership is in contravention of this Agreement for purposes of TBOC or any successor statute.
9.2. Reconstitution . If the Partnership is required to wind-up as a result from the occurrence of an event described in Section 9.1(a) or Section 9.1(b) , then the Partnership may be reconstituted and its business continued pursuant to TBOC. If a reconstitution is completed, an appropriate amendment to this Agreement and, if necessary, to the Certificate shall be executed and, in the case of the Certificate, if necessary, appropriately filed of record. The rights of the remaining Partners after reconstitution, and the rights and liabilities of any Partner wrongfully causing the winding-up of the Partnership in contravention of this Agreement, shall be as provided for under the laws of the State of Texas.
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9.3. Interim Manager . If the Partnership is required to wind-up as a result of an event described in Section 9.1(a) or Section 9.1(b) , the Limited Partners, by the Approval of the Partners, may appoint an interim manager of the Partnership, who shall have and may exercise all the rights, powers, and duties of the General Partner under this Agreement, until (i) the new General Partner is elected pursuant to Section 6.4 , if the Partnership is reconstituted pursuant to Section 9.2 , or (ii) a liquidator is appointed pursuant to Section 10.1 , if the Partnership is not reconstituted.
ARTICLE 10
LIQUIDATION AND TERMINATION
10.1. General .
(a) Selection of Liquidator . If the Partnership is required to wind-up as a result of an event described in Section 9.1(a) or Section 9.1(b) and is not reconstituted, then the Limited Partners, by the Approval of the Partners, shall, subject to Section 10.1(b) , select a party to begin to wind-up the affairs of the Partnership and to liquidate and sell its assets, all pursuant to TBOC. If the Partnership is required to wind-up pursuant to Section 9.1(c) or Section 9.1(d) , the General Partner shall begin to wind-up the affairs of the Partnership and to liquidate and sell its assets, all pursuant to TBOC. The party or parties actually conducting the liquidation in accordance with the foregoing sentences are herein referred to as the “ Liquidator .”
(b) Duties; Qualifications . The Liquidator (if other than a General Partner) shall have sufficient business expertise and competence to conduct the winding-up and termination of the Partnership and, in the course thereof, to cause the Partnership to perform any existing or future Partnership contractual obligations. The Liquidator shall determine the time, manner, and terms of any sale or sales of Property in liquidation, having due regard to the activity and condition of the relevant market and general financial and economic conditions.
(c) Compensation . The Liquidator is entitled to receive reasonable compensation for its services, as agreed upon by the Liquidator and the General Partner, if any, and as Approved by the Partners.
(d) Amendment to Certificate . At the request of a Liquidator who is not a General Partner, the Certificate shall be amended as permitted by TBOC.
(e) Resignation, Removal, Succession . The Liquidator may resign at any time by giving fifteen (15) days’ prior written notice and may be removed at any time, with or without cause, by written notice of removal Approved by the Partners. On the death, dissolution, removal, or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all the rights, powers, and duties of the original Liquidator) will, within thirty (30) days thereafter, be Approved by the Partners, evidenced by written appointment and acceptance. The right to appoint a successor substitute Liquidator in the manner provided herein shall be recurring and continuing for so long as the functions and services of the Liquidator are authorized to continue under this Agreement, and every reference herein to the Liquidator refers also to any successor or substituted Liquidator appointed in the manner herein provided. The Liquidator has and may exercise, without further authorization or consent of any of the parties hereto or their legal representatives or successors in interest, all of the powers conferred by this Agreement upon the General Partner to the extent necessary or desirable in the good faith judgment of the Liquidator to perform its duties and functions. The Liquidator is not liable as a General Partner hereunder to the Limited Partners or to third-party creditors.
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10.2. Liquidation . In the course of the winding-up and termination of the business and affairs of the Partnership, its assets (other than cash) shall be sold, its liabilities and obligations to creditors and all expenses incurred in its liquidation shall be paid. All Property shall be sold on liquidation of the Partnership, and no Property shall be distributed in kind to the Partners, unless it is distributed in proportion to the amounts that each Partner is due under this Section 10.2 . Thereafter, the net proceeds from those sales (after deducting all selling costs and expenses in connection therewith), together with (at the expiration of the one-year period referred to in Section 10.3 ) the balance in the reserve account referred to in Section 10.3 , shall be distributed to the Limited Partners in accordance with Section 4.1 by the end of the taxable year during which the liquidation of the Partnership occurs (or, if later, by ninety (90) days after the date of the liquidation).
The Liquidator shall use all reasonable efforts to effect complete liquidation of the Partnership within one year after the date on which the Partnership is dissolved. Each holder of a Unit shall look solely to the assets of the Partnership for all distributions and shall have no recourse therefor (on dissolution or otherwise) against the Partnership or the other Partners. On the completion of the liquidation of the Partnership and the distribution of all funds of the Partnership, the Partnership shall terminate, and the Liquidator shall have the authority to execute and record all documents required to effectuate the dissolution and termination of the Partnership. Distributions pursuant to this Section 10.2 may be made to a trust established for the benefit of the Partners for the purposes of liquidating the Property, collecting amounts owed to the Partnership, and paying contingent or unforeseen liabilities or obligations of the Partnership.
10.3. Creation of Reserves . After making payment or provision for payment of all fixed and determinable debts and liabilities of the Partnership and all expenses of liquidation, the Liquidator may set up, for a period not to exceed one (1) year after the date of the event requiring winding-up, the cash reserves that the Liquidator deems reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership.
10.4. Final Accounting . Within a reasonable time following the completion of the liquidation, the Liquidator shall supply to the Partners a statement that shall set forth (i) the assets and the liabilities of the Partnership as of the date of complete liquidation, (ii) the distributions to each Partner pursuant to Section 10.2 , and (iii) the amount retained as reserves by the Liquidator pursuant to Section 10.3 .
ARTICLE 11
MISCELLANEOUS
11.1. Notices .
(a) Any notice, notification, demand, or request provided or permitted to be given under this Agreement must be in writing and shall have been deemed to have been properly given, unless explicitly stated otherwise, if sent by (i) FedEx or other comparable overnight courier, (ii) registered or certified mail, postage prepaid, return receipt requested, or (iii) facsimile during normal business hours to the place of business of the recipient.
(b) For purposes of all notices, the addresses and facsimile numbers of the Partners are set forth on Exhibit A .
(c) All notices, notifications, demands, or requests so given shall be deemed given and received (i) if sent via FedEx or overnight courier, the next Business Day after being delivered; (ii) if sent via registered or certified mail, three (3) days after being deposited in the mail; or (iii) if sent via facsimile, the next Business Day after being faxed.
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11.2. Interpretation . The construction and validity of this Agreement and the rights and obligations of the respective parties hereunder shall be governed by, and interpreted and enforced in accordance with, the laws of the State of Texas.
11.3. Terms . Common nouns and pronouns shall be deemed to refer to the masculine, feminine, neuter, singular, and plural, as the identity of the Person or Persons may in the context require. Any reference to the Code or other statutes or laws shall include all amendments, modifications, or replacements of the specific sections and provisions concerned.
11.4. Amendment . Except as set forth in Section 3.1 , this Agreement may not be amended, altered, or modified except by an instrument in writing Approved by the Partners (or the duly-authorized agent of any party), excluding each Partner who has Transferred its entire interest in the Partnership to an Assignee.
11.5. Severability . If any provision of this Agreement or any application of such provision to any Person or circumstances shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other Persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.
11.6. No Third-Party Beneficiary . This Agreement is made solely and specifically between and for the benefit of the parties hereto and their respective successors and assigns, subject to the expressed provisions hereof relating to successors and assigns. No other Person has any rights, interest, or claims hereunder or is or will be entitled to any benefits under or on account of this Agreement as a third-party beneficiary or otherwise unless specifically provided in this Agreement.
11.7. Sole and Absolute Discretion . Except as otherwise provided in this Agreement, all actions that any General Partner may take and all determinations that any General Partner may make pursuant to this Agreement may be taken and made at the sole and absolute discretion of that General Partner.
11.8. Binding Effect . Subject to the provisions of this Agreement relating to transferability, this Agreement shall be binding upon and inure to the benefit of the parties signatory hereto, and their respective distributees, successors, and assigns.
11.9. Complete Agreement . This Agreement constitutes the complete and exclusive statement of the agreement between the Partners and replaces and supersedes all prior agreements, except for any agreement executed contemporaneously herewith by and among the Partners or any of them contemporaneously herewith. This Agreement supersedes all written and oral statements, and no representation, statement, condition, or warranty not contained in this Agreement shall be binding on the Partners or have any force or effect whatsoever. No Partner has rendered any services to, or on behalf of, any other Partner or the Partnership, and no Partner shall have any rights with respect to any services that might be alleged to have been rendered.
11.10. Title to Partnership Property . To the extent that Property is held in the name of a Partner, the Property shall be deemed held by that Partner as agent and nominee for and on behalf of the Partnership. Any other property acquired by or standing in the name of any Partner shall be conclusively presumed not to be Property, unless an instrument in writing, signed by such Partner, shall specify to the contrary.
11.11. Reliance on Authority of Persons Signing Agreement . If a Partner is a Person other than a natural person, the Partnership (i) is not required to determine the authority of the Person signing this Agreement to make any commitment or undertaking on behalf of such entity or to determine any fact or circumstance bearing upon the existence of the authority of such Person; (ii) is not required to see to
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the application or distribution of proceeds paid or credited to Persons signing this Agreement on behalf of such entity; (iii) is entitled to rely on the authority of the Person signing this Agreement with respect to the giving of consent on behalf of such entity in connection with any matter for which consent is permitted or required under this Agreement; and (iv) is entitled to rely on the authority of any general partner, joint venturer, manager, co- or successor trustee, or president or vice president (as the case may be), of any such entity the same as if such Person were the Person originally signing this Agreement on behalf of such entity.
11.12. Other Business . Each Partner may be engaged in a business or businesses other than that of the Partnership and may acquire properties for its own account or jointly with others or in any other capacity without being accountable or liable to the Partnership for the breach of any fiduciary obligation. These activities may be organized for purposes of engaging in activities similar to the activities of the Partnership, even if in competition with the Partnership, and the Partnership shall not have any rights in and to such independent ventures or the income or profits derived therefrom.
11.13. Partition Rights . No Partner shall have the right to the partition of any Property or to take any action or initiate or prosecute any judicial proceeding for the partition, or the partition and sale, of any Property.
11.14. Agreement in Counterparts . This Agreement may be executed in several counterparts, and all so executed shall constitute one Agreement, binding on all of the parties hereto, notwithstanding that all the parties are not signatories to the original or the same counterpart.
Remainder of Page Intentionally Left Blank.
Signature Page(s) Follows.
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IN WITNESS WHEREOF, this Agreement is effective as of the day and year first above written.
| GENERAL PARTNER : | ||
|
ALTA MESA HOLDINGS GP, LLC , a Texas limited liability company |
||
| By: |
/s/ Harlan H. Chappelle |
|
| Harlan H. Chappelle, | ||
| President and Chief Executive Officer | ||
Signature Page to the
7 th A&R LPA of Alta Mesa Holdings, LP
| LIMITED PARTNER : | ||
|
SRII OPCO, LP , a Delaware limited partnership |
||
| By: | SRII Opco GP, LLC, | |
| a Delaware limited liability company, | ||
| its General Partner | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: Stephen S. Coats | ||
| Title: Secretary | ||
Signature Page to the
7 th A&R LPA of Alta Mesa Holdings, LP
| LIMITED PARTNER : | ||
|
ALTA MESA HOLDINGS GP, LLC , a Texas limited liability company |
||
| By: |
/s/ Harlan H. Chappelle |
|
| Harlan H. Chappelle, | ||
| President and Chief Executive Officer | ||
Signature Page to the
7 th A&R LPA of Alta Mesa Holdings, LP
SEVENTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ALTA MESA HOLDINGS, LP
(A Texas Limited Partnership)
EXHIBIT A
| 1. | Name of Partnership: | Alta Mesa Holdings, LP | ||
| 2. | Address, and Telephone and Facsimile Numbers of Principal Office: |
15021 Katy Freeway Suite 400 |
||
| Houston, Texas 77094 | ||||
| Telephone: (281) 530-0991 | ||||
| Facsimile: (281) 530-5278 | ||||
| 3. | Registered Agent and Office: | CT Corporation System | ||
| 1099 Bryan Street | ||||
| Suite 900 | ||||
| Dallas, Texas 75201 | ||||
| 4. | General Partner: | |||
| Name: | Alta Mesa Holdings GP, LLC | |||
|
Mailing Address, and Telephone and Facsimile Numbers: |
15021 Katy Freeway | |||
| Suite 400 | ||||
| Houston, Texas 77094 | ||||
| Telephone: (281) 530-0991 | ||||
| Facsimile: (281) 530-5278 | ||||
| Effective Date Became Partner: | September 26, 2005 | |||
| GP Units | 1 | |||
| LP Units | 1.798 | |||
A-1
A-2
Exhibit 3.2
SIXTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ALTA MESA HOLDINGS GP, LLC
(A Texas Limited Liability Company)
February 9, 2018
THE MEMBERSHIP INTERESTS REFERENCED HEREIN HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. WITHOUT REGISTRATION, THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT ON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR THE TRANSFER, OR THE SUBMISSION TO THE COMPANY OF OTHER EVIDENCE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATIONS PROMULGATED THEREUNDER. ADDITIONALLY, ANY SALE OR OTHER TRANSFER OF MEMBERSHIP INTERESTS IS SUBJECT TO CERTAIN RESTRICTIONS THAT ARE SET FORTH IN THIS AGREEMENT.
i
TABLE OF CONTENTS
|
ARTICLE I. DEFINITIONS |
1 | |||||
|
1.1 |
Definitions | 1 | ||||
|
1.2 |
Other Definitional Provisions | 4 | ||||
|
ARTICLE II. FORMATION |
4 | |||||
|
2.1 |
Name and Formation | 4 | ||||
|
2.2 |
Principal Place of Business | 4 | ||||
|
2.3 |
Registered Office and Agent | 4 | ||||
|
2.4 |
Duration | 4 | ||||
|
2.5 |
Purposes and Powers | 4 | ||||
|
ARTICLE III. MEMBER MATTERS; CAPITALIZATION; TRANSFER RESTRICTIONS |
4 | |||||
|
3.1 |
Members and Rights of Membership Interests | 4 | ||||
|
3.2 |
Liability of the Members | 5 | ||||
|
3.3 |
Annual and Special Meetings | 5 | ||||
|
3.4 |
Actions Without a Meeting | 5 | ||||
|
3.5 |
Limitations on Transfers | 5 | ||||
|
3.6 |
Certificates | 6 | ||||
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ARTICLE IV. DISTRIBUTIONS |
7 | |||||
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4.1 |
Distributions | 7 | ||||
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4.2 |
Limitation Upon Distribution | 7 | ||||
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ARTICLE V. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS |
8 | |||||
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5.1 |
Class A Member Contribution | 8 | ||||
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5.2 |
Subsequent Capital Contributions | 8 | ||||
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ARTICLE VI. MANAGEMENT BY BOARD |
8 | |||||
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6.1 |
General | 8 | ||||
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6.2 |
Composition | 8 | ||||
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6.3 |
Officers | 8 | ||||
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6.4 |
Waiver of Fiduciary Duties | 10 | ||||
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ARTICLE VII. BOOKS, ACCOUNTS AND INFORMATION |
10 | |||||
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7.1 |
Records and Reports | 10 | ||||
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7.2 |
Returns and Other Elections | 10 | ||||
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ARTICLE VIII. DISSOLUTION AND TERMINATION |
10 | |||||
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8.1 |
Dissolution | 10 | ||||
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8.2 |
Distribution of Assets Upon Dissolution | 11 | ||||
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8.3 |
Articles of Dissolution | 11 | ||||
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ARTICLE IX. MISCELLANEOUS PROVISIONS |
11 | |||||
|
9.1 |
Amendments | 11 | ||||
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9.2 |
Confidentiality | 11 | ||||
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9.3 |
Notices | 12 | ||||
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9.4 |
Entire Agreement | 12 | ||||
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9.5 |
Further Assurances | 12 | ||||
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9.6 |
Tax Matters | 12 | ||||
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9.7 |
Governing Law; Severability; Jurisdiction | 13 | ||||
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9.8 |
Binding Effect | 14 | ||||
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9.9 |
Severability | 14 | ||||
|
9.10 |
Time of the Essence | 14 | ||||
|
9.11 |
No Third Party Beneficiaries | 15 | ||||
|
9.12 |
Counterparts | 15 |
Exhibit A Company and Member Information
ii
SIXTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ALTA MESA HOLDINGS GP, LLC
(A Texas Limited Liability Company)
This Sixth Amended and Restated Limited Liability Company Agreement (this “ Agreement ”) of Alta Mesa Holdings GP, LLC, a Texas limited liability company (the “ Company ”), is entered into by and between the members set forth in Exhibit A (the “ Members ”), as of February 9, 2018 (the “ Effective Date ”).
