PREM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to § 240.14a-12

ALTUS MIDSTREAM COMPANY

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

Class C common stock, par value $0.0001, of Altus Midstream Company (“Class C Common Stock”)
Common units representing limited partner interests in Altus Midstream LP (“Common Units”)

  (2)  

Aggregate number of securities to which transaction applies:

 

50,000,000 shares of Class C Common Stock

50,000,000 Common Units

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

The underlying value of the transaction was determined based upon the market value of shares of Class A common stock, par value $0.0001, of Altus Midstream Company (“Class A Common Stock”) for which the Common Units to be issued in the transaction are exchangeable on a one-for-one basis as follows: (A) $64.94, the average of the high and low prices per share of the Class A Common Stock on November 10, 2021, as quoted on the Nasdaq Global Market multiplied by (B) 50,000,000, the number of Common Units and shares of Class C Common Stock to be issued in the transaction.

  (4)  

Proposed maximum aggregate value of transaction:

 

$3,247,000,000

  (5)  

Total fee paid:

 

$300,996.90

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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SUBJECT TO COMPLETION, DATED [], 2021

 

 

LOGO

IMPORTANT STOCKHOLDER MEETING—PLEASE VOTE TODAY

Dear Fellow Stockholders,

Altus Midstream Company (Altus), Altus Midstream LP (the Partnership), New BCP Raptor Holdco, LLC (Contributor) and, solely for the purposes set forth therein, BCP Raptor Holdco, LP (BCP) have entered into a contribution agreement providing for the acquisition of BCP and BCP Raptor Holdco GP, LLC (BCP GP, and together with BCP, the Contributed Entities) by the Partnership. In the transaction, Contributor will contribute all of the equity interests of the Contributed Entities (the Contributed Interests) to the Partnership, with the Contributed Entities each becoming wholly-owned subsidiaries of the Partnership. In exchange for the contribution by Contributor, Contributor or its designees will receive an aggregate of 50,000,000 common units representing limited partner interests in the Partnership (Common Units) and an aggregate of 50,000,000 shares of Altus’ Class C common stock, par value $0.0001 per share (the Class C Common Stock). As a result of the transaction, Altus’ current stockholders will continue to hold their shares of Altus’ Class A common stock, par value $0.0001 per share (Class A Common Stock) and Class C Common Stock (collectively, Altus Common Stock), Contributor or its designees will collectively own approximately 75% of the issued and outstanding Altus Common Stock, Apache Midstream LLC (Apache Midstream), a wholly-owned subsidiary of APA Corporation, which currently owns approximately 79% of the issued and outstanding Altus Common Stock, will own approximately 20% of the issued and outstanding Altus Common Stock, and the remaining current stockholders will own approximately 5% of the issued and outstanding Altus Common Stock.

The Class A Common Stock is currently listed on the Nasdaq Global Market (Nasdaq) under the ticker symbol “ALTM,” and immediately after the transaction is completed, will continue to be listed on Nasdaq. Neither the Common Units nor the Class C Common Stock is listed on any national securities exchange, but the Common Units and the Class C Common Stock together are exchangeable on a one-for-one basis for shares of Class A Common Stock. Neither the Contributed Entities nor the Contributed Interests are listed on any national securities exchange.

Altus stockholders are being asked to approve the issuance of the Common Units and shares of Class C Common Stock to Contributor as required by Nasdaq rules (the share issuance proposal) and to approve an amendment and restatement of Altus’ certificate of incorporation to make certain changes described in this proxy statement (the charter amendment proposal). The approval of the share issuance proposal requires the affirmative vote of a majority of the votes cast by the holders of Altus Common Stock present (in person or by proxy) at the Altus special meeting and entitled to vote, assuming a quorum is present. The approval of the charter amendment proposal requires the affirmative vote of holders of a majority of the outstanding Altus Common Stock. This proxy statement is being used to solicit proxies for a special meeting of Altus stockholders to approve both proposals. The Altus Board of Directors has unanimously approved the contribution agreement and determined that the transaction is advisable and in the best interests of Altus and its stockholders, and unanimously recommends that Altus stockholders vote “FOR” the share issuance proposal and the charter amendment proposal.

We urge you to read this proxy statement, including the annexes, carefully and in their entirety. In particular, you should consider the matters discussed under “Risk Factors” beginning on page 22, which contains a description of certain risks you may wish to consider in evaluating the proposals.


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Your vote is very important. We will not complete the transaction unless the share issuance proposal is approved. Whether or not you expect to attend the special meeting, the details of which are described in this proxy statement, please vote immediately by submitting your proxy through the Internet, by telephone, or by completing, signing, dating, and mailing your signed proxy card(s) in the enclosed pre-paid envelope.

Sincerely,

Jon W. Sauer

CHAIRMAN OF THE BOARD

Altus Midstream Company

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the proposed transaction or determined if this proxy statement is truthful or complete. Any representation to the contrary is a criminal offense.

This proxy statement is dated [●] and is first being mailed to Altus stockholders on or about [●].


