Washington, D.C. 20549
Scott W. Smith
President and Chief Executive Officer
5847 San Felipe, Suite 3000
Houston, Texas 77057
(832) 327-2255
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Douglas V. Getten
Paul Hastings LLP
600 Travis St., Suite 5800
Houston, Texas 77002
(713) 860-7300
If any of the securities being registered on
this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check
the following box.
¨
If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.
¨
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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 to Section 7(a)(2)(B) of the Securities Act.
¨
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements and information in this prospectus
may constitute “forward-looking” statements. Statements included in this prospectus that are not historical facts (including
any statements concerning plans and objectives of management for future operations or economic performance, or assumptions or forecasts
related thereto) are forward-looking statements. These statements can be identified by the use of forward-looking terminology including
“may,” “believe,” “expect,” “intend,” “anticipate,” “estimate,”
“continue,” or other similar words. These statements discuss future expectations, contain projections of results of
operations or of financial condition or state other “forward-looking” information. We and our representatives may from
time to time make other oral or written statements that are also forward-looking statements. Forward-looking statements include,
but are not limited to, statements we make concerning future actions, conditions or events, future operating results, income or
cash flow.
These statements are accompanied by cautionary
language identifying important factors, though not necessarily all such factors, which could cause future outcomes to differ materially
from those set forth in the forward-looking statements. These forward-looking statements are based on our current expectations
and beliefs concerning future developments and their potential effect on us. Such forward-looking statements are subject to various
risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this prospectus.
Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no
assurance can be given that these expectations will prove to be correct. Important factors that could cause our actual results
to differ materially from the expectations reflected in these forward-looking statements include, among other things, those set
forth in the Risk Factors section of our Predecessor’s Annual Report on Form 10-K for the fiscal year ended December 31,
2016 (the “2016 Annual Report”) and our Predecessor’s and our Quarterly Reports on Form 10-Q, and those
set forth from time to time in our filings with the SEC, which are available on our website at
www.vnrenergy.com
and through
the SEC’s Electronic Data Gathering and Retrieval System at
www.sec.gov
. These factors and risks include, but are
not limited to:
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our ability to achieve the anticipated benefits from the consummation of the cases filed under Chapter 11 of the Bankruptcy
Code (“Chapter 11”);
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our ability to execute our business strategies, including our business strategies post-emergence from the Chapter 11
Cases;
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ability to maintain relationships with suppliers, customers, employees and other third parties as a result of our Chapter 11
filing and following emergence from the Chapter 11 Cases;
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our ability to obtain sufficient financing to execute our business plan post-emergence;
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our ability to meet our liquidity needs;
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the potential adverse effects of the consummation of the Chapter 11 restructuring on our liquidity and results of operations;
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increased advisory costs to implement the reorganization;
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the impact of the Chapter 11 restructuring on the liquidity and market price of our common stock and on our ability
to access the public capital markets;
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risks relating to any of our unforeseen liabilities;
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further declines in oil, natural gas liquids (“NGLs”) or natural gas prices;
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the level of success in exploration, development and production activities;
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adverse weather conditions that may negatively impact development or production activities;
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the timing of exploitation and development expenditures;
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inaccuracies of reserve estimates or assumptions underlying them;
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revisions to reserve estimates as a result of changes in commodity prices;
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impacts to financial statements as a result of impairment write-downs;
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risks related to the level of indebtedness and periodic redeterminations of the borrowing base under our credit agreements;
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ability to comply with restrictive covenants contained in the agreements governing our indebtedness that may adversely affect
operational flexibility;
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ability to generate sufficient cash flows from operations to meet the internally funded portion of any capital expenditures
budget;
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ability to obtain external capital to finance exploitation and development operations and acquisitions;
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federal, state and local initiatives and efforts relating to the regulation of hydraulic fracturing;
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failure of properties to yield oil or natural gas in commercially viable quantities;
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uninsured or underinsured losses resulting from oil and natural gas operations;
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ability to access oil and natural gas markets due to market conditions or operational impediments;
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the impact and costs of compliance with laws and regulations governing oil and natural gas operations;
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ability to replace oil and natural gas reserves;
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any loss of senior management or technical personnel;
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competition in the oil and natural gas industry;
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risks arising out of hedging transactions;
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the costs and effects of litigation;
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sabotage, terrorism or other malicious intentional acts (including cyber-attacks), war and other similar acts that disrupt
operations or cause damage greater than covered by insurance; and
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costs of tax treatment as a corporation.
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All forward-looking statements, expressed or
implied, included in this prospectus are based on information available to us on the date of this prospectus. We undertake no obligation
to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified
in their entirety by the cautionary statements contained throughout this prospectus.
PROSPECTUS SUMMARY
This summary provides a brief overview of
information contained elsewhere in this prospectus and the documents we incorporate by reference. It does not contain all of the
information you should consider before making an investment decision. You should read this entire prospectus and the documents
incorporated by reference (see “Where You Can Find More Information”). Such documents incorporated by reference include
our Predecessor’s Annual Report on Form 10-K for the year ended December 31, 2016 (including the section entitled
“Item 1A. Risk Factors” therein), our Predecessor’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2017 and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017,
before making an investment decision.
Vanguard Natural Resources, Inc.
Overview
We are an exploration and production company
focused on the acquisition, production and development of oil and natural gas properties in the United States. Through our operating
subsidiaries, as of June 30, 2017, we own properties and oil and natural gas reserves primarily located in ten operating basins:
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the Green River Basin in Wyoming;
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the Piceance Basin in Colorado;
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the Permian Basin in West Texas and New Mexico;
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the Gulf Coast Basin in Texas, Louisiana, Mississippi and Alabama;
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the Arkoma Basin in Arkansas and Oklahoma;
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the Big Horn Basin in Wyoming and Montana;
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the Anadarko Basin in Oklahoma and North Texas;
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the Williston Basin in North Dakota and Montana;
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the Wind River Basin in Wyoming; and
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the Powder River Basin in Wyoming.
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For further information regarding our business,
reserve estimates or asset base, we refer to the documents we incorporate by reference. Please read “Where You Can Find More
Information.”
Accounting Policies
Upon the consummation of the Plan, we adopted
multiple changes to our accounting policies:
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We adopted fresh-start accounting in accordance with Accounting Standards Codification 852, which resulted in our becoming
a new entity for financial reporting purposes. Upon adoption of fresh-start accounting, our assets and liabilities were recorded
at their fair values as of our emergence from the Chapter 11 Cases on August 1, 2017. The fair values of our assets and
liabilities differ materially from the recorded values of our assets and liabilities as reflected in our Predecessor’s historical
consolidated balance sheets.
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We changed our method of accounting for natural gas and oil properties from the full cost method of accounting (the “Full
Cost Method”) to the successful efforts method of accounting (the “Successful Efforts Method”);
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We have elected to adopt the new standard for revenue recognition under Accounting Standards Codification 606 (“ASC 606”)
upon emergence. The new guidance requires us to recognize revenue upon transfer of goods or services to a customer at an amount
that reflects the expected consideration to be received in exchange for those goods or services; and
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We elected to change from a pass-through entity for tax purposes to a c-corp and, accordingly, a taxable entity;
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The effects of the Plan and the application
of the new accounting policies will be reflected in our annual, quarterly and current reports and other information that we file
with the SEC. In addition, please see the pro forma financial statements incorporated by reference into this prospectus for more
information about the effects of the consummation of the Plan and the adoption of fresh-start accounting.
Risk Factors
You should carefully consider the risks described
under “Risk Factors” and elsewhere in this prospectus, any prospectus supplement or amendment, our Predecessor’s
most recent Annual Report on Form 10-K and our other filings with the SEC that are incorporated into this prospectus in evaluating
an investment in our Common Stock. The described risks could materially and adversely affect our business, financial condition
or results of operation. If any of the risks were to actually occur, they may materially harm our business and our financial condition
and results of operations. In this event, the trading price of our Common Stock could decline and you could lose some or all of
your investment.
Company Information
Our principal executive office is located at 5847
San Felipe, Suite 3000, Houston, Texas 77057. Our main telephone number is (832) 327-2255. Our website is located at
www.vnrenergy.com
. We make available our periodic reports and other information filed with or furnished to the SEC
free of charge through our website, as soon as reasonably practicable after those reports and other information are electronically
filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference herein and
does not constitute a part of this prospectus.
The Offering
Common Stock offered by the selling stockholders:
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17,918,493 shares of Common Stock, including 98,110 shares of Common Stock issuable upon exercise of the Warrants (as defined below). See “Description of Capital Stock” for further discussion.
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Common Stock outstanding prior to and after giving effect to this offering:
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20,055,958 shares, as of October 26, 2017, which does not include the 2,233,333 shares of Common Stock available for grant but not issued under the MIP (as defined below).
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Use of proceeds:
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The selling stockholders will receive all of the proceeds from the sale of Common Stock offered from time to time pursuant to this prospectus. Accordingly, we will not receive any proceeds from the sale of Common Stock by the selling stockholders pursuant to this prospectus. Please read “Use of Proceeds.”
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Risk Factors:
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Investing in our Common Stock involves substantial risk. For a discussion of risks relating to us, our business and an investment in our Common Stock, see the risk factors described in “Item 1A – Risk Factors” contained in our Predecessor’s Annual Report on Form 10-K for the year ended December 31, 2016, and all other information set forth in this prospectus before investing in our Common Stock.
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Dividends:
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We do not plan to pay dividends on our Common Stock in the foreseeable future.
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OTCQX ticker symbol:
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Our Common Stock is quoted on the OTCQX under the symbol “VNRR.”
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RISK FACTORS
You should carefully consider all of the information
set forth in this prospectus and the documents incorporated by reference herein, and in particular, the risks described under “Risk
Factors” and elsewhere in this prospectus, any prospectus supplement or amendment, our Predecessor’s most recent Annual
Report on Form 10-K and our other filings with the SEC that are incorporated into this prospectus. The risks described in
any document incorporated by reference are not the only ones we face, but are considered to be the most material. There may be
other unknown or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse effects
on our future results. If that occurs, the price of Common Stock could decline materially and you could lose all or part of your
investment. Past financial performance may not be a reliable indicator of future performance and historical trends should not be
used to anticipate results or trends in future periods.
Risks Related to Our Emergence from Bankruptcy
We recently emerged from bankruptcy, which may adversely
affect our business and relationships.
It is possible that our having filed for bankruptcy
and our recent emergence from bankruptcy may adversely affect our business and relationships with customers, vendors, royalty or
working interest owners, contractors, employees or suppliers. Due to uncertainties, many risks exist, including the following:
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key suppliers, vendors or other contract counterparties may terminate their relationships with us or require additional financial
assurances or enhanced performance from us;
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our ability to renew existing contracts and compete for new business may be adversely affected;
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our ability to attract, motivate and/or retain key executives and employees may be adversely affected;
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employees may be distracted from performance of their duties or more easily attracted to other employment opportunities; and
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competitors may take business away from us, and our ability to attract and retain customers may be negatively impacted.
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The occurrence of one or more of these events
could have a material and adverse effect on our operations, financial condition and reputation. We cannot assure you that having
been subject to bankruptcy protection will not adversely affect our operations in the future.
In connection with the
disclosure statement we filed with the Bankruptcy Court, and the hearing to consider confirmation of the Plan, we prepared
projected financial information to demonstrate to the Bankruptcy Court the feasibility of the Plan and our ability to
continue operations upon our emergence from bankruptcy. Those projections were prepared solely for the purpose of the
bankruptcy proceedings and have not been, and will not be, updated on an ongoing basis and should not be relied upon by
investors. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future
performance with respect to prevailing and anticipated market and economic conditions that were and remain beyond our control
and that may not materialize. Projections are inherently subject to substantial and numerous uncertainties and to a wide
variety of significant business, economic and competitive risks and the assumptions underlying the projections and/or
valuation estimates may prove to be wrong in material respects. Actual results may vary significantly from those contemplated
by the projections. As a result, investors should not rely on these projections.
Our actual financial results after emergence
from bankruptcy may not be comparable to our historical financial information as a result of the implementation of the Plan and
the transactions contemplated thereby. Furthermore, we have made several significant updates to our accounting policies following
emergence:
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We adopted fresh-start accounting in accordance with Accounting Standards Codification 852, which resulted in our becoming
a new entity for financial reporting purposes. Upon adoption of fresh-start accounting, our assets and liabilities were recorded
at their fair values as of our emergence from the Chapter 11 Cases on August 1, 2017. The fair values of our assets and
liabilities differ materially from the recorded values of our assets and liabilities as reflected in our Predecessor’s historical
consolidated balance sheets.
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We changed our method of accounting for natural gas and oil properties from the Full Cost Method to the Successful Efforts
Method. We recorded significant impairments of our natural gas and oil properties under the Full Cost Method, which might not have
been required under the Successful Efforts Method;
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We have elected to adopt the new standard for revenue recognition under ASC 606 upon emergence. The new guidance requires us
to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to
be received in exchange for those goods or services; and
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We elected to change from a pass-through entity for tax purposes to a c-corp and, accordingly, a taxable entity.
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Accordingly, our future financial conditions
and results of operations may not be comparable to the financial condition or results of operations reflected in our Predecessor’s
historical financial statements. The lack of comparable historical financial information may discourage investors from purchasing
our Common Stock.
Our ability to attract and retain key personnel is critical
to the success of our business and may be affected by our emergence from bankruptcy.
The success of our business depends on key personnel.
Our ability to attract and retain these key personnel may be difficult in light of our emergence from bankruptcy, the uncertainties
currently facing the business and changes we may make to the organizational structure to adjust to changing circumstances. We may
need to enter into retention or other arrangements that could be costly to maintain. If executives, managers or other key personnel
resign, retire or otherwise depart, or their service is otherwise interrupted, we may not be able to replace them in a timely manner
and we could experience significant declines in productivity.
Upon our emergence from bankruptcy, the composition
of our board of directors changed significantly.
Pursuant to the Plan, the composition of our
board of directors (our “Board”) changed significantly. Upon emergence, our Board consists of seven directors, only
one of whom, Scott W. Smith, our President and Chief Executive Officer, previously served on the board of directors of our Predecessor.
The new directors have different backgrounds, experiences and perspectives from those individuals who previously served on our
Predecessor’s board of directors and, thus, may have different views on the issues that will determine our future. There
is no guarantee that our new Board will pursue, or will pursue in the same manner, our current strategic plans. As a result, the
future strategy and our plans may differ materially from those of the past.
Risks Related to Our Common Stock
The price of our Common Stock historically has been
volatile. This volatility may negatively affect the price of our Common Stock.
The Company’s stock continues to experience
substantial price volatility. This volatility may negatively affect the price of our Common Stock at any point in time. Our stock
price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other
factors, including:
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announcements concerning our competitors, the oil and gas industry or the economy in general;
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fluctuations in the prices of oil, natural gas and NGLs;
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general and industry-specific economic conditions;
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changes in financial estimates or recommendations by securities analysts or failure to meet analysts’ performance expectations;
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additions or departures of key members of management;
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any increased indebtedness we may incur in the future;
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speculation or reports by the press or investment community with respect to us or our industry in general;
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announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint
ventures or capital commitments;
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changes or proposed changes in laws or regulations affecting the oil and gas industry or enforcement of these laws and regulations,
or announcements relating to these matters; and
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general market, political and economic conditions, including any such conditions and local conditions in the markets in which
we operate.
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Broad market and industry factors may decrease
the market price of our Common Stock, regardless of our actual operating performance. The stock market in general has from time
to time experienced extreme price and volume fluctuations, including periods of sharp decline. In the past, following periods of
volatility in the overall market and the market price of a company’s securities, securities class action litigation has often
been instituted against these companies. Such litigation, if instituted against us, could result in substantial costs and be a
diversion of our management’s attention and resources.
