Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. ROAN RESOURCES, INC. (1326428) 10-Q published on Nov 06, 2019 at 4:29 pm
Reporting Period: Sep 29, 2019
Conditions to Close and Covenants
The Merger Agreement includes specified closing conditions that must be met or waived. These conditions include, but are not limited to, (i) the stockholders of the Company voting in favor of adopting the Merger Agreement, (ii) the expiration or termination of applicable waiting periods under applicable antitrust laws, (iii) the absence of any law, order, judgment or injunction by any governmental entity restraining, prohibiting or rendering the consummation of the Merger illegal, (iv) the Test Indebtedness of the Company, as defined in the Merger Agreement, being less than or equal to $760.0 million and (v) certain other customary closing conditions. The Merger Agreement also includes customary representations, warranties and covenants of the Company, Citizen Operating and Merger Sub. These include a covenant by the Company to enter into additional natural gas liquid, natural gas and oil hedging arrangements. See Commodity Contracts below for discussion of the additional derivative contracts entered into by the Company in October 2019.
Either the Company or Citizen Operating may terminate the Merger Agreement if the Merger is not consummated by March 17, 2020. The Merger Agreement includes specifications regarding fees to be paid by either party should the agreement be terminated prior to March 17, 2020. The Company’s board of directors may terminate the Merger Agreement to enter into a superior proposal upon satisfaction of certain conditions, as specified in the Merger Agreement, and upon payment of a termination fee of $25.0 million. If Citizen Operating terminates the Merger Agreement, under certain circumstances as specified in the Merger Agreement, Citizen Operating would be obligated to pay a termination fee of $35.0 million. The Merger Agreement also contains a provision that would require Citizen Operating to pay for the cost (subject to a cap of $15.0 million) to unwind certain hedging arrangements if the transaction is terminated due to Citizen Operating’s breach or failure to obtain financing and the $35.0 million termination fee is insufficient to cover the unwind costs.
The Merger Agreement generally requires us to use commercially reasonable efforts to, and cause each of our subsidiaries to use commercially reasonable efforts to, conduct our operations within the Company Operations Plan (as defined in the Merger Agreement) pending consummation of the proposed Merger and restricts us, without Citizen Operating’s consent, from taking certain specified actions until the proposed Merger is completed. Furthermore, following the announcement of the proposed Merger, the Company elected to temporarily reduce its drilling and development activity and to suspend all completion activity, which will have a material adverse effect on its cash flows from operations. These restrictions may affect our ability to execute our business strategies, respond effectively to competitive pressures and industry developments, pursue alternative business opportunities or strategic transactions, undertake significant capital projects, undertake significant financing transactions, modify our lease arrangements and otherwise pursue other actions that are not within the Company Operations Plan, even if such actions would constitute appropriate changes to our business and help us attain our financial and other goals, and, as a result, these restrictions may impact our financial condition and results of operations.
The proposed Merger could also cause disruptions to our business or business relationships, which could have an adverse impact on our business, financial condition and results of operations. Parties with which we have business relationships, including customers and suppliers, may experience uncertainty as to the future of such relationships and may delay or defer certain business decisions concerning our products or services, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties. Customers, suppliers, vendors, lenders and other business partners may also seek to change existing agreements with us as a result of the proposed Merger. Any such delay or deferral of those decisions or changes in existing agreements could adversely impact our business, regardless of whether the proposed Merger is ultimately consummated. The consummation of the proposed Merger may adversely affect our relationship with our customers, vendors, suppliers, lenders or other business partners.
The Merger Agreement contains provisions that, subject to limited exceptions, restrict our ability to (i) continue to engage in discussions, solicitations or negotiations regarding an Alternative Proposal (as defined in the Merger Agreement), (ii) initiate, solicit, knowingly encourage, knowingly induce or knowingly facilitate (including by way of furnishing information) an Alternative Proposal, (iii) participate or engage in or otherwise knowingly facilitate any discussions or negotiations regarding, or furnish to any person any information or date relating to us or any of our subsidiaries, in connection with an Alternative Proposal, (iv) approve, endorse or recommend an Alternative Proposal or (v) enter into any letter of intent, term sheet, memorandum of understating, merger agreement, acquisition agreement, exchange agreement or any other agreement with respect to an Alternative Proposal or requiring us to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by the Merger Agreement. In addition, before our board of directors withdraws, qualifies or modifies its recommendation of the proposed Merger or terminates the Merger Agreement to enter into a definitive agreement with respect to a competing transaction, Citizen Operating generally has an opportunity to offer to modify the terms of the proposed Merger. In some circumstances, upon termination of the Merger Agreement, we will be required to pay a termination fee equal to $25 million.