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LOGO

ALTUS MIDSTREAM COMPANY

One Post Oak Central

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056

NOTICE OF STOCKHOLDERS’ MEETING OF

ALTUS MIDSTREAM COMPANY

TO BE HELD ON []

To Altus Midstream Company Stockholders:

Notice is hereby given that a special meeting of stockholders of Altus Midstream Company, a Delaware corporation (Altus, the Company, or we) will be held on [●], at [●] (Central time) at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. The purpose of the special meeting is to allow Altus stockholders to consider and vote upon the following proposals:

 

   

Share Issuance Proposal. A proposal to approve the issuance of an aggregate of 50,000,000 common units representing limited partner interests in Altus Midstream LP and an aggregate of 50,000,000 shares of Altus’ Class C common stock, par value $0.0001 per share, to New BCP Raptor Holdco, LLC (Contributor) or its designees, pursuant to the Contribution Agreement, dated as of October 21, 2021, by and among Altus, Altus Midstream LP, Contributor, and solely for the purposes set forth therein, BCP Raptor Holdco, LP (BCP); and

 

   

Charter Amendment Proposal. A proposal to approve an amendment and restatement of the Second Amended and Restated Certificate of Incorporation of Altus to, among other changes, (i) allow for stockholder action by written consent in lieu of holding a meeting of the stockholders, (ii) allow for 10% or greater holders of voting stock to call special meetings of the stockholders, and (iii) further define the waiver of corporate opportunities with respect to Altus and its officers and directors, and any of their respective affiliates.

In connection with the execution of the contribution agreement, Apache Midstream LLC (Apache Midstream), entered into a voting and support agreement with Contributor, BCP and, solely for the limited purposes set forth therein, APA Corporation (the voting and support agreement) with respect to all shares of Altus Common Stock beneficially owned by Apache Midstream, and any additional shares of Altus Common Stock of which Apache Midstream acquires record or beneficial ownership between the date of the voting and support agreement and the termination of the voting and support agreement (the Apache Midstream Support Agreement Shares), wherein Apache Midstream agreed to vote all of the Apache Midstream Support Agreement Shares (i) in favor of approving any matters necessary for the consummation of the transaction contemplated by the contribution agreement and (ii) against specified actions that would discourage, delay or adversely affect the transaction, including specified actions that contemplate alternative transactions. Apache Midstream holds and is entitled to vote in the aggregate approximately 79% of the issued and outstanding shares of Altus Common Stock. Accordingly, as long as the Altus Board of Directors (the Altus Board) does not change its recommendation, approval of the share issuance proposal and the charter amendment proposal at the special meeting is assured. In the event that the Altus Board has changed its recommendation to Altus’ stockholders in accordance with the contribution agreement, Apache Midstream’s voting obligation is reduced to 35% of the total issued and outstanding shares of Altus Common Stock plus additional votes proportionate to the voting percentage of Altus’ other stockholders. For more information, please see the section entitled “The Contribution Agreement and Other Transaction Agreements—Voting and Support Agreement.”


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Your vote is very important. The approval of the share issuance proposal requires the affirmative vote of a majority of the votes cast by the holders of Altus Common Stock present (in person or by proxy) at the Altus special meeting and entitled to vote, assuming a quorum is present. The approval of the charter amendment proposal requires the affirmative vote of holders of a majority of the outstanding Altus Common Stock. We will not complete the transaction unless the share issuance proposal is approved. The Altus Board recommends that you vote FOR each of the proposals.

Only holders of record of Altus Common Stock at the close of business on [●], the record date, are entitled to receive this notice and to vote at the special meeting. No appraisal rights will be available to Altus stockholders in connection with the transaction.

Whether or not you plan to attend the special meeting, please read the accompanying document and then cast your vote as instructed in your proxy card, as promptly as possible. You can also cast your vote by using the Internet or by telephone. If you have any questions, would like additional copies of the document, or need assistance with voting your Altus Common Stock, please contact Altus’ corporate secretary.

Sincerely,

Rajesh Sharma

CORPORATE SECRETARY

[●]


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TABLE OF CONTENTS

 

SUMMARY TERM SHEET

     1  

FREQUENTLY USED TERMS

     4  

QUESTIONS AND ANSWERS ABOUT THE ALTUS SPECIAL MEETING

     5  

SUMMARY OF THE PROXY STATEMENT

     9  

Information About the Companies

     9  

The Altus Special Meeting

     9  

The Contribution Agreement

     10  

Voting and Support Agreement

     13  

Recommendation of the Altus Board

     13  

Opinion of Credit Suisse, Altus’ Financial Advisor

     13  

Interests of Altus’ Executive Officers and Directors in the Transaction

     14  

Directors and Management of Altus Following the Transaction

     14  

No Appraisal Rights

     14  

Public Trading Markets; Listing of the Class A Common Stock

     14  

Accounting Treatment

     14  

Regulatory Approvals Required for the Transaction

     15  

Agreement Not to Solicit Other Offers

     15  

Termination of the Contribution Agreement

     17  

Termination Fee Payable by Altus

     18  

Summary Selected Unaudited Pro Forma Condensed Consolidated Combined Financial Information