RECITALS
WHEREAS, the Company was formed as a manager-managed limited liability company under the laws of the State of Texas by filing articles of organization (as amended from time to time, the “ Articles of Organization ”) with the Texas Secretary of State on September 26, 2005;
WHEREAS, prior to the Effective Date, the Company has been governed by the Fifth Amended and Restated Limited Liability Company Agreement of the Company dated August 16, 2017 (the “ Predecessor Agreement ”); and
WHEREAS, the Members now desire to amend and restate the Predecessor Agreement pursuant to Section 9.1 thereof on the terms set forth herein to reflect, among other things, certain changes in ownership of the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Predecessor Agreement is hereby amended and restated to read as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions . The following terms used in this Agreement shall have the following meaning:
“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with that Person. For purposes of this definition, “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“ Agreement ” has the meaning ascribed to it in the Preamble.
“ Applicable Laws ” means any applicable law, statute, ordinance, rule, regulation, decision, order or determination of any governmental authority.
“ Articles of Organization ” has the meaning ascribed to it in the Recitals.
“ Bayou City ” shall mean, collectively, BCE-MESA Holdings, LLC, a Delaware limited liability company, and BCE-AMH Holdings, LLC, a Delaware limited liability company, both of which are under the control (as such term is defined in the definition of “Affiliate”) of Bayou City Energy Management LLC, a Delaware limited liability company.
“ Board ” has the meaning ascribed to it in Section 6.1 .
“ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks in New York or Texas are authorized or required by law or executive order to close.
“ Capital Contributions ” means any contribution to the capital of the Company in cash or property by the Members whenever made.
“ Class A Member ” means each Person holding Class A Units, any successor or successors to all or any part of any such Person’s Class A Units, or any other Person admitted as a Class A Member of the Company pursuant to this Agreement, each in the capacity as a Class A Member of the Company, solely with respect to that Class A Member’s Class A Units.
“ Class A Units ” has the meaning ascribed to it in Section 3.1(a) .
“ Class B Member ” means each Person holding Class B Units, any successor or successors to all or any part of any such Person’s Class B Units, or any other Person admitted as a Class B Member of the Company pursuant to this Agreement, each in the capacity as a Class B Member of the Company, solely with respect to that Class B Member’s Class B Units.
“ Class B Units ” has the meaning ascribed to it in Section 3.1(a) .
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Company ” has the meaning ascribed to it in the Preamble.
“ Control Group Holders ” shall mean each of Bayou City, HPS Investment Partners, LLC, a Delaware limited liability company, Michael E. Ellis, an individual, and Harlan H. Chappelle, an individual.
“ Effective Date ” has the meaning ascribed to it in the Preamble.
“ High Mesa Interests ” has the meaning ascribed to it in Section 3.5(b)(i) .
“ HMI ” means High Mesa, Inc., a Delaware corporation.
“ Indenture ” has the meaning ascribed to it in Section 3.5(b)(ii) .
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“ Majority Board Consent ” means, as of any determination date, the affirmative vote of the Managers then constituting more than fifty percent (50%) of the Board based on the number of Managers at a duly called and convened meeting of the Board or the affirmative written consent in lieu of a meeting executed by the Managers then constituting more than fifty percent (50%) of the Board based on the number of Managers.
“ Managers ” has the meaning ascribed to it in Section 6.2 .
“ Members ” has the meaning ascribed to it in the Preamble.
“ Partnership ” means Alta Mesa Holdings, LP, a Texas limited partnership.
“ Permitted Holder ” has the meaning set forth in the Indenture.
“ 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, other entity or government or any agency or political subdivision thereof.
“ Predecessor Agreement ” has the meaning ascribed to it in the Recitals.
“ Representatives ” has the meaning set forth in Section 9.2(a) .
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ SRII Opco ” shall mean SRII Opco, LP, a Delaware limited partnership.
“ Tax Matters Member ” has the meaning ascribed to it in Section 9.6(a) .
“ TBOC ” means the Texas Business Organizations Code, as the same may be amended from time to time.
“ Transfer ” means, with respect to any Units, any assignment, sale, transfer, conveyance, pledge, grant of an option or other disposition or act of alienation of such or of any interest therein, whether voluntary or involuntary or by operation of law.
“ Units ” means the Class A Units and Class B Units, collectively, representing the ownership interest of a Member in the Company, and includes any and all rights, benefits and privileges to which such Member is entitled in his capacity as a Member of the Company as provided in this Agreement, the TBOC or otherwise, together with all obligations, duties and liabilities imposed on such Member in his capacity as a Member of the Company as provided in this Agreement, the TBOC or otherwise and any “ Unit ” shall refer to any one of the foregoing.
“ Voting Agreement ” means that certain Voting Agreement by and among the Company and each Class B Member dated the Effective Date.
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1.2 Other Definitional Provisions . All terms used in this Agreement which are not defined in this Article I have the meanings contained elsewhere in this Agreement. Defined terms used herein in the singular shall include the plural and vice versa.
ARTICLE II.
FORMATION
2.1 Name and Formation . The name of the Company is “Alta Mesa Holdings GP, LLC”. The Company was formed as a Texas limited liability company on September 26, 2005.
2.2 Principal Place of Business . The principal office and place of business of the Company are set forth on Exhibit A . The Company may locate its place of business and principal office at any other place or places as the Board or officers of the Company may from time to time deem necessary or advisable.
2.3 Registered Office and Agent . The registered office and registered agent of the Company shall be the registered office and registered agent named in the Articles of Organization and set forth on Exhibit A . The Company may change the registered office and registered agent as the Board may from time to time deem necessary or advisable.
2.4 Duration . The period of duration of the Company is perpetual from the date its Articles of Organization were filed with the Secretary of State of Texas, unless the Company is earlier dissolved in accordance with either the provisions of this Agreement or the TBOC.
2.5 Purposes and Powers .
(a) The purposes for which the Company is organized is to acquire and own a partnership interest in the Partnership and to serve as the general partner thereof, and to transact any or all lawful business incidental or related thereto for which limited liability companies may be organized under the TBOC.
(b) The Company shall have any and all powers which are necessary or desirable to carry out the purposes and business of the Company, to the extent the same may be legally exercised by limited liability companies under the TBOC.
ARTICLE III.
MEMBER MATTERS; CAPITALIZATION; TRANSFER RESTRICTIONS
3.1 Members and Rights of Membership Interests .
(a) The membership interests in the Company shall be represented by Class A membership interests (the “ Class A Units ”) and Class B membership interests (the “ Class B Units ”), each with the rights, interests and obligations set forth herein. The Class A Member shall be the owner of all of the Class A Units and shall have and may exercise in accordance with this Agreement all of the rights and powers, and shall have all of the obligations, of the Class A Units. Subject to the termination of all rights, powers and obligations afforded to the Class B Members under this Agreement as contemplated in Section 3.5(b) , the Class B Members shall be the owners of all of the Class B Units, and shall have and may exercise in accordance with this Agreement all of the rights and powers, and shall have all of the obligations, of the Class B Units.
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(b) The Class A Units shall have 100% of the economic interests in the Company and each item of income, gain, loss, deduction and credit of the Company shall be allocated and distributed to the Class A Member in the manner and at the times provided for in this Agreement. Subject to Section 3.5(b)(ii) , the Class A Units shall be non-voting Units.
(c) Subject to Section 3.5(b)(ii) , the Class B Units shall have 100% of the voting interests in the Company. The Class B Units shall have no economic interest in the Company and shall not be entitled to receive any allocation or distribution of any item of income, gain, loss, deduction and credit of the Company.
(d) Subject to the terms of the Voting Agreement, any action requiring approval of the Members shall require the approval of Class B Members who, in the aggregate, own more than fifty percent (50%) of the Class B Units.
3.2 Liability of the Members . The Members shall not be liable for the debts, liabilities or obligations of the Company in excess of their respective Capital Contributions.
3.3 Annual and Special Meetings . Annual and special meetings of the Members for the transaction of such business as may properly come before the meeting shall be held at such place, time and date as shall be agreed by the Members from time to time.
3.4 Actions Without a Meeting . Notwithstanding any provision contained in this Article III , all actions of the Members provided for herein may be taken by written consent without a meeting. Any such action which may be taken by the Members without a meeting shall be effective only if the written consent or consents are in writing, set forth the action so taken, and are signed by the number of Members constituting not less than the minimum amount of Members that would be necessary to take such action at a meeting at which the Members entitled to vote on the action were present and voted.
3.5 Limitations on Transfers .
(a) General . No Member shall Transfer any of its Units without the prior written consent of the Board; provided, however, that (i) no Class B Member that is also a Control Group Holder shall Transfer any of its Units, other than to the Company pursuant to Section 3.5(b) and (ii) upon any Transfer of Units by SRII Opco, SRII Opco shall simultaneously assign its rights and obligations under the Voting Agreement to the applicable transferee.
(b) Forfeiture of Class B Units .
(i) Notwithstanding anything to the contrary contained herein, if at any time a Class B Member that is also a Control Group Holder no longer directly or indirectly holds (including through the ownership of equity interests in HMI) and none of its Affiliates (excluding HMI) holds any partnership interests in High Mesa Holdings, LP, a Delaware limited partnership (such partnership interests being referred to herein as “ High Mesa Interests ”), that Class B Member shall automatically and without any further action of any party hereto forfeit all
5
of its Class B Units to the Company for no consideration; provided, that, in the event that there is only one (1) remaining Class B Member that is also a Control Group Holder, that Class B Member shall not be permitted to dispose of its Class B Units except with the prior written consent of the Class A Member.
(ii) Notwithstanding anything to the contrary contained herein, if either (A) the Company has been released from that certain Indenture dated as of December 8, 2016 among Alta Mesa Holdings, LP, Alta Mesa Finance Services Corp., the subsidiary guarantors party thereto and U.S. Bank, National Association as trustee, as amended, restated or modified from time to time (the “ Indenture ”), pursuant to the terms thereof, (B) the “change of control” covenants have been removed from the Indenture or (C) the Class A Member is considered a Permitted Holder under the Indenture, each of the Class B Members shall automatically and without any further action of any party hereto forfeit all of its Class B Units to the Company for no consideration, and all voting power with respect to the Company (including, for the avoidance of doubt, the right to appoint the Managers) shall be held exclusively by the Class A Member and the Voting Agreement shall automatically terminate.
3.6 Certificates .
(a) The Company shall provide each owner of membership interests in the Company a certificate in such form as is approved by the Company and conforms with Applicable Law, certifying the membership interests owned by it. Further, for purposes of providing for transfer of, perfecting a lien or encumbrance in, and other relevant matters related to a membership interest, a membership interest will be deemed to be a “security” subject to the rules set forth in Chapters 8 and 9 of the Texas Uniform Commercial Code and any similar Uniform Commercial Code provision adopted by any other relevant jurisdiction.
(b) In the absence of a more restrictive legend, all certificates evidencing membership interests will be stamped or typed in a conspicuous place with the following legend:
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. WITHOUT REGISTRATION, THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT ON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR THE TRANSFER, OR THE SUBMISSION TO THE COMPANY OF OTHER EVIDENCE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATIONS PROMULGATED THEREUNDER.
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ANY SALE, TRANSFER, ASSIGNMENT, PLEDGE, ENCUMBRANCE OR DISPOSITION OF THE MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE OR ANY INTEREST THEREIN IS SUBJECT TO THE TERMS AND PROVISIONS OF THE COMPANY’S LIMITED LIABILITY COMPANY AGREEMENT (AS MAY BE AMENDED AND/OR RESTATED FROM TIME TO TIME).
(c) The Company may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Company alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the Person claiming the certificate to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Company may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or its legal representative, to advertise the same in such manner as it will require and/or to give the Company a bond in such sum as it may direct as indemnity against any claim that may be made against the Company with respect to the certificate alleged to have been lost, stolen or destroyed.
(d) Upon surrender to the Company or its transfer agent, if any, of a certificate representing membership interests duly endorsed or accompanied by proper evidence of succession, assignation or transfer in accordance with this Agreement and of the payment of all taxes applicable to the transfer of said membership interest, the Company will be obligated to issue a new certificate to the Person entitled thereto, cancel the old certificate and record the transaction upon its books, provided, however, that the Company will not be so obligated unless such transfer was made in compliance with the provisions of this Agreement and any applicable state and federal laws.
(e) The Company will be entitled to recognize the exclusive right of a Person registered on its books as the owner of the indicated membership interests and will not be bound to recognize any equitable or other claim to or interest in such membership interests on the part of any Person other than such registered owner, whether or not it will have express or other notice thereof, except as otherwise provided by law.
ARTICLE IV.
DISTRIBUTIONS
4.1 Distributions . Subject to Section 4.2 and the other provisions of this Agreement, the Company shall make distributions to the Class A Member at such times as determined by the Board.
