Item 1.01 Entry into a Material Definitive Agreement
On December 2, 2016, Centennial Resource Development, Inc. (Centennial) entered into subscription agreements (the Investor Subscription Agreements) with certain investors pursuant to which the investors named therein (collectively, the Investors) have agreed to purchase, in the aggregate, 33,012,380 shares of Centennials Class A common stock, par value $0.0001 per share (the Class A Shares), at a purchase price of $14.54 per share, for an aggregate amount of approximately $480 million.
The closing under the Investor Subscription Agreements will occur substantially concurrently with the closing of Centennials pending acquisition of the leasehold interests and related upstream assets of Silverback Exploration, LLC and Silverback Operating, LLC (the Acquisition), and is conditioned thereon. The closing under the Investor Subscription Agreements is also conditioned on receipt by Centennial of proceeds from financings on terms satisfactory to Centennial that, together with the proceeds from the sale of the Class A Shares to the Investors named therein, will be sufficient for Centennial to pay the purchase price for the Acquisition, as well as other customary closing conditions.
The Investor Subscription Agreements contain customary representations, warranties, covenants and agreements by Centennial and the Investors. Centennial has also agreed to register the Class A Shares within the time frame specified in the Investor Subscription Agreements. The Investors have also agreed not to transfer their Class A Shares until the business day following the record date to be established in connection with a Centennial shareholder meeting to be held to approve a proposal to permit the conversion of the previously announced issuance of convertible preferred shares to an affiliate of Riverstone Holdings LLC (Riverstone) at the time of the Acquisition. Centennial has notified the Investors that, pursuant to the rules and interpretive materials of The Nasdaq Capital Market, the Class A Shares will not be entitled to vote to approve the proposal at the meeting.
The Investor Subscription Agreements will be terminated, and be of no further force and effect, upon the earlier to occur of (i) the termination of the purchase agreement relating to the Acquisition in accordance with its terms, (ii) the consummation of the Acquisition pursuant to the terms of the purchase agreement without the assignment to Centennial pursuant to the terms of the previously announced agreement to assign, (iii) the mutual written agreement of the parties, (iv) if any of the conditions to the closing are not satisfied on or prior to the closing date and (v) January 31, 2017, if the Closing has not occurred by such date (subject to extension to February 15, 2017, upon notice).
The Class A Shares to be issued pursuant to the Investor Subscription Agreements have not been registered under the Securities Act of 1933, as amended (the Securities Act), and will be issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The closing under the Investor Subscription Agreement is expected to occur on or before December 30, 2016. Centennial will pay a fee of 2% of the gross proceeds of the sale of the Class A Shares to the placement agents for Centennial, in the aggregate, and a fee of 2% of the gross proceeds to an affiliate of Riverstone.
The foregoing summary of the Investor Subscription Agreements does not purport to be complete and is qualified in its entirety by reference to the form of Investor Subscription Agreement, a copy of which is filed as Exhibit 10.1 hereto and incorporated by reference herein.