     19  

RISK FACTORS

     22  

Risks Related to the Transaction

     22  

Risks Related to ECM’s Business

     26  

Environmental and Regulatory Risk Factors Related to ECM

     33  

Risks Related to Altus’ Business

     39  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     40  

THE ALTUS SPECIAL MEETING

     42  

Time and Place of the Altus Special Meeting

     42  

Purpose of the Altus Special Meeting

     42  

Other Business

     42  

Recommendation of the Altus Board

     42  

Record Date and Quorum

     43  

Attendance

     43  

Voting by Altus Directors and Executive Officers

     44  

Voting by Apache Midstream

     44  

Notice of Internet Availability of Proxy Materials

     45  

Voting by Attending the Altus Special Meeting in Person

     45  

 

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Voting Without Attending the Altus Special Meeting in Person

     45  

Revocation

     46  

Solicitation of Proxies; Payment of Solicitation Expenses

     46  

PROPOSAL NO. 1—THE SHARE ISSUANCE PROPOSAL

     47  

THE TRANSACTION

     49  

General

     49  

Background of the Transaction

     50  

Reasons for the Recommendation to Altus Stockholders by the Altus Board

     54  

Opinion of Credit Suisse, Altus’ Financial Advisor

     57  

Certain Unaudited Financial Forecasts of Altus and ECM

     65  

Interests of Altus’ Executive Officers and Directors in the Transaction

     68  

Directors and Management of Altus Following the Transaction

     69  

Controlled Company and Altus Board Independence

     73  

Regulatory Approvals Required for the Transaction

     73  

Accounting Treatment

     74  

Public Trading Markets; Listing of the Class A Common Stock

     74  

No Appraisal Rights

     74  

THE CONTRIBUTION AGREEMENT AND OTHER TRANSACTION AGREEMENTS

     75  

Structure of the Transaction

     75  

Closing and Effective Time of the Transaction

     75  

Effect of the Transaction on Altus Common Stock

     76  

No Appraisal Rights

     76  

Treatment of Altus Equity-Based Awards and Altus Warrants

     76  

Conditions to Consummation of the Transaction

     76  

Obligations with Respect to the Altus Special Meeting and Recommendation to Stockholders

     78  

Agreement Not to Solicit Other Offers

     79  

Effect of Termination

     85  

Termination Fee Payable by Altus

     85  

Representations and Warranties

     86  

Conduct of Business Pending the Transaction

     87  

Employee Benefits Matters

     90  

Regulatory Approvals Required for the Transaction

     91  

Indemnification; Directors’ and Officers’ Insurance

     92  

Expenses

     93  

Transition Services

     93  

Third Party Finance Consents; Company JV Consents

     93  

Dividends and Distributions Pending Closing

     94  

Resignations and Appointments

     94  

Dividend Reinvestment Plan

     94  

 

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Other Covenants and Agreements

     95  

Waivers; Amendments

     95  

Voting and Support Agreement

     96  

Amended and Restated Stockholders Agreement

     98  

Voting Agreements

     100  

Second Amended and Restated Registration Rights Agreement

     100  

Third Amended and Restated Certificate of Incorporation of Altus

     102  

Amended and Restated Bylaws of Altus

     102  

Third Amended and Restated Agreement of Limited Partnership of the Partnership

     103  

Governing Law

     103  

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS

     104  

INFORMATION ABOUT THE COMPANIES

     117  

Information About BCP

     117  

Information About Altus

     117  

DESCRIPTION OF CAPITAL STOCK

     118  

Common Stock

     118  

PROPOSAL NO. 2—THE CHARTER AMENDMENT PROPOSAL

     120  

BENEFICIAL OWNERSHIP OF COMMON STOCK

     124  

STOCKHOLDER PROPOSALS

     126  

Proposals for Inclusion in 2022 Proxy Statement

     126  

Proposals and Director Nominations for Presentation at 2022 Annual Meeting

     126  

SOLICITATION OF PROXIES

     127  

STOCKHOLDERS WITH THE SAME LAST NAME AND ADDRESS

     128  

WHERE YOU CAN FIND MORE INFORMATION

     129  

ANNEX A—Information Concerning EagleClaw Midstream

     A-1  

ANNEX B—Contribution Agreement

     B-1  

ANNEX C—Form of Second Amended and Restated Registration Rights Agreement

     C-1  

ANNEX D—Form of Third Amended and Restated Certificate of Incorporation of Altus

     D-1  

ANNEX E—Amended and Restated Stockholders Agreement

     E-1  

ANNEX F—Third Amended and Restated Agreement of Limited Partnership of the Partnership

     F-1  

ANNEX G—Form of Amended and Restated Bylaws of Altus

     G-1  

ANNEX H—Opinion of Credit Suisse

     H-1  

 

 

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SUMMARY TERM SHEET

This summary term sheet, together with the sections entitled “Questions and Answers About the Altus Special Meeting” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement, but does not contain all of the information that is important to you. You should read carefully this entire proxy statement, including the attached Annexes, and the other documents referred to herein, for a more complete understanding of the matters to be considered at the special meeting. In addition, for definitions of terms frequently used throughout this proxy statement, including this summary term sheet, please see the section entitled “Frequently Used Terms.”

 

   

Altus Midstream Company, a Delaware corporation, through its ownership interest in the Partnership, owns gas gathering, processing, and transmission assets in the Permian Basin of West Texas, anchored by midstream service contracts to service Apache Corporation’s production from Alpine High. Additionally, Altus owns equity interests in four intrastate Permian Basin pipelines that have access to various points along the Texas Gulf Coast. For more information about Altus and its affiliates that are party to the transaction, please see the section entitled “Information About the Companies—Information About Altus.

