EX-10.1 3 d273466dex101.htm EX-10.1 Execution Version DISTRIBUTION SUPPORT AND EXPENSE REIMBURSEMENT AGREEMENT BY AND AMONG AMERICAN MIDSTREAM PARTNERS, LP, AMERICAN MIDSTREAM GP, LLC, AND MAGNOLIA INFRASTRUCTURE HOLDINGS, LLC DATED AS OF OCTOBER 23,...
Exhibit 10.1
Execution Version
DISTRIBUTION SUPPORT AND
EXPENSE REIMBURSEMENT AGREEMENT
BY AND AMONG
AMERICAN MIDSTREAM PARTNERS, LP,
AMERICAN MIDSTREAM GP, LLC,
AND
MAGNOLIA INFRASTRUCTURE HOLDINGS, LLC
DATED AS OF OCTOBER 23, 2016
DISTRIBUTION SUPPORT AND
EXPENSE REIMBURSEMENT AGREEMENT
DISTRIBUTION SUPPORT AND EXPENSE REIMBURSEMENT AGREEMENT, dated as of October 23, 2016 (this “Agreement”), by and among AMERICAN MIDSTREAM PARTNERS, LP, a Delaware limited partnership (“AMID”), AMERICAN MIDSTREAM GP, LLC, a Delaware limited liability company and the general partner of AMID (“AMID GP”), and MAGNOLIA INFRASTRUCTURE HOLDINGS, LLC, a Delaware limited liability company (“Magnolia” or the “Supporting Party”).
WHEREAS, this Agreement is being entered into concurrently with the execution of the Agreement and Plan of Merger, dated as of the date hereof (as amended, supplemented, restated or otherwise modified from time to time, the “Merger Agreement”) by and among AMID, AMID GP, Argo Merger Sub, LLC, a Delaware limited liability company, Argo Merger GP Sub, LLC, a Delaware limited liability company, JP Energy Partners LP, a Delaware limited partnership (“JPE”), JP Energy XX XX LLC, a Delaware limited liability company (“JPE GP”), pursuant to which, among other things, upon consummation of the merger (the “LP Merger”) JPE shall continue its existence as the surviving entity and as a wholly-owned subsidiary of AMID, each outstanding common unit representing common limited partner interests of JPE (the “Common Units”) (other than Common Units held by Xxxxxxxx Midstream Holdings LLC (“Xxxxxxxx”) and JP Energy Development, LP (“JPE Development”) and their Affiliates) will be converted into the right to receive 0.5775 common units of AMID (the “AMID Common Units”), and each outstanding Common Unit, and each outstanding subordinated unit representing subordinated limited partner interests of JPE (the “Subordinated Units”), held by Xxxxxxxx, JPE Development and their Affiliates will be converted into the right to receive 0.5225 AMID Common Units (“Affiliate Exchange Ratio”), all on the terms specified therein; and
WHEREAS, concurrently with the execution of the Merger Agreement, AMID GP, Xxxx XX Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of AMID GP (“AMID Merger GP Sub”), and JPE GP are entering into an Agreement and Plan of Merger (as amended, supplemented, restated or otherwise modified from time to time, the “GP Merger Agreement”), pursuant to which, among other things, JPE GP will be merged with AMID Merger GP Sub (such merger, the “GP Merger”);
ARTICLE I
“Affiliate” shall have the meaning assigned to such term in the Merger Agreement.
PAGE 1
“AMID Partnership Agreement” means the Fifth Amended and Restated Agreement of Limited Partnership of American Midstream Partners, LP, as amended or supplemented from time to time.
“AMID Units” means any Common Units, Series A-1 Convertible Preferred Units, Series A-2 Convertible Preferred Units or Series C Preferred Units that the Supporting Party or any of its Subsidiaries owns or acquires of record on or after the date hereof.
“Cap” shall have the meaning set forth in Section 2.1.
“Common Units” shall have the meaning assigned to such term in the AMID Partnership Agreement.
“Conflicts Committee” shall have the meaning assigned to such term in the AMID Partnership Agreement.
