Item 1.01 Entry into a Material Definitive Agreement.
On January 29, 2020, CNX Midstream Partners LP ( "CNXM") entered into an
Exchange Agreement (the "Agreement") with CNX Midstream GP LLC (the "General
Partner"), the general partner of CNXM and an indirect wholly owned subsidiary
of CNX Resources Corporation (the "Company"), and CNX Gas Company LLC ("CNX
Gas"), a wholly owned subsidiary of the Company, pursuant to which all of the
incentive distribution rights representing limited partner interests in CNXM
(the "IDRs") were cancelled and the 2.0% general partner interest in CNXM held
by the General Partner was converted into a non-economic general partner
interest in CNXM in exchange for (i) the issuance by CNXM to CNX Gas of
26,000,000 common units representing limited partner interests in CNXM ("Common
Units") and 3,000,000 newly created Class B units representing limited partner
interests in CNXM ("Class B Units") and (ii) an aggregate cash payment by CNXM
to CNX Gas of $135.0 million to be paid in installments of $50.0 million due
December 31, 2020, $50.0 million due December 31, 2021 and $35.0 million due
December 31, 2022 (together, the "Restructuring Transactions").
The Agreement contains representations, warranties and covenants customary for
an agreement of this type. The closing of the Restructuring Transactions
occurred simultaneously with the execution of the Agreement on January 29, 2020.
In connection with the Restructuring Transactions, the Second Amended and
Restated Agreement of Limited Partnership of CNXM, dated as of January 3, 2018,
was amended and restated to, among other things, reflect the cancellation of the
IDRs, the restructuring of the general partner interest in CNXM and the issuance
of the Class B Units pursuant to the Restructuring Transactions.
Holders of a Class B Unit have the same rights and obligations of a holder of
Common Units, except (i) the right to vote (which is limited to matters
requiring approval by a unit majority of all unitholders, in which case the
Class B Units will vote alongside Common Units as a single class), (ii) the
right to participate in the allocation of income, gain, loss and deduction to
Common Units and (iii) the right to participate in distributions made with
respect to Common Units. On January 1, 2022, each Class B Unit will
automatically convert into a Common Unit on a one-for-one basis, and thereafter
the converted Class B Units will be treated like Common Units.
The foregoing description of the Restructuring Transactions and the Agreement is
not complete and is qualified in its entirety by reference to the full text of
the Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K
and incorporated herein by reference.
The terms of the Agreement were approved on behalf of CNXM by the conflicts
committee and the board of directors of the General Partner (the "Conflicts
Committee"). The Conflicts Committee, which is comprised of independent members
of the board of directors of the General Partner, retained independent legal and
financial advisors to assist it in evaluating and negotiating the Restructuring
Transactions. The terms of the Agreement were approved on behalf of the Company
by the board of directors of the Company.
Relationships
The General Partner manages CNXM's operations and activities through the General
Partner's officers and directors. Certain individuals serve as officers and/or
directors of the Company and the General Partner. As of January 29, 2020, and
following the Restructuring Transactions, CNX indirectly owns 47,692,198 Common
Units and 3,000,000 Class B Units.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Description of the Exhibit
10.1 Exchange Agreement, dated as of January 29, 2020, by and among CNX
Midstream Partners LP, CNX Midstream GP LLC and CNX Gas Company LLC
104 Cover Page Interactive Data File (formatted as inline XBRL and
contained in Exhibit 101)
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