Sales of our Common Stock by existing stockholders,
or the perception that these sales may occur, especially by directors or significant stockholders of the Company, may cause our
stock price to decline.
If our existing stockholders, in particular
our directors or other affiliates, sell substantial amounts of our Common Stock in the public market, or are perceived by the public
market as intending to sell, the trading price of our Common Stock could decline. In addition, sales of these shares of Common
Stock could impair our ability to raise capital, should we wish to do so. Up to 17,918,493 shares of our Common Stock (inclusive
of 98,110 shares of Common Stock issuable upon exercise of Warrants) may be sold pursuant to this prospectus by the selling stockholders,
which represent 89.34% of our outstanding Common Stock as of October 26, 2017 (after giving effect to the exercise of such 98,110
Warrants). We cannot predict the timing or amount of future sales of our Common Stock by selling stockholders pursuant to this
prospectus, but such sales, or the perception that such sales could occur, may adversely affect prevailing market prices for our
Common Stock.
The exercise of all or any number of outstanding warrants
or the issuance of stock-based awards may dilute your holding of shares of our Common Stock.
At the Effective Date, reserved for issuance
20.1 million shares of Common Stock and (i) to electing holders of Predecessor’s preferred equity, three and a half
year warrants (the “Preferred Unit Warrants”), which are exercisable to purchase up to 621,649.49 shares of the
Common Stock as of the Effective Date, subject to dilution, at a strike price of $44.25 and (ii) to electing holders of Predecessor’s
common equity, three and a half year warrants (the “Common Unit Warrants” and, together with the Preferred Unit Warrants,
the “Warrants”), which are exercisable to purchase up to 640,875.75 shares of the Common Stock as of the Effective
Date, subject to dilution, at a strike price of $61.45. The Warrants expire on February 1, 2021. Additionally, an aggregate
of 2,233,333 shares of Common Stock are available for grant to certain of our employees pursuant to awards under the Vanguard
Natural Resources, Inc. Management Incentive Plan (the “MIP”). The exercise of equity awards, including any stock options
that we may grant in the future, and Warrants, and the sale of shares of our Common Stock underlying any such options or the Warrants,
could have an adverse effect on the market for our Common Stock, including the price that an investor could obtain for their shares.
Investors may experience dilution in the net tangible book value of their investment upon the exercise of the Warrants and any
stock options that may be granted or issued pursuant to the MIP in the future.
USE OF PROCEEDS
The selling stockholders will receive all of
the proceeds from the sale of Common Stock offered from time to time pursuant to this prospectus. Accordingly, we will not receive
any proceeds from the sale of Common Stock by the selling stockholders pursuant to this prospectus. In addition, we have agreed
to pay certain expenses of the selling stockholders incurred in connection with the sale of Common Stock from time to time. Please
read “Selling Stockholders.”
DETERMINATION OF OFFERING PRICE
The selling stockholders will determine at what
price they may sell the shares of Common Stock offered by this prospectus, and such sales may be made at fixed prices, prevailing
market prices at the time of the sale, varying prices determined at the time of sale, or negotiated prices.
MARKET FOR THE SECURITIES
Our Common Stock is quoted on the OTCQX under
the symbol “VNRR” and has been trading since September 28, 2017. No established public trading market existed for our
Common Stock prior to September 28, 2017. The following table sets forth the per share range of high and low bid information for
our Common Stock as reported on the OTCQX for the periods presented.
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High
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Low
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Quarter Ended:
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September 30, 2017 (from September 28, 2017 through September 30, 2017)
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$
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20.50
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$
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17.04
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December 31, 2017 (through October 26, 2017)
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$
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21.00
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$
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18.25
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The closing price of our Common Stock on the
OTCQX on October 26, 2017 was $19.50 per share. Such over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual transactions.
As of October 26, 2017, we had 20,055,958 shares
of Common Stock outstanding. As of October 26, 2017, we had 9 record holders of Common Stock, based on information provided by
our transfer agent.
DIVIDEND POLICY
We do not intend to pay cash dividends on our
Common Stock in the foreseeable future. We currently intend to retain any earnings for the future operation and development of
our business, including exploration, development and acquisition activities. Any future dividend payments will be restricted by
the terms of the agreements governing our revolving credit facility and our 9.0% Senior Secured Second Lien Notes due 2024
(the “Second Lien Notes”).
SELLING STOCKHOLDERS
This prospectus covers the offer and sale of
up to an aggregate of 17,918,493 shares of Common Stock that may be offered and sold from time to time by the selling stockholders
identified below under this prospectus, subject to any appropriate adjustment as a result of any subdivision, split, combination
or other reclassification of our Common Stock.
We have prepared the table, the paragraph immediately
following this paragraph, and the related notes based on information supplied to us by the selling stockholders on or prior to
October 26, 2017. We have not sought to verify such information.
Beneficial ownership has been determined under
rules promulgated by the SEC. The information does not necessarily indicate beneficial ownership for any other purpose. The selling
stockholders may from time to time offer and sell pursuant to this prospectus any or all of the Common Stock owned by them but
make no representation that any of the Common Stock will be offered for sale.
Selling Stockholder
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Beneficially
Owned
Prior to the
Offering†
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Offered
Hereby
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Beneficially
Owned After
the Offering*
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As a
Percentage of
Total
Outstanding
After the
Offering
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Fred C. Alexander III
(1)
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2,311
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2,311
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0
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Aristeia Capital, LLC
(2)
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162,599
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162,599
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0
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—
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Blackrock Multi-Manager Alternative Strategies Fund
(3)
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16,931
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16,931
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0
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—
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BSF Multi-Manager Alternatives Strategy Fund
(3)
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52,468
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52,468
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0
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—
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Contrarian Advantage-B, LP
(4)
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52,529
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52,529
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0
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—
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Contrarian Capital Fund I, L.P.
(5)
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1,462,357
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1,462,357
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0
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—
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Contrarian Capital Trade Claims, L.P.
(5)
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152,688
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152,688
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0
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—
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Contrarian Capital Senior Secured, L.P.
(5)
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52,036
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52,036
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0
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—
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Contrarian Opportunity Fund, L.P.
(5)
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622,405
|
|
|
|
622,405
|
|
|
|
0
|
|
|
|
—
|
|
Contrarian Centre Street Partnership, L.P.
(5)
|
|
|
491,478
|
|
|
|
491,478
|
|
|
|
0
|
|
|
|
—
|
|
Contrarian Dome du Gouter Master Fund, LP
(5)
|
|
|
273,226
|
|
|
|
273,226
|
|
|
|
0
|
|
|
|
—
|
|
CCM Pension-A, L.L.C.
(6)
|
|
|
105,944
|
|
|
|
105,944
|
|
|
|
0
|
|
|
|
—
|
|
CCM Pension-B, L.L.C.
(6)
|
|
|
19,697
|
|
|
|
19,697
|
|
|
|
0
|
|
|
|
—
|
|
Cross Sound Distressed Opportunities Fund, L.P.—Series 1
(7)
|
|
|
558,698
|
|
|
|
558,698
|
|
|
|
0
|
|
|
|
—
|
|
Crown Managed Accounts SPC acting for and on behalf of Crown/Latigo Segregated Portfolio
(8)
|
|
|
135,098
|
|
|
|
135,098
|
|
|
|
0
|
|
|
|
—
|
|
Clarence Hugh Edwards Jr.
(9)
|
|
|
6,933
|
|
|
|
6,933
|
|
|
|
0
|
|
|
|
—
|
|
Fidelity Summer Street Trust: Fidelity Capital & Income Fund
(10)
|
|
|
696,296
|
|
|
|
696,296
|
|
|
|
0
|
|
|
|
—
|
|
Fidelity School Street Trust: Fidelity Strategic Income Fund
(10)
|
|
|
233,252
|
|
|
|
233,252
|
|
|
|
0
|
|
|
|
—
|
|
Fidelity Advisor Series II: Fidelity Advisor Strategic Income Fund
(10)
|
|
|
253,535
|
|
|
|
253,535
|
|
|
|
0
|
|
|
|
—
|
|
First Ballantyne LLC
(11)
|
|
|
44,247
|
|
|
|
44,247
|
|
|
|
0
|
|
|
|
|
|
James Michael Ford
(12)
|
|
|
23,115
|
|
|
|
23,115
|
|
|
|
0
|
|
|
|
—
|
|
J.H. Lane Partners Master Fund, LP
(13)
|
|
|
194,794
|
|
|
|
194,794
|
|
|
|
0
|
|
|
|
—
|
|
J.P. Morgan Securities LLC
(14)
|
|
|
1,466,153
|
|
|
|
1,466,153
|
|
|
|
0
|
|
|
|
—
|
|
Michael D. Johnson
(15)
|
|
|
957
|
|
|
|
957
|
|
|
|
0
|
|
|
|
—
|
|
John Edward Kreshon
(16)
|
|
|
1,849
|
|
|
|
1,849
|
|
|
|
0
|
|
|
|
|
|
Selling Stockholder
|
|
Beneficially
Owned
Prior to the
Offering†
|
|
|
Offered
Hereby
|
|
|
Beneficially
Owned After
the Offering*
|
|
|
As a
Percentage of
Total
Outstanding
After the
Offering
|
|
Latigo Advisors Master Fund, Ltd.
(8)
|
|
|
32,631
|
|
|
|
32,631
|
|
|
|
0
|
|
|
|
—
|
|
Latigo Ultra Master Fund, Ltd.
(8)
|
|
|
172,179
|
|
|
|
172,179
|
|
|
|
0
|
|
|
|
—
|
|
Marathon Bluegrass Credit Fund LP
(3)
|
|
|
380,469
|
|
|
|
380,469
|
|
|
|
0
|
|
|
|
—
|
|
Marathon Centre Street Partnership
(3)
|
|
|
1,145,654
|
|
|
|
1,145,654
|
|
|
|
0
|
|
|
|
—
|
|
Marathon Credit Dislocation Fund LP
(3)
|
|
|
389,642
|
|
|
|
389,642
|
|
|
|
0
|
|
|
|
—
|
|
Marathon Special Opportunity Master Fund LTD.
(3)
|
|
|
2,079,379
|
|
|
|
2,079,379
|
|
|
|
0
|
|
|
|
—
|
|
Master SIF SICAV-SIF
(3)
|
|
|
355,902
|
|
|
|
355,902
|
|
|
|
0
|
|
|
|
—
|
|
Monarch Alternative Solutions Master Fund Ltd.
(17)
|
|
|
90,963
|
|
|
|
90,963
|
|
|
|
0
|
|
|
|
—
|
|
Monarch Capital Master Partners III LP
(17)
|
|
|
442,034
|
|
|
|
442,034
|
|
|
|
0
|
|
|
|
—
|
|
MCP Holdings Master LP
(17)
|
|
|
511,364
|
|
|
|
511,364
|
|
|
|
0
|
|
|
|
—
|
|
Monarch Debt Recovery Master Fund Ltd
(17)
|
|
|
995,841
|
|
|
|
995,841
|
|
|
|
0
|
|
|
|
—
|
|
P Monarch Recovery Ltd.
(17)
|
|
|
2,101
|
|
|
|
2,101
|
|
|
|
0
|
|
|
|
—
|
|
Pentelli Master Fund Ltd.
(3)
|
|
|
65,942
|
|
|
|
65,942
|
|
|
|
0
|
|
|
|
—
|
|
Morgan Stanley & Co. LLC
(18)
|
|
|
2,206,333
|
|
|
|
2,206,333
|
|
|
|
0
|
|
|
|
—
|
|
Reef Road Master Fund LTD
(19)
|
|
|
140,890
|
|
|
|
140,890
|
|
|
|
0
|
|
|
|
—
|
|
Sierra Pacific Securities, LLC
(20)
|
|
|
85,215
|
|
|
|
85,215
|
|
|
|
0
|
|
|
|
—
|
|
Silver Point Capital Offshore Master Fund, L.P.
(21)
|
|
|
468,773
|
|
|
|
468,773
|
|
|
|
0
|
|
|
|
—
|
|
Silver Point Capital Fund, L.P.
(21)
|
|
|
299,717
|
|
|
|
299,717
|
|
|
|
0
|
|
|
|
—
|
|
Scott J. Simons
(22)
|
|
|
2,310
|
|
|
|
2,310
|
|
|
|
0
|
|
|
|
—
|
|
Three Little Birds Investments, LLC
(23)
|
|
|
23,115
|
|
|
|
23,115
|
|
|
|
0
|
|
|
|
—
|
|
TRS Credit Fund LP
(3)
|
|
|
463,895
|
|
|
|
463,895
|
|
|
|
0
|
|
|
|
—
|
|
Variable Insurance Products Fund V: Strategic Income Portfolio
(10)
|
|
|
23,745
|
|
|
|
23,745
|
|
|
|
0
|
|
|
|
—
|
|
Whitebox Asymmetric Partners, LP
(24)
|
|
|
176,027
|
|
|
|
176,027
|
|
|
|
0
|
|
|
|
—
|
|
Whitebox Institutional Partners, LP
(25)
|
|
|
15,371
|
|
|
|
15,371
|
|
|
|
0
|
|
|
|
—
|
|
Whitebox Multi-Strategy Partners, LP
(26)
|
|
|
267,405
|
|
|
|
267,405
|
|
|
|
0
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
17,918,493
|
|
|
|
17,918,493
|
|
|
|
0
|
|
|
|
—
|
|
The shares of Common Stock (including the shares
of Common Stock, reflected herein, issuable upon exercise of the Warrants to purchase shares of our Common Stock) that may be offered
for resale by the selling holders pursuant to this prospectus were acquired by the selling stockholders in connection with our
emergence from bankruptcy on August 1, 2017, in transactions that were exempt from registration under the Securities Act of 1933,
as amended (the “Securities Act”). See “Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations – Bankruptcy Proceedings Under Chapter 11” in our Quarterly Report on Form 10-Q for the three
months ended June 30, 2017 for additional information regarding our restructuring and how the selling stockholders acquired our
Common Stock and Warrants to acquire our Common Stock.
|
†
|
The number of shares beneficially owned by each stockholder is determined under rules promulgated by the SEC and includes voting
or investment power with respect to securities. Under Rule 13d-3 under the Exchange Act, as amended, beneficial ownership includes
any shares to which the individual or entity has sole or shared voting power or investment power and includes any shares as to
which the individual or entity has the right to acquire beneficial ownership within 60 days of October 26, 2017, through the
exercise of any warrant, stock option or other right. The inclusion in this table of such shares, however, does not constitute
an admission that the named stockholder is a direct or indirect beneficial owner of such shares. Unless otherwise indicated, each
of the stockholders has sole voting and investment power with respect to the shares of Common Stock beneficially owned by the stockholder.
|
|
*
|
Represents the amounts of shares that will be held by
the selling stockholder after completion of this offering based on the assumptions that: (a) all shares registered for sale
by the registration statement of which this prospectus is a part will be sold by or on behalf of the selling stockholder; and
(b) no other shares of our Common Stock will be acquired prior to completion of this offering by the selling stockholder.
