Item 1.01 Entry Into a Material Definitive Agreement.
Restructuring Support Agreement
On
June 30, 2020, Rosehill Resources Inc. (the Company) and Rosehill Operating Company, LLC (Rosehill Operating, and together with the Company, the Company Parties), its direct subsidiary, entered into a
Restructuring Support Agreement (the RSA), which includes the term sheet attached thereto as Exhibit A (the Term Sheet), with (i) Tema Oil and Gas Company (Tema), as (a) the holder of approximately 66.8%
of the voting equity interests of the Company and 35.2% of the equity interests in Rosehill Operating and (b) party to that certain Tax Receivable Agreement dated as of April 27, 2017 (as amended, restated, modified, or supplemented from
time to time), by and among the Company and Tema, (ii) certain beneficial holders of, or investment advisors, sub-advisors, or managers of discretionary accounts that are beneficial holders of claims
under that certain Amended and Restated Credit Agreement, dated as of March 28, 2018 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the Existing Credit Agreement), among the Company Parties,
JPMorgan Chase Bank, N.A., as issuing bank and administrative agent (in such capacity, JP Morgan), and the lenders from time to time party thereto (the Consenting Lenders), and (iii) certain beneficial holders of, or the
investment advisors, sub-advisors, or managers on behalf of discretionary funds, accounts, or entities that are beneficial holders of claims under the Note Purchase Agreement dated as of December 8, 2017
(as amended, restated modified, or supplemented from time to time), by and among the Company Parties, the holders party thereto, and U.S. Bank National Association, as agent and collateral agent, and 100% of the Companys issued Series B
Preferred Stock (the Consenting Noteholders, and together with Tema and the Consenting Lenders, the Consenting Creditors).
The RSA contemplates that the Company Parties will (i) file voluntary cases (the Chapter 11 Cases) under chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas (the Bankruptcy Court) to effect a restructuring through a prepackaged chapter 11 plan of reorganization (the Plan) to be
filed with the Bankruptcy Court on or before July 15, 2020, at 11:59 p.m. (prevailing Central Time) and (ii) enter into a proposed junior convertible debtor in possession delayed draw term loan facility (the DIP Facility) as
evidenced by the DIP Credit Agreement (as defined in the RSA).
The RSA contains certain covenants on the part of each of the Company
Parties and the Consenting Creditors, including that the Consenting Creditors use commercially reasonable efforts to support the Restructuring Transactions (as defined in the RSA), to vote in favor of the Plan, and to otherwise use good faith when
negotiating the forms of the Definitive Documents (as defined in the RSA) with the Company Parties. The RSA also provides for certain conditions to the obligations of the parties and for termination upon the occurrence of certain events, including,
without limitation, the failure to achieve certain milestones and certain breaches or other actions by the parties under the RSA.
Proposed Plan of
Reorganization
The Plan as contemplated by the RSA will provide for the following, among other things:
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after the time on which all conditions to the effectiveness of the Plan have been satisfied or waived in
accordance with the terms thereof, and the Plan becomes effective (the Effective Date), either a reorganized Rosehill Operating or a newly created legal entity that would be the successor to the Company Parties (either entity
constituting New Rosehill) will be established;
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the entry by New Rosehill into an exit RBL credit agreement to refinance indebtedness under the Existing Credit
Agreement (the Revolving Credit Facility), with a tenor of 4 years and a maximum initial borrowing base of $235 million;
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the principal of the DIP Facility will be converted to 24.15% of the shares of the equity of New Rosehill (the
New Common Shares), and the backstop fee earned in connection with the DIP Facility will be converted to 1.69% of the New Common Shares, in each case, subject to dilution from the post-emergence management incentive plan that will be
adopted by the board of directors of New Rosehill (the MIP);
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each of the Consenting Noteholders will receive its pro rata share of 68.60% of the New Common Shares, subject to
dilution from the MIP, in exchange for all of the Secured Note Claims (as defined in the Term Sheet);
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