“DCF Credits” shall have the meaning set forth in Section 2.1(b).
“DCF Difference” shall have the meaning set forth in Section 2.1(b).
“LP DCF per Unit” shall have the meaning set forth in Exhibit A.
“DCF per Unit Difference” shall have the meaning set forth in Section 2.1(b).
“Delaware Courts” shall have the meaning set forth in Section 6.5.
“Effective Time” shall have the meaning assigned to such term in the Merger Agreement.
“Encumbrances” shall mean any and title defects, charges, liens, mortgages, pledges, claims, security interests, options, restrictions, and other encumbrances of every type and description, whether imposed by law, agreement, understanding or otherwise, other than those imposed under applicable securities laws.
“Notice” has the meaning set forth in Section 6.2.
“Orders” shall have the meaning set forth in Section 3.1(d).
“Series A-1 Convertible Preferred Units” shall have the meaning assigned to such term in the AMID Partnership Agreement.
“Series A-2 Convertible Preferred Units” shall have the meaning assigned to such term in the AMID Partnership Agreement.
“Series C Preferred Unit” shall have the meaning assigned to such term in the AMID Partnership Agreement.
“Shortfall Amount” shall have the meaning set forth in Section 2.1(b).
“Support DCF” shall mean the meaning set forth in Exhibit A.
“Support DCF per Unit” shall mean the meaning set forth in Exhibit A.
“Support Period” shall have the meaning set forth in Section 2.1(a).
PAGE 2
“Target DCF per Unit” shall have the meaning set forth in Section 2.1.
“Termination Date” shall have the meaning set forth in Section 5.2.
“Transition Period” shall have the meaning set forth in Section 2.2(b).
ARTICLE II
ACTIONS IN CONNECTION WITH THE MERGER AGREEMENT
2.1. Distribution Financial Support to AMID.
(a) The Supporting Party hereby acknowledges and agrees, that if the LP Merger is consummated, to provide financial support to AMID, as necessary, commencing with (i) the regular quarterly distribution for the quarter ending March 31, 2017 or (ii) if the Effective Time occurs after such time that the quarterly distribution for the quarter ending March 31, 2017 is determined or paid, the quarterly distribution for the quarter immediately following the Effective Time, (such distribution date, the “Commencement Date”), and ending with the regular quarterly distribution for the 8th quarter following the Commencement Date, in an aggregate amount not to exceed $25.0 million (the “Cap”), such that, subject to the Cap and the provisions of Section 2.1(b), AMID will have LP DCF per Unit (as defined in Exhibit A) during the eight (8) consecutive quarters following the Commencement Date (the “Support Period”) equal to the amounts set forth on Exhibit A (each, a “Target DCF per Unit”).
(b) As soon as practicable, and in any event within 20 days, following the completion of each calendar quarter during the Support Period, AMID shall determine the LP DCF per Unit for such quarter, the Support DCF Per Unit, and the difference, if any (such difference, the “DCF per Unit Difference”), of (i) the Target DCF per Unit for such quarter set forth in Exhibit A less (ii) the LP DCF per Unit in respect of such quarter. The DCF per Unit Difference shall be multiplied by the number of Units outstanding, as such number of Units is determined pursuant to Exhibit A, as of the end of such quarter (such product, the “DCF Difference”). For any quarter in which the DCF Difference is negative, such negative amount(s) shall be reserved for use as credits against support obligations of the Supporting Party for future quarters during the Support Period (such unused credits, the “DCF Credits”). For any quarter in which the DCF Difference less any previously unused DCF Credits is positive, subject to the Cap, the Supporting Party shall provide support sufficient to eliminate such shortfall (the amount of such shortfall, the “Shortfall Amount”). Not later than 30 days after the end of each calendar quarter of the Support Period, AMID shall provide notice in writing to the Supporting Party of the LP DCF per Unit and the Shortfall Amount, if any, or DCF Credits, if any, for such calendar quarter, together with supporting financial information. No later than two (2) business days before the day on which the quarterly financial statements of AMID are to be filed with the Securities and Exchange Commission for the applicable calendar quarter of the Support Period, the Supporting Party shall provide the Shortfall Amount, subject to the Cap and any DCF Credits, pursuant to the terms agreed to by the Supporting Party and AMID GP. In connection with providing financial support for any Shortfall Amount, the Supporting Party and AMID GP will agree to any amendment to the AMID Partnership Agreement that may be necessary or appropriate to document the form of the financial support mutually agreed to by the Supporting Party and AMID GP.
