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Item 1.01
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Entry into a Material Definitive Agreement
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Hillstone Purchase Agreement
On September 25, 2019, NGL Water Solutions
Permian, LLC (the “Buyer”), a wholly owned subsidiary of NGL Energy Partners LP (the “Partnership”),
and the Partnership entered into an Equity Purchase Agreement (the “Hillstone Purchase Agreement”) with
Water Remainco, LLC (“Seller Representative”), Hillstone Environmental Partners, LLC (“Hillstone”),
GGCOF HEP Blocker II, LLC, GGCOF HEP Blocker, LLC, Golden Gate Capital Opportunity Fund-A, L.P., GGCOF AIV L.P. and GGCOF HEP Blocker
II Holdings, LLC. Pursuant to the Hillstone Purchase Agreement, the Buyer has agreed to effect the acquisition of Hillstone (the
“Hillstone Acquisition”) by purchasing 100% of the outstanding equity interests in Hillstone in exchange
for approximately $600 million in cash.
Consummation
of the Hillstone Acquisition is subject to satisfaction or waiver of various closing conditions, including, among others (i) the
accuracy of the representations and warranties of the parties as of the closing date, (ii) the performance of various covenants
and agreements of the parties through the closing date and (iii) the expiration or termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Partnership expects the Hillstone Acquisition to
close in 2019, but there can be no assurance that the Hillstone Acquisition will be completed in the anticipated time frame,
or at all, or that the anticipated benefits of the Hillstone Acquisition will be realized.
The Hillstone Purchase
Agreement contains termination rights for the parties, including, among others, rights to terminate such agreement if (i) the
closing has not occurred on or prior to November 30, 2019; and (ii) any of the conditions to closing specified in such agreement
are not satisfied by the closing date, in each case, through no fault of the terminating party.
In connection with
entering into the Hillstone Purchase Agreement, the Buyer deposited with Seller Representative approximately $49.9 million, which
is anticipated to be credited against the purchase price at closing. The Hillstone Purchase Agreement provides that if it is terminated
by the Seller Representative or the Buyer under certain specified circumstances, the Sellers (as defined therein) will be entitled
to retain the deposit as liquidated damages or to seek specific performance.
Class D Preferred Unit and Warrant Purchase Agreement
On
September 25, 2019, the Partnership entered into a Class D Preferred Unit and Warrant Purchase Agreement (the
“Class D Purchase Agreement”) with EIG Neptune Equity Aggregator, L.P., FS Energy and Power
Fund and Foundation Infrastructure Partners in connection with GCM Pellit Holdings, LLC (together, the
“Investors”), pursuant to which the Partnership agreed to issue and sell to the Investors in a
private placement (the “Private Placement”) $200 million (in aggregate initial liquidation
preference) of the Partnership’s Class D Preferred Units (the “Preferred Units”) and
warrants (the “Warrants”) to purchase an aggregate of 8,500,000 common units representing limited
partner interests in the Partnership (“Common Units”). The aggregate purchase price for the
Preferred Units and Warrants is $200 million. The Warrants are subject to vesting and exercise terms described in Item 3.02
hereof. The Partnership plans to use the net proceeds from the issuance and sale of the Preferred Units and Warrants to
fund a portion of the purchase price for the Hillstone Acquisition.
The Partnership anticipates that the Private
Placement will close simultaneously with the closing of the Hillstone Acquisition. The closing of the Private Placement is subject
to the closing of the Hillstone Acquisition as well as other customary closing conditions. The
Class D Purchase Agreement contains certain termination rights for the Partnership and the Investors, including, among others,
the right of each party to terminate the Class D Purchase Agreement if the closing of the Hillstone Acquisition has not
occurred on or prior to November 30, 2019 (unless such date is extended pursuant to the terms of the Hillstone Purchase Agreement).
Pursuant to the terms of the Class D
Purchase Agreement, the Partnership expects to pay a cash closing fee in the aggregate amount of $4.0 million to affiliates of
the Investors. The Class D Purchase Agreement contains customary representations and warranties by the Partnership and the
Investors, and the Partnership and the Investors have agreed to indemnify each other for losses resulting from a breach of any
of their respective representations, warranties or covenants.
Pursuant to the terms of the Class
D Purchase Agreement, upon consummation of the Private Placement, the Partnership and the Investors will amend and restate
the Registration Rights Agreement dated July 2, 2019 by and among the Partnership and the purchasers party thereto to, among
other things, add GCM Pellit Holdings, LLC as a party and to include the Preferred Units and the Common Units issuable
upon exercise of the Warrants.
The description of the Class D Purchase
Agreement is qualified in its entirety by reference to the full text of the Class D Purchase Agreement, which is filed as Exhibit 10.1
hereto, and is incorporated into this Item 1.01 by reference.