The selling stockholders may sell all, some or none of the shares offered pursuant to this prospectus and may sell other shares
of our Common Stock that they may own pursuant to another registration statement under the Securities Act or sell some or all
of their Common Stock pursuant to an exemption from the registration requirements of the Securities Act, including under Rule 144
promulgated thereunder or any successor rule. Except as described below, to our knowledge, there are currently no agreements,
arrangements or understandings with respect to the sale of any of the shares that may be held by the selling stockholders after
completion of this offering or otherwise.
|
|
(1)
|
The address of Fred C. Alexander III is 4300 Denbigh Dr., Charlotte, NC 28226. Fred C. Alexander III is an affiliate of a registered
broker-dealer.
|
|
(2)
|
Aristeia Capital, LLC and Aristeia Advisors, L.P. (collectively, “Aristeia”) may be deemed the beneficial owners
of the securities described herein in their capacity as the investment manager and/or general partner, as the case may be, of Aristeia
Master, L.P., Windermere Ireland Fund PLC, Compass ESMA LP, and Compass TSMA LP (each a “Fund” and collectively, the
“Funds”), which are the holders of such securities. As investment manager, trading advisor and/or general partner of
each Fund, Aristeia has voting and investment control with respect to the securities held by each Fund. Anthony M. Frascella is
the Chief Investment Officer of Aristeia. Each of Aristeia and such individual disclaims beneficial ownership of the securities
referenced herein except to the extent of its or his direct or indirect economic interest in the Funds. The business address of
Aristeia is One Greenwich Plaza, 3
rd
Floor, Greenwich, CT 06830.
|
|
(3)
|
Bruce Richards and Louis Hanover, are managing members of Marathon Asset Management GP LLC, general partner of Marathon Asset
Management LP (“Marathon”), which is acting as investment advisor to the funds and accounts listed. Michael V. Alexander,
an employee of Marathon and/or one of its affiliates, is a member of the Board of Directors. Mr. Alexander does not individually
hold or otherwise beneficially own any securities of Vanguard Natural Resources, Inc. Mr. Alexander disclaims beneficial ownership
of any such securities, except to the extent of his pecuniary interest therein. The number of shares beneficially owned includes
2,646 shares of Common Stock issuable upon exercise of Preferred Unit Warrants held by Marathon Bluegrass Credit Fund LP, 8,220
shares of Common Stock issuable upon exercise of Preferred Unit Warrants held by Marathon Centre Street Partnership, 2,850 shares
of Common Stock issuable upon exercise of Preferred Unit Warrants held by Marathon Credit Dislocation Fund LP, 14,154 shares of
Common Stock issuable upon exercise of Preferred Unit Warrants held by Marathon Special Opportunity Master Fund LTD, 2,080 shares
of Common Stock issuable upon exercise of Preferred Unit Warrants held by Master SIF SICAV-SIF, and 3,237 shares of Common Stock
issuable upon exercise of Preferred Unit Warrants held by TRS Credit Fund LP that, in each case, are exercisable within 60 days
of the date of this prospectus. The business address of these funds and accounts is One Bryant Park, 38th Floor, New York, NY 10036.
|
|
(4)
|
Contrarian Capital Management, L.L.C. (“Contrarian”) is the general partner of Contrarian Advantage-B, LP (“TCAB”).
The managing member of Contrarian is Mr. Jon R. Bauer (“Bauer”) and each of Contrarian and Bauer may be deemed to beneficially
own the securities held by TCAB. Contrarian and Bauer each disclaim beneficial ownership of such securities except to the extent
of their pecuniary interests therein. Graham Morris, an employee of Contrarian, is a member of the Board of Directors. Mr. Morris
disclaims beneficial ownership of such securities. The business address of TCAB is 411 West Putnam Ave, Ste 425, Greenwich, CT
06830.
|
|
(5)
|
Contrarian is the investment manager for Contrarian Capital Trade Claims, L.P. (“CCTC”), Contrarian Capital Senior
Secured, L.P. (“CSSM”), Contrarian Opportunity Fund L.P. (“COF”), Contrarian Centre Street Partnership,
L.P. (“CCSP”), Contrarian Dome du Gouter Master Fund, LP (“CDGM”) and Contrarian Capital Fund I, L.P. (“CCI”).
The managing member of Contrarian is Bauer and each of Contrarian and Bauer may be deemed to beneficially own the securities held
by CCTC, CSSM, COF, CCSP, CDGM and CCI. Contrarian and Bauer each disclaim beneficial ownership of such securities except to the
extent of their pecuniary interests therein. Graham Morris, an employee of Contrarian, is a member of the Board of Directors. Mr.
Morris disclaims beneficial ownership of such securities. The business address of CCTC, CSSM, COF, CCSP, CDGM and CCI is 411 West
Putnam Ave, Ste 425, Greenwich, CT 06830.
|
|
(6)
|
Contrarian is the managing member of CCM Pension-A, L.L.C. (“CPENA”) and CCM Pension-B, L.L.C. (“CPENB”).
The managing member of Contrarian is Bauer and each of Contrarian and Bauer may be deemed to beneficially own the securities held
by CPENA and CPENB. Contrarian and Bauer each disclaim beneficial ownership of such securities except to the extent of their pecuniary
interests therein. Graham Morris, an employee of Contrarian, is a member of the Board of Directors. Mr. Morris disclaims beneficial
ownership of such securities. The business address of CPENA and CPENB is 411 West Putnam Ave, Ste 425, Greenwich, CT 06830.
|
|
(7)
|
The Chief Investment Officers of Cross Sound Distressed Opportunities Fund L.P. – Series 1 (“Cross Sound”)
are David Dunn and Arif Gangat. The business address of Cross Sound is 10 Westport Road, Bldg. C, Suite 202, P.O. Box 400, Wilton,
CT 06897.
|
|
(8)
|
David Sabath and David Ford are the managing members of Latigo Partners, L.P. (“Latigo”), which is the trading
advisor of Crown Managed Accounts SPC acting for and on behalf of Crown/Latigo Segregated Portfolio (“Latigo Crown”)
and the investment manager of Latigo Ultra Master Fund, Ltd. (“Latigo Ultra”) and Latigo Advisors Master Fund (“Latigo
Advisors”). The business address of Latigo Crown, Latigo Ultra and Latigo Advisors is 450 Park Avenue, 12
th
Floor,
New York, NY 10022.
|
|
(9)
|
The address for Clarence Edwards is 14 Terra Lea Lane, Greensville, SC 29615. Clarence Edwards is an affiliate of a registered
broker-dealer.
|
|
(10)
|
These accounts are managed by direct or indirect subsidiaries of FMR LLC. Abigail P. Johnson is a Director, the Vice Chairman,
the Chief Executive Officer and the President of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the
predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power
of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement
under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares.
Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members
of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR
LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the
various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management
& Research Company (“FMR Co”), a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’
Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established
by the Fidelity Funds’ Boards of Trustees. The business address of Fidelity Summer Street Trust: Fidelity Capital & Income
Fund is 135 Santilli Highway, Everett, MA 02149. The business addresses of Variable Insurance Products Fund: Strategic Income Portfolio,
Fidelity School Street Trust: Fidelity Strategic Income Fund and Fidelity Advisor Series II: Fidelity Advisor Strategic Income
Fund are 245 Summer Street, Boston, MA 02210. The Fidelity Funds are affiliates of a registered broker-dealer.
|
|
(11)
|
The business address of First Ballantyne, LLC (“FB”) is 13950 Ballantyne Corp. Place, Suite 185, Charlotte, NC
28277. FB is a registered broker-dealer.
|
|
(12)
|
The address of James Michael Ford is 1502 Hubbard Ct, Fort Mill, SC 29708. James Michael Ford is an affiliate of a registered
broker-dealer.
|
|
(13)
|
J.H. Lane Partners. LP is the Investment Manager of J.H. Lane Partners Fund, LP and J.H. Lane Partners Offshore Fund. Ltd.
J.H. Lane Partners Fund, LP and J .H. Lane Partners Offshore Fund, Ltd. together with the general partner J.H. Lane Holdings GP,
LLC, own J .H. Lane Partners Master Fund, LP (“J.H. Lane”). The number of shares beneficially owned includes 9,676
shares of Common Stock issuable upon exercise of Preferred Unit Warrants held by J.H. Lane that are exercisable within 60 days
of the date of this prospectus. The Managing Members of J.H. Lane Partners, LP and J.H. Lane Holdings GP, LLC are Seth Lax and
Jonathan Neiss. The business address of J.H. Lane is 126 East 56
th
Street, Suite 1620, New York, NY 10022.
|
|
(14)
|
Each of Christopher L. Harvey, Eric D. Tepper, Eric J. Stein, Erin Elizabeth Hill, Jason Edwin Sippel, Kelly Cesare Coffey,
Matthew Cherwin, Patrick C. Kirby and Robert C. Holmes is a Manager of J.P. Morgan Securities LLC (“JPM”), a Delaware
limited liability company, and as such may be deemed to have voting and dispositive power over the shares held by JPM. Each of
Christopher L. Harvey, Eric D. Tepper, Eric J. Stein, Erin Elizabeth Hill, Jason Edwin Sippel, Kelly Cesare Coffey, Matthew Cherwin,
Patrick C. Kirby and Robert C. Holmes disclaims beneficial ownership of the shares. JPM is a broker-dealer registered pursuant
to Section 15 of the Exchange Act. The number of shares beneficially owned includes 53,707 shares of Common Stock issuable upon
exercise of Preferred Unit Warrants held by JPM that are exercisable within 60 days of the date of this prospectus. The business
address for each of JPM, Christopher L. Harvey, Eric D. Tepper, Eric J. Stein, Erin Elizabeth Hill, Jason Edwin Sippel, Kelly Cesare
Coffey, Matthew Cherwin, Patrick C. Kirby and Robert C. Holmes is 383 Madison Avenue, 3rd Floor, New York, New York 10179.
|
|
(15)
|
The number of shares beneficially owned includes 33 shares of Common Stock issuable upon exercise of Common Unit Warrants held
by Michael D. Johnson that are exercisable within 60 days of the date of this prospectus. The address of Michael D. Johnson is
336 Chancelot Lane, Fort Mill, SC 29708. Michael D. Johnson is an affiliate of a registered broker dealer.
|
|
(16)
|
The address of John Edward Kreshon is 3333 Fielding Ave, Charlotte, NC 28211. John Edward Kreshon is an affiliate of a registered
broker-dealer.
|
|
(17)
|
Monarch Alternative Capital LP (“Monarch”) is the investment manager for Monarch Alternative Solutions Master Fund
Ltd, Monarch Capital Master Partners III LP, MCP Holdings Master LP, Monarch Debt Recovery Master Fund Ltd and P Monarch Recovery
Ltd. (together, the “Monarch Funds”). MDRA GP LP (“MDRA”) is the general partner of Monarch. Monarch GP
LLC (“Monarch GP”) is the general partner of MDRA. Monarch, MDRA and Monarch GP each may be deemed to beneficially
own the securities held by the Monarch Funds. Monarch, MDRA and Monarch GP each disclaim beneficial ownership of such securities
except to the extent of their pecuniary interests therein. Joseph Citarrella, a principal of Monarch, is a member of the Board
of Directors. Mr. Citarrella disclaims beneficial ownership of any such securities. The business address for each of the Monarch
Funds is c/o Monarch Alternative Capital LP, 535 Madison Avenue, New York, NY 10022.
|
|
(18)
|
Richard VanderMass is a Managing Director of the business unit at Morgan Stanley & Co. LLC that holds the shares in the
ordinary course of its business and as such may be deemed to have voting and dispositive power over the shares held by Morgan Stanley
& Co. LLC. Richard VanderMass disclaims beneficial ownership of these shares. Morgan Stanley & Co. LLC, a registered broker-dealer,
is a subsidiary of Morgan Stanley, a widely held reporting company under the Exchange Act. The number of shares beneficially owned
includes 1,507 shares of Common Stock issuable upon exercise of Preferred Unit Warrants held by Morgan Stanley that are exercisable
within 60 days of the date of this prospectus. The mailing address for Morgan Stanley & Co. LLC is 1585 Broadway, 2nd Floor,
New York, NY 10036.
|
|
(19)
|
Reef Road Capital LLC serves as investment advisor to Reef Road Master Fund LTD (“Reef Road Master”) and Eric Rosen
and Jeff Nusbaum have voting and investment decision over the shares. The business address for Reef Road Master is 747 Third Avenue,
19
th
Floor, New York, NY 10017.
|
|
(20)
|
Erin Lankowsky and Jurrod Dean are Co-Presidents of Sierra Pacific Securities, LLC (“Sierra Pacific”). Sierra Pacific
is a broker-dealer registered pursuant to Section 15 of the Exchange Act. The business address of Sierra Pacific is 10100 W. Charleston
Blvd., Suite 214, Las Vegas, NV 89135.
|
|
(21)
|
Silver Point Capital, L.P. (“Silver Point”) is the investment manager of Silver Point Capital Offshore Master Fund,
L.P. and Silver Point Capital Fund, L.P. (the “SP Funds”) and, by reason of such status, may be deemed to be the beneficial
owner of all of the reported securities held by the SP Funds. Silver Point Capital Management, LLC (“SP Management”)
is the general partner of Silver Point and as a result may be deemed to be the beneficial owner of all securities held by the SP
Funds. Messrs. Edward A. Mulé and Robert J. O’Shea are each members of SP Management (collectively, the “Silver
Point Members”), and as a result may be deemed to be the beneficial owner of all of the securities held by the SP Funds.
Silver Point, SP Management and the Silver Point Members each disclaim beneficial ownership of such securities except to the extent
of their pecuniary interest therein. The business address for the SP Funds is Two Greenwich Plaza, 1
st
Floor, Greenwich,
CT 06830.
|
|
(22)
|
The address for Scott J. Simons is 3028 Brookmont Place, Charlotte, NC 28210. Scott J Simons is an affiliate of a registered
broker-dealer.
|
|
(23)
|
Christopher S. Edwards is the beneficial owner and ultimate controlling manager of all assets of Three Little Birds Investments,
LLC (“Three Little Birds”). The business address of Three Little Birds is 4712 Carmel Club Drive, Charlotte, NC 28226.
Three Little Birds is an affiliate of a registered broker-dealer.
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Whitebox General Partner LLC is the general partner of Whitebox Asymmetric Partners, LP, the Cayman Islands limited partnership
that has direct beneficial ownership of the shares. Whitebox General Partner LLC is owned by Andrew Redleaf, Robert Vogel, Jacob
Mercer, Paul Roos, Mark Strefling, Paul Twitchell, Richard Vigilante and Dyal Capital Partners II (B) LP. Messrs. Redleaf, Vogel,
Mercer, Roos, Strefling, Twitchell and Vigilante share voting and dispositive power over all of the shares of Whitebox General
Partner LLC. Whitebox Advisors LLC is the investment manager of Whitebox Asymmetric Partners, LP and holds voting and disposable
power over the shares of the Company. Whitebox Advisors LLC is owned by Andrew Redleaf, Robert Vogel, Jacob Mercer, Paul Roos,
Mark Strefling, Paul Twitchell, Richard Vigilante and Dyal Capital Partners II (A) LP. The address of these persons is 3033 Excelsior
Blvd, Suite 300, Minneapolis, MN 55416.
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(25)
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Whitebox General Partner LLC is the general partner of Whitebox Institutional Partners, LP, the Delaware limited partnership
that has direct beneficial ownership of the shares. Whitebox General Partner LLC is owned by Andrew Redleaf, Robert Vogel, Jacob
Mercer, Paul Roos, Mark Strefling, Paul Twitchell, Richard Vigilante and Dyal Capital Partners II (B) LP. Messrs. Redleaf, Vogel,
Mercer, Roos, Strefling, Twitchell and Vigilante share voting and dispositive power over all of the shares of Whitebox General
Partner LLC. Whitebox Advisors LLC is the investment manager of Whitebox Institutional Partners, LP and holds voting and disposable
power over the shares of the Company. Whitebox Advisors LLC is owned by Andrew Redleaf, Robert Vogel, Jacob Mercer, Paul Roos,
Mark Strefling, Paul Twitchell, Richard Vigilante and Dyal Capital Partners II (A) LP. The address of these persons is 3033 Excelsior
Blvd, Suite 300, Minneapolis, MN 55416.