 

   

As of [●], the record date for the special meeting, there were [●] shares of Altus Common Stock issued and outstanding, including [●] shares of Class A Common Stock and 12,500,000 shares of Class C Common Stock. Holders of Class A Common Stock and holders of Class C Common Stock vote together as a single class on all matters submitted to a vote of Altus’ stockholders, except as required by law.

 

   

On October 21, 2021, Altus entered into the following agreements with the other parties thereto:

 

   

the contribution agreement;

 

   

the Amended and Restated Stockholders Agreement by and among APA Corporation, Apache Midstream, Altus, Contributor, BCP, and affiliates of Blackstone Energy Partners VII L.P., Blackstone Energy Partners II L.P. and ISQ Global Infrastructure Fund II L.P., which stockholders agreement is to be effective as of closing (other than a provision to negotiate and enter into a dividend reinvestment plan that shall be implemented shortly following closing), and amends and replaces the existing stockholders agreement, dated November 9, 2018, among Altus, Kayne Anderson Sponsor, LLC, and Apache Midstream;

 

   

separate voting agreements, which are to be effective as of closing, if ever, with each of (i) APA Corporation and Apache Midstream, (ii) affiliates of Blackstone Capital Partners VII L.P. and Blackstone Energy Partners II L.P., and (iii) affiliates of ISQ Global Infrastructure Fund II L.P., requiring such stockholder to vote all shares of Altus Common Stock beneficially owned by such stockholder for the election to the Altus Board of the directors designated pursuant to the Amended and Restated Stockholders Agreement for so long as such stockholder and its affiliates hold at least 10% of the outstanding Altus Common Stock; and

 

   

the Third Amended and Restated Agreement of Limited Partnership of the Partnership, which is to become effective as of closing, if ever, and provides for, among other things, admission of Contributor, the BX Holders and ISQ as limited partners thereunder, updates to certain tax and tax-related provisions, and amendment of certain provisions relating to the Series A Preferred Units of the Partnership (Series A Preferred Units).

 

   

In the transaction, Contributor will contribute all of the Contributed Interests to the Partnership, with the Contributed Entities each becoming wholly-owned subsidiaries of the Partnership. In exchange for the contribution by Contributor, Contributor or its designees will receive an aggregate of 50,000,000 Common Units and an aggregate of 50,000,000 shares of Class C Common Stock. As a result of the transaction, Altus’ current stockholders will continue to hold their shares of Altus Common Stock, Contributor or its designees will collectively own approximately 75% of the issued and outstanding

 

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Altus Common Stock, Apache Midstream, which currently owns approximately 79% of the issued and outstanding Altus Common Stock, will own approximately 20% of the issued and outstanding Altus Common Stock, and the remaining current stockholders will own approximately 5% of the issued and outstanding Altus Common Stock.

 

   

In connection with the execution of the contribution agreement, Apache Midstream entered into a voting and support agreement with Contributor, BCP and, solely for the limited purposes set forth therein, APA Corporation (the voting and support agreement) with respect to all shares of Altus Common Stock beneficially owned by Apache Midstream, and any additional shares of Altus Common Stock of which Apache Midstream acquires record or beneficial ownership between the date of the voting and support agreement and the termination of the voting and support agreement (the Apache Midstream Support Agreement Shares), wherein Apache Midstream agreed to vote all of the Apache Midstream Support Agreement Shares (i) in favor of approving any matters necessary for the consummation of the transaction contemplated by the contribution agreement and (ii) against specified actions that would discourage, delay or adversely affect the transaction, including specified actions that contemplate alternative transactions. Apache Midstream holds and is entitled to vote in the aggregate approximately 79% of the issued and outstanding shares of Altus Common Stock. Accordingly, as long as the Altus Board does not change its recommendation, approval of the share issuance proposal and the charter amendment proposal at the special meeting is assured. In the event that the Altus Board has changed its recommendation to its stockholders in accordance with the contribution agreement, Apache Midstream’s voting obligation is reduced to 35% of the total issued and outstanding shares of Altus Common Stock plus additional votes proportionate to the voting percentage of Altus’ other stockholders. For more information, please see the section entitled “The Contribution Agreement and Other Transaction Agreements—Voting and Support Agreement.”

 

   

The Altus Board considered various factors in determining whether to approve the transaction, including strategic considerations and aggregate value, operational benefits of the transaction and the potential enhanced asset portfolio, financial projections, the favorable terms included in the transaction documents, and the risks and potentially negative factors of the transaction. For more information about the Altus Board’s reasons for approving the transaction, see the section entitled “The Transaction—Reasons for the Recommendation to Altus Stockholders by the Altus Board.”

 

   

At the special meeting, Altus stockholders will be asked to consider and vote upon (i) for purposes of complying with Nasdaq Listing Rules 5635(a) and 5635(b), the share issuance proposal and (ii) the charter amendment proposal. Please see the sections entitled “Proposal No. 1—The Share Issuance Proposal” and “Proposal No. 2—The Charter Amendment Proposal.