4.2 Limitation Upon Distribution . No distribution shall be declared and paid unless, if after the distribution is made, the value of assets of the Company would exceed the liabilities of the Company, except liabilities to the Class A Member on account of its Capital Contributions.
7
ARTICLE V.
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS.
5.1 Class A Member Contribution . The Class A Member has contributed cash or property to the Company in the amount set forth as the Capital Contribution of such Member on the books and records of the Company.
5.2 Subsequent Capital Contributions . Notwithstanding anything to the contrary contained herein, no Member shall be permitted or required to make any Capital Contribution to the Company without the consent of the Board.
ARTICLE VI.
MANAGEMENT BY BOARD
6.1 General . The management of the Company is reserved to a board of managers (the “ Board ”). The powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, the Board, which shall make all decisions and take all actions for the Company in its individual capacity and in its capacity as general partner of the Partnership. Notwithstanding any provision contained in this Article IV , all actions of the Managers provided for herein may be taken by written consent without a meeting, or any meeting thereof may be held by means of a conference telephone. Any such action that may be taken by the Managers without a meeting shall be effective only if the written consent or consents are in writing, set forth the action so taken, and are signed by the number of Managers constituting not less than the minimum amount of Managers that would be necessary to take such action at a meeting at which the Managers entitled to vote on the action were present and voted.
6.2 Composition . The Board shall be comprised of a number of managers (each a “ Manager ” and collectively the “ Managers ”) determined by the Class B Members, each of whom shall be appointed by the Class B Members. Any Manager may be removed at any time, with or without cause, by the Class B Members.
6.3 Officers .
(a) The Board may appoint such officers of the Company as it deems necessary. Each officer shall be appointed for such term and shall exercise such powers, perform such duties and have such authority as determined from time to time by the Board. The Board may appoint a Chief Executive Officer, President, one or more Vice Presidents, a Secretary, Treasurer, Chief Financial Officer and any other officers or assistant officers as it deems appropriate. Any two or more offices may be held by the same person.
(b) Except as modified by the Board by written resolution, officers will have such powers and duties generally pertaining to their offices and such powers and duties as conferred by this Agreement.
(i) Chief Executive Officer . The Chief Executive Officer shall preside at all meetings of the Members and exercise and perform such other powers and duties as may from time to time be assigned to the Chief Executive Officer by the Board or by this Agreement.
8
(ii) President . The President of the Company, subject to the control of the Board, shall have the responsibility for the general direction of the affairs of the Company, and general supervision over its other officers, responsibility for the general direction of the operational affairs of the Company, and general overall responsibility for the day-to-day operations of the Company. The President may sign in the name of the Company (1) all contracts or other instruments authorized by the Board and (2) all contracts or instruments in the usual and regular course of business of the Company, except in cases where the signing thereof shall be expressly delegated by the Board or by this Agreement to another officer or agent of the Company or when the Board shall have expressly provided that the President shall not have such authority. In addition, the President shall perform all duties incident to the office of President and such other duties as from time to time may be assigned to him or her by the Board or as prescribed by this Agreement.
(iii) Vice Presidents . At the request of the President, or in his or her absence or disability, the Vice Presidents, in the order of their election, shall perform the duties of the President, and, when so acting, shall have all the powers of, and be subject to all restrictions upon, the President. The Vice Presidents shall perform such duties and exercise such powers as may from time to time be assigned to them by the Board or the President.
(iv) Secretary . The Secretary shall keep the minutes of all meetings of the Members and shall have general charge of such books and records of the Company as the Board may direct, and in general shall perform all duties and exercise all powers incident to the office of Secretary and such other duties and powers as the Board or the President may from time to time assign to or confer on the Secretary.
(v) Treasurer . The Treasurer shall have control of and shall be responsible for all matters pertaining to the accounts and finances of the Company and shall direct the manner of certifying the same, including the manner of keeping all vouchers for payments by the Company and all other documents relating to such payments; all operating and financial statements of the Company and its various committees; the books of account of the Company, their arrangements and classification; the accounting and auditing practices of the Company; all matters relating to taxation; the care and custody of all monies, funds and securities of the Company; and the collection of all accounts and the maintenance of full and accurate accounts of all receipts, disbursements and contributions of the Company. The Treasurer shall have the power to endorse for deposit or collection or otherwise all checks, drafts, notes, bills of exchange or other commercial papers payable to the Company, and to give proper receipts or discharges for all payments to the Company. The Treasurer shall perform such duties and exercise such powers, as are incident to the Office of Treasurer and such other duties and powers as the Board or the President may from time to time assign to or confer on the Treasurer.
9
(vi) Chief Financial Officer . The Chief Financial Officer shall have the duty of oversight over all Company financial matters, including supervision over the duties of the Treasurer and controller of the Company. The Chief Financial Officer shall perform such duties and exercise such powers as are incident to the office of Chief Financial Officer, and such other duties and powers as the Board or the President may from time to time to assign to or confer on the President.
(c) Subject to the other provisions of this Agreement, the compensation of all officers of the Company shall be fixed by the Board.
(d) Each officer of the Company shall hold office until his successor is chosen and qualified or until his death, resignation or removal from office. Any officer appointed by the Board may be removed either with or without cause by the Board at any time, but such removal shall be without prejudice to the contractual rights, if any, of the individual so removed. If for any reason an officer’s position becomes vacant, the vacancy may be filled by the Board.
6.4 Waiver of Fiduciary Duties . This Agreement is not intended to, and does not, create or impose any fiduciary duty on the Managers or Members. The Members and Managers may engage in, and possess interests in, other businesses, activities, ventures, enterprises and investments of any and every type and description, with no duty or obligation (i) to refrain from engaging in such activities, (ii) to offer the right to participate in such activities to the Company or (iii) to account to, or to share the results or profits of such activities with the Company. Any doctrine of “company opportunity” or similar doctrine is hereby expressly disclaimed. The Members hereby waive any and all fiduciary duties that, absent such waiver, may be implied by law, and in doing so, recognize, acknowledge and agree that their duties and obligations to one another and to the Company are only as expressly set forth in this Agreement or the non-waivable provisions of applicable law.
ARTICLE VII.
BOOKS, ACCOUNTS AND INFORMATION
7.1 Records and Reports . The Company shall maintain records and accounts of all operations and expenditures of the Company and all records required to be maintained pursuant to the TBOC.
7.2 Returns and Other Elections . The Board shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business.
ARTICLE VIII.
DISSOLUTION AND TERMINATION
8.1 Dissolution .
(a) The Company shall be dissolved upon the Majority Board Consent.
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(b) Upon dissolution of the Company, the business and affairs of the Company shall be wound up, and the assets of the Company shall be liquidated under this Article VIII .
(c) Dissolution of the Company shall be effective as of the day on which the event occurs giving rise to the dissolution, but the Company shall not terminate until there has been a winding up of the Company’s business and affairs, and the assets of the Company have been distributed as provided in Section 8.2 .
(d) Upon dissolution of the Company, the Members may cause any part or all of the assets of the Company to be sold in such manner as the Members shall determine in an effort to obtain the best prices for such assets; provided, however that the Members may distribute assets of the Company in kind to the extent practicable.
8.2 Distribution of Assets Upon Dissolution . In settling accounts after dissolution, the assets of the Company shall be paid in the following order:
(a) First, to creditors, in the order of priority as provided by applicable law, except those to any Member on account of its Capital Contributions; and
(b) Second, any remainder shall be distributed to the Class A Member.
8.3 Articles of Dissolution . When all liabilities and obligations of the Company have been paid or discharged, or adequate provision has been made therefor, and all of the remaining property and assets of the Company have been distributed to the Class A Member, the Articles of Dissolution shall be executed on behalf of the Company by the appropriate officer of the Company and shall be filed with the Secretary of State of Texas, and the appropriate officer of the Company shall execute, acknowledge and file any and all other instruments necessary or appropriate to reflect the dissolution and termination of the Company.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
9.1 Amendments . This Agreement and the Articles of Organization may be amended, supplemented or restated only upon obtaining the approval of Class B Members who, in the aggregate, own more than fifty percent (50%) of the Class B Units. Upon obtaining the approval of such Class B Members to any amendment to the Articles of Organization, the appropriate officer of the Company shall cause Articles of Amendment to be prepared, executed and filed in accordance with the TBOC.
9.2 Confidentiality . Each Member agrees that, except as required by law or consented to in writing by the Company, it will, and will cause its directors, officers, employees, representatives and/or agents (collectively, “ Representatives ”) to, keep strictly confidential all information concerning the Company or its business, properties or plans; provided, however, that the foregoing shall not apply to (a) any information that is or becomes generally available to the public (other than as a result of a disclosure directly or indirectly by such Member or its Representatives in violation hereof), (b) any disclosure of information to the investors, limited partners or potential investors of any Member as such Member may reasonably deem necessary
11
or appropriate, (c) any information the disclosure of which is required by law, provided that the Member promptly notifies the Company of, and takes reasonable steps to minimize the extent of, any such required disclosure or (d) any disclosure of information to lenders or prospective or permitted assignees of any Member, provided that any such lender or prospective or permitted assignee has agreed in writing to be bound by, or is already bound by, confidentiality obligations reasonably comparable in the aggregate to the provisions contained in this Section 9.2 .
9.3 Notices .
(a) Except as expressly set forth to the contrary in this Agreement, all notices, requests or consents provided for or required to be given hereunder shall be in writing and shall be deemed to be duly given if personally delivered or mailed by certified mail, return receipt requested, or nationally recognized overnight delivery service with proof of receipt maintained, at the address set forth on Exhibit A (or any other address that any such party may designate by written notice to the other parties).
(b) Any such notice shall, if delivered personally, be deemed received upon delivery; shall, if delivered by certified mail, be deemed received upon the earlier of actual receipt thereof or five Business Days after the date of deposit in the United States mail, as the case may be; and shall, if delivered by nationally recognized overnight delivery service, be deemed received upon the first Business Day after the date of deposit with the delivery service.
(c) Whenever any notice is required to be given by applicable law, the Articles of Organization or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
9.4 Entire Agreement . This Agreement, the Exhibit thereto and the Voting Agreement embody the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersede all prior agreements or understandings (whether written or oral), with respect to the subject matter hereof. This Agreement amends and restates the Predecessor Agreement in its entirety.
9.5 Further Assurances . In connection with this Agreement, the Company and each Member shall execute and deliver all such future instruments and take such other and further action as may be reasonably necessary or appropriate to carry out the provisions of this Agreement and the intention of the parties as expressed herein.
9.6 Tax Matters .
(a) The Class A Member and Class B Members hereby agree to treat, for federal income tax purposes, the Company as an entity disregarded as separate from its owner, the Class A Member, and shall not take any position inconsistent with such treatment.
(b) As such the Class A Member shall be the responsible party for all tax matters on behalf of the Company (the “ Tax Matters Member ”), and shall timely file or cause to be filed all tax returns required to be filed by the Company and pay or cause to be paid any taxes due or payable with respect to the Company. The Tax Matters Member is responsible for and
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authorized to take such actions and to execute and file all statements and forms on behalf of the Company which may be permitted or required by the applicable provisions of the Code or Treasury Regulations issued thereunder. The Tax Matters Member shall have full and exclusive power and authority on behalf of the Company to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. The Tax Matters Member shall keep the other Members informed as to the status of any audit of the Company’s tax affairs.
9.7 Governing Law; Severability; Jurisdiction .
(a) Governing Law . This Agreement and any claim, controversy or dispute arising under or related in any way to this Agreement, the transactions leading to this Agreement or contemplated hereby, and/or the interpretation and enforcement of the rights and duties of the parties hereunder or related in any way to the foregoing, shall be governed by and construed in accordance with the internal, substantive laws of the State of Texas applicable to agreements entered into and to be performed solely within such state without giving effect to the principles of conflict of laws thereof.
(b) CONSENT TO JURISDICTION AND SERVICE OF PROCESS . ANY PROCEEDING ARISING UNDER OR RELATED IN ANY WAY TO THIS AGREEMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER OR RELATED IN ANY WAY TO THE FOREGOING MAY ONLY BE INSTITUTED IN THE STATE OR FEDERAL COURTS OF THE STATE OF TEXAS AND EACH PARTY WAIVES ANY OBJECTION WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING, AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH PROCEEDING. SERVICE OF PROCESS WITH RESPECT THERETO MAY BE MADE UPON A PARTY HERETO BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS AS PROVIDED IN SECTION 9.3 .
(c) WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.7(c) .
13
(d) In the event of a direct conflict between the provisions of this Agreement and (i) any provision of the Articles of Organization or (ii) any mandatory, non-waivable provision of the TBOC, such provision of the Articles of Organization or the TBOC shall control. If any provision of the TBOC provides that it may be varied or superseded in the agreement of a limited liability company (or otherwise by agreement of the members of a limited liability company), such provision shall be deemed superseded and waived in its entirety if this Agreement contains a provision addressing the same issue or subject matter.
(e) If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
9.8 Binding Effect . Subject to the restrictions on Transfer set forth in this Agreement, this Agreement shall be binding upon and shall inure to the benefit of the Company and each Member and their respective heirs, permitted successors, permitted assigns, permitted distributees and legal representatives; and by their signatures hereto, the Company and each Member intends to and does hereby become bound. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any Person other than the parties hereto and their respective permitted successors and assigns any legal or equitable right, remedy or claim under, in or in respect of this Agreement or any provision herein contained. The rights under this Agreement may be assigned by a Member to a transferee of all or a portion of such Member’s Units Transferred in accordance with this Agreement (and shall be assigned to the extent this Agreement requires such assignment), but only to the extent of such Units so Transferred; it being understood that the assignment of any rights under this Agreement shall not constitute admission to the Company as a Member unless and until such transferee is duly admitted as a Member in accordance with this Agreement.
9.9 Severability . If any provisions contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not invalidate the entire Agreement. Instead, such provision shall be deemed to be modified to the extent necessary to render it valid and enforceable and if no such modification shall render it valid and enforceable then the Agreement shall be construed as if not containing such provision.
9.10 Time of the Essence . Time is of the essence with respect to this Agreement.
14
9.11 No Third Party Beneficiaries . Nothing herein expressed or implied is intended to confer upon any person, other than the parties hereto or their respective permitted assigns, successors, heirs and legal representatives, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
9.12 Counterparts . This Agreement may be executed in counterparts and all such counterparts shall be construed together to form a single document.