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(26)
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Whitebox General Partner LLC is the general partner of Whitebox Multi-Strategy Partners, LP, the British Virgin Islands limited
partnership that has direct beneficial ownership of the shares. Whitebox General Partner LLC is owned by Andrew Redleaf, Robert
Vogel, Jacob Mercer, Paul Roos, Mark Strefling, Paul Twitchell, Richard Vigilante and Dyal Capital Partners II (B) LP. Messrs.
Redleaf, Vogel, Mercer, Roos, Strefling, Twitchell and Vigilante share voting and dispositive power over all of the shares of Whitebox
General Partner LLC. Whitebox Advisors LLC is the investment manager of Whitebox Multi-Strategy Partners, LP and holds voting and
disposable power over the shares of the Company. Whitebox Advisors LLC is owned by Andrew Redleaf, Robert Vogel, Jacob Mercer,
Paul Roos, Mark Strefling, Paul Twitchell, Richard Vigilante and Dyal Capital Partners II (A) LP. The address of these persons
is 3033 Excelsior Blvd, Suite 300, Minneapolis, MN 55416.
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Relationships with Selling Stockholders
Information concerning the selling stockholders
may change from time to time, including by addition of additional selling stockholders, and, if necessary, we will amend or supplement
this prospectus accordingly. To our knowledge, none of the selling stockholders has, or has had within the past three years, any
position, office or other material relationship with us or any of our predecessors or affiliates, other than its ownership of Common
Stock and related director memberships in addition to lending relationships.
Broker-Dealers and Underwriters
Certain selling stockholders are registered
broker-dealers or affiliates of registered broker-dealers (but are not themselves broker-dealers). Each of the selling stockholders
that are registered broker-dealers may be deemed an “underwriter” within the meaning of Section 2(a)(11) of the Securities
Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares of our Common Stock may be underwriting
discounts and commissions under the Securities Act. Each of the selling stockholders who is an affiliate of a broker-dealer acquired
the securities identified in the table as beneficially owned by it in the ordinary course of business and, at the time of that
acquisition, had no agreements or understandings, directly or indirectly, with any person to distribute those securities. These
broker-dealer affiliates did not receive the securities to be sold in the offering as underwriting compensation.
PLAN OF DISTRIBUTION
We are registering shares of Common Stock covered
by this prospectus to permit the selling stockholders to conduct public secondary trading of these shares from time to time after
the date of this prospectus. Distributions of the shares of Common Stock by the selling stockholders, or by their partners, pledgees,
donees (including charitable organizations), transferees or other successors in interest, may from time to time be offered for
sale either directly by such individual, or through underwriters, dealers or agents or on any exchange on which Common Stock may
from time to time be traded, in the over-the-counter market, or in independently negotiated transactions or otherwise.
The methods by which the shares of Common Stock
may be sold include:
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privately negotiated transactions;
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underwritten transactions;
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exchange distributions and/or secondary distributions;
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on any national securities exchange or quotation service on which the Common Stock may be listed or quoted at the time of sale;
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sales in the over-the-counter market;
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in transactions otherwise than on such exchanges or services or in the over-the-counter market;
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ordinary brokerage transactions and transactions in which the broker solicits purchasers;
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broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per
share;
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a block trade (which may involve crosses) in which the broker or dealer so engaged will attempt to sell the securities as agent
but may position and resell a portion of the block as principal to facilitate the transaction;
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purchases by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this prospectus;
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through the settlement of short sales;
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through the writing of options on the shares, whether or not the options are listed on an options exchange;
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through the distributions of the shares by any selling stockholder to its partners, members or stockholders;
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a combination of any such methods of sale; and
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any other method permitted pursuant to applicable law.
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Such transactions may be effected by the selling
stockholders at market prices prevailing at the time of sale or at negotiated prices. The selling stockholders may effect such
transactions by selling the securities to underwriters or to or through broker-dealers or other agents, and such underwriters or
broker-dealers or agents may receive compensation in the form of discounts, concessions or commissions from the selling stockholders
and may receive commissions from the purchasers of the securities for whom they may act as agent. Any such discounts, concessions
or commissions may be in excess of those customary in the types of transactions involved. The selling stockholders may agree to
indemnify any underwriter, broker-dealer or agent that participates in transactions involving sales of the shares of Common Stock
against certain liabilities, including liabilities arising under the Securities Act. We have agreed to register the shares of Common
Stock for sale under the Securities Act and to indemnify the selling stockholders and each person who participates as an underwriter
in the offering of the shares of Common Stock against certain civil liabilities, including certain liabilities under the Securities
Act.
In connection with sales of the securities under
this prospectus, the selling stockholders may enter into hedging transactions with broker-dealers, who may in turn engage in short
sales of the securities in the course of hedging the positions they assume. The selling stockholders also may sell securities short
and deliver them to close their short positions, or loan or pledge the securities to broker-dealers that in turn may sell them,
enter into option or other transactions with other financial institutions that require the delivery of the securities to such institutions
which such institutions may resell, or enter into transactions in which a broker-dealer makes purchases as principal for resale
for its own account or through other types of transactions.
The selling stockholders may from time to time
pledge or grant a security interest in some or all of the shares of Common Stock owned by them and, if they default in the performance
of their secured obligations, the pledgees or secured parties may offer and sell Common Stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424 or other applicable provision of the Securities Act amending the list
of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.
There can be no assurances that the selling
stockholders will sell any or all of the securities offered under this prospectus. Further, we cannot assure you that any such
selling stockholder will not transfer, devise or gift the common stock by other means not described in this prospectus. The selling
stockholders may also sell shares of Common Stock under Rule 144 or Rule 144A under the Securities Act, or pursuant to another
exemption from registration under the Securities Act, in each case, if available, rather than under this prospectus. The selling
stockholders may also sell the Common Stock to non-U.S. Persons outside the United States in accordance with Regulation S under
the securities act, rather than under this prospectus.
Pursuant to the Registration Rights Agreement,
we have agreed to pay substantially all of the expenses incidental to the registration of the Common Stock, including the payment
of federal securities law and state “blue sky” registration fees excluding underwriting discounts and commissions relating
to the sale of Common Stock.
DESCRIPTION OF CAPITAL STOCK
Authorized Capitalization
Our Certificate of Incorporation provides that
we are authorized to issue 60,000,000 shares of capital stock, divided into two classes consisting of (a) 50,000,000 shares
of Common Stock and (b) 10,000,000 shares of preferred stock, par value $0.001 per share.
Common Stock
Dividends
Subject to the rights granted to any holders
of preferred stock, our Certificate of Incorporation provides that holders of the shares of Common Stock will be entitled to dividends
in the amounts and at the times declared by the Board in its discretion out of any assets or our funds legally available for the
payment of dividends. At this time, any future dividend payments will be restricted by the terms of the agreements governing our
revolving credit facility and our Second Lien Notes.
Voting Rights
Each holder of Common Stock is entitled to one
vote for each share on all matters submitted to a vote of the stockholders, including the election or removal of directors. Until
public listing of the Common Stock on a national exchange or the consummation of an initial public offering, any action to be taken
by the affirmative vote of the stockholders at any annual or special meeting of the stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing, setting forth the action taken is signed by the holders
of outstanding stock of the Corporation having not less than the minimum number of votes that would be necessary to take such action
at a meeting of stockholders at which all shares entitled to vote thereon were present and voted. After the date in which a public
listing of the Common Stock on a national exchange or the consummation of an initial public offering is completed, any action to
be taken by the affirmative vote of the stockholders at any annual or special meeting of the stockholders may be taken without
prior notice and without a vote, if a consent or consents in writing, setting forth the action taken is signed by all of the holders
of outstanding stock entitled to vote thereon.
Our Certificate of Incorporation provides that
the Whole Board (as defined in the Certificate of Incorporation) will initially be comprised of six directors and our Bylaws provide
that, subject to the rights, if any, of the holders of shares of any class or series of preferred stock then outstanding to remove
directors as set forth in the instrument of designation of such preferred stock applicable thereto, any director or the entire
Board may be removed from office, with or without cause, upon the affirmative vote of the holders of at least a majority of the
total voting power of all the shares entitled to vote generally in the election of our directors, voting together as a single class.
The number of directors that comprise the Whole Board may be changed from time to time by a resolution adopted by a majority of
the Board.
Our Bylaws provide that all elections of our
directors will be determined by a plurality of the votes cast, and except as otherwise required by law or the rules of any stock
exchange upon which our securities are listed or as otherwise provided in the Bylaws or the Certificate of Incorporation, all other
matters will be determined by a majority of the votes cast affirmatively or negatively, on such matter. The Board is currently
comprised of seven directors.
Other Rights
The shares of Common Stock are not convertible,
redeemable, assessable or entitled to the benefits of any sinking or repurchase fund. The rights, preferences and privileges of
holders of the shares of Common Stock will be subject to those of the holders of any shares of preferred stock that we may issue
in the future. Upon liquidation, dissolution or winding up of the affairs of the Company, the holders of the shares of Common Stock
will share equally, on a per share basis, in the assets thereof that may be available for distribution after satisfaction of creditors
and of the preferences of shares of preferred stock.
Under the terms of our Certificate of Incorporation
and our Bylaws, we are prohibited from issuing any non-voting equity securities to the extent required under Section 1123(a)(6)
of the Bankruptcy Code and only for so long as Section 1123 of the Bankruptcy Code is in effect and applicable to us.
Limitation on Voting
Notwithstanding anything contained in the Certificate
of Incorporation to the contrary, J.P. Morgan Securities LLC (“JPMS”) and its affiliates, collectively, shall not be
entitled to vote, directly or indirectly, equity securities of the Company representing, in aggregate, greater than 4.99% of the
total combined voting power of any class of equity securities of the Company entitled to vote on any matter (any equity securities
held by JPMS and its affiliates, collectively, in excess of such 4.99% limitation, the “Excess Voting Stock”). For
the avoidance of doubt, if JPMS or any of its affiliates shall transfer any Excess Voting Stock to any other person that is not
an affiliate of JPMS, the limitation set forth above shall no longer apply to such Excess Voting Stock. Excess Voting Stock may
only be transferred by JPMS or any of its affiliates: (i) among or between JPMS and its affiliates; (ii) in a widespread public
distribution; (iii) in transfers in which no transferee (or group of associated transferees) would receive from JPMS and its affiliates
in such sale or transfer two percent (2%) or more of any class of voting securities of the Company; (iv) to an underwriter for
the purpose of conducting a widespread public distribution of the voting securities of the Company; (v) to the Company; or (vi)
to a transferee that would control more than fifty percent (50%) of the voting securities of the Company without any transfer of
Excess Voting Stock from JPMS or its affiliates.
Directors
The Board shall consist of not less than one
nor more than fifteen directors, and is currently comprised of seven directors. The number of directors may be changed from time
to time by a resolution adopted by a majority of the Board. Each director to be elected by stockholders shall be determined
by a plurality of the votes cast. There is no cumulative voting in the election of directors. Directors may be removed, with or
without cause, by an affirmative vote of the holders of a majority of the total voting power of all the shares entitled to vote
generally in the election of our directors, voting together as a single class, as described in “—Common Stock—Voting
Rights.”
All directors will be in one class and serve
for a term ending at the annual meeting following the annual meeting at which the director was elected. Our current class of directors
will be subject to reelection at our 2018 annual meeting.
Limitation of Liability of Directors
The Certificate of Incorporation provides that
no director shall be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as
a director to the fullest extent permitted by the Delaware General Corporation Law (“DGCL”). The effect of this provision
is to eliminate our and our stockholders’ rights, through stockholders’ derivative suits on our behalf, to recover
monetary damages against a director for a breach of fiduciary duty as a director.
We may purchase insurance on behalf of any officer,
director, employee or other agent for any liability arising out of that person’s actions as our officer, director, employee
or agent, regardless of whether Delaware law would permit indemnification.
Section 102 of the DGCL allows a corporation
to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for
a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith,
engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase
in violation of the DGCL or obtained an improper personal benefit.
Section 145 of the DGCL provides, among
other things, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact
that the person is or was a director, officer, agent or employee of the corporation or is or was serving at the corporation’s
request as a director, officer, agent, or employee of another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred
by the person in connection with such action, suit or proceeding. The power to indemnify applies (a) if such person is successful
on the merits or otherwise in defense of any action, suit or proceeding, or (b) if such person acted in good faith and in
a manner he or she reasonably believed to be in the best interest, or not opposed to the best interest, of the corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The power
to indemnify applies to actions brought by or in the right of the corporation as well, but only to the extent of defense expenses
(including attorneys’ fees but excluding amounts paid in settlement) actually and reasonably incurred and not to any satisfaction
of judgment or settlement of the claim itself, and with the further limitation that in such actions no indemnification shall be
made in the event of any adjudication of negligence or misconduct in the performance of his or her duties to the corporation, unless
the court believes that in the light of all the circumstances indemnification should apply.
Section 174 of the DGCL provides, among
other things, that a director, who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase
or redemption, may be held liable for such actions. A director who was either absent when the unlawful actions were approved or
dissented at the time may avoid liability by causing his or her dissent to such actions to be entered in the books containing the
minutes of the meetings of the Board at the time such action occurred or immediately after such absent director receives notice
of the unlawful acts.
Anti-Takeover Provisions of the Certificate of Incorporation,
the Bylaws and the DGCL
Our Certificate of Incorporation, our Bylaws
and the DGCL contain provisions that may have some anti-takeover effects and may delay, defer or prevent a takeover attempt or
a removal of the incumbent officers or directors that a stockholder might consider in his, her or its best interest, including
those attempts that might result in a premium over the market price for shares held by the stockholders.
Preferred Stock
The Board is empowered, without further vote
or action by the stockholders (except as may otherwise be provided by the terms of any class or series of then-outstanding preferred
stock), to (i) authorize the issuance of preferred stock in one or more classes or series, (ii) establish from time to
time the number of shares to be included in each such series, which the Board may thereafter increase or decrease (but not below
the number of shares thereof then-outstanding), and (iii) fix the designations, powers, preferences, rights, qualifications,
limitations and restrictions thereof.
The issuance of preferred stock may have the
effect of delaying, deferring or preventing a change in control of the Company without further action by the stockholders and may
adversely affect the voting and other rights of the holders of the shares of Common Stock.
Calling of Special Meeting of Stockholders
Stockholders are only permitted to call a special
meeting upon a written request of holders of record of at least the majority of the total voting power of all of our outstanding
shares entitled to vote generally in the election of directors.
Amendment of the Bylaws
Under the DGCL, the power to adopt, amend or
repeal bylaws is conferred upon the stockholders. A corporation may, however, in its certificate of incorporation also confer upon
the board of directors the power to adopt, amend or repeal its bylaws. Our Certificate of Incorporation and our Bylaws grant to
the Board the power to adopt, amend, restate or repeal the Bylaws, provided that until the earlier of a public listing of the Common
Stock on a national exchange or the consummation of an initial public offering, no provision inconsistent with the terms of the
vacancies of our Board or newly created directorships may be altered, amended or repealed, unless such repeal or amendment shall
have been approved by 66 2/3% of the total voting power of our shares entitled to vote generally in the election of directors.
Other Limitations on Stockholder Actions
Advance notice is required for stockholders
to nominate directors or to submit proposals for consideration at meetings of stockholders.
Newly Created Directorships and Vacancies on the Board
Under the Bylaws, prior to the date we complete
a public listing of the Common Stock on a national exchange or consummate an initial public offering, any vacancy on the Board
shall be filled only by the affirmative vote of the holders of a majority in voting power of the stock entitled to vote thereon.
From and after the date we complete a public listing or an initial public offering, subject to the rights, if any, of the holders
of shares of any class or series of preferred stock then outstanding to designate a director to fill a vacancy as set forth in
the instrument of designation of such preferred stock applicable thereto, any vacancy on the Board resulting from any death, resignation,
retirement, disqualification, removal from office, or newly created directorship resulting from any increase in the authorized
number of directors or otherwise may be filled by the Board, acting by a majority of the remaining directors then in office, even
if less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall hold office for a term expiring
at the annual meeting of stockholders and until such director’s successor shall have been duly elected and qualified or until
such director’s earlier death, resignation or removal.