PAGE 3
(c) The Supporting Party’s obligations under this Section 2.1 shall terminate upon the first of the following to occur:
(i) The termination of the Merger Agreement;
(ii) aggregate support payments by the Supporting Party equal the Cap; or
(iii) payment of the Shortfall Amount, if applicable, for the quarter ending eight (8) consecutive quarters following the Commencement Date, or if there is no Shortfall Amount for such annual period then at the time notice of such determination is furnished by AMID to the Supporting Party.
(d) The parties hereto acknowledge and agree that the financial support set forth in Section 2.1, Section 2.2, and Section 2.3 forms part of the consideration of the transactions contemplated by the Merger Agreement and this Agreement. The financial support provided by the Supporting Party shall not constitute indebtedness or otherwise create any obligation for AMID to repay the financial support, or for AMID to issue any equity or other securities to the Supporting Party or its Affiliates in consideration thereof.
(a) Magnolia agrees that from and after the Effective Time it will, without duplication of amounts reimbursed to JPE and JPE GP pursuant to that certain Expense Reimbursement Agreement, dated October 23, 2016, by and among Xxxxxxxx Midstream Holdings, LLC, a Delaware limited liability company, JPE, and JPE GP, reimburse, or will pay directly on behalf of, JPE and JPE GP the third party reasonable costs and expense incurred by JPE and JPE GP in connection with the Merger, including but, without limitation, all reasonable legal, accountant, and financial advisory fees, regulatory expenses and other similar third party costs and expenses incurred in connection with the negotiation, execution and performance of the Merger Agreement and consummation of the Merger.
(b) In addition, the Supporting Party shall bear AMID’s and AMID GP’s reasonable costs and expenses relating directly to the integration of JPE and JPE GP incurred during the period commencing at the Effective Time and ending on the one (1) year anniversary of the Effective Time (the “Transition Period”), including, without limitation, severance and training costs, the net amount of any termination costs for offices and services, IT transition costs, relocation expenses and any incremental expenses incurred by AMID or AMID GP during such transition period that are temporarily duplicative of expenses incurred at JPE or JPE GP during such period (such as the incremental costs incurred by AMID associated with running parallel corporate functions in conjunction with an office move). At the end of each fiscal quarter during the Transition Period, AMID shall prepare and deliver to the Supporting Party an invoice containing the amounts and descriptions of all expenses for which reimbursement is sought under this Section 2.2(b), which shall be payable within thirty (30) days of receipt. The Supporting Party shall have the right to request additional documentation in support of any costs or expenses included in any such invoice. The obligations of the Supporting Party under this Section 2.2(b) shall terminate concurrently with payment of AMID’s final invoice for expenses incurred during the Transition Period.
PAGE 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
PAGE 5
ARTICLE IV
ARTICLE V
CONDITIONALITY AND TERMINATION
5.1. Conditions to Each Party’s Obligations under this Agreement. Except for the consummation of the Merger, no other conditions precede the respective obligations of each party hereto.
PAGE 6
ARTICLE VI
If to AMID or AMID GP, to:
American Midstream Partners, LP
0000 XxxxXxxx Xxxx.
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
Email: xxxxxxxx@xxxxxxxxxxxxxxxxx.xxx
With a copy to:
Xxxxx Lord LLP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxx
Facsimile: (000) 000-0000
Email: xxxxx@xxxxxxxxx.xxx
If to the Supporting Party, to:
c/o ArcLight Capital Partners, LLC
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxxx Xxxxxx
Facsimile: (000) 000-0000
Email: xxxxxxx@xxxxxxxxxxxxxxx.xxx
With a copy to:
Xxxxxxx Xxxxx Xxxxxx LLP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: G. Xxxxxxx X’Xxxxx
Fax: (000) 000-0000
Email: xxxxxxx@xxxxxxxxxxxx.xxx
PAGE 7
Notice given by personal delivery, courier service or mail shall be effective upon actual receipt. Notice given by email shall be confirmed by appropriate answer back and shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next Business Day after receipt if not received during the recipient’s normal business hours. All Notices by email shall be confirmed promptly after transmission in writing by certified mail or personal delivery. Any party may change any address to which Notice is to be given to it by giving Notice as provided above of such change of address.