[ Remainder of Page Intentionally Left Blank; Signature Pages Follow ]
15
The undersigned, being all of the Members of the Company, do hereby ratify, confirm and approve the adoption of this Agreement as the limited liability company agreement of the Company, and does hereby assume and agree to be bound by and to perform all of the terms and provisions set forth in this Agreement effective as of the date first written above.
| CLASS A MEMBER : | ||
|
SRII OPCO, LP , a Delaware limited partnership |
||
| By: SRII Opco GP, LLC, its general partner | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: Stephen S. Coats | ||
| Title: Secretary | ||
| CLASS B MEMBERS : | ||
|
SRII OPCO, LP , a Delaware limited partnership |
||
| By: SRII Opco GP, LLC, its general partner | ||
| By: |
/s/ Stephen S. Coats |
|
| Name: Stephen S. Coats | ||
| Title: Secretary | ||
|
BCE-AMH HOLDINGS, LLC , a Delaware limited liability company |
||
| By: Bayou City Energy Management LLC | ||
| Its: Manager | ||
| By: |
/s/ William W. McMullen |
|
| Name: William W. McMullen | ||
| Title: Managing Partner | ||
Signature Page to the Sixth Amended and Restated
Limited Liability Company Agreement of Alta Mesa Holdings GP, LLC
|
BCE-MESA HOLDINGS, LLC , a Delaware limited liability company |
||
| By: Bayou City Energy Management LLC | ||
| Its: Manager | ||
| By: |
/s/ William W. McMullen |
|
| Name: William W. McMullen | ||
| Title: Managing Partner | ||
| MEZZANINE PARTNERS II DELAWARE SUBSIDIARY, LLC | ||
| a Delaware limited liability company | ||
| By: HPS Mezzanine Partners II, LLC | ||
| Its: Investment manager | ||
| By: HPS Investment Partners, LLC | ||
| Its: Sole and managing member | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
| OFFSHORE MEZZANINE PARTNERS MASTER FUND II, L.P. | ||
| a Delaware limited partnership | ||
| By: HPS Mezzanine Partners II, LLC | ||
| Its: Investment manager | ||
| By: HPS Investment Partners, LLC | ||
| Its: sole and managing member | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
Signature Page to the Sixth Amended and Restated
Limited Liability Company Agreement of Alta Mesa Holdings GP, LLC
| INSTITUTIONAL MEZZANINE PARTNERS II SUBSIDIARY, L.P. | ||
| a Delaware limited partnership | ||
| By: HPS Mezzanine Partners II, LLC | ||
| Its: Investment manager | ||
| By: HPS Investment Partners, LLC | ||
| Its: Sole and managing member | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
| AP MEZZANINE PARTNERS II, L.P. | ||
| a Delaware limited partnership | ||
| By: HPS Mezzanine Partners II, LLC | ||
| Its: Investment manager | ||
| By: HPS Investment Partners, LLC | ||
| Its: Sole and managing member | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
| THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY | ||
| a Wisconsin corporation | ||
| By: HPS Investment Partners, LLC, pursuant to proxy | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
Signature Page to the Sixth Amended and Restated
Limited Liability Company Agreement of Alta Mesa Holdings GP, LLC
| THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY FOR ITS GROUP ANNUITY SEPARATE ACCOUNT | ||
| a Wisconsin corporation | ||
| By: HPS Investment Partners, LLC, pursuant to proxy | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
| NORTHWESTERN MUTUAL CAPITAL STRATEGIC EQUITY FUND III, LP | ||
| a Delaware limited partnership | ||
| By: Northwestern Mutual Capital GP III, LLC | ||
| Its: General Partner | ||
| By: Northwestern Mutual Capital, LLC | ||
| Its: Manager | ||
| By: HPS Investment Partners, LLC, pursuant to proxy | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
| KCK-AMIH, LTD. | ||
| By: HPS Investment Partners, LLC, as attorney in fact | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
Signature Page to the Sixth Amended and Restated
Limited Liability Company Agreement of Alta Mesa Holdings GP, LLC
| UNITED INSURANCE COMPANY OF AMERICA | ||
| an Illinois corporation | ||
| By: HPS Investment Partners, LLC, as attorney in fact | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
| JADE REAL ASSETS FUND, L.P. | ||
| a Delaware limited partnership | ||
| By: HPS Investment Partners, LLC | ||
| Its: Investment Manager | ||
| By: |
/s/ Don Dimitrievich |
|
| Name: Don Dimitrievich | ||
| Title: Managing Member | ||
|
/s/ Michael E. Ellis |
||
| MICHAEL E. ELLIS | ||
|
/s/ Harlan H. Chappelle |
||
| HARLAN H. CHAPPELLE | ||
Signature Page to the Sixth Amended and Restated
Limited Liability Company Agreement of Alta Mesa Holdings GP, LLC
EXHIBIT A
SIXTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ALTA MESA HOLDINGS GP, LLC
Company Information :
| Name of Company: | Alta Mesa Holdings GP, LLC | |||
| Address of Company: |
15021 Katy Freeway, Suite 400 Houston, Texas 77094 |
|||
| Registered Agent & Registered Office: |
Harlan H. Chappelle 15021 Katy Freeway, Suite 400 Houston, Texas 77094 |
|||
| Class A Member Information : | ||||
| Name of Class A Member: |
SRII Opco, LP, a Delaware limited partnership |
|||
| Address: |
15021 Katy Freeway, Suite 400 Houston, TX 77094 |
|||
| Class A Membership Interest: | 100% | |||
| Date Became Member: | February 9, 2018 | |||
| Class B Member Information : | ||||
| a. | Name: |
SRII Opco, LP, a Delaware limited partnership |
||
| Address: |
15021 Katy Freeway, Suite 400 Houston, TX 77094 |
|||
| Class B Membership Interest: | 90% | |||
| Date Became Member: | February 9, 2018 | |||
| b. | Name: |
BCE-AMH Holdings, LLC, a Delaware limited liability company |
||
| Address: |
1201 Louisiana Street, Suite 3308 Houston, Texas 77094 Attention: William W. McMullen |
|||
| Class B Membership Interest: | 0.425% | |||
| Date Became Member: | August 16, 2017 | |||
| c. | Name: |
BCE-MESA Holdings, LLC, a Delaware limited liability company |
||
| Address: |
1201 Louisiana Street, Suite 3308 Houston, Texas 77094 Attention: William W. McMullen |
|||
| Class B Membership Interest: | 2.075% | |||
| Date Became Member: | August 16, 2017 | |||
| d. | Name: |
Mezzanine Partners II Delaware Subsidiary, LLC, a Delaware limited liability company |
||
| Address: |
c/o HPS Investment Partners, LLC 40 West 57 th Street, 33 rd Floor New York, New York 10019 Attn: Faith Rosenfeld |
|||
| Class B Membership Interest: | .682% | |||
| Date Became Member: | August 16, 2017 | |||
| e. | Name: |
Offshore Mezzanine Partners Master Fund II, L.P., a Delaware limited partnership |
||
| Address: |
c/o HPS Investment Partners, LLC 40 West 57 th Street, 33 rd Floor New York, New York 10019 Attn: Faith Rosenfeld |
|||
| Class B Membership Interest: | 1.128% | |||
| Date Became Member: | August 16, 2017 | |||
| f. | Name: |
Institutional Mezzanine Partners II Subsidiary, L.P., a Delaware limited partnership |
||
| Address: |
c/o HPS Investment Partners, LLC 40 West 57 th Street, 33 rd Floor New York, New York 10019 Attn: Faith Rosenfeld |
|||
| Class B Membership Interest: | 0.121% | |||
| Date Became Member: | August 16, 2017 | |||
| g. | Name: |
AP Mezzanine Partners II, L.P., a Delaware limited partnership |
||
| Address: |
c/o HPS Investment Partners, LLC 40 West 57 th Street, 33 rd Floor New York, New York 10019 Attn: Faith Rosenfeld |
|||
| Class B Membership Interest: | 0.139% | |||
| Date Became Member: | August 16, 2017 | |||
| h. | Name: |
The Northwestern Mutual Life Insurance Company, a Wisconsin corporation |
||
| Address: |
Attn: Securities Department 720 East Wisconsin Avenue Milwaukee, WI 53202 |
|||
| Class B Membership Interest: | 0.115% | |||
| Date Became Member: | August 16, 2017 | |||
| i. | Name: |
The Northwestern Mutual Life Insurance Company, For Its Group Annuity Separate Account, a Wisconsin corporation |
||
| Address: |
Attn: Securities Department 720 East Wisconsin Avenue Milwaukee, WI 53202 |
|||
| Class B Membership Interest: | 0.014% | |||
| Date Became Member: | August 16, 2017 | |||
| j. | Name: |
Northwestern Mutual Capital Strategic Equity Fund III, LP a Delaware limited partnership |
||
| Address: |
Attn: Securities Department 720 East Wisconsin Avenue Milwaukee, WI 53202 |
|||
| Class B Membership Interest: | 0.009% | |||
| Date Became Member: | August 16, 2017 | |||
| k. | Name: | KCK-AMIH, Ltd. | ||
| Address: |
c/o Jeff Owens DLA Piper LLP (US) 203 LaSalle Street Chicago, IL 60601 USA
Attn: Steven Yentzer DLA Piper LLP (US) 701 Fifth Avenue, Suite 7000 Seattle, WA 98104 USA
Attn: Alan H. Hammerman 2700 Patriot Blvd., Suite 170 Glenview, IL 60026
Attn: Nael Kassar KCK, Ltd. 10 Ulster Terrace London NW1 4PJ, England |
|||
| Class B Membership Interest: | 0.214% | |||
| Date Became Member: | August 16, 2017 | |||
| l. | Name: |
United Insurance Company of America, an Illinois corporation |
||
| Address: |
Attn: Nathan Harnetiaux c/o Kemper Corporation One East Wacker Drive, 9th Floor Chicago, IL 60601 |
|||
| Class B Membership Interest: | 0.014% | |||
| Date Became Member: | August 16, 2017 | |||
| m. | Name: | Jade Real Assets Fund, L.P. | ||
| Address: |
c/o HPS Investment Partners, LLC 40 West 57 th Street, 33 rd Floor New York, New York 10019 Attn: Faith Rosenfeld |
|||
| Class B Membership Interest: | 0.065% | |||
| Date Became Member: | August 16, 2017 | |||
| n. | Name: | Harlan H. Chappelle | ||
| Address: |
15021 Katy Freeway, Suite 400 Houston, Texas 77094 |
|||
| Class B Membership Interest: | 2.5% | |||
| Date Became Member: | August 16, 2017 | |||
| o. | Name: | Michael E. Ellis | ||
| Address: |
15021 Katy Freeway, Suite 400 Houston, Texas 77094 |
|||
| Class B Membership Interest: | 2.5% | |||
| Date Became Member: | August 16, 2017 | |||
Exhibit 10.10
MANAGEMENT SERVICES AGREEMENT
By and Between:
ALTA MESA HOLDINGS, LP,
as the “ Agent ”
and
KINGFISHER MIDSTREAM, LLC,
as the “ Company ”
February 9, 2018
TABLE OF CONTENTS
| Page | ||||||
|
ARTICLE 1 DEFINITIONS |
1 | |||||
|
1.1 |
Certain Defined Terms |
1 | ||||
|
1.2 |
Interpretation |
4 | ||||
|
ARTICLE 2 SERVICES |
5 | |||||
|
2.1 |
Engagement |
5 | ||||
|
2.2 |
Services |
5 | ||||
|
2.3 |
Limitation on Powers and Duties |
7 | ||||
|
2.4 |
Independent Contractor Status |
7 | ||||
|
2.5 |
Performance of Services by Affiliates; Retention of Professionals |
7 | ||||
|
2.6 |
Standard of Care |
8 | ||||
|
2.7 |
Exculpation |
8 | ||||
|
2.8 |
Indemnification; Disclaimer |
8 | ||||
|
2.9 |
Without limiting Section 2.7: |
8 | ||||
|
2.10 |
Responsibilities of the Company |
10 | ||||
|
2.11 |
Changes to Services |
10 | ||||
|
2.12 |
Document Retention |
10 | ||||
|
ARTICLE 3 COMPENSATION AND EXPENSE REIMBURSEMENT |
10 | |||||
|
3.1 |
Management Fee |
10 | ||||
|
3.2 |
Expenses |
10 | ||||
|
3.3 |
Use of Company Funds |
11 | ||||
|
3.4 |
Invoices; Penalty Rate |
11 | ||||
|
3.5 |
Disputed Invoices |
11 | ||||
|
3.6 |
Taxes |
12 | ||||
|
3.7 |
Audit Rights |
12 | ||||
|
3.8 |
Insurance |
12 | ||||
|
ARTICLE 4 TERM AND TERMINATION |
12 | |||||
|
4.1 |
Term |
12 | ||||
|
4.2 |
Termination |
12 | ||||
|
4.3 |
Effect of Termination |
13 | ||||
|
4.4 |
Transition Obligations |
13 | ||||
|
4.5 |
Survival |
13 | ||||
|
ARTICLE 5 MISCELLANEOUS |
14 | |||||
|
5.1 |
Force Majeure |
14 | ||||
|
5.2 |
Entire Agreement |
14 | ||||
|
5.3 |
Amendment |
14 | ||||
|
5.4 |
Waiver |
14 | ||||
|
5.5 |
Assignability |
14 | ||||
|
5.6 |
Parties in Interest |
15 | ||||
|
5.7 |
Binding Effect |
15 | ||||
i
| 5.8 |
Notices |
15 | ||||
| 5.9 |
Severability of Provisions |
15 | ||||
| 5.10 |
Governing Law |
15 | ||||
| 5.11 |
Consent to Jurisdiction |
15 | ||||
| 5.12 |
WAIVER OF JURY TRIAL |
16 | ||||
| 5.13 |
Proprietary Information |
16 | ||||
| 5.14 |
Confidentiality |
17 | ||||
| 5.15 |
Further Assurances |
18 | ||||
| 5.16 |
Advice of Counsel |
18 | ||||
| 5.17 |
Counterparts |
18 |
ANNEX I INSURANCE
*****
ii
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (as the same may be amended, restated or otherwise modified, this “ Agreement ”) is made and entered into as of the 9th day of February, 2018 (the “ Effective Date ”), by and between Alta Mesa Holdings, LP, a Texas limited partnership (the “ Agent ”), and Kingfisher Midstream, LLC, a Delaware limited liability company (the “ Company ”). The Agent and the Company are referred to individually herein as a “ Party ” and collectively as the “ Parties ”.
WHEREAS, the Agent and the Company are both subsidiaries of SRII Opco, LP, a Delaware limited partnership (the “ Parent ”);
WHEREAS, the Company is party to an Operating Transition Services Agreement (the “ TSA ”) with Asset Risk Management, LLC (“ ARM ”) pursuant to which ARM is providing certain services to the Company;
WHEREAS, during the Term (as defined herein), the Company desires to engage the Agent to provide or cause to be provided certain administrative, management and operational services necessary to manage the Business (as defined herein) of the Company and its subsidiaries (collectively, the “ Company Group ”), and the Agent is willing to render such administrative, management and operational services, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Defined Terms . As used in this Agreement (including the recitals hereof), the following terms shall have the respective meanings assigned to them in this Section 1.1 :
“ Affiliate ” of any specified entity means any other entity directly or indirectly controlling or controlled by or under direct or indirect common control with such specified entity and “control”, when used with respect to any specified entity, means the power to direct the management and policies of such entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“ Agent ” has the meaning given to such term in the Preamble.