 

   

In considering the recommendation of the Altus Board to vote “FOR” the share issuance proposal and “FOR” the charter amendment proposal, you should be aware that aside from their interests as stockholders, certain members of Altus’ management and the Altus Board have interests in the transaction that are different from, or in addition to, the interests of Altus stockholders’ generally. The Altus Board was aware of and carefully considered these interests of its directors and officers, among other matters, during its deliberations on the merits, terms, and structure of the transaction, overseeing the negotiation of the transaction, and approving the contribution agreement and the transaction. Stockholders should take these interests into account in deciding whether to approve the share issuance proposal and the charter amendment proposal. For more information about these interests, please see the section entitled “The Transaction—Interests of Altus’ Executive Officers and Directors in the Transaction.”

 

   

Unless waived by Altus and Contributor, and subject to applicable law, the closing of the transaction is subject to a number of conditions set forth in the contribution agreement and receipt of stockholder approval contemplated by this proxy statement.

 

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The contribution agreement may be terminated at any time prior to the consummation of the transaction upon agreement of the parties thereto, or by Altus or Contributor in specified circumstances. For more information about the termination rights under the contribution agreement, please see the section entitled “The Contribution Agreement and Other Transaction Agreements—Termination of the Contribution Agreement.”

 

   

The proposed transaction involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors” beginning on page 22 of this proxy statement.

 

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FREQUENTLY USED TERMS

These frequently used terms may be helpful for you to have in mind at the outset.

 

   

Altus” means Altus Midstream Company, a Delaware corporation.

 

   

Altus Common Stock” means the Class A Common Stock and the Class C Common Stock, collectively.

 

   

Apache Midstream” means Apache Midstream LLC, a Delaware limited liability company and wholly-owned subsidiary of APA Corporation.

 

   

BCP” means BCP Raptor Holdco, LP, a Delaware limited partnership.

 

   

BCP GP” means BCP Raptor Holdco GP, LLC, a Delaware limited liability company and the general partner of BCP.

 

   

Blackstone” means investment funds affiliated with or managed by Blackstone Inc., collectively.

 

   

BX Aggregator” means BCP Raptor Aggregator, LP, a Delaware limited partnership, a controlled affiliate of Blackstone Capital Partners VII L.P. and Blackstone Energy Partners II L.P., and a unitholder of BCP.

 

   

BX Holders” means BX Aggregator and BX Permian, together.

 

   

BX Permian” means BX Permian Pipeline Aggregator, LP, a Delaware limited partnership, a controlled affiliate of Blackstone Capital Partners VII L.P. and Blackstone Energy Partners II L.P., and a unitholder of BCP.

 

   

Class A Common Stock” means the Class A common stock, par value $0.0001 per share, of Altus.

 

   

Class C Common Stock” means the Class C common stock, par value $0.0001 per share, of Altus.

 

   

Common Units” means the common units representing limited partner interests in the Partnership.

 

   

Consideration” means the aggregate 50,000,000 Common Units and 50,000,000 shares of Class C Common Stock to be issued to Contributor or its designees pursuant to the contribution agreement.

 

   

Contributed Entities” means BCP and BCP GP, together.

 

   

Contributed Interests” means the equity interests of BCP and BCP GP, together.

 

   

contribution agreement” means the Contribution Agreement, dated as of October 21, 2021, by and among Altus, the Partnership, Contributor, and BCP.

 

   

Contributor” means New BCP Raptor Holdco, LLC, a Delaware limited liability company.

 

   

EagleClaw Midstream” or “ECM” means BCP and its subsidiaries, collectively.

 

   

ISQ” means Buzzard Midstream LLC, a Delaware limited liability company, a controlled affiliate of ISQ Global Infrastructure Fund II L.P., and a unitholder of BCP.

 

   

I Squared Capital” means ISQ Global Infrastructure Fund II L.P.

 

   

MMcf/d” means million cubic feet per day.

 

   

Partnership” means Altus Midstream LP, a Delaware limited partnership and subsidiary of Altus.

 

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QUESTIONS AND ANSWERS ABOUT THE ALTUS SPECIAL MEETING

The questions and answers below highlight only selected procedural information from this proxy statement. They do not contain all of the information that may be important to you. You should read carefully the entire document to fully understand the voting procedures for the Altus special meeting.

 

Q:

Why am I receiving these materials?

 

A:

On October 21, 2021, Altus, the Partnership, Contributor, and BCP entered into the contribution agreement, providing for the acquisition of the Contributed Entities by the Partnership.

In the transaction, Contributor will contribute all of the Contributed Interests to the Partnership, with each of the Contributed Entities becoming a wholly-owned subsidiary of the Partnership. In exchange for the contribution by Contributor, Contributor or its designees will receive an aggregate of 50,000,000 Common Units and an aggregate of 50,000,000 shares of Class C Common Stock.

As a result of the transaction, Altus’ current stockholders will continue to hold their shares of Altus Common Stock, Contributor or its designees will collectively own approximately 75% of the issued and outstanding Altus Common Stock, Apache Midstream, which currently owns approximately 79% of the issued and outstanding Altus Common Stock, will own approximately 20% of the issued and outstanding Altus Common Stock, and the remaining current stockholders will own approximately 5% of the issued and outstanding Altus Common Stock.