No Cumulative Voting
Our stockholders do not have the right to cumulate
votes, as discussed in “—Common Stock—Voting.”
Section 203 of the DGCL
Before the Effective Date, the limited liability
company agreement of the Company’s predecessor provided that the predecessor was subject to Section 203 of the DGCL.
As of the Effective Date, we elected in our Certificate of Incorporation to not be subject to Section 203, which election
will become effective 12 months after the Effective Date and would not apply to a “business combination”
(as defined below) with a person who became an “interested stockholder” (as defined below) prior to the Effective Date.
In general, Section 203 prohibits a publicly
held Delaware corporation from engaging in a “business combination” (as defined below) with an “interested stockholder”
(as defined below) for a three-year period following the time that such stockholder becomes an interested stockholder, unless the
business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger,
asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An “interested
stockholder” is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination
of interested stockholder status, 15% or more of the corporation’s outstanding voting stock. Under Section 203, a business
combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
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before the stockholder became interested, the Board approved either the business combination or the transaction that resulted
in the stockholder becoming an interested stockholder;
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upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee
stock plans, in some instances; or
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at or after the time the stockholder became interested, the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of
the outstanding voting stock that is not owned by the interested stockholder.
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Exclusive Forum
Our Certificate of Incorporation provides that,
unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the
Court of Chancery shall not have jurisdiction, another state court located within the state of Delaware, or if no such state court
shall have jurisdiction, the federal district court for the District of Delaware) will be, to the fullest extent permitted by law,
the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim
of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any
action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or our
Certificate of Incorporation or our Bylaws, or (iv) any action asserting a claim against us, our directors, officers or employees
governed by the internal affairs doctrine. Any person or entity purchasing or otherwise holding any interest in our shares of capital
stock will be deemed to have notice of and consented to the foregoing forum selection provisions.
Transfer Agent and Registrar
Our transfer agent and registrar of Common Stock
is American Stock Transfer & Trust Company, LLC.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of October
26, 2017, the number of shares of our Common Stock beneficially owned by (i) each person known by us to be the holder of more
than five percent of our voting securities, (ii) each director, (iii) each executive officer, and (iv) all of our
directors and officers as a group. This information is reported in accordance with the beneficial ownership rules of the SEC under
which a person is deemed to be the beneficial owner of a security if that person has or shares voting power or investment power
with respect to such security or has the right to acquire such ownership within 60 days. Common Stock subject to currently
exercisable and convertible securities, which are exercisable or convertible within 60 days after the date of this prospectus,
are deemed outstanding for purposes of computing the percentage beneficially owned by the person or entity holding such securities
but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person or entity. Unless
otherwise indicated, each holder has sole voting and investment power with respect to the Common Stock owned by such holder.
Name of Beneficial Owner
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Shares
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Percent of Class
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5% Owners
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Marathon Asset Management, L.P.
(1)
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4,950,282
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24.64
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%
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Contrarian Capital Management, L.L.C.
(2)
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3,232,360
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16.12
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%
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Morgan Stanley & Co. LLC
(3)
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2,206,333
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11.00
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%
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Monarch Alternative Capital LP
(4)
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2,042,303
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10.18
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%
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J.P. Morgan Securities LLC
(5)
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1,466,153
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7.29
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%
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FMR LLC
(6)
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1,206,828
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6.02
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%
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Directors
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Scott W. Smith
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0
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0
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R. Scott Sloan
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0
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0
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Randall M. Albert
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0
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0
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Michael Alexander
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0
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0
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Joseph Citarrella
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0
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0
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W. Greg Dunlevy
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0
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0
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Graham Morris
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0
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0
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Non-Director Executive Officers
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|
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Britt Pence
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0
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0
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|
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All directors and executive officers as a group (8 persons)
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|
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0
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0
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(1)
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Bruce Richards and Louis Hanover, are managing members of Marathon Asset Management GP LLC, general partner of Marathon Asset
Management LP (“Marathon”), which is acting as investment advisor to certain funds and accounts, as described in footnote
3 under “Selling Stockholders.” Michael V. Alexander, an employee of Marathon and/or one of its affiliates, is a member
of the Board of Directors. Mr. Alexander does not individually hold or otherwise beneficially own any securities of Vanguard Natural
Resources, Inc. Mr. Alexander disclaims beneficial ownership of any such securities, except to the extent of his pecuniary interest
therein. The number of shares beneficially owned includes 2,646 shares of Common Stock issuable upon exercise of Preferred Unit
Warrants held by Marathon Bluegrass Credit Fund LP, 8,220 shares of Common Stock issuable upon exercise of Preferred Unit Warrants
held by Marathon Centre Street Partnership, 2,850 shares of Common Stock issuable upon exercise of Preferred Unit Warrants held
by Marathon Credit Dislocation Fund LP, 14,154 shares of Common Stock issuable upon exercise of Preferred Unit Warrants held by
Marathon Special Opportunity Master Fund LTD, 2,080 shares of Common Stock issuable upon exercise of Preferred Unit Warrants held
by Master SIF SICAV-SIF, and 3,237 shares of Common Stock issuable upon exercise of Preferred Unit Warrants held by TRS Credit
Fund LP that, in each case, are exercisable within 60 days of the date of this prospectus. The business address of these funds
and accounts is One Bryant Park, 38th Floor, New York, NY 10036.
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(2)
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Contrarian Capital Management, L.L.C. (“Contrarian”) is the general partner of Contrarian Advantage-B, LP (“TCAB”).
The managing member of Contrarian is Mr. Jon R. Bauer (“Bauer”) and each of Contrarian and Bauer may be deemed to beneficially
own the securities held by TCAB. Contrarian and Bauer each disclaim beneficial ownership of such securities except to the extent
of their pecuniary interests therein. Graham Morris, an employee of Contrarian, is a member of the Board of Directors. Mr. Morris
disclaims beneficial ownership of such securities. The business address of TCAB is 411 West Putnam Ave, Ste 425, Greenwich, CT
06830.
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Contrarian is the investment manager
for Contrarian Capital Trade Claims, L.P. (“CCTC”), Contrarian Capital Senior Secured, L.P. (“CSSM”), Contrarian
Opportunity Fund L.P. (“COF”), Contrarian Centre Street Partnership, L.P. (“CCSP”), Contrarian Dome du
Gouter Master Fund, LP (“CDGM”) and Contrarian Capital Fund I, L.P. (“CCI”). The managing member of Contrarian
is Bauer and each of Contrarian and Bauer may be deemed to beneficially own the securities held by CCTC, CSSM, COF, CCSP, CDGM
and CCI. Contrarian and Bauer each disclaim beneficial ownership of such securities except to the extent of their pecuniary interests
therein. Graham Morris, an employee of Contrarian, is a member of the Board of Directors. Mr. Morris disclaims beneficial ownership
of such securities. The business address of CCTC, CSSM, COF, CCSP, CDGM and CCI is 411 West Putnam Ave, Ste 425, Greenwich, CT
06830.
Contrarian is the managing member of
CCM Pension-A, L.L.C. (“CPENA”) and CCM Pension-B, L.L.C. (“CPENB”). The managing member of Contrarian
is Bauer and each of Contrarian and Bauer may be deemed to beneficially own the securities held by CPENA and CPENB. Contrarian
and Bauer each disclaim beneficial ownership of such securities except to the extent of their pecuniary interests therein. Graham
Morris, an employee of Contrarian, is a member of the Board of Directors. Mr. Morris disclaims beneficial ownership of such securities.
The business address of CPENA and CPENB is 411 West Putnam Ave, Ste 425, Greenwich, CT 06830.
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(3)
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Richard VanderMass is a Managing Director of the business unit at Morgan Stanley & Co. LLC that holds the shares in the
ordinary course of its business and as such may be deemed to have voting and dispositive power over the shares held by Morgan Stanley
& Co. LLC. Richard VanderMass disclaims beneficial ownership of these shares. Morgan Stanley & Co. LLC, a registered broker-dealer,
is a subsidiary of Morgan Stanley, a widely held reporting company under the Exchange Act. The number of shares beneficially owned
includes 1,507 shares of Common Stock issuable upon exercise of Preferred Unit Warrants held by Morgan Stanley that are exercisable
within 60 days of the date of this prospectus. The mailing address for Morgan Stanley & Co. LLC is 1585 Broadway, 2nd Floor,
New York, NY 10036.
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(4)
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Monarch Alternative Capital LP (“Monarch”) is the investment manager for Monarch Alternative Solutions Master Fund
Ltd, Monarch Capital Master Partners III LP, MCP Holdings Master LP, Monarch Debt Recovery Master Fund Ltd and P Monarch Recovery
Ltd. (together, the “Monarch Funds”). MDRA GP LP (“MDRA”) is the general partner of Monarch. Monarch GP
LLC (“Monarch GP”) is the general partner of MDRA. Monarch, MDRA and Monarch GP each may be deemed to beneficially
own the securities held by the Monarch Funds. Monarch, MDRA and Monarch GP each disclaim beneficial ownership of such securities
except to the extent of their pecuniary interests therein. Joseph Citarrella, a principal of Monarch, is a member of the Board
of Directors. Mr. Citarrella disclaims beneficial ownership of any such securities. The business address for each of the Monarch
Funds is c/o Monarch Alternative Capital LP, 535 Madison Avenue, New York, NY 10022.
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(5)
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Each of Christopher L. Harvey, Eric D. Tepper, Eric J. Stein, Erin Elizabeth Hill, Jason Edwin Sippel, Kelly Cesare Coffey,
Matthew Cherwin, Patrick C. Kirby and Robert C. Holmes is a Manager of J.P. Morgan Securities LLC (“JPM”), a Delaware
limited liability company, and as such may be deemed to have voting and dispositive power over the shares held by JPM. Each of
Christopher L. Harvey, Eric D. Tepper, Eric J. Stein, Erin Elizabeth Hill, Jason Edwin Sippel, Kelly Cesare Coffey, Matthew Cherwin,
Patrick C. Kirby and Robert C. Holmes disclaims beneficial ownership of the shares. JPM is a broker-dealer registered pursuant
to Section 15 of the Exchange Act. The number of shares beneficially owned includes 53,707 shares of Common Stock issuable upon
exercise of Preferred Unit Warrants held by JPM that are exercisable within 60 days of the date of this prospectus. The business
address for each of JPM, Christopher L. Harvey, Eric D. Tepper, Eric J. Stein, Erin Elizabeth Hill, Jason Edwin Sippel, Kelly Cesare
Coffey, Matthew Cherwin, Patrick C. Kirby and Robert C. Holmes is 383 Madison Avenue, 3rd Floor, New York, New York 10179.
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(6)
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Reflects accounts managed by direct or indirect subsidiaries of FMR LLC. Abigail P. Johnson is a Director, the Vice Chairman,
the Chief Executive Officer and the President of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the
predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power
of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement
under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares.
Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members
of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR
LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the
various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management
& Research Company (“FMR Co”), a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’
Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established
by the Fidelity Funds’ Boards of Trustees. The business address of Fidelity Summer Street Trust: Fidelity Capital & Income
Fund is 135 Santilli Highway, Everett, MA 02149. The business addresses of Variable Insurance Products Fund: Strategic Income Portfolio,
Fidelity School Street Trust: Fidelity Strategic Income Fund and Fidelity Advisor Series II: Fidelity Advisor Strategic Income
Fund are 245 Summer Street, Boston, MA 02210. The Fidelity Funds are affiliates of a registered broker-dealer.
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MANAGEMENT
Directors and Executive Officers
The Board consists of seven members, as set
forth below:
Name
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|
Age
|
|
Position(s)
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Scott W. Smith
|
|
59
|
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President, Chief Executive Officer and Director
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R. Scott Sloan
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53
|
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Executive Vice President, Chief Financial Officer and Director
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Randall M. Albert
|
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59
|
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Director
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Michael Alexander
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40
|
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Director
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Joseph Citarrella
|
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31
|
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Director and Chairman of the Board
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W. Greg Dunlevy
|
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62
|
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Director
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Graham Morris
|
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44
|
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Director
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Our other current executive officer is:
Name
|
|
Age
|
|
Position(s)
|
Britt Pence
|
|
55
|
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Executive Vice President of Operations
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Scott W. Smith
is the President and Chief
Executive Officer of the Company. He has served in such capacity since August 1, 2017. Prior to August 2017, Mr. Smith was our
Predecessor’s President and Chief Executive Officer since 2006 and served as a director since 2008. In 2011, Mr. Smith also
served as the President and CEO of Encore Energy Partners LP until its merger completion with Vanguard in December 2011. Before
joining Vanguard, from 2004 to 2006, Mr. Smith served as President of Ensource Energy Company, LLC. Mr. Smith was previously a
board member and investor in Wiser Investment Company LLC and the largest shareholder in The Wiser Oil Company until its sale to
Forest Oil Corporation in 2004. From 2000 to 2004, Mr. Smith served on the board of directors of The Wiser Oil Company. Mr. Smith
was also a member of the executive committee of The Wiser Oil Company. From 1998 to 1999, Mr. Smith was the co-manager of San Juan
Partners, LLC, which established control of Burlington Resources Coal Seam Gas Trust, which was subsequently sold to Dominion Resources,
Inc.
R. Scott Sloan
is the Executive Vice
President and Chief Financial Officer of the Company and has served in such capacities since September 27, 2017. Mr. Sloan brings
significant financial, strategic, and commercial industry experience to the Vanguard board. Most recently, Mr. Sloan oversaw strategic
planning, new business development, and oil and gas marketing for Hess Corporation. Previously, Mr. Sloan held various senior leadership
positions over his 25 year career at BP, including President of BP Russia, Director of M&A, and several regional Chief Financial
Officer roles. Mr. Sloan also held board positions with TNK Holdings, Slavneft, Rusia Petroleum, In Salah Sales, and Medgaz. He
received his B.A. in Economics from Colgate University and M.B.A. in Corporate Finance from the University of Chicago.
Randall M. Albert
is the owner and CEO
of Shale Advisory Group. Mr. Albert retired from CONSOL Energy in January 2014 after a 34 year career, serving the last several
years as the Chief Operating Officer-Gas. Mr. Albert began at CONSOL as a mining engineer in 1979 and served in various roles during
his tenure before leading the Coalbed Methane Business in CONSOL Energy’s Southern Appalachia Region. In 2010, he was named
the Chief Operating Officer-Gas and given operational responsibility for CONSOL Energy’s entire gas business. Mr. Albert
is a past Chairman of the Marcellus Shale Coalition and a Member of the Board of Eclipse Resources Corporation and Wellsite Rentals
and Fishing Tools. He serves on the Strategic Advisory Board of Black Bay Energy Capital, a New Orleans-based private equity fund.
He holds a B.S. in Mining Engineering from Virginia Tech. Mr. Albert is a Registered Professional Engineer in West Virginia and
Virginia.
Michael Alexander
is a Managing Director
at Marathon Asset Management, a New York based investment manager, which he joined in March 2005. Mr. Alexander focuses on corporate
credit and restructuring transactions and covers multiple sectors including energy. Mr. Alexander spent three years in Marathon’s
London office from 2006 to 2009 helping build Marathon’s European credit business before returning to New York. Prior to
joining Marathon, he worked at The Blackstone Group in its restructuring advisory business (now PJT Partners). Mr. Alexander received
a B.S. in Commerce from the University of Virginia with a concentration in finance (1999).