“ Agreement ” has the meaning given to such term in the Preamble.
“ Assets ” means the gathering system of the Company and any other assets acquired by the Company.
“ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy.”
1
“ Bankruptcy Event ” means, when used with respect to a Person, that (a) such Person has (i) applied for or consented to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) admitted in writing its inability to pay its debts as such debts become due, (iii) made a general assignment for the benefit of its creditors, (iv) commenced a voluntary case under the Bankruptcy Code, (v) filed a petition seeking to take advantage, as a debtor, of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or readjustment of debts, or (vi) failed to controvert in a timely and appropriate manner, or acquiesced in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code; or (b) a proceeding or case has been commenced without the application or consent of such Person in any court of competent jurisdiction seeking (i) its liquidation, reorganization, dissolution, winding-up, or the composition or readjustment of its debts, or (ii) the appointment of a trustee, receiver, custodian or the like of such Person under any law relating to bankruptcy, insolvency, reorganization, winding-up or the composition or readjustment of its debts, and such proceeding or case shall continue undismissed, or any order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of ninety (90) or more consecutive days.
“ Business ” means the business of the Company Group.
“ Business Day ” means a day other than a Saturday, Sunday, or other day on which commercial banks in the State of Texas are authorized or required to close for the general transaction of banking business.
“ Claim ” has the meaning given to such term in Section 2.9(a) .
“ Company ” has the meaning given to such term in the Preamble.
“ Company Agreement ” means that certain Fourth Amended and Restated Limited Liability Company Agreement of the Company, dated as of February 9, 2018, including all schedules and annexes thereto, as the same may be amended, restated, or otherwise modified from time to time.
“ Company Group ” has the meaning given to such term in the Recitals.
“ Confidential Information ” has the meaning given to such term in Section 5.14 .
“ Damages ” has the meaning given to such term in Section 2.9(a) .
“ Disclosing Party ” has the meaning given to such term in Section 5.14 .
“ Effective Date ” has the meaning given to such term in the Preamble.
“ Emergency ” means taking any and all actions and making repairs, including implementing an emergency shutdown of any or all of the Assets, that are required or appropriate to avoid, prevent or mitigate (a) imminent harm to persons or property, including injury, illness or death or damage to the Assets or an environmental condition; (b) violation of any applicable Law that could reasonably be expected to result in a material loss or liability to the Company; or (c) curtailment of service on the Assets.
2
“ Exculpatee ” has the meaning given to such term in Section 2.7(a) .
“ Force Majeure ” means any cause or causes beyond the reasonable control of a Party that prevents or hinders the Party from performing its duties, obligations and services under this Agreement, including: (i) acts of God, (ii) landslides, lightning, earthquakes, tornadoes, named tropical storms and hurricanes, flood, fire or explosion, (iii) war or threat of war (declared or undeclared), invasion, riot, terrorist attack or other civil unrest, (iv) Governmental Order or Law, (v) actions, embargoes or blockades in effect on or after the date of this Agreement, (vi) action by any Governmental Authority, (vii) national or regional emergency, (viii) strikes, labor stoppages or slowdowns or other industrial disturbances, and (ix) shortage of adequate power or transportation facilities.
“ Fundamental Change ” means, with respect to an entity, the sale of such entity, in one transaction or a series of related transactions, whether structured as (a) a sale or other transfer of all or substantially all of the equity securities of the entity (including by way of merger, consolidation, share exchange, or similar transaction), (b) the sale or other transfer of all or substantially all of the assets of the entity promptly followed by a dissolution and liquidation of the entity, (c) the sale of all or substantially all of the Assets or (d) a combination of any of the foregoing.
“ Governmental Authority ” means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government.
“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“ Indemnitee(s) ” has the meaning given to such term in Section 2.9(a) .
“ Initial Term ” has the meaning given to such term in Section 4.1 .
“ Intellectual Property Rights ” has the meaning given to such term in Section 5.13(b) .
“ Law ” means any statute, law, principle of common law, rule, regulation, judgment, order, ordinance, requirement, code, writ, injunction, or decree of any Governmental Authority.
“ Management Fee ” has the meaning given to such term in Section 3.1 .
“ Parties ” has the meaning given to such term in the Preamble.
“ Party ” has the meaning given to such term in the Preamble.
3
“ Penalty Rate ” has the meaning given to such term in Section 3.4 .
“ Person ” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.
“ Proprietary Information ” means any patent, copyright and other intellectual property rights in the methodologies, processes, models, strategic plans and other information about the disclosing Party’s business, industry, products and services, plans, specifications, operation methods, pricing, costs, techniques, manuals, know-how and other intellectual property, in written, oral or other tangible form, provided by one Party to another Party or its representative.
“ Receiving Party ” has the meaning given to such term in Section 5.14 .
“ Renewal Term ” has the meaning given to such term in Section 4.1 .
“ Representatives ” has the meaning given to such term in Section 5.14 .
“ Services ” has the meaning given to such term in Section 2.2 .
“ Term ” means the period commencing on the Effective Date and ending on the termination or expiration of this Agreement.
“ Third Party ” means any Person that is not a Party.
“ Work Product ” has the meaning given to such term in Section 5.13(b) .
1.2 Interpretation . In this Agreement, except to the extent the context otherwise requires: (a) any reference to an Article, a Section, a Schedule or an Annex is a reference to an article or section hereof, or a schedule or an annex hereto, respectively, and to a subsection or a clause is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears; (b) the words “hereof”, “herein”, “hereto”, “hereunder” and the like mean and refer to this Agreement as a whole and not merely to the specific Article, Section, subsection, paragraph or clause in which the respective word appears; (c) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; (d) the words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation;” (e) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement; (f) references to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation referred to; (g) any table of contents, captions and headings are for convenience of reference only and shall not affect the interpretation or construction of this Agreement; and (h) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”.
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ARTICLE 2
SERVICES
2.1 Engagement . On the terms and subject to the conditions and qualifications set forth in this Agreement, the Company hereby engages Agent, acting directly or through its Affiliates and their respective employees, agents, contractors or independent Third Parties, and Agent hereby accepts such engagement, to provide Services to the Company Group.
2.2 Services . Except as otherwise limited by this Agreement or the Company Agreement, the Agent shall, in accordance with the standards set forth in Section 2.6 , take all appropriate actions on behalf of the Company Group to supervise and administer the business, operations and affairs of the Company Group, including the following matters (in each case, as directed and supervised by the Company) (collectively, the “ Services ”), but explicitly excluding the services that ARM is providing to the Company pursuant to the TSA:
(a) establishing and maintaining the books and records, including accounting, contract and other records and files necessary and appropriate for the proper conduct by the Company Group of its business and operations (including keeping a full and complete accounting of all revenues and income of the Company Group, costs incurred by or on behalf of the Company Group and costs incurred by or on behalf of the Agent in connection with the performance by the Agent of the Services);
(b) Monitor the receipts, income and expenditures of the Company Group;
(c) Provide, or arrange for Third Party professionals, Third Party service providers, and legal, human resources, land, operations, purchasing, communications, information system, technical and other services as may be necessary to properly carry on the business and operations of the Company Group;
(d) Supervise, manage, direct and operate all aspects of the day-to-day management and administration of the Company Group;
(e) Supervise, manage and administer activities necessary for the Company Group to comply with and perform all of the Company Group’s obligations, responsibilities and covenants under any agreement binding upon the Company Group;
(f) Provide such clerical, bookkeeping, and contract administration services as are necessary and appropriate for the conduct of the Company Group’s business;
(g) File, or cause to be filed, all necessary or appropriate filings with federal, state and local authorities under Applicable Law to maintain the Company Group’s existence, its qualification to do business, and its registration under any assumed or fictitious name;
(h) File and record, or cause to be filed and recorded, such documents and papers as are necessary and appropriate to evidence the Company Group’s ownership of any of its assets;
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(i) Give and receive notices, execute drawdown certificates, furnish required reports and information and monitor compliance on behalf of the Company Group as required or permitted by any agreement binding upon the Company Group;
(j) Assist in the making of all filings and in the obtaining of all licenses, permits and approvals from any Governmental Authority as may be necessary or appropriate under Applicable Law in connection with the operations or business of the Company Group and submit any application, filing or notice for the renewal of any existing licenses or permits;
(k) Administer the Company Group’s performance of its obligations under any agreement binding upon the Company Group;
(l) Review and provide support for the implementation of the Company Group’s insurance program, including obtaining and maintaining for the Company Group all insurance required to be maintained by the Company Group, conducting periodic risk management surveys of the operations of the Company Group, handling all claims and insuring proper collection for any insurance coverage, and providing copies of policies, endorsements, inspections, claims, quotes and other reports or documentation related to the Company Group;
(m) Review the provision of services by the Company Group’s accountants, including the examination by such accountants of the financial records and statements of the Company Group;
(n) Make such reports and recommendations to the officers of the Company Group, including concerning the performance of the independent accountants, as the officers of the Company Group may reasonably request or deem appropriate;
(o) File, or cause to be filed, with the appropriate Governmental Authorities, all required federal, state, and local tax returns for the Company Group including cooperating with professional service providers engaged by the Company Group, providing the Company with drafts of each income tax return twenty (20) days prior to the last date on which such tax return can be timely filed and each other tax return five (5) days prior to the last date on which tax return can be timely filed, for the Company’s review and approval, informing the Company in a timely manner of any tax issues that arise and meeting the tax information and tax return reporting deadlines;
(p) Make available such information regarding the Company Group, and available to the Agent, as may be requested by the officers of the Company Group, or the Company Group’s attorneys;
(q) Provide such assistance to the Company Group’s counsel and auditors as generally may be required to properly carry on the business and operations of the Company Group;
(r) Assist in the representation of the Company Group before any Governmental Authority; and
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(s) Perform such other acts which are necessary or appropriate to carry out its obligations hereunder.
Notwithstanding anything to the contrary in this Agreement, the Agent shall not be obligated to provide any Services the provision of which would violate any Laws.
2.3 Limitation on Powers and Duties . Notwithstanding the provisions of Sections 2.1 and 2.2 , without the prior approval of the Company (such approval to be provided or withheld in accordance with the terms of the Company Agreement), the Agent shall not:
(a) amend, change or modify this Agreement;
(b) initiate any claim or lawsuit by any member of the Company Group; or
(c) commence on behalf of any member of the Company Group, or cause any member of the Company Group to commence, any Bankruptcy Event, reorganization, arrangement, insolvency, or receivership proceeding under the laws of the United States of America or any other country or any state or province thereof.
2.4 Independent Contractor Status . Notwithstanding anything in this Agreement to the contrary, (a) the relationship of the Agent to the Company Group shall be and remain that of an independent contractor; (b) neither the Agent, any of its Affiliates nor any of their respective directors, managers, officers, employees or agents shall be deemed to be an employee of the Company Group; and (c) nothing herein shall be deemed or construed to create an agency, partnership, joint venture or similar relationship under applicable state Law between the Agent, on the one hand, and the Company Group, on the other hand, or to cause any Party to be responsible in any way for the debts and obligations of the other Party. All debts and liabilities to Third Parties required or permitted to be incurred by the Agent under this Agreement in the course of providing the Services shall be the debts and liabilities of the Company Group, and the Agent shall not be liable for any such obligations by reason of providing Services on behalf of the Company Group. Nothing stated in this Agreement shall operate to create any special or fiduciary duty between the Parties. At all times during the performance of Services by the Agent, all persons performing such Services who shall be in the employ or under the control of the Agent or its Affiliates (including employees, agents, contractors, temporary employees and consultants), shall not be deemed, solely because of the provision of such Services, to be an employee of the Company and shall not be entitled to any payment, benefit or perquisite directly from the Company on account of such Services, including participation in any employee benefit and pension plans maintained by the Company or any Affiliate of the Company.
2.5 Performance of Services by Affiliates; Retention of Professionals . Subject to the limitations of Sections 2.1 , 2.2 and 2.3 , (a) in discharging its obligations hereunder, the Agent may engage any of its Affiliates or any Third Party professionals and other service providers to perform Services on its behalf and (b) the Company hereby appoints the Agent during the Term to act as its agent in connection with the Company Group’s retention of any such Third Party professionals and other service providers which, as determined by the Agent in its discretion, are needed to perform the Services; provided, however, that Agent shall be responsible for Services rendered by its Affiliates, Third Party professionals or other service providers. All costs or fees payable to such Affiliates, professionals and other service providers shall be borne by the Company Group.
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2.6 Standard of Care . In supervising, administering and managing the business and affairs of the Company Group pursuant to this ARTICLE 2 , the Agent shall perform all of its duties in accordance with reasonable and prudent practices, as relevant to the Services, of the oil and gas industry, and in material compliance with all applicable Laws and the terms of this Agreement. Agent will (a) maintain separate accounts, financial statements, books and records from those of the Company Group and (b) prevent any funds or accounts of the Company Group from being commingled with the funds or accounts of Agent.
2.7 Exculpation .
(a) Neither the Agent, its Affiliates, nor its or their respective partners, members, officers, directors, managers, employees or agents (individually and collectively referred to as an “ Exculpatee ”), shall be liable, responsible, or accountable in damages or otherwise to the Company Group, or its owners, members, employees, agents or assigns, for any action taken or failure to act (EVEN IF SUCH ACTION OR FAILURE TO ACT CONSTITUTED THE SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE AGENT OR SUCH EXCULPATEE ) in connection with the Services provided hereunder, unless such act or failure to act was the result of fraud, willful misconduct or gross negligence on the part of the Exculpatee. The Exculpatees shall have no liability whatsoever under this Agreement for failing to act (or limiting its actions) hereunder, and no obligation to provide any Services.
(b) IN NO EVENT SHALL THE EXCULPATEE EVER BE LIABLE TO ANY SUCH PERSON OR ENTITY, OR ANY OTHER PARTY UNDER THIS AGREEMENT OR IN CONNECTION WITH SERVICES PROVIDED HEREUNDER, FOR ANY PUNITIVE, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES IN TORT, CONTRACT OR OTHERWISE, UNLESS SUCH PUNITIVE, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES IN TORT, CONTRACT OR OTHERWISE ARE CLAIMED BY A THIRD PARTY AND SUCH DAMAGES TO SUCH THIRD PARTY WERE THE RESULT OF FRAUD, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE ON THE PART OF SUCH EXCULPATEE. TO THE EXTENT PERMITTED BY LAW, THE COMPANY HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES CONSUMER PROTECTION ACT, §§ 17.41, ET. SEQ., OF THE TEXAS BUSINESS AND COMMERCE CODE (OTHER THAN SECTION 17.555). The exculpation provided by this Section 2.7 shall continue as to an Exculpatee who has ceased to serve in such capacity, and shall inure to the benefit of the heirs, successors, assigns, administrators and personal representatives of the Exculpatees.