This proxy statement is being sent to holders of Altus Common Stock in connection with a special meeting of Altus stockholders to vote upon approval of the issuance of the Consideration to Contributor or its designees pursuant to the contribution agreement and for purposes of complying with Rules 5635(a) and 5635(b) of the Nasdaq Listing Rules, as well as to approve an amendment and restatement of the Second Amended and Restated Certificate of Incorporation of Altus.

 

Q:

What am I being asked to vote on?

 

A:

Altus stockholders are being asked to consider and vote on the following proposals:

 

   

Share Issuance Proposal. A proposal to approve the issuance of the Consideration to Contributor or its designees pursuant to the contribution agreement; and

 

   

Charter Amendment Proposal. A proposal to approve the Third Amended and Restated Certificate of Incorporation of Altus, which amends and restates the Second Amended and Restated Certificate of Incorporation of Altus to, among other changes, (i) allow for stockholder action by written consent in lieu of holding a meeting of the stockholders, (ii) allow for 10% or greater holders of voting stock to call special meetings of the stockholders, and (iii) further define the waiver of corporate opportunities with respect to Altus and its officers and directors, and any of their respective affiliates.

 

Q:

What vote is required to approve each of the proposals?

 

A:

The approval of the share issuance proposal requires the affirmative vote of a majority of the votes cast by the holders of Altus Common Stock present (in person or by proxy) at the special meeting and entitled to vote, assuming a quorum is present. The approval of the charter amendment proposal requires the affirmative vote of holders of a majority of the outstanding Altus Common Stock.

In connection with the contribution agreement, Apache Midstream has entered into the voting and support agreement whereby Apache Midstream has agreed to vote its shares of Altus Common Stock in a manner so as to facilitate consummation of the transaction. For more information, please see the section entitled “The Contribution Agreement and Other Transaction Agreements—Voting and Support Agreement.”

 

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Q:

What if I do not vote my shares or if I abstain from voting?

 

A:

The approval of the share issuance proposal requires the affirmative vote of a majority of the votes cast by the holders of Altus Common Stock present (in person or by proxy) at the special meeting and entitled to vote, assuming a quorum is present. As a result, if you abstain from voting on the share issuance proposal, your Altus Common Stock will be counted as present for purposes of establishing a quorum, but the abstention will not be considered as a vote cast on the proposal. If you fail to vote on the share issuance proposal, your failure to vote will not affect the adoption of the proposal, except to the extent such failure to vote prevents a quorum for voting on the proposal.

The approval of the charter amendment proposal requires the affirmative vote of holders of a majority of the outstanding Altus Common Stock. As a result, if you abstain from voting or do not vote your Altus Common Stock, it will have the same effect as a vote against the charter amendment proposal.

 

Q:

What proposals must be passed in order for the transaction to be completed?

 

A:

The obligations of the parties to complete the transaction are conditioned upon approval of the share issuance proposal. We will not complete the transaction unless the share issuance proposal is approved.

 

Q:

How does the Altus Board recommend that I vote on the matters to be considered at the special meeting?

 

A:

The Altus Board unanimously recommends that Altus stockholders vote:

 

   

FOR” the share issuance proposal; and

 

   

FOR” the charter amendment proposal.

In considering the recommendation of the Altus Board, you should be aware that some of Altus’ executive officers and directors have interests in the transaction that are different from, or in addition to, the interests of Altus stockholders generally. See “The Transaction—Interests of Altus’ Executive Officers and Directors in the Transaction.”

 

Q:

Will there be any changes to my Altus Common Stock as a result of the transaction?

 

A:

No. All Altus Common Stock will remain outstanding after the transaction, and no changes will be made to the Altus Common Stock currently outstanding as a result of the transaction.

 

Q:

When and where will the special meeting be held?

 

A:

The special meeting will be held on [●], at [●] (Central time) at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400, subject to any adjournments or postponements.

 

Q:

Who is entitled to vote at the special meeting?

 

A:

The record date for the special meeting is [●]. Only record holders of Altus Common Stock at the close of business on the record date for the special meeting are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting.

 

Q:

How do I submit my proxy for the special meeting?

 

A:

If you hold shares of Altus Common Stock in your own name (as a “stockholder of record”) at the close of business on the record date, you may vote in person by attending the special meeting or, to ensure that your shares are represented at the special meeting, you may instruct the Company on how to vote your shares:

 

   

By Internet. Pursuant to rules adopted by the Securities and Exchange Commission (SEC), we have elected to provide our stockholders access to our proxy materials via the Internet. Accordingly, we are

 

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sending a Notice of Internet Availability of Proxy Materials (the Notice) to our stockholders. All stockholders will have the ability to access the proxy materials on the website referenced in the Notice or request to receive a printed set of the proxy materials. The Notice contains instructions on how to access the proxy materials over the Internet, how to vote online, and how to request a printed copy of the materials. Internet voting will be available until 11:59 p.m., local time, on [●] or, if the special meeting is continued, adjourned, or postponed, until 11:59 p.m., local time, on the day immediately before such continued, adjourned, or postponed meeting. We encourage you to take advantage of the proxy materials on the Internet. By opting to access your proxy materials online, you will save us the cost of producing and mailing documents, reduce the amount of mail you receive, and allow us to conserve natural resources.