Joseph Citarrella
is a Principal at Monarch
Alternative Capital LP, a New York-based private investment firm. Prior to joining Monarch in May 2012, Mr. Citarrella was an Associate
at Goldman Sachs in the Global Investment Research group, covering the integrated oil, exploration and production, and refining
sectors. Mr. Citarrella received a B.A. in Economics from Yale University.
W. Greg Dunlevy
was one of the Founding
Partners of Kosmos Energy Ltd. (NYSE: KOS). He joined in 2003 and worked there until his retirement in 2015 serving as executive
vice president and chief financial officer. Prior to Kosmos, he was previously Senior Vice President and CFO of Triton Energy Ltd.
(NYSE: OIL), and then Amerada Hess Corporation (now Hess Corporation) where he served as Senior Vice President, Finance Administration
and commercial following its acquisition of Triton. Mr. Dunlevy began his career with ARCO, where he served in a variety of positions
including for ARCO Petroleum Products Company, the ARCO Oil and Gas Company, and Lyondell Petrochemical Company subsidiaries. Mr.
Dunlevy received his M.B.A. from Harvard Business School and his B.S. in Chemistry from the College of William & Mary.
Graham Morris
is the Distressed Equity
Strategy Head for Contrarian Capital Management. Mr. Morris joined Contrarian in 2006 and is responsible for managing the Distressed
Equity Strategy. Prior to this role, Mr. Morris was the Assistant Portfolio Manager of Contrarian Long Short and Contrarian Distressed
Equity. Before joining Contrarian, Mr. Morris was an Analyst at Advent Capital Management L.L.C. from 2003 to 2005. At Advent Capital,
Mr. Morris covered event driven and deep value equities as well as high yield and convertible bond investments. From 2000 to 2002,
he was an Associate in the Telecom & Media Investment Banking group at UBS where he advised corporate clients on restructuring
activities, high yield offerings, IPOs and mergers, and acquisitions. Mr. Morris received his M.B.A. from Columbia Business School
and graduated Phi Beta Kappa with a B.A. in Economics from the University of Texas at Austin.
Britt Pence
is
our Executive Vice President of Operations and has served in such capacity since August 1, 2017. Prior to August 2017, Mr. Pence
was our Predecessor’s Executive Vice President of Operations since January 2013. Prior to this promotion, Mr. Pence was our
Predecessor’s Senior Vice President of Operations beginning in June 2010 and Vice President of Engineering since joining
our Predecessor in May 2007. Prior to joining us, since 1997, Mr. Pence was an Area Manager with Anadarko Petroleum Corporation
(NYSE: APC) supervising evaluation and exploitation projects in coalbed methane fields in Wyoming and conventional fields in East
Texas and the Gulf of Mexico. Prior to joining Anadarko, Mr. Pence served as a reservoir engineer with Greenhill Petroleum Company
from 1991 to 1997 with responsibility for properties in the Permian Basin, South Louisiana and the Gulf of Mexico. From 1983 to
1991, Mr. Pence served as reservoir engineer with Mobil with responsibility for properties in the Permian Basin. Mr. Pence obtained
a B.S. in Petroleum Engineering from Texas A&M University.
Director Independence
We have no securities listed for trading on
a national securities exchange, but our Common Stock is quoted on the OTCQX. As a result, we are not required to have a majority
of independent directors, though the OTCQX does require that we have at least two. For purposes of complying with the OTCQX requirements,
our Board has determined that each of Messrs. Alexander, Citarrella and Morris is independent under each of those definitions.
Predecessor Reorganization
Scott W. Smith and Britt Pence also served as
executive officers of our Predecessor at the time of the filing of its Chapter 11 Cases up until the consummation of the Plan.
For more information, please read “Explanatory Note,” “Summary—Recent Developments—Consummation of
the Plan” and the other documents incorporated by reference herein.
Board Structure
Our Certificate of Incorporation provides that
the Whole Board (as defined in the Certificate of Incorporation) will initially be comprised of six directors and no director may
be removed, with or without cause, without the affirmative vote or written consent of the holders of at least a majority of the
voting power of the shares entitled to vote generally in the election of directors of the Company. Subject to the rights of the
holders of any series of preferred stock to elect additional directors under specified circumstances, the number of directors that
comprise the Whole Board will be fixed from time to time exclusively by the Board as provided in our Bylaws.
Our Bylaws provide that all elections of directors
of the Company will be determined by a plurality of the votes cast, and except as otherwise required by law or the rules of any
stock exchange upon which our securities are listed or as otherwise provided in the Bylaws or the Certificate of Incorporation,
all other matters will be determined by a majority of the votes cast affirmatively or negatively, on such matter.
Committees of the Board of Directors
The standing committees of the Board currently
are the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, Health, Safety and Environmental
Committee and the Strategic Opportunities Committee.
Audit Committee
The Audit Committee duties include assisting
the Board in fulfilling its responsibility to oversee management regarding: (i) the conduct and integrity of our financial
reporting to any governmental or regulatory body, the public or other users thereof; (ii) our systems of internal accounting
and financial and disclosure controls; (iii) the qualifications, engagement, compensation, independence and performance of
our independent auditors, their conduct of the annual audit, and their engagement for any other services; (iv) our legal and
regulatory compliance; and (v) our codes of ethics as established by management and the Board.
In discharging its oversight role, the Committee
is authorized: (i) to investigate any matter that the Committee deems appropriate, with access to all of our books, records,
facilities and personnel; and (ii) to retain independent counsel, auditors or other experts, with adequate funding provided
by us. The members of the Audit Committee are W. Greg Dunlevy, Michael Alexander and Graham Morris. Mr. Dunlevy is the chairman
of the Audit Committee and has been determined by the Board to be an “audit committee financial expert,” as defined
by SEC rules.
The primary responsibilities for the Audit Committee
are set forth in the Audit Committee Charter, which was adopted by the Board on August 9, 2017.
Compensation Committee
The Compensation Committee shall determine and
approve, either on its own or with our independent directors, compensation of the Chief Executive Officer (the “CEO”)
and assist the Board in: (i) determining appropriate compensation levels for our other executive officers; (ii) evaluating
officer and director compensation plans, policies and programs; and (iii) reviewing compensation and benefit plans for officers
and employees.
In discharging its role, the Committee is empowered
to investigate any matter brought to its attention with access to all of our books, records, facilities and personnel. The Committee
may, in its sole discretion, select, retain or obtain the advice of independent legal counsel, compensation consultants or other
advisors (collectively, “Advisors”) and will receive appropriate funding from us, as determined by the Committee, for
payment of reasonable compensation to such Advisors. The Committee will be directly responsible for the appointment, compensation
and oversight of the work of any Advisor retained by the Committee, who shall be accountable ultimately to the Committee. Prior
to selecting an Advisor, the Committee shall assess the Advisor’s independence from our management, taking into consideration
all relevant factors the Committee deems appropriate to such Advisor’s independence, including any factors specified in applicable
rules and regulations. The Committee may select or receive advice from any Advisor it prefers, including Advisors that are not
independent, after considering the independence factors required by applicable rules and regulations.
The members of the Compensation Committee are
Graham Morris, Randall M. Albert and Joseph Citarrella. Mr. Morris is the chairman of the Compensation Committee.
The primary responsibilities for the Compensation
Committee are set forth in the Compensation Committee Charter, which was adopted by the Board on August 9, 2017 and is available
on our website.
Nominating and Corporate Governance Committee
The purpose of the Nominating and Corporate
Governance Committee (the “N&G Committee”) is to assist the Board by: (i) identifying, screening and reviewing
individuals qualified to serve as directors and recommending to the Board candidates for election at the annual meeting of stockholders
to fill Board vacancies; (ii) developing, recommending to the Board and overseeing implementation of our Corporate Governance
Guidelines and Principles; and (iii) reviewing, on a regular basis, our overall corporate governance and recommending to the
Board improvements when necessary.
In discharging its role, the Committee is empowered
to investigate any matter brought to its attention with access to all of our books, records, facilities and personnel. The Committee
has the power to retain outside counsel, director search and recruitment consultants or other experts and will receive adequate
funding from us, as determined by the Committee, for payment of reasonable compensation to such advisors. The Committee shall have
the sole authority to retain, compensate, terminate and oversee director search and recruitment consultants, who shall be accountable
ultimately to the Committee.
The members of the N&G Committee are Michael
Alexander and Joseph Citarrella. Mr. Citarrella is the chairman.
The primary responsibilities for the N&G
Committee are set forth in the Nominating and Corporate Governance Committee Charter, which was adopted by the Board on August 9,
2017.
Health, Safety and Environmental Committee
The purpose of the Health, Safety and Environmental
Committee is to assist the Board with its responsibilities relating to oversight of our health, safety and environmental practices
and to monitor management’s efforts in creating a culture of safety and environmental protection. The Committee will primarily
fulfill this responsibility by carrying out the activities enumerated in Section IV of the Health, Safety and Environmental
Committee Charter (the “HSE Charter”), and will perform such other functions as the Board may assign from time to time.
The members of the HSE Committee are Scott W.
Smith and Joseph Citarrella. Mr. Smith is the chairman.
The primary responsibilities for the HSE Committee
are set forth in the HSE Charter, which was adopted by the Board on August 9, 2017.
Strategic Opportunities Committee
The purpose of the Strategic Opportunities Committee
is to assist the Board with its oversight responsibilities relating to long-term strategy for us, risks and opportunities to the
strategy, and strategic decisions regarding the portfolio of business and investments. The Committee will primarily fulfill this
responsibility by carrying out the activities enumerated in Section IV of the Strategic Opportunities Charter, and will perform
such other functions as the Board may assign from time to time.
In discharging its oversight role, the Committee
is authorized: (i) to investigate any matter that the Committee deems appropriate, with access to all of our books, records,
facilities and personnel; and (ii) to retain independent counsel, auditors or other experts, with adequate funding provided
by us.
The members of the Strategic Opportunities Committee
are Michael Alexander, Graham Morris, Joseph Citarrella and R. Scott Sloan. Mr. Alexander is the chairman.
The primary responsibilities for the Strategic
Opportunities Committee are set forth in the Strategic Opportunities Committee Charter, which was adopted by the Board on August 9,
2017.
Code of Business Conduct and Ethics, Corporate Governance
Guidelines and Committee Charters
On August 9, 2017 we adopted a Code of
Business Conduct and Ethics, the Corporate Governance Guidelines, the Audit Committee Charter, the Compensation Committee Charter,
the Nominating and Corporate Governance Committee Charter, the HSE Charter and the Strategic Opportunities Committee Charter. We
will make a printed copy of the Code of Business Conduct and Ethics, Corporate Governance Guidelines and our committee charters
available to any stockholder who so requests. Requests for print copies may be directed to us as follows: Vanguard Natural Resources,
Inc., 5847 San Felipe, Suite 3000, Houston, Texas 77057, Attention: Secretary. The Code and the committee charters are
also posted on our website at
www.vnrenergy.com
.
Compensation Committee Interlocks and Insider Participation
Mr. Sloan was a member of the Compensation Committee
until he stepped down from this position in connection with his appointment as Executive Vice President and Chief Financial Officer
on September 27, 2017. Otherwise, no members of the Compensation Committee were an officer or employee of ours or any of our subsidiaries
during fiscal 2016 or 2017 (to date) or was formerly an officer of ours. None of our executive officers has served on
the board of directors or compensation committee of any entity that had one or more of its executive officers serving on our Board.
Director Compensation
We have engaged Lyons, Benenson & Company
Inc. as independent compensation consultants to assist in developing our executive and director compensation programs. Our non-employee
directors are currently eligible to receive (i) an annual cash retainer of $100,000, which is paid quarterly in arrears and (ii)
an annual equity grant of restricted stock units with a $100,000 grant date value. For certain non-employee directors, specifically
Messrs. Citarrella, Alexander and Morris, the director’s compensation is paid to the fund that currently employs such individual
(i.e., Monarch, Marathon and Contrarian, respectively), and the Board has approved that such director’s equity compensation
be paid in cash in lieu of equity on the dates that such grants would have otherwise vested (i.e., 25% immediately and 25% on each
of the first three anniversaries of August 1, 2017). Each other non-employee director (i.e., Messrs. Albert and Dunlevy) will receive
an initial annual equity grant as soon as possible following the Board’s adoption of form of award agreements under the management
incentive plan, with 25% of such initial grant vesting immediately and the remainder vesting ratably on the first three anniversaries
of the grant date. The Board intends that future annual equity retainers will vest ratably on the first four anniversaries of the
date of grant. Mr. Sloan will receive a pro rata portion of his equity and cash compensation in respect of his service on the Board
prior to his appointment as Executive Vice President and Chief Financial Officer.
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Review, Approval or Ratification of Transactions with Related
Parties
On August 9, 2017 the audit committee of
our Board (the “Audit Committee”) adopted the Related Party Transaction Policy (the “Policy”) to review
and approve all Related Transactions with Related Parties, as those terms are defined in the Policy and provided below.
Prior to the entry of any potential Related
Transaction, such transaction shall be reported to our general counsel or, if there is no general counsel, the chairman of the
Audit Committee, who will undertake an appropriate evaluation to determine if the counterparty in the transaction meets the definition
of a Related Party. If that evaluation indicates that the Related Transaction would require the Audit Committee’s approval,
the general counsel or, if there is no general counsel, the chairman of the Audit Committee, will report the Related Transaction,
together with a summary of material facts, to the Audit Committee. The Audit Committee shall review the material facts of the Related
Transaction and either approve or disapprove subject to the exceptions described below. In determining whether to approve or disapprove
a Related Transaction, the Audit Committee will consider whether there is a relationship that offers the potential for: (i) transactions
at less than arm’s-length; (ii) favorable treatment; or (iii) the ability to influence the outcome of events differently
from that which might result in the absence of that relationship.
In the event our chief executive officer, chief
financial officer or general counsel becomes aware of a Related Transaction that was not previously approved under the Policy,
such person shall promptly notify the chairman of the Audit Committee, and the Audit Committee or, if not practicable for us to
wait for the entire Audit Committee to consider the matter, the chairman of the Audit Committee shall consider whether the Related
Transaction shall be ratified or rescinded or other action should be taken. The chairman of the Audit Committee shall report to
the Audit Committee at the next Audit Committee meeting any actions taken under the Policy.
The Audit Committee has already reviewed certain
Related Transactions as described as in the Policy and determined that each of the Related Transactions described therein shall
be deemed to be pre-approved or ratified, as applicable, by the Audit Committee under the terms of the Policy, unless specifically
determined otherwise by the Audit Committee.
No director shall participate in any discussion
or approval of a Related Transaction for which he or she is a Related Party, except that the director shall provide all material
information concerning the Related Transaction to the Audit Committee.
For purposes of the Policy, a Related Party
transaction is defined as any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships
in excess of $120,000, in which we or any of our subsidiaries is a participant, and any Related Party has or will have a direct
or indirect interest (other than solely as a result of being a director, officer or a less than ten percent beneficial owner of
another entity).
For purposes of the Policy a “Related
Party” is defined as any person who is or was (since the last fiscal year for which we have filed an Annual Report on Form 10-K,
even if that person does not presently serve in that role):
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·
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an affiliate of us – a party that, directly or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with us;
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·
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a trust for the benefit of employees that is managed by or under the trusteeship of management;
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|
·
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an owner of record or known beneficial owner of more than 5% of the voting interest of us;
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·
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a member of our management including people with authority and responsibility for planning, directing and controlling our activities.
Management includes members of the Board, chief executive officer, chief financial officer, general counsel, vice presidents and
persons in charge of principal business units and business functions, and any other persons who perform similar business or policymaking
functions. If a director or member of management is also a director of another entity, the entities are considered related when
they are both under the control or significant influence of that individual;
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·
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any family member, including spouses, brothers, sisters, parents, children and spouses of these persons who might control or
influence a principal owner or member of management or who might be controlled or influenced by a principal owner or member of
management because of a family relationship; or
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·
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other parties with which we may deal if one party can control or significantly influence the management or operating policies
of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
The ability to exercise significant influence may be indicated in several ways, such as representation on the Board, participating
in policy-making processes, material inter-company transactions, interchange of managerial personnel, or technology dependency.