2.8 Indemnification ; Disclaimer.
2.9 Without limiting Section 2.7 :
(a) THE COMPANY SHALL RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS THE AGENT AND ITS OWNERS, OFFICERS, MEMBERS, MANAGERS, DIRECTORS, SHAREHOLDERS, AFFILIATES, EMPLOYEES AND AGENTS (IN THIS SECTION 2.8 SOMETIMES INDIVIDUALLY REFERRED TO AS AN
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“ INDEMNITEE ” AND COLLECTIVELY AS THE “ INDEMNITEES ”) FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES, EXPENSES, DAMAGES, JUDGMENTS, FINES, SETTLEMENTS AND OTHER AMOUNTS (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) (COLLECTIVELY, THE “ DAMAGES ”) ARISING FROM ANY CLAIMS, DEMANDS, ACTIONS, SUITS OR PROCEEDINGS, CIVIL, CRIMINAL, ADMINISTRATIVE OR INVESTIGATIVE (EACH, A “ CLAIM ”), IN WHICH THE INDEMNITEE IS OR MAY BE INVOLVED, OR THREATENED TO BE INVOLVED, AS A PARTY OR OTHERWISE, BY REASON OF OR IN ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE AGENT’S SERVICES HEREUNDER, INCLUDING CLAIMS FOR PERSONAL INJURY OR DEATH OF ANY PERSONS ARISING IN CONNECTION WITH THE PERFORMANCE OF THE SERVICES; PROVIDED , HOWEVER , THAT NO INDEMNITEE SHALL BE INDEMNIFIED BY THE COMPANY FOR ANY ACTS OR OMISSIONS BY THE INDEMNITEE THAT CONSTITUTE FRAUD, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE ON THE PART OF SUCH INDEMNITEE.
(b) THE PARTIES RECOGNIZE AND AGREE THAT AN INDEMNITEE MAY BE ENTITLED TO INDEMNIFICATION FROM ACTS OR OMISSIONS THAT MAY GIVE RISE TO ORDINARY, CONCURRENT OR COMPARATIVE NEGLIGENCE, AND THIS SECTION 2.8 DOES NOT LIMIT ANY OTHER INDEMNIFICATION OBLIGATION THAT IS AVAILABLE TO THE INDEMNITEE. THE LIMITATIONS ON LIABILITY AND INDEMNITIES IN THIS AGREEMENT ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING ANY EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES. THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE OR ENFORCEABLE, THE PROVISIONS IN THIS AGREEMENT IN ALL-CAPS FONT ARE “CONSPICUOUS” FOR THE PURPOSE OF ANY APPLICABLE LAW.
(c) Expenses incurred by an Indemnitee in defending or investigating a threatened or pending Claim for which the Indemnitee seeks indemnification pursuant to this Section 2.8 shall be paid by the Company Group in advance of the final disposition of such Claim upon receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be finally determined that such Indemnitee is not entitled to be indemnified by the Company Group.
(d) The indemnification provided by this Section 2.8 shall continue as to an Indemnitee who has ceased to serve in such capacity, and shall inure to the benefit of the heirs, successors, assigns, administrators and personal representatives of the Indemnitees.
(e) THE AGENT SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED (i) RELATING TO THE SERVICES, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, (ii) RELATING TO THE RESULTS TO BE OBTAINED FROM THE SERVICES, AND (iii) THAT THE SERVICES ARE ERROR-FREE OR NON-INTERRUPTIBLE.
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2.10 Responsibilities of the Company . The Company shall provide the Agent reasonable access to any data, information, materials and access to any systems or personnel that the Agent determines is reasonably necessary or appropriate for the Agent to perform the Services hereunder. To the extent the Agent shall have charge or possession of any of the Company Group’s assets in connection with the provision of the Services pursuant to this Agreement, the Agent shall (i) hold such assets in the name and for the benefit of the Company Group and (ii) separately maintain and not commingle such assets with any assets of the Agent or any other Person. The Company Group is solely responsible for the accuracy and completeness of any and all such data that it submits to the Agent. The Company shall, upon reasonable notice, give the Agent and its Affiliates reasonable access, during regular business hours and at such other times as are reasonably required, to the relevant premises, including the Assets, to the extent reasonably necessary for the purposes of providing and receiving Services.
2.11 Changes to Services . Additions or changes to the Services listed in this ARTICLE 2 may be made at any time by amending the Agreement in accordance with Section 5.3 . Such additions or changes, including any fees or fee adjustments related to such additions or changes, shall be agreed between the Parties before any work commences.
2.12 Document Retention . The Parties shall retain documents and other information relating to the Services for at least the time period that is required by applicable Law. Promptly following termination of this Agreement under Section 4.2 , the Agent shall deliver to such Person as the Company may designate in writing, copies of all title files, division order files, well files, production records, equipment inventories, and production, severance, and ad valorem tax records pertaining to the assets of the Company Group and other information about the assets and operations of the Company Group reasonably requested by the Company (which are in the possession of the Agent).
ARTICLE 3
COMPENSATION AND EXPENSE REIMBURSEMENT
3.1 Management Fee . As consideration for the Services rendered by the Agent to the Company under this Agreement, the Company shall pay the Agent a management fee in the amount of $10,000 per month (the “ Management Fee ”). On or before the first day of each month during the Term, the Company shall remit to the Agent the Management Fee for such month; provided that with respect to the payment to be made for the first month of the Initial Term, the Company shall remit to the Agent, upon execution of this Agreement, the pro-rated portion of the Management Fee for such month for the period of time from and including the date hereof to the end of such month.
3.2 Expenses .
(a) In addition to the Management Fee, the Company shall be responsible for the following costs and expenses incurred by the Agent in providing the Services: (i) the proportionate, fully-burdened costs and expenses (as reasonably incurred by the Agent) of the
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Agent’s employees, including any overtime, bonuses or incentive compensation and the costs of employee benefits (including workers compensation) provided to the Agent’s employees, with the proportionate share of such costs and expenses calculated based on the portion of an employee’s overall working time for Agent that the employee spent performing Services, (ii) all direct expenses incurred by the Agent in providing the Services and payable to Third Parties, (iii) reimbursement of properly incurred and allocated general and administrative overhead, and (iv) any other costs and expenses required to be reimbursed to the Agent by the Company pursuant to this Agreement or as actually incurred by the Agent in connection with its provision of the Services.
3.3 Use of Company Funds . Subject to the terms and conditions of this Agreement, the Agent will pay the costs incurred in performing the Services as they become due and payable by the applicable member of the Company Group, and all local, state and federal taxes incurred related thereto, from the applicable Company Group bank account(s), and the Agent will have the right to withdraw funds from such account(s) for such purposes. The Agent will not make any expenditure of, or otherwise use, any funds of any Company Group member, except for (a) expenditures contemplated by this Agreement and (b) expenditures required in the event of an Emergency.
3.4 Invoices; Penalty Rate . The Company Group agrees to pay interest at the rate of 10% per year (or the maximum rate permitted by applicable Law, whichever is less) for all amounts not paid within thirty (30) days from the date of the invoice therefor (the “ Penalty Rate ”).
3.5 Disputed Invoices .
(a) In the event that the Company disputes in good faith all or any portion of an invoice submitted by Agent for reimbursable expenses, other than expenses incurred in connection with an Emergency, the Company Group may withhold payment of the amount disputed by the Company in good faith and such withheld payments shall not be subject to the Penalty Rate; provided that the Company gives Agent written notice of its disagreement with the disputed amount, stating the reasons therefor in reasonable detail and providing supporting documentation as appropriate. If Agent agrees in writing with the Company, then the Company Group shall not be required to pay the disputed amount to Agent. The Agent and the Company shall endeavor in good faith to promptly settle any disputed amount. If any such amount withheld is subsequently determined by agreement of the Parties or otherwise to have been unjustifiably withheld, then the Company Group shall promptly pay Agent the amount withheld plus the Penalty Rate from the date that such amount should have been paid until the date of such payment.
(b) If, within twenty (20) days after receipt of any written exception pursuant to Section 3.5(a) , the Company and Agent have been unable to resolve any dispute, and if (i) such dispute relates to whether amounts were properly charged or services actually performed and (ii) the aggregate amount in dispute exceeds $100,000, either of Company or Agent may submit the dispute to an independent Third Party auditing firm that is mutually agreeable to the Company, on the one hand, and Agent, on the other hand. The Parties shall cooperate with such auditing firm and shall provide such auditing firm access to such books and records as may be reasonably necessary to permit a determination by such auditing firm. The resolution by the auditing firm shall be final and binding on the Parties and the Parties shall each be responsible for 50% of such auditing firm’s fees for such review and determination.
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3.6 Taxes . In addition to all charges specified in this ARTICLE 3 , the Company Group shall pay or reimburse the Agent for all state or local, sales and use taxes, or amounts levied in lieu thereof, based on charges set forth in this ARTICLE 3 ; provided, however, the Company Group shall have no responsibility for taxes imposed on the Agent’s net income by any taxing authority.
3.7 Audit Rights . At any time during the Term and for a period of one (1) year following the termination of this Agreement, the Company shall have the right, exercisable at its option and expense, to review and copy the records of the Company Group maintained by the Agent (so long as, with respect to any period following the Term, such records have not been delivered by the Agent pursuant to Section 2.12 ), and if necessary, to verify the performance by the Agent of its obligations under this Agreement, and to audit such records. This audit right may be exercised from time to time (but in no event more than once in any calendar quarter) during normal business hours upon reasonable notice to the Agent. The Company shall use its commercially reasonable efforts to conduct any such audit or examination in a manner that minimizes the inconvenience or disruption to the Agent.
3.8 Insurance . Throughout the Term, (a) the Company shall maintain, at its sole cost, insurance covering the Assets and the Business as a reasonably prudent owner or operator of assets similar to the Assets would maintain, and (b) the Agent shall maintain the insurance coverage set out on Annex I , and the Company shall reimburse the Agent for the portion of its insurance premiums attributable to such coverage. In each of the insurance policies required by this Section 3.8 , the Party holding the insurance will waive and require its insurers to waive any right of subrogation or recovery against, and name as an additional insured, the other Party (and if applicable the Indemnitees). Upon a Party’s reasonable request, the other Party will deliver copies of all insurance policies and certificates of insurance required by this Section 3.8 .
ARTICLE 4
TERM AND TERMINATION
4.1 Term . This Agreement shall commence on the Effective Date and continue in effect for an initial period of two years (the “ Initial Term ”). Thereafter, this Agreement shall automatically renew for additional consecutive one-year periods (each, a “ Renewal Term ”), unless terminated by either Party upon at least ninety (90) days written notice to the other Party prior to the end of the Initial Term or any Renewal Term.
4.2 Termination . Notwithstanding Section 4.1 , this Agreement shall terminate upon the earliest to occur of the following:
(a) The mutual written agreement of the Parties, effective as of the date so mutually agreed;
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(b) By election of the Company:
(i) upon the Agent’s material breach of this Agreement, if such breach is not remedied within sixty (60) days after the Agent’s receipt of the Company’s written notice thereof, or such longer period as is reasonably required to cure such breach; provided that the Agent commences to cure such breach within such 60-day period and proceeds with due diligence to cure such breach and such breach is continuing at the time notice of termination is delivered to the Agent,
(ii) upon the occurrence of a Fundamental Change with respect to the Company or the Agent, or
(iii) upon the occurrence of a Bankruptcy Event with respect to either the Company or the Agent.
(c) By election of the Agent:
(i) upon the Company’s material breach of this Agreement, if such breach is not remedied within sixty (60) days after the Company’s receipt of the Agent’s written notice thereof, or such longer period as is reasonably required to cure such breach; provided that the Company commences to cure such breach within such 60-day period and proceeds with due diligence to cure such breach and such breach is continuing at the time notice of termination is delivered to the Company,
(ii) upon the failure of the Company to pay any Management Fee or, subject to Section 3.5 , any expense to the Agent within ten (10) Business Days of its due date;
(iii) upon the occurrence of a Fundamental Change with respect to the Company, or
(iv) upon the occurrence of a Bankruptcy Event with respect to either the Company or the Agent.
4.3 Effect of Termination . If this Agreement is terminated in accordance with Section 4.2 above, all rights and obligations under this Agreement shall cease except for (a) obligations that expressly survive termination of this Agreement, including as provided in Section 4.5 ; (b) liabilities and obligations that have accrued prior to such termination, including the obligation to pay any amounts that have become due and payable prior to such termination; and (c) the obligation to pay any portion of the Agent’s costs and expenses that has accrued prior to such termination, even if such portion has not become due and payable at that time.
4.4 Transition Obligations . For a period of not more than sixty (60) days after the termination of this Agreement, the Agent shall take all actions that the Company reasonably requests to effect the transition of the Services hereunder to a successor provider or providers of such services, as reasonably designated by the Company, in an orderly and expeditious manner.
4.5 Survival . Upon the termination or expiration of this Agreement, all amounts payable to the Agent pursuant to ARTICLE 3 (other than interest that accrues on unpaid amounts) shall cease to accrue. However, the Company Group shall (a) pay the Agent for all Services performed up through the termination or expiration date (including any transition period
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pursuant to Section 4.4 ) and (b) subject to Section 3.5, reimburse the Agent for all costs and expenses reimbursable pursuant to Section 3.4 that are incurred or are otherwise attributable to the period on or prior to the termination or expiration date (including any transition period pursuant to Section 4.4 ). The provisions of Sections 2.7 , 2.8 , 3.7 4.3 , this Section 4.5 , and ARTICLE 5 (other than Section 5.1 ) shall survive any termination or expiration of this Agreement indefinitely or for such shorter period provided in such Section.
ARTICLE 5
MISCELLANEOUS
5.1 Force Majeure . The obligations of a Party under this Agreement shall be suspended during the period and to the extent that the Agent is prevented due to a Force Majeure; provided , however , that a Party shall not be excused by Force Majeure from any obligation to pay money incurred prior to the Force Majeure. The Party suffering a Force Majeure shall give notice of suspension as soon as reasonably practicable to the other Party stating the date and extent of such suspension and the cause thereof, and shall exercise due diligence to end its inability to perform as promptly as practicable. Notwithstanding the foregoing, a Party is not required to settle any strike, lockout or other labor dispute in which it may be involved. The Term (including the Initial Term or Renewal Term, as applicable) shall be automatically extended for a period of time equal to the time lost by reason of the suspension not to exceed ninety (90) days.
5.2 Entire Agreement . This Agreement constitutes the complete and exclusive statement of agreement among, and supersedes all prior written and oral agreements or statements by and among, the Parties with respect to the subject matter herein. No representation, promise, inducement, statement or intention, condition or warranty has been made by or on behalf of either Party that is not set forth in this Agreement or the documents referred to herein.
5.3 Amendment . This Agreement may not be amended or modified except by a written instrument specifically referring to this Agreement and executed by all of the Parties.
5.4 Waiver . The failure of either Party at any time or from time to time to require performance of the other Party’s obligations under this Agreement shall in no manner affect the right to enforce any provision of this Agreement at any subsequent time, and the waiver of any rights arising out of any breach shall not be construed as a waiver of any rights arising out of any subsequent breach.