PAGE 8
(a) Each party hereto acknowledges that monetary damages would not be an adequate remedy in the event that any covenant or agreement in this Agreement is not performed in accordance with its terms, and it is therefore agreed that, in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. Each party hereto agrees not to oppose the granting of such relief in the event a court determines that such a breach has occurred, and to waive any requirement for the securing or posting of any bond in connection with such remedy.
(b) All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.
[Remainder of this page intentionally left blank]
PAGE 9
AMID: | ||||
AMERICAN MIDSTREAM PARTNERS, LP | ||||
By: | American Midstream GP, LLC, its general partner | |||
By: | /s/ Xxxx X. Xxxxxxx III | |||
Name: | Xxxx X. Xxxxxxx III | |||
Title: | Chairman, President and Chief | |||
Executive Officer | ||||
AMID GP: | ||||
AMERICAN MIDSTREAM GP, LLC | ||||
By: | /s/ Xxxx X. Xxxxxxx III | |||
Name: | Xxxx X. Xxxxxxx III | |||
Title: | Chairman, President and | |||
Chief Executive Officer | ||||
MAGNOLIA: | ||||
MAGNOLIA INFRASTRUCTURE HOLDINGS, LLC | ||||
By: | /s/ Xxxxxx X. Xxxxxx | |||
Name: | Xxxxxx X. Xxxxxx | |||
Title: | President |
SUPPORT AGREEMENT | SIGNATURE PAGE |
EXHIBIT A
FINANCIAL PROJECTIONS
Target LP DCF per Unit During the Support Period:
Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | |||
$0.45 | $0.43 | $0.48 | $0.48 | |||
Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | |||
$0.52 | $0.52 | $0.51 | $0.55 | |||
Q1 2019 | ||||||
$0.55 |
For purposes of this Exhibit A, the terms set forth below shall be defined as follows:
“Adjusted EBITDA” shall mean the Adjusted EBITDA as reported within AMID’s applicable quarterly or annual financial statements.
“DCF” shall mean Adjusted EBITDA, less cash paid for interest expense and maintenance capital expenditures as each is reported within AMID’s applicable quarterly financial and earning statements.
“GP DCF” shall mean any amount of cash distributed to holders of the Incentive Distribution Rights and General Partnership Interest (as such terms are defined in the AMID Partnership Agreement), to the extent actually paid, assuming that the total amount distributed to the holders of any Partnership Interest (as such term is defined in the AMID Partnership Agreement) equals Support DCF or a coverage ratio of 1.0x.
“LP DCF” shall mean Support DCF less GP DCF.
“LP DCF per Unit” shall mean LP DCF divided by Units.
“Series A Preferred Units” shall mean the sum of the Series A-1 Convertible Preferred Units and the Series A-2 Convertible Preferred Units.
“Support DCF” shall mean DCF, plus cash interest or related expense or deduction paid to Supporting Party or its Affiliates.
“Support DCF per Unit” shall mean Support DCF divided by Units.
SUPPORT AGREEMENT | EXHIBIT A |
“Units” shall mean the weighted average number of AMID Common Units outstanding for the applicable period plus the additional number of AMID Common Units that would be outstanding. assuming that (a) the outstanding Series A Preferred Units are converted into AMID Common Units on December 31, 2016 at a 1.10X conversion ratio and (b) any other security that could be converted into AMID Common Units would be excluded from the AMID Common Unit count in the calculation of Support DCF per Unit even if any such other security is actually converted into AMID Common Units.
SUPPORT AGREEMENT | EXHIBIT A |