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Registration Rights Agreement
On the Effective Date, in accordance with the
Plan and that certain Amended and Restated Backstop Commitment and Equity Investment Agreement, dated as of February 24, 2017,
as amended and restated on May 23, 2017 (as may have been further amended from time to time, the “Amended and Restated Backstop
Commitment Agreement”), the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”)
with certain recipients of shares of Common Stock distributed on the Effective Date that were party to the Amended and Restated
Backstop Commitment Agreement (including certain of their affiliates and related funds), in accordance with the terms set forth
in the Plan (collectively, the “Registration Rights Holders”). The Registration Rights Agreement provides our stockholders
party thereto certain registration rights.
The Registration Rights Agreement requires the
Company to file a shelf registration statement (“Initial Shelf Registration Statement”) within ninety (90) calendar
days following the Effective Date that includes the Registrable Securities (as defined in the Registration Rights Agreement) whose
inclusion has been timely requested, provided, however, that the Company is not required to file or cause to be declared effective
an Initial Shelf Registration Statement unless the request from Registration Rights Holders amounts to at least 20% of all Registrable
Securities. The Registration Rights Agreement also provides the Registration Rights Holders the ability to demand registrations
or underwritten shelf takedowns subject to certain requirements and exceptions.
In addition, if the Company proposes to register
shares of Common Stock in certain circumstances, the Registration Rights Holders will have certain “piggyback” registration
rights, subject to restrictions set forth in the Registration Rights Agreement, to include their shares of Common Stock in the
registration statement.
The Registration Rights Agreement also provides
that (i) for so long as the Company is subject to the requirements to publicly file information or reports with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act, the Company will timely file all information and reports with the SEC and comply with
all such requirements and (b) if the Company is not subject to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company will make available the information necessary to comply with Section 4(a)(7) of the Securities Act and Rule 144 and Rule
144A, if available with respect to resales of the Registrable Securities under the Securities Act, at all times, all to the extent
required from time to time to enable Registration Rights Holders to sell Registrable Securities without registration under the
Securities Act pursuant to the abovementioned exemptions or any other rule or regulation hereafter adopted by the SEC.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal
income tax consequences related to the purchase, ownership and disposition of our Common Stock by a taxpayer that holds our Common
Stock as a “capital asset” (generally property held for investment). This summary is based on the provisions of the
Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations and administrative rulings
and judicial decisions, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive
effect. We have not sought any ruling from the Internal Revenue Service (the “IRS”), with respect to the statements
made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with
such statements and conclusions.
Legal conclusions contained in this section,
unless otherwise noted, are the opinion of Paul Hastings LLP. This summary does not address all aspects of U.S. federal income
taxation or the tax considerations arising under the laws of any non-U.S., state, or local jurisdiction, or under U.S. federal
estate or gift tax laws. In addition, this summary does not address tax considerations applicable to investors that may be subject
to special treatment under the U.S. federal income tax laws, such as (without limitation):
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banks, insurance companies or other financial institutions;
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tax-exempt or governmental organizations;
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dealers in securities or foreign currencies;
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traders in securities that use the mark-to-market method of accounting for U.S. federal income tax purposes;
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“controlled foreign corporations,” “passive foreign investment companies” and corporations that accumulate
earnings to avoid U.S. federal income tax;
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persons subject to the alternative minimum tax;
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partnerships or other pass-through entities for U.S. federal income tax purposes or holders of interests therein;
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persons that hold or are deemed to sell our Common Stock under the constructive sale provisions of the Code;
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persons that acquired our Common Stock through the exercise of employee stock options or otherwise as compensation or through
a tax-qualified retirement plan;
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real estate investment trusts or regulated investment companies;
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persons that hold our Common Stock as part of a straddle, appreciated financial position, synthetic security, hedge, conversion
transaction or other integrated investment or risk reduction transaction; and
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persons that hold in excess of 5% of our Common Stock.
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If a partnership (including an entity or arrangement
treated as a partnership for U.S. federal income tax purposes) holds our Common Stock, the tax treatment of a partner in the
partnership generally will depend upon the status of the partner and upon the activities of the partnership. Accordingly, we urge
partners of a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes)
investing in our Common Stock to consult their tax advisors regarding the U.S. federal income tax considerations of the purchase,
ownership and disposition of our Common Stock by such partnership.
YOU ARE ENCOURAGED TO CONSULT YOUR TAX ADVISOR
WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SHARES OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE AND GIFT TAX
LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Corporate Status
We are a corporation for U.S. federal income
tax purposes. As a result, we are subject to tax as a corporation and distributions on our Common Stock will be treated as distributions
on corporate stock for federal income tax purposes. Holders of Common Stock will receive a Form 1099 from us with respect
to distributions received on our Common Stock.
Consequences to U.S. Holders
The discussion in this section is addressed
to holders of our Common Stock who are U.S. holders for U.S. federal income tax purposes. A U.S. holder for purposes
of this discussion is a beneficial owner of our Common Stock and who is, for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in
or under the laws of the United States, any state thereof or the District of Columbia;
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certain former citizens or long-term residents of the United States;
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an estate the income of which is subject to U.S. federal income tax regardless of its source; or
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a trust (i) whose administration is subject to the primary supervision of and which has one or more United States persons
who have the authority to control all substantial decisions of the trust or (ii) which has made a valid election to be treated
as a United States person.
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Distributions
Distributions with respect to our Common Stock
will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings
and profits, as determined under U.S. federal income tax principles. To the extent that the amount of a distribution with
respect to our Common Stock exceeds our current and accumulated earnings and profits, such distribution will be treated first as
a tax-free return of capital to the extent of the U.S. holder’s adjusted tax basis in such Common Stock, which reduces
such basis dollar-for-dollar, and thereafter as capital gain from the sale or exchange of such Common Stock. Please read “—Gain
on Disposition of Common Stock.” Non-corporate holders who receive distributions on our Common Stock that are treated as
dividends for U.S. federal income tax purposes generally will be subject to U.S. federal income tax at a maximum tax
rate of 20% on such dividends provided certain holding period requirements are met.
We do not expect to have any earnings and profits
for an extended period of time, and we may not have sufficient earnings and profits during future tax years for any distributions
on our Common Stock to qualify as dividends for U.S. federal income tax purposes. If a distribution on our Common Stock fails
to qualify as a dividend for U.S. federal income tax purposes, U.S. corporate holders will be unable to utilize the corporate
dividends-received deduction with respect to such distribution.
You are encouraged to consult your tax advisor
as to the tax consequences of receiving distributions on our Common Stock that do not qualify as dividends for U.S. federal
income tax purposes, including, in the case of prospective corporate investors, the inability to claim the corporate dividends
received deduction with respect to such distributions.
Gain on Disposition of Common Stock
A U.S. holder generally will recognize
capital gain or loss on a sale, exchange, certain redemptions, or other taxable disposition of our Common Stock equal to the difference,
if any, between the amount realized upon the disposition of such Common Stock and the U.S. holder’s adjusted tax basis
in those shares. A U.S. holder’s tax basis in the shares generally will be equal to the amount paid for such shares
reduced (but not below zero) by distributions received on such shares that are not treated as dividends for U.S. federal income
tax purposes. Such capital gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding
period for the shares sold or disposed of is more than one year. Long-term capital gains of individuals generally are subject to
a reduced maximum U.S. federal income tax rate of 20%. The deductibility of net capital losses is subject to limitations.
Backup Withholding and Information Reporting
Information returns generally will be filed
with the IRS with respect to distributions on our Common Stock and the proceeds from a disposition of our Common Stock. U.S. holders
may be subject to backup withholding (at a rate of 28%) on distributions with respect to our Common Stock and on the proceeds
of a disposition of our Common Stock unless such U.S. holders furnish the applicable withholding agent with a taxpayer identification
number, certified under penalties of perjury, and certain other information, or otherwise establish, in the manner prescribed by
law, an exemption from backup withholding. Penalties apply for failure to furnish correct information and for failure to include
reportable payments in income.
Backup withholding is not an additional tax.
Any amounts withheld under the backup withholding rules will be creditable against a U.S. holder’s U.S. federal
income tax liability, and the U.S. holder may be entitled to a refund, provided the U.S. holder timely furnishes the
required information to the IRS. U.S. holders are urged to consult their own tax advisors regarding the application of the
backup withholding rules to their particular circumstances and the availability of, and procedure for, obtaining an exemption from
backup withholding.
3.8% Tax on Unearned Income
Certain U.S. holders that are individuals,
trusts or estates will be subject to an additional 3.8% Medicare tax on unearned income, which generally will include dividends
received and gain recognized with respect to our Common Stock. For individual U.S. holders, the additional Medicare tax applies
to the lesser of (i) “net investment income,” or (ii) the excess of “modified adjusted gross income”
over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment income”
generally equals a U.S. holder’s gross investment income reduced by the deductions that are allocable to such income.
Investment income generally includes passive income such as interest, dividends, annuities, royalties, rents and capital gains.
U.S. holders are urged to consult their own tax advisors regarding the application of this additional Medicare tax to their
particular circumstances.
Consequences to Non-U.S. Holders
The discussion in this section is addressed
to holders of our Common Stock who are non-U.S. holders for U.S. federal income tax purposes. For purposes of this discussion,
a non-U.S. holder is a beneficial owner of our Common Stock that is an individual, corporation, estate or trust that is not
a U.S. holder as defined above.
Distributions
Distributions with respect to our Common Stock
will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings
and profits, as determined under U.S. federal income tax principles. Subject to the withholding requirements under FATCA (as
defined below) and with respect to effectively connected dividends, each of which is discussed below, any distribution treated
as a dividend paid to a non-U.S. holder on our Common Stock generally will be subject to U.S. withholding tax at a rate
of 30% of the gross amount of the distribution or such lower rate as may be specified by an applicable income tax treaty.
To the extent a distribution exceeds our current and accumulated earnings and profits, such distribution will reduce the non-U.S. holder’s
adjusted tax basis in its Common Stock (but not below zero). The amount of any such distribution in excess of the non-U.S. holder’s
adjusted tax basis in its Common Stock will be treated as gain from the sale of such shares and will have the tax consequences
described below under “Gain on Disposition of Common Stock.” The rules applicable to distributions by a United States
real property holding corporation (a “USRPHC”) to non-U.S. persons that exceed current and accumulated earnings
and profits are not clear. As a result, it is possible that U.S. federal income tax at a rate not less than 15% (or such
lower rate as may be specified by an applicable income tax treaty for distributions from a USRPHC) may be withheld from distributions
received by non-U.S. holders that exceed our current and accumulated earnings and profits. To receive the benefit of a reduced
treaty rate on distributions, a non-U.S. holder must provide the withholding agent with an IRS Form W-8BEN, IRS Form W-8BEN-E
or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate.
Non-U.S. holders are encouraged to consult
their tax advisors regarding the withholding rules applicable to distributions on our Common Stock, the requirement for claiming
treaty benefits, and any procedures required to obtain a refund of any overwithheld amounts.
Distributions treated as dividends that are
paid to a non-U.S. holder and are effectively connected with a trade or business conducted by the non-U.S. holder in
the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment maintained
by the non-U.S. holder in the United States) generally will be taxed on a net income basis at the rates and in the manner
generally applicable to United States persons (as defined under the Code). Such effectively connected dividends will not be subject
to U.S. withholding tax if the non-U.S. holder satisfies certain certification requirements by providing to the applicable
withholding agent a properly executed IRS Form W-8ECI (or successor form) certifying eligibility for exemption. If a non-U.S. holder
is a non-U.S. corporation, it may also be subject to a “branch profits tax” (at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty) on its effectively connected earnings and profits (as adjusted for
certain items), which will include effectively connected dividends.
Gain on Disposition of Common Stock
Subject to the discussion below under “—Additional
Withholding Requirements under FATCA,” a non-U.S. holder generally will not be subject to U.S. federal income tax
on any gain realized upon the sale or other disposition of our Common Stock unless:
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the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days
or more during the calendar year in which the sale or disposition occurs and certain other conditions are met;
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the gain is effectively connected with a trade or business conducted by the non-U.S. holder in the United States (and,
if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder
in the United States); or
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our Common Stock constitute a United States real property interest by reason of our status as a USRPHC for U.S. federal
income tax purposes.
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A non-U.S. holder described in the first
bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as may be specified
by an applicable income tax treaty) on the amount of such gain, which generally may be offset by U.S. source capital losses.
A non-U.S. holder whose gain is described
in the second bullet point above or, subject to the exceptions described in the next paragraph, the third bullet point above, generally
will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons unless an applicable
income tax treaty provides otherwise. If the non-U.S. holder is a corporation, it may also be subject to a branch profits
tax (at a 30% rate or such lower rate as may be specified by an applicable income tax treaty) on its effectively connected
earnings and profits (as adjusted for certain items), which will include such gain.
Generally, a corporation is a USRPHC if the
fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of
its real property interests and its other assets used or held for use in a trade or business. We believe that we currently are,
and expect to remain for the foreseeable future, a USRPHC for U.S. federal income tax purposes. However, as long as our Common
Stock continue to be regularly traded on an established securities market, only a non-U.S. holder that actually or constructively
owns, or owned at any time during the shorter of the five-year period ending on the date of the disposition or the non-U.S. holder’s
holding period for the Common Stock, more than 5% of our Common Stock will be taxable on gain realized on the disposition
of our Common Stock as a result of our status as a USRPHC. If our Common Stock were not regularly traded during the calendar year
in which the relevant disposition by a non-U.S. holder occurs, such non-U.S. holder (regardless of the percentage of
our Common Stock owned) would be subject to U.S. federal income tax on a taxable disposition of our Common Stock (as described
in the preceding paragraph), and a 15% withholding tax would apply to the gross proceeds from such disposition. Non-U.S. holders
should consult their tax advisors with respect to the application of the foregoing rules to their ownership and disposition of
our Common Stock.
Backup Withholding and Information Reporting
Generally, we must report annually to the IRS
and to each non-U.S. holder the amount of dividends paid to such holder, the name and address of the recipient, and the amount,
if any, of tax withheld with respect to those dividends. These information reporting requirements apply even if withholding was
not required. Pursuant to tax treaties or other agreements, the IRS may make such reports available to tax authorities in the recipient’s
country of residence.
Payments of dividends to a non-U.S. holder
generally will not be subject to backup withholding if the non-U.S. holder establishes an exemption by properly certifying
its non-U.S. status on an IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate version of IRS Form W-8,
provided that the withholding agent does not have actual knowledge, or reason to know, that the beneficial owner is a United States
person that is not an exempt recipient.
Payments of the proceeds from a sale or other
disposition by a non-U.S. holder of our Common Stock effected by or through a U.S. office of a broker generally will
be subject to information reporting and backup withholding (at the rate of 28%) unless the non-U.S. holder establishes
an exemption by properly certifying its non-U.S. status on an IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate
version of IRS Form W-8 and certain other conditions are met. Information reporting and backup withholding generally will
not apply to any payment of the proceeds from a sale or other disposition of our Common Stock effected outside the United States
by a non-U.S. office of a broker. However, unless such broker has documentary evidence in its records that the holder is not
a United States person and certain other conditions are met, or the non-U.S. holder otherwise establishes an exemption, information
reporting will apply to a payment of the proceeds of the disposition of our Common Stock effected outside the United States by
such a broker if it has certain relationships within the United States.
Backup withholding is not an additional tax.
Rather, the U.S. income tax liability (if any) of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is
timely furnished to the IRS.