5.5 Assignability . Neither Party may assign, delegate or transfer (by merger, operation of Law or otherwise) its respective rights or delegate its respective obligations under this Agreement without the express prior written consent of the other Party. Notwithstanding the foregoing, the Agent may assign its rights and obligations under this Agreement, in whole or in part, to an Affiliate without the prior written consent of the Company; provided that no such assignment will relieve the Agent of its obligations under this Agreement. Any purported assignment, delegation, or transfer in contravention of this Section 5.5 shall be void and unenforceable. The foregoing provisions of this Section 5.5 are not intended to prohibit or restrict the Agent from engaging subcontractors or Affiliates to perform some or all of the Services; provided that the Agent shall remain fully responsible and liable for performance of any such Services as if such subcontracted activities had been performed directly by the Agent.
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5.6 Parties in Interest . Except for Sections 2.7 and 2.8 , the provisions of this Agreement are solely for the benefit of the Parties and their respective successors and permitted assigns, and are not intended to confer upon any other Person any third party beneficiary rights under this Agreement.
5.7 Binding Effect . This Agreement shall inure to the benefit of and shall be binding upon the Parties and their respective successors and permitted assigns.
5.8 Notices . All notices, requests, demands or other communications provided for hereunder shall be in writing. Notices may be given by personal delivery, by overnight courier, by electronic mail with acknowledgement of receipt requested or received, or by certified or registered United Sates mail, return receipt requested. Except as otherwise expressly provided herein, notice shall be deemed to have been given (a) if by personal delivery, on the date of delivery; (b) if by overnight courier, on the earlier of the date delivery is first attempted or the next Business Day after the same has been delivered to a reputable commercial overnight courier; (c) if by electronic mail, on the date of such transmission if sent by 5:00 p.m. (Houston time) on a Business Day, or if sent thereafter, on the next Business Day; and (d) if by certified or registered United States Mail, on the earlier of the date delivery is first attempted or three (3) Business Days after delivery to the United States Post Office, postage prepaid, return receipt requested. Notices shall be sent to the intended recipient at the addresses set forth below its signature on the signature page, or to the most recent addresses which the indented recipient has provided to the other parties for purposes of, and in accordance with, this Section 5.8 .
5.9 Severability of Provisions . If any provision of this Agreement is held to be invalid, prohibited, or otherwise unenforceable by a court of competent jurisdiction, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed invalid, prohibited, or unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided , however , that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be reformed, construed and enforced to the maximum extent permitted by applicable Law.
5.10 Governing Law . This Agreement, and any instrument or agreement required hereunder (to the extent not expressly provided for therein), shall be governed by, and construed under, the internal laws of the State of Texas, without reference to conflicts of laws rules thereof.
5.11 Consent to Jurisdiction . Each Party irrevocably consents and agrees that any action, proceeding, or other litigation by or against any other Party or Parties with respect to any claim or cause of action based upon or arising out of or related to this Agreement or the transactions contemplated hereby, shall be brought and tried exclusively in the federal or state courts located in the City of Houston, County of Harris, in the State of Texas, and any such legal action or proceeding may be removed to the aforesaid courts. By execution and delivery of the Agreement, each Party accepts, for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts. Each Party hereby irrevocably waives (a) any objection which it may now or hereafter have to the laying of venue with respect
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any such action, proceeding, or litigation arising out of or in connection with this Agreement or the transactions contemplated hereby brought in the aforesaid courts, and (b) any right to stay or dismiss any such action, proceeding, or litigation brought before the aforesaid courts on the basis of forum non-conveniens . Each Party further agrees that personal jurisdiction over it may be affected by service of process by certified mail, postage prepaid, addressed as provided in Section 5.8 of this Agreement, and when so made shall be as if served upon it personally within the State of Texas.
5.12 WAIVER OF JURY TRIAL . TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY A PARTY AGAINST THE OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH PARTY HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION 5.12 AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT. EACH PARTY ACKNOWLEDGES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL CONSIDERATION FOR THE OTHER PARTY EXECUTING THIS AGREEMENT.
5.13 Proprietary Information .
(a) The Company acknowledges that all Proprietary Information provided or created by the Agent in rendering Services shall be the sole and exclusive property of the Agent. Each Party agrees to honor the other Party’s copyrights, patents, and trademarks, and will not use the other Party’s Proprietary Information without the other Party’s prior written consent except in the course of rendering or receiving Services hereunder.
(b) The Company acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by Agent or any of its employees, either individually or jointly with others, during the Term and relating in any way to the Services or the business or contemplated business, research or development of the Agent (regardless of when or where the work product is prepared or whose equipment or other resources is used in preparing the same), all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and any other tangible embodiments thereof (collectively, “ Work Product ”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), mask works, patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all
16
pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “ Intellectual Property Rights ”), shall be the sole and exclusive property of the Agent. The Company hereby irrevocably assigns to the Agent, for no additional consideration, the Company Group’s entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Agent’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than the Agent would have had in the absence of this Agreement.
5.14 Confidentiality . Except as specifically provided in this Agreement, the Parties agree that any and all information that is not otherwise publicly available (“ Confidential Information ”) communicated by one Party or its employees or representatives (the “ Disclosing Party ”) to the other Party or its employees or representatives (the “ Receiving Party ”), whether disclosed before or after the Effective Date, (a) shall be treated as confidential, proprietary, and trade secret information of Disclosing Party, (b) shall be held in strict confidence by the Receiving Party, (c) shall be used only for purposes of this Agreement by the Receiving Party, and (d) that no Confidential Information, including the provisions of this Agreement and the Proprietary Information, shall be disclosed by the Receiving Party, its affiliates, subsidiaries or contractors, and each of their respective directors, officers, employees, consultants, agents, or representatives (“ Representatives ”), without the prior written consent of the Disclosing Party, except as may be necessary by reason of legal, accounting or regulatory requirements beyond the reasonable control of the Receiving Party. The Receiving Party shall limit access to the Disclosing Party’s Confidential Information to only those of its Representatives that are bound by obligations that are substantially similar to those contained in this Section 5.14 . The Receiving Party shall safeguard Confidential Information with at least the same degree of care (which shall always be at least a reasonable amount of care) that it uses to safeguard its own confidential, proprietary, and trade secret information of a similar nature. This Section 5.14 shall not apply to information (i) which is in the public domain (other than through its unauthorized disclosure by Receiving Party or its Representatives), (ii) which the Receiving Party legitimately had in its possession prior to receiving it from the Disclosing Party, (iii) which the Receiving Party legitimately obtained from a Third Party who rightfully acquired such information, or (iv) which the Receiving Party independently developed without reference to the information received from the Disclosing Party. If the Receiving Party must disclose any Confidential Information pursuant to applicable Law or regulation or by operation of Law, the Receiving Party may disclose only such minimum Confidential Information as is legally required; provided that the Receiving Party shall provide reasonable notice to the Disclosing Party of such requirement and a reasonable opportunity to object to such disclosure. In any event, the Receiving Party shall be fully liable for any breach of this Agreement by its Representatives and agrees, at its sole expense, to take all reasonable measures to restrain its Representatives from any prohibited or unauthorized disclosure or use of the Disclosing Party’s Confidential Information. This Section 5.14 shall survive the termination of this Agreement for a period of one (1) year.
17
5.15 Further Assurances . The Parties agree to execute such additional instruments, agreements and documents, and to take such other actions, as may be necessary to effect the purposes of this Agreement.
5.16 Advice of Counsel . The Parties have read this Agreement and have voluntarily executed this Agreement. In making this Agreement, the Parties have obtained the advice of legal counsel and agree that this Agreement is the product of arms-length negotiations. This Agreement was drafted by counsel for the Parties and there shall not be a presumption or construction against any Party; each Party hereby expressly waiving the doctrine of contra proferentem with respect to the interpretation and application of this Agreement.
5.17 Counterparts . This Agreement and any amendment, waivers, consents or supplements hereto or in connection herewith may be executed by one or more of the Parties on any number of separate counterparts, by facsimile or email, and all of said counterparts taken together shall be deemed to constitute one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signatures are physically attached to the same document. A facsimile or portable document format (“pdf”) signature page shall constitute an original for purposes hereof.
[SIGNATURES TO FOLLOW]
18
IN WITNESS WHEREOF, the Parties have caused this Management Services Agreement to be executed by a duly authorized officer, to be effective as of the Effective Date first written above.
Signature Page to Management Services Agreement
Signature Page to Management Services Agreement
Annex I
Insurance
| 1. General Liability | $1,000,000/occurrence | |
| $2,000,000 policy aggregate | ||
| $1,000,000 Employee benefits | ||
| 2. Umbrella Liability | $74,000,000 occurrence/aggregate | |
| 3. Excess Liability | $51,000,000 occurrence/aggregate | |
| 4. Workers Compensation | Workers Comp: Statutory | |
| Employers Liability: $1,000,000 | ||
| 5. Commercial Auto Liability | $1,000,000 combined single limit | |
| 6. Oil Spill Financial Responsibility | $35,000,000 per occurrence | |
| 7. Excess Care Custody & Control | $35,000,000 per occurrence | |
| 8. Commercial Property | Building/Contents Value | |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Silver Run Acquisition Corporation II Completes its Business Combination with
Alta Mesa Holdings, LP and Kingfisher Midstream, LLC and Becomes Alta Mesa Resources, Inc.
HOUSTON, TX, February 9, 2018 – Silver Run Acquisition Corporation II (“Silver Run II”) (NASDAQ: SRUN, SRUNU, SRUNW) today announced that it completed its business combination with Alta Mesa Holdings, LP (“Alta Mesa”) and Kingfisher Midstream, LLC (“Kingfisher”). Alta Mesa is an independent exploration and production company focused on the development and acquisition of unconventional oil and natural gas reserves in the Anadarko Basin. Kingfisher is a company engaged in providing certain midstream energy services, including crude oil and gas gathering, processing and marketing to producers of natural gas, natural gas liquids, crude oil and condensate in the STACK Play region of Oklahoma. The transaction was approved by the board of directors of Silver Run II and was approved at a special meeting of Silver Run II’s stockholders on February 6, 2018 by 98.43% of stockholders voting in person or by proxy at the special meeting. In connection with the closing of the transaction, Silver Run II has been renamed Alta Mesa Resources, Inc. (“Alta Mesa Resources”), and its common stock and warrants will be traded on the NASDAQ Capital Market under the symbols “AMR” and “AMRRW,” respectively, beginning on February 12, 2018.
The size of Alta Mesa Resources’ board of directors has been increased from four members to eleven members, and consists of James T. Hackett, Harlan H. Chappelle, Michael E. Ellis, David M. Leuschen, Pierre F. Lapeyre, Jr., William W. McMullen, Don Dimitrievich, William D. Gutermuth, Jeffrey H. Tepper, Diana J. Walters and Donald R. Sinclair.
Following the closing, Riverstone Holdings LLC (“Riverstone”) and Alta Mesa management collectively own a significant portion of Alta Mesa Resources, representing approximately 33% of Alta Mesa Resources’ market capitalization. In addition, the equity holders of Kingfisher collectively own approximately 14% of Alta Mesa Resources’ market capitalization.
In connection with the closing, Alta Mesa entered into an amended and restated senior secured revolving credit facility that provides for an aggregate of $1.0 billion with an initial $350.0 million borrowing base limit. Kingfisher is also a party to a $200 million revolving credit facility. As of the closing, neither Alta Mesa nor Kingfisher has any outstanding borrowings under their respective credit facilities or letter of credit reimbursement obligations.
Advisors
Citigroup Global Markets Inc. acted as capital markets advisor to Silver Run II. Latham & Watkins LLP acted as legal counsel to Riverstone and Silver Run II. Haynes and Boone, LLP acted as legal counsel to Alta Mesa. Bracewell LLP acted as legal counsel to Kingfisher. Kirkland & Ellis LLP acted as legal counsel to Bayou City Energy Management LLC (“BCE”).
About Alta Mesa Resources
Alta Mesa Resources is the successor of Silver Run II, and its strategy following the transaction is to focus on the development and acquisition of unconventional oil and natural gas reserves in the Anadarko Basin through Alta Mesa and to provide midstream energy services, including crude oil and gas gathering, processing and marketing, to producers of natural gas, natural gas liquids, crude oil and condensate in the STACK Play region of Oklahoma through Kingfisher. For more information, please visit http://altamesa.net/
About Riverstone
Riverstone is an energy and power-focused private investment firm founded in 2000 by David M. Leuschen and Pierre F. Lapeyre, Jr. with over $37 billion of capital raised. Riverstone conducts buyout and growth capital investments in the exploration & production, midstream, oilfield services, power, and renewable sectors of the energy industry. With offices in New York, London, Houston, and Mexico City, Riverstone has committed over $36 billion to more than 130 investments in North America, Latin America, Europe, Africa, Asia, and Australia.
About HPS Investment Partners, LLC
HPS Investment Partners, LLC (“HPS”) is a leading global investment firm with a focus on non-investment grade credit. Established in 2007, HPS has approximately 100 investment professionals and over 200 total employees, and is headquartered in New York with ten additional offices globally. HPS was originally formed as a unit of Highbridge Capital Management, LLC (“Highbridge”), a subsidiary of J.P. Morgan Asset Management (“J.P. Morgan”), and formerly known as Highbridge Principal Strategies, LLC. In March 2016, the principals of HPS acquired the firm from J.P. Morgan, which retained Highbridge’s hedge fund strategies. As of January 2018, HPS had approximately $44 billion of assets under management and since inception has invested over $4 billion in the energy and power industries.
About BCE
BCE is a private equity firm founded in 2015 to focus on making investments in the North American upstream oil and gas sector. BCE targets privately negotiated investments through two complementary strategies: providing buyout and growth equity capital for operators with current production and exploitable upside, and partnering with operators to provide dedicated drilling capital in off-balance sheet structures.
Forward-Looking Statements
This communication includes certain statements that may constitute “forward-looking statements” for purposes of the federal securities laws. Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements may include, for example, statements about the benefits of the transaction described in this communication; the future financial performance of Alta Mesa Resources following the transaction; and changes in Alta Mesa’s and Kingfisher’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. These forward-looking statements are based on information available as of the date of this communication, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing Alta Mesa Resources’ views as of any subsequent date, and Alta Mesa Resources does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not place undue reliance on these forward-looking statements. As a result of a number of known
and unknown risks and uncertainties, Alta Mesa Resources’ actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include Alta Mesa Resources’ ability to recognize the anticipated benefits of the transaction, which may be affected by, among other things, competition and the ability of Alta Mesa Resources to grow and manage growth profitably following the transaction; changes in applicable laws or regulations; the possibility that Alta Mesa Resources may be adversely affected by other economic, business, and/or competitive factors; and other risks and uncertainties indicated in Alta Mesa Resources’ public filings with the Securities and Exchange Commission.