 

   

By Mobile Device. Stockholders of record may scan the QR code on the enclosed proxy card with a mobile device (specific directions for using the mobile voting system are shown on the proxy card).

 

   

By Telephone. Stockholders of record may submit proxies by telephone, by using the toll-free telephone number listed on the enclosed proxy card (specific directions for using the telephone voting system are shown on the proxy card).

 

   

By Mail. Stockholders of record who have received a paper copy of a proxy card by mail may submit proxies by marking, signing, dating, and returning their proxy card in the postage-paid envelope provided. Proxy cards submitted by mail and received by Altus after 5:00 p.m., local time, on [●] may not be considered unless the special meeting is continued, adjourned, or postponed, and then only if received before the date and time the continued, adjourned, or postponed special meeting is held.

If you hold Altus Common Stock in “street name” through a bank, broker, or other nominee, please follow the voting instructions provided by your bank, broker, or other nominee to ensure that your Altus Common Stock is represented at the special meeting.

 

Q:

How many votes do I have?

 

A:

Holders of Altus Common Stock have one vote per share on each matter to be acted upon.

 

Q:

If my Altus Common Stock is held in “street name” by my bank, broker, or other nominee, will my bank, broker, or other nominee automatically vote my shares for me?

 

A:

No. If your Altus Common Stock is held in “street name,” you must instruct the broker, bank, nominee, or other holder of record on how to vote your shares. Your broker, bank, nominee, or other holder of record will vote your shares only if you provide instructions on how to vote by filling out the voting instruction form sent to you by your broker, bank, nominee, or other holder of record with this proxy statement.

Please follow the voting instructions provided by your bank, broker, or other nominee so that it may vote your Altus Common Stock on your behalf. Please note that you may not vote your Altus Common Stock held in street name by returning a proxy card directly to Altus or by voting in person at the special meeting unless you first obtain a “legal proxy” from your bank, broker, or other nominee.

 

Q:

What will happen if I return my proxy card without indicating how to vote?

 

A:

If you submit your proxy via the Internet, by scanning the QR code on a mobile device, by telephone, or by mail, the officers named on your proxy card will vote your shares in the manner you requested if you correctly submitted your proxy. If you are a stockholder of record and sign your proxy card and return it without indicating how to vote on any particular proposal, the Altus Common Stock represented by your proxy will be voted in favor of that proposal.

 

Q:

May I vote in person?

 

A:

Yes. If you are a stockholder of record at the close of business on [●], you may attend the special meeting and vote your Altus Common Stock in person, in lieu of submitting your proxy by Internet, mobile device,

 

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  or telephone or returning your signed proxy card by mail. If you hold your Altus Common Stock in “street name” through a broker, bank, nominee, or other holder of record, you must provide a “legal proxy” at the special meeting in order to vote in person, which “legal proxy” you must obtain from your bank, broker, nominee, or other holder of record.

 

Q:

What do I do if I want to change my vote after I have delivered my proxy card?

 

A:

You may revoke a proxy before it is voted by submitting a new proxy with a later date by Internet, mobile device, telephone, or mail (if applicable), by voting at the meeting, by attending the special meeting in person and giving Altus’ Inspector of Elections notice of your intent to vote your shares of Altus Common Stock in person or by filing a written revocation with Altus’ corporate secretary at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. Your attendance at the special meeting alone will not automatically revoke your proxy.

 

Q:

What happens if I sell my Altus Common Stock after the record date but before the special meeting?

 

A:

If you transfer your Altus Common Stock after the record date but before the date of the special meeting, you will retain your right to vote at the special meeting.

 

Q:

Am I entitled to exercise appraisal rights under the Delaware General Corporation Law if I do not vote in favor of the share issuance proposal and the charter amendment proposal?

 

A:

No. Under applicable law, no appraisal rights will be available to holders of Altus Common Stock in connection with either proposal.

 

Q:

When do you expect to complete the transaction?

 

A:

BCP and Altus currently expect to complete the transaction in the first quarter of 2022. However, no assurance can be given as to when, or whether, the transaction will be completed.

 

Q:

What will happen if the transaction is not completed?

 

A:

In the event that the transaction is not completed, Altus and the Partnership will not issue the Consideration to Contributor or its designees, and there will be no change to the number of issued and outstanding shares of Altus Common Stock.

 

Q:

Who can help answer my questions?

 

A:

If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact Altus’ corporate secretary at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400.

 

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SUMMARY OF THE PROXY STATEMENT

This summary highlights information contained elsewhere in this proxy statement and may not contain all of the information that is important to you. You are urged to carefully read the entire document and the other documents referred to in this proxy statement to fully understand the transaction. See “Where You Can Find More Information.”