Additional Withholding Requirements under FATCA
Sections 1471 through 1474 of the
Code and the Treasury regulations and administrative guidance issued thereunder (“FATCA”), impose a 30% withholding
tax on any dividends paid on our Common Stock and on the gross proceeds from a disposition of our Common Stock (if such disposition
occurs after December 31, 2018), in each case if paid to a “foreign financial institution” or a “non-financial
foreign entity” (each as defined in the Code) (including, in some cases, when such foreign financial institution or non-financial
foreign entity is acting as an intermediary), unless (i) in the case of a foreign financial institution, such institution
enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax
authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and
debt holders of such institution, as well as certain account holders that are non-U.S. entities with U.S. owners); (ii) in
the case of a non-financial foreign entity, such entity certifies that it does not have any “substantial United States owners”
(as defined in the Code) or provides the applicable withholding agent with a certification (generally on an IRS Form W-8BEN-E)
identifying each direct and indirect substantial United States owner of the entity; or (iii) the foreign financial institution
or non-financial foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation (such
as an IRS Form W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement
with the United States governing these rules may be subject to different rules. Under certain circumstances, a holder might be
eligible for refunds or credits of such taxes.
INVESTORS CONSIDERING THE PURCHASE OF SHARES
OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS
TO THEIR PARTICULAR SITUATIONS AND THE APPLICABILITY AND EFFECT OF U.S. FEDERAL ESTATE AND GIFT TAX LAWS AND ANY STATE, LOCAL
OR NON-U.S. TAX LAWS AND TAX TREATIES.
LEGAL MATTERS
Certain legal matters in connection with our
Common Stock offered hereby will be passed upon for us by Paul Hastings LLP, Houston, Texas.
EXPERTS
The audited consolidated balance sheets of our
Predecessor and its subsidiaries as of December 31, 2016 and 2015 and the related consolidated statements of operations, members’
equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2016, and management’s
assessment of the effectiveness of internal control over financial reporting of our Predecessor and subsidiaries as of December 31,
2016, incorporated by reference from our Predecessor’s Annual Report on Form 10-K for the year ended December 31, 2016, filed
with the SEC on March 15, 2017, in this prospectus, have been so incorporated by reference in reliance on the reports of BDO USA,
LLP, an independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing.
The audit report covering the December 31,
2016 consolidated financial statements contains an explanatory paragraph that states that our Predecessor’s filing of the
Chapter 11 Cases raises substantial doubts about our Predecessor’s ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the outcome of that uncertainty.
The consolidated financial statements of Eagle
Rock Energy Partners, L.P (“EROC”) as of December 31, 2014 and 2013, and for each of the years in the three-year period
ended December 31, 2014, have been incorporated by reference herein and in the registration statement in reliance upon the report
of KPMG LLP, independent registered public accounting firm, incorporated by reference herein from Vanguard Natural Resources, LLC’s
Current Report on Form 8-K/A, filed with the SEC on October 9, 2015, and upon the authority of said firm as experts in accounting
and auditing.
The audited historical financial statements
of LRR Energy, L.P. included in Exhibit 99.1 of Vanguard Natural Resources, LLC’s Current Report on Form 8-K/A filed on October
9, 2015 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting
firm, given on the authority of said firm as experts in auditing and accounting.
Certain estimates of our net oil and natural
gas reserves and related information included or incorporated by reference in this prospectus have been derived from reports prepared
by DeGolyer and MacNaughton. All such information has been so included or incorporated by reference on the authority of such firms
as experts regarding the matters contained in their reports.
Vanguard Natural Resources, Inc.
17,820,383 Shares of Common Stock
98,110 Shares of Common Stock Issuable
Upon Exercise of the Warrants
Prospectus
, 2017
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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ITEM 13.
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OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
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Set forth below are the expenses (other than
underwriting discounts and commissions) expected to be incurred in connection with the issuance and distribution of the securities
registered hereby. With the exception of the SEC registration fee, the amounts set forth below are estimates.
SEC registration fee
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$
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43,501.63
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Accountants’ fees and expenses
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*
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Legal fees and expenses
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*
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Printing and engraving expenses
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*
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Transfer agent and registrar fees
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*
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Miscellaneous
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*
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Total
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*
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*
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These fees are calculated based on the number of issuances
and amount of Common Stock offered and cannot be estimated at this time.
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ITEM 14.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS.
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Section 145 of the DGCL permits corporations
to indemnify directors and officers. The statute generally requires that to obtain indemnification the director or officer must
have acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation;
and, additionally, in criminal proceedings, that the officer or director had no reasonable cause to believe his conduct was unlawful.
In any proceeding by or in the right of the corporation, no indemnification may be provided if the director or officer is adjudged
liable to the corporation (unless ordered by the court). Indemnification against expenses actually and reasonably incurred by a
director or officer is required to the extent that such director or officer is successful on the merits in the defense of the proceeding.
Our Certificate of Incorporation provides that
we will indemnify and hold harmless, to the fullest extent permitted by the DGCL, any person who was or is made or is threatened
to be made a party or is otherwise involved in any threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that he or she is or was one of our directors or officers or
is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust or other enterprise.
Our Certificate of Incorporation further provides for the advancement of expenses to each of its officers and directors.
Our Certificate of Incorporation provides that,
to the fullest extent permitted by the DGCL, our directors shall not be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director. Under Section 102(b)(7) of the DGCL, the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of fiduciary duty can be limited or eliminated except (1) for
any breach of the director’s duty of loyalty to the corporation or its stockholders; (2) for any act or omission not
in good faith or which involves intentional misconduct or a knowing violation of law; (3) under Section 174 of the DGCL
(relating to unlawful payment of dividend or unlawful stock purchase or redemption); or (4) for any transaction from which
the director derived an improper personal benefit.
We also maintain a general liability insurance
policy which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their
capacities as directors or officers, whether or not we would have the power to indemnify such person against such liability under
the DGCL or the provisions of the Certificate of Incorporation.
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ITEM 15.
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RECENT SALES OF UNREGISTERED SECURITIES.
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On the Effective Date, we reserved for issuance
the following in accordance with the Plan:
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678,464 shares of Common Stock were issued pro rata to holders of claims arising under our Predecessor’s senior unsecured
notes;
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1,283,333 shares of Common Stock were issued pro rata to holders of our Predecessor’s 7.0% Senior Secured Second
Lien Notes (the “Old Notes”) in exchange for a fully committed $19.25 million investment;
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678,405 shares of Common Stock were issued to participants in the 1145 rights offering extended by the Debtors to certain
holders of claims arising under the senior unsecured notes (including certain of the commitment parties party to the Amended and
Restated Backstop Commitment Agreement);
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7,846,595 shares of Common Stock were issued to participants who were eligible to participate in the accredited investor rights
offering extended by the Debtors to certain holders of claims arising under the senior unsecured notes (including certain of the
commitment parties party to the Amended and Restated Backstop Commitment Agreement);
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1,023,000 shares of Common Stock were issued to commitment parties under the Amended and Restated Backstop Commitment Agreement
in respect of the premium due thereunder;
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8,525,000 shares of Common Stock were issued to commitment parties under the Amended and Restated Backstop Commitment Agreement
in connection with their backstop obligation thereunder together with 1,482,021 shares of Common Stock reflecting shares purchased
by such commitment parties in respect of unsubscribed shares in the rights offerings; and
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20,983 shares of Common Stock were issued to holders of Predecessor’s preferred equity.
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With the exception of Common Stock described
in the second, fourth and sixth bullets above, Common Stock was issued under the Plan pursuant to an exemption from the registration
requirements of the Securities Act under Section 1145 of the Bankruptcy Code (an “1145 Exemption”). Common Stock
described in the second, fourth and sixth bullets above was issued under the exemption from registration requirements of the Securities
Act provided by Section 4(a)(2) thereof.
Pursuant to the Plan, we also issued the following
pursuant to an 1145 Exemption:
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To electing holders of Predecessor’s preferred equity, three and a half year warrants (the “Preferred Unit Warrants”),
which are exercisable to purchase up to 621,649.49 shares of the Common Stock as of the Effective Date, subject to dilution.
The expiration date of the Preferred Unit Warrants will be February 1, 2021, and the strike price is $44.25; and
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To electing holders of Predecessor’s common equity, three and a half year warrants (the “Common Unit Warrants”),
which are exercisable to purchase up to 640,875.75 shares of the Common Stock as of the Effective Date, subject to dilution.
The expiration date of the Common Unit Warrants will be February 1, 2021, and the strike price is $61.45.
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Furthermore, we issued approximately $80.7 million
aggregate principal amount of new Second Lien Notes to certain eligible holders of the outstanding Old Notes, which we co-issued
along with our Predecessor, in full satisfaction of such holders’ claim of approximately $80.7 million related to the
Old Notes. We issued the Second Lien Notes in accordance with the exemption from the registration requirements of the Securities
Act afforded by Section 4(a)(2) of the Securities Act.
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ITEM 16.
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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Reference is made to the Exhibit Index preceding
the signature pages hereto, which Exhibit Index is hereby incorporated by reference into this item.
The undersigned registrant hereby undertakes:
(a) to
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to
include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) to
reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
and
(iii) to
include any material information with respect to the plan of distribution not previously disclosed in this registration statement
or any material change to such information in this registration statement;
(b) that,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof;
(c) to
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering;
(d) that,
for the purpose of determining liability under the Securities Act to any purchaser, if the registrant is subject to Rule 430C,
each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part
of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement
made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration statement or made in any such document immediately prior
to such date of first use; and
(e) that,
for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and
(f) that,
for the purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial
bona fide
offering thereof.
The undersigned registrant hereby undertakes
that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant
to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s
annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial
bona fide
offering thereof.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
EXHIBIT INDEX
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
2.1
|
|
Modified Second Amended Joint Plan of Reorganization under Chapter 11 of Bankruptcy Code of Vanguard Natural Resources, LLC (incorporated by reference to Exhibit 2.1 to our Predecessor’s Current Report on Form 8-K filed July 19, 2017)
|
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation of Vanguard Natural Resources, Inc. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
3.2
|
|
Amended and Restated Bylaws of Vanguard Natural Resources, Inc. (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
3.3
|
|
Certificate of Amendment as filed with the Delaware Secretary of State (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed September 29, 2017)
|
|
|
|
4.1
|
|
Amended and Restated Indenture, dated as of August 1, 2017, among Vanguard Natural Resources, Inc., the guarantors named therein and Delaware Trust Company, as trustee and collateral trustee (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
5.1*
|
|
Opinion of Paul Hastings LLP as to the legality of the securities being registered
|
|
|
|
10.1
|
|
Fourth Amended and Restated Credit Agreement, dated as of August 1, 2017, by and among Vanguard Natural Gas, LLC, Citibank N.A., as Administrative Agent and the financial institutions thereto (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
10.2
|
|
Amended and Restated First Lien Pledge and Security Agreement, dated as of August 1, 2017, by and among Vanguard Natural Resources, Inc., Vanguard Natural Gas, LLC and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
10.3
|
|
Amended and Restated Second Lien Pledge and Security Agreement, dated as of August 1, 2017, by and among Vanguard Natural Resources, Inc. and Delaware Trust Company, as collateral agent (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
10.4
|
|
Amended and Restated Second Lien Pledge and Security Agreement, dated as of August 1, 2017, by and among certain subsidiaries and affiliates of Vanguard Natural Resources, Inc. and Delaware Trust Company, as collateral agent (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
10.5
|
|
Amended and Restated Intercreditor Agreement, dated as of August 1, 2017, by and among Citibank, N.A., as priority lien agent, and Delaware Trust Company, as second lien collateral trustee, and acknowledged and agreed to by Vanguard Natural Gas, LLC, Vanguard Natural Resources, Inc. and the other grantors party thereto (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
Exhibit
Number
|
|
Description of Exhibit
|
10.6
|
|
Amended and Restated Collateral Trust Agreement, dated as of August 1, 2017, by and among Vanguard Natural Resources, Inc., the grantors and guarantors named therein and Delaware Trust Company as trustee and as collateral trustee (incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
10.7
|
|
Registration Rights Agreement, dated as of August 1, 2017, between Vanguard Natural Resources, Inc. and certain parties thereto (incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
10.8
|
|
Warrant Agreement, dated as of August 1, 2017, between Vanguard Natural Resources, Inc., as Issuer, and American Stock Transfer & Trust Company, LLC, as warrant agent (incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
10.9
|
|
Second Amended and Restated Employment Agreement of Scott W. Smith, dated August 1, 2017 (incorporated by reference to Exhibit 10.9 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
10.10
|
|
Second Amended and Restated Employment Agreement of Britt Pence, dated August 1, 2017 (incorporated by reference to Exhibit 10.11 to our Current Report on Form 8-K15D5 filed August 2, 2017)
|
|
|
|
10.11
|
|
Letter to Richard Scott Sloan, dated September 29, 2017 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed September 29, 2017)
|
|
|
|
10.12
|
|
Vanguard Natural Resources, Inc. Management Incentive Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed August 25, 2017)
|
|
|
|
21.1*
|
|
Subsidiaries of Vanguard Natural Resources, Inc.
|
|
|
|
23.1*
|
|
Consent of BDO USA, LLP
|
|
|
|
23.2*
|
|
Consent of KPMG LLP
|
|
|
|
23.3*
|
|
Consent of PricewaterhouseCoopers LLP
|
|
|
|
23.4*
|
|
Consent of DeGolyer and MacNaughton
|
|
|
|
23.5*
|
|
Consent of Paul Hastings LLP (contained in Exhibit 5.1)
|
|
|
|
24.1
|
|
Powers of Attorney of the Directors and Officers of the Registrant (included in signature pages)
|
|
|
|
99.1
|
|
Order Confirming Debtors’ Modified Second Amended Joint Plan of Reorganization under Chapter 11 of Bankruptcy Code of Vanguard Natural Resources, LLC (incorporated by reference to Exhibit 99.1 to our Predecessor’s Current Report on Form 8-K filed July 19, 2017)
|
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas, on October 30, 2017.
|
Vanguard Natural Resources, Inc.
|
|
|
|
By:
|
/s/ Scott W. Smith
|
|
Name: Scott W. Smith
|
|
Title: President and Chief Executive Officer
|
KNOW ALL PERSONS BY THESE PRESENTS, that the
persons whose signatures appear below, constitute and appoint Scott W. Smith and R. Scott Sloan, and each of them, as their true
and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for them and in their names, places
and steads, in any and all capacities, to sign any and all amendments (including post- effective amendments) to this registration
statement, and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes
as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them,
or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Scott W. Smith
|
|
President, Chief Executive Officer
and Director
|
|
October 30, 2017
|
Scott W. Smith
|
|
(principal executive officer)
|
|
|
|
|
|
|
|
/s/
R. Scott Sloan
|
|
Chief Financial Officer and Director
|
|
October 30, 2017
|
R. Scott Sloan
|
|
(principal financial officer and principal
accounting officer)
|
|
|
|
|
|
|
|
/s/
Joseph Citarrella
|
|
Chairman of the Board of Directors
|
|
October 30, 2017
|
Joseph Citarrella
|
|
|
|
|
|
|
|
|
|
/s/
Randall M. Albert
|
|
Director
|
|
October 30, 2017
|
Randall M. Albert
|
|
|
|
|
|
|
|
|
|
/s/
Michael Alexander
|
|
Director
|
|
October 30, 2017
|
Michael Alexander
|
|
|
|
|
|
|
|
|
|
/s/
W. Greg Dunlevy
|
|
Director
|
|
October 30, 2017
|
W. Greg Dunlevy
|
|
|
|
|
|
|
|
|
|
/s/
Graham Morris
|
|
Director
|
|
October 30, 2017
|
Graham Morris
|
|
|
|
|