Contact:
Alta Mesa Holdings, LP
Lance L. Weaver
(281) 943-5597
lweaver@altamesa.net
SOURCE: Alta Mesa Resources, Inc.
Exhibit 99.2
ALTA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements and explanatory notes give effect to the sale of all our oil and natural gas assets in Weeks Island field to Texas Petroleum Investment Company on December 30, 2017 and the disposition of all our remaining oil and natural gas assets that were not located in the STACK prior to the closing of the Business Combination with Alta Mesa Resources Inc. (formerly Silver Run Acquisition Corporation II, a Delaware corporation (“AMR”), to High Mesa Holdings, L.P, a Delaware limited partnership.
The unaudited pro forma condensed consolidated financial statements and explanatory notes are based on the estimates and assumptions set forth in the explanatory notes. The unaudited pro forma condensed consolidated financial statements have been prepared utilizing our historical consolidated financial statements, and should be read in conjunction with the historical consolidated financial statements and notes thereto.
The unaudited pro forma consolidated statements of operations have been prepared as if the sale transaction and the disposition of the remaining non-STACK assets had been consummated on January 1, 2014. The unaudited condensed consolidated balance sheet has been prepared as if the sale transaction and the disposition of the remaining non-STACK assets had been consummated on September 30, 2017.
The unaudited pro forma condensed consolidated financial statements are presented for informational purposes only, are based on certain assumptions that we believe are reasonable, and do not purport to represent our financial condition or our results of operations had the business combinations occurred on the dates noted above or to project the results for any future date or period. In the opinion of management, all adjustments have been made that are necessary to present fairly the unaudited pro forma condensed consolidated financial information.
The unaudited pro forma condensed consolidated financial statements and explanatory notes are based on the estimates and assumptions set forth in the explanatory notes.
ALTA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2017
See notes to the unaudited pro forma condensed consolidated financial statements.
F-1
ALTA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
| Pro forma | ||||||||||||
| September 30, | Pro forma | September 30, | ||||||||||
| 2017 | Adjustments (a) | 2017 | ||||||||||
| (in thousands) | ||||||||||||
|
Operating revenues and other |
||||||||||||
|
Oil, natural gas and natural gas liquids |
$ | 230,205 | $ | (45,698 | ) | $ | 184,507 | |||||
|
Other revenues |
274 | (274 | ) | — | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating revenues |
230,479 | (45,972 | ) | 184,507 | ||||||||
|
Gain on acquisition of oil and natural gas properties |
6,893 | (1,626 | ) | 5,267 | ||||||||
|
Gain on derivative contracts |
38,024 | — | 38,024 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating revenues and other |
275,396 | (47,598 | ) | 227,798 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Operating expenses |
||||||||||||
|
Lease and plant operating expense |
49,836 | (21,944 | ) | 27,892 | ||||||||
|
Marketing and transportation |
21,566 | (1,080 | ) | 20,486 | ||||||||
|
Production and ad valorem taxes |
8,812 | (5,101 | ) | 3,711 | ||||||||
|
Workover expense |
5,112 | (1,981 | ) | 3,131 | ||||||||
|
Exploration expense |
19,930 | (8,042 | ) | 11,888 | ||||||||
|
Depreciation, depletion, and amortization expense |
80,082 | (16,836 | ) | 63,246 | ||||||||
|
Impairment expense |
29,206 | (28,018 | ) | 1,188 | ||||||||
|
Accretion expense |
1,447 | (1,213 | ) | 234 | ||||||||
|
General and administrative expense |
35,534 | (66 | ) | 35,468 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating expenses |
251,525 | (84,281 | ) | 167,244 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) from operations |
23,871 | 36,683 | 60,554 | |||||||||
|
Other income (expense) |
||||||||||||
|
Interest expense, net |
(38,189 | ) | (88 | ) | (38,277 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Total other income (expense) |
(38,189 | ) | (88 | ) | (38,277 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) before income taxes |
(14,318 | ) | 36,595 | 22,277 | ||||||||
|
Provision for (benefit from) state income taxes |
285 | (285 | ) | — | ||||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) from continuing operations |
$ | (14,603 | ) | $ | 36,880 | $ | 22,277 | |||||
|
|
|
|
|
|
|
|||||||
See notes to the unaudited pro forma condensed consolidated financial statements.
F-2
ALTA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2016
| Pro forma | ||||||||||||
| December 31, | Pro forma | December 31, | ||||||||||
| 2016 | Adjustments (a) | 2016 | ||||||||||
| (in thousands) | ||||||||||||
|
Operating revenues and other |
||||||||||||
|
Oil, natural gas and natural gas liquids |
$ | 210,293 | $ | (70,287 | ) | $ | 140,006 | |||||
|
Other revenues |
415 | (214 | ) | 201 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating revenues |
210,708 | (70,501 | ) | 140,207 | ||||||||
|
Gain (loss) on sale of assets |
3,542 | (3,539 | ) | 3 | ||||||||
|
Gain (loss) on derivative contracts |
(40,460 | ) | — | (40,460 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Total operating revenues and other |
173,790 | (74,040 | ) | 99,750 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Operating expenses |
||||||||||||
|
Lease and plant operating expense |
56,893 | (29,474 | ) | 27,419 | ||||||||
|
Marketing and transportation |
13,326 | (1,698 | ) | 11,628 | ||||||||
|
Production and ad valorem taxes |
10,750 | (7,985 | ) | 2,765 | ||||||||
|
Workover expense |
4,714 | (1,273 | ) | 3,441 | ||||||||
|
Exploration expense |
24,777 | (7,547 | ) | 17,230 | ||||||||
|
Depreciation, depletion, and amortization expense |
92,901 | (39,416 | ) | 53,485 | ||||||||
|
Impairment expense |
16,306 | (15,924 | ) | 382 | ||||||||
|
Accretion expense |
2,174 | (1,904 | ) | 270 | ||||||||
|
General and administrative expense |
41,758 | (1,290 | ) | 40,468 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating expenses |
263,599 | (106,511 | ) | 157,088 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) from operations |
(89,809 | ) | 32,471 | (57,338 | ) | |||||||
|
Other income (expense) |
||||||||||||
|
Interest expense, net |
(59,990 | ) | (10 | ) | (60,000 | ) | ||||||
|
Loss on extinguishment of debt |
(18,151 | ) | — | (18,151 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Total other income (expense) |
(78,141 | ) | (10 | ) | (78,151 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) before income taxes |
(167,950 | ) | 32,461 | (135,489 | ) | |||||||
|
Provision for (benefit from) state income taxes |
(29 | ) | 29 | — | ||||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) from continuing operations |
$ | (167,921 | ) | $ | 32,432 | $ | (135,489 | ) | ||||
|
|
|
|
|
|
|
|||||||
See notes to the unaudited pro forma condensed consolidated financial statements.
ALTA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
|
December 31,
2015 |
Pro forma
Adjustments (a) |
Pro forma
December 31, 2015 |
||||||||||
| (in thousands) | ||||||||||||
|
Operating revenues and other |
||||||||||||
|
Oil, natural gas and natural gas liquids |
$ | 241,284 | $ | (108,166 | ) | $ | 133,118 | |||||
|
Other revenues |
682 | (192 | ) | 490 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating revenues |
241,966 | (108,358 | ) | 133,608 | ||||||||
|
Gain (loss) on sale of assets |
67,781 | (167 | ) | 67,614 | ||||||||
|
Gain on derivative contracts |
124,141 | — | 124,141 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating revenues and other |
433,888 | (108,525 | ) | 325,363 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Operating expenses |
||||||||||||
|
Lease and plant operating expense |
67,706 | (40,294 | ) | 27,412 | ||||||||
|
Marketing and transportation expense |
4,030 | (2,320 | ) | 1,710 | ||||||||
|
Production and ad valorem taxes |
15,131 | (12,024 | ) | 3,107 | ||||||||
|
Workover expense |
6,511 | (3,980 | ) | 2,531 | ||||||||
|
Exploration expense |
42,718 | (32,944 | ) | 9,774 | ||||||||
|
Depreciation, depletion, and amortization expense |
143,969 | (82,697 | ) | 61,272 | ||||||||
|
Impairment expense |
176,774 | (157,975 | ) | 18,799 | ||||||||
|
Accretion expense |
2,076 | (1,869 | ) | 207 | ||||||||
|
General and administrative expense |
44,454 | (6,600 | ) | 37,854 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating expenses |
503,369 | (340,703 | ) | 162,666 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) from operations |
(69,481 | ) | 232,178 | 162,697 | ||||||||
|
Other income (expense) |
||||||||||||
|
Interest expense, net |
(61,750 | ) | 43 | (61,707 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Total other income (expense) |
(61,750 | ) | 43 | (61,707 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) before state income taxes |
(131,231 | ) | 232,221 | 100,990 | ||||||||
|
Provision for state income taxes |
562 | — | 562 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) from continuing operations |
$ | (131,793 | ) | $ | 232,221 | $ | 100,428 | |||||
|
|
|
|
|
|
|
|||||||
See notes to the unaudited pro forma condensed consolidated financial statements.
ALTA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
| Pro forma | ||||||||||||
| December 31, | Pro forma | December 31, | ||||||||||
| 2014 | Adjustments (a) | 2014 | ||||||||||
| (in thousands) | ||||||||||||
|
Operating revenues and other |
||||||||||||
|
Oil, natural gas and natural gas liquids |
$ | 431,125 | $ | (314,464 | ) | $ | 116,661 | |||||
|
Other |
1,003 | (321 | ) | 682 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating revenues |
432,128 | (314,785 | ) | 117,343 | ||||||||
|
Gain (loss) on sale of assets |
87,520 | (87,515 | ) | 5 | ||||||||
|
Gain oil and natural gas derivative contracts |
96,559 | — | 96,559 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating revenues and other |
616,207 | (402,300 | ) | 213,907 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Operating expenses |
||||||||||||
|
Lease and plant operating expense |
64,686 | (46,700 | ) | 17,986 | ||||||||
|
Marketing and transportation expense |
9,134 | (8,052 | ) | 1,082 | ||||||||
|
Production and ad valorem taxes |
28,214 | (25,360 | ) | 2,854 | ||||||||
|
Workover expense |
8,961 | (6,318 | ) | 2,643 | ||||||||
|
Exploration expense |
61,912 | (50,080 | ) | 11,832 | ||||||||
|
Depreciation, depletion, and amortization expense |
141,804 | (112,742 | ) | 29,062 | ||||||||
|
Impairment expense |
74,927 | (74,924 | ) | 3 | ||||||||
|
Accretion expense |
2,198 | (1,911 | ) | 287 | ||||||||
|
General and administrative expense |
69,198 | (833 | ) | 68,365 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total operating expenses |
461,034 | (326,920 | ) | 134,114 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) from operations |
155,173 | (75,380 | ) | 79,793 | ||||||||
|
Other income (expense) |
||||||||||||
|
Interest expense, net |
(55,797 | ) | 45 | (55,752 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Total other income (expense) |
(55,797 | ) | 45 | (55,752 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) before state income taxes |
99,376 | (75,335 | ) | 24,041 | ||||||||
|
Provision for state income taxes |
176 | — | 176 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) from continuing operations |
$ | 99,200 | $ | (75,335 | ) | $ | 23,865 | |||||
|
|
|
|
|
|
|
|||||||
See notes to the unaudited pro forma condensed consolidated financial statements.
N OTES TO ALTA MESA HOLDINGS, LP.
U NAUDITED P RO F ORMA C ONDENSED C ONSOLIDATED F INANCIAL S TATEMENTS
1. Description of the transaction
On December 30, 2017, we closed the sale of all our oil and natural gas properties in Weeks Island field, to Texas Petroleum Investment Company, a Texas corporation for a net proceeds $22.6 million, net of purchase price adjustments. The net proceeds were used to reduce amounts outstanding under the Company’s senior secured revolving credit facility. The oil and natural gas producing properties are located primarily in the Iberia Parish, Louisiana.
In connection with the closing of the Business Combination with Alta Mesa Resources Inc. (formerly Silver Run Acquisition Corporation II, a Delaware corporation (“AMR”), we have completed our transition from a diversified asset base composed of a portfolio of conventional assets to an unconventional oil and liquids-rich resource play in the eastern portion of the Anadarko Basin in Oklahoma (the “STACK”) with an extensive inventory of drilling opportunities. The STACK is an acronym describing both its location—Sooner Trend Anadarko Basin Canadian and Kingfisher County—and the multiple, stacked productive formations present in the area.
On February 8, 2018, just prior to the closing of the Business Combination, we assigned the remainder of our non-STACK assets to High Mesa Holdings, L.P. (“HMH, LP”), our parent company. At the time of the disposition, management estimated the carrying value of Alta Mesa’s remaining non-STACK assets to be $42.8 million with liabilities of $52.5 million, which liabilities include $44.6 million of asset retirement obligations. The remainder of our non-STACK oil and natural gas properties are primarily located in East Texas, Florida, South Texas and South Louisiana.
Although the Weeks Island field sale was not individually significant, we have presented the pro forma effects of both elements of the non-STACK assets divestiture in these pro forma financial statements because they collectively comprise a strategic shift in our operations. The results of operations related to the Weeks Island field and the remaining non-STACK assets (collectively the “non-STACK Assets Divestiture”) will be reported as discontinued operations.
2. Basis of Presentation
The unaudited pro forma condensed consolidated financial information was prepared in accordance with Securities and Exchange Commission (“SEC”) rules which are subject to change and interpretation and was based on the historical consolidated financial statements of Alta Mesa.
The pro forma adjustments to historical financial information are based on currently available information and certain estimates and assumptions and therefore the actual effects of this transaction will differ from the pro forma adjustments.
3. Adjustments and Assumptions to the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2017
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 reflects the following adjustments assuming the non-STACK Assets Divestiture occurred on September 30, 2017:
| a) | Reflects the assets and liabilities of the non-STACK assets that were disposed of as part of the non-STACK Assets Divestiture. |
| b) | Reflects the net proceeds from the sale of the Weeks Island field to reduce amounts outstanding under the Company’s senior secured revolving credit facility. |
4) Adjustments and Assumptions to the Unaudited Pro Forma Condensed Consolidated Combined Statement of Operations for the Nine Months Ended September 30, 2017
The unaudited pro forma condensed consolidated combined statement of operations for the nine months ended September 30, 2017 reflects the following adjustments assuming the non-STACK Assets Divestiture occurred on January 1, 2016:
| a) | Reflects the operating results of the non-STACK assets disposed of as part of the non-STACK Assets Divestiture |
5) Adjustments and Assumptions to the Unaudited Pro Forma Condensed Consolidated Combined Statement of Operations for the Years Ended December 31, 2016, 2015 and 2014
The unaudited pro forma condensed consolidated combined statement of operations for the years ended December 31, 2016, 2015 and 2014 reflects the following adjustments assuming the non-STACK Assets Divestiture occurred on January 1, 2014:
| a) | Reflects the operating results of the non-STACK assets disposed of as part of the non-STACK Assets Divestiture |