Information About the Companies

BCP

BCP is the parent of EagleClaw Midstream. EagleClaw Midstream is a privately held midstream energy business providing comprehensive gathering, transportation, compression, processing, and treating services for companies that produce natural gas, natural gas liquids (NGLs), crude oil, and water. BCP is headquartered in Midland, Texas and has a significant presence in Houston, Texas. EagleClaw Midstream operates in the Southern Delaware Basin, specifically in Culberson, Loving, Pecos, Reeves, and Ward Counties, Texas. EagleClaw Midstream is the largest private gas processor in the Delaware Basin, with 1,320 MMcf/d of capacity and more than 1,400 miles of operated pipelines. EagleClaw Midstream has long-term dedications of nearly 750,000 acres for gas, crude, and water midstream services from approximately 30 successful and active producers in the Delaware Basin. Additionally, BCP owns equity interests in Permian Highway Pipeline which is a natural gas intrastate Permian Basin pipeline that has access to various points along the Texas Gulf Coast.

The EagleClaw Midstream principal headquarters are located at 500 W Illinois Ave., Midland, Texas 79701, and its telephone number at its principal offices is (432) 789-1333. Additional information about EagleClaw Midstream is included elsewhere in this proxy statement. See “Information About the Companies—Information About BCP” and Annex A to this proxy statement.

Altus Midstream Company

Altus, through its ownership interest in the Partnership, owns gas gathering, processing, and transmission assets in the Permian Basin of West Texas, anchored by midstream service agreements to service Apache Corporation’s production from its Alpine High resource play and surrounding areas (Alpine High). Additionally, Altus owns equity interests in four intrastate Permian Basin pipelines that have access to various points along the Texas Gulf Coast.

Altus has no independent operations or material assets outside its ownership interest in the Partnership. The Partnership’s assets include approximately 182 miles of in-service natural gas gathering pipelines, approximately 46 miles of residue gas pipelines with four market connections, and approximately 38 miles of NGL pipelines. Three cryogenic processing trains, each with nameplate capacity of 200 MMcf/d, were placed into service during 2019. Other assets include an NGL truck loading terminal with six Lease Automatic Custody Transfer units and eight NGL bullet tanks with 90,000 gallon capacity per tank. Altus’ existing gathering, processing, and transmission infrastructure is expected to provide capacity levels capable of fulfilling its midstream contracts to service Apache Corporation’s production from Alpine High and potential third-party customers.

Altus’ principal offices are located at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. Altus’ telephone number at its principal offices is (713) 296-6000. Additional information about Altus is included elsewhere in this proxy statement. See “Information About the Companies—Information About Altus.”

The Altus Special Meeting

The special meeting will be held on [●], at [●] (Central time) at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400, subject to any adjournments or postponements.

 

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The Altus Board has established [●] as the record date for the special meeting. Only record holders of Altus Common Stock at the close of business on the record date for the special meeting are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting. At the close of business on the record date, there were [●] shares of Class A Common Stock and 12,500,000 shares of Class C Common Stock outstanding and entitled to vote. Holders of Class A Common Stock and holders of Class C Common Stock vote together as a single class on all matters submitted to a vote of Altus’ stockholders, except as required by law. Holders of Altus Common Stock have one vote per share on each matter to be acted upon.

The purpose of the special meeting is to vote upon the following proposals:

 

   

Share Issuance Proposal. A proposal to approve the issuance of the Consideration to Contributor or its designees in exchange for all of the equity interests of the Contributed Entities which, following an internal reorganization to be completed before closing, will be owned directly by Contributor; and

 

   

Charter Amendment Proposal. A proposal to approve an amendment and restatement of the Second Amended and Restated Certificate of Incorporation of Altus to, among other changes, (i) allow for stockholder action by written consent in lieu of holding a meeting of the stockholders, (ii) allow for 10% or greater holders of voting stock to call special meetings of the stockholders, and (iii) further define the waiver of corporate opportunities with respect to Altus and its officers and directors, and any of their respective affiliates.

The required vote to approve each proposal is as set forth in the table below.

 

Proposal

  

Vote Required

Share Issuance Proposal (Proposal No. 1)    Affirmative vote of a majority of the votes cast by the holders of Altus Common Stock present (in person or by proxy) at the special meeting and entitled to vote, assuming a quorum is present
Charter Amendment Proposal (Proposal No. 2)    Affirmative vote of a majority of the outstanding Altus Common Stock

The Contribution Agreement

Overview

On October 21, 2021, Altus, the Partnership, Contributor, and BCP entered into the contribution agreement, providing for the acquisition of the Contributed Entities by the Partnership. In the transaction, Contributor will contribute all of the Contributed Interests to the Partnership, with each of the Contributed Entities becoming a wholly-owned subsidiary of the Partnership.

 

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The following diagram illustrates the structure of the transaction:

Before the Transaction

 

 

LOGO

Note: Lines represent 100% ownership, unless otherwise indicated.

(1)

Includes ownership of Common Units and shares of Class C Common Stock that together can be redeemed for shares of Class A Common Stock.

(2)

Reflects 660,694 units outstanding at the original issuance price.

 

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After the Transaction

 

 

LOGO

Note: Lines represent 100% ownership, unless otherwise indicated.

(1)

includes ownership of Common Units and shares of Class C Common Stock that together can be redeemed for shares of Class A Common Stock.

(2)

Reflects 660,694 unit outstanding as of June 30, 2021 at the original issuance price. Does not reflect redemption of 100,000 Series A Preferred Units to occur in connection with the closing of the transaction.

(3)

BCP Raptor’s 26.7% ownership interest in PHP is subject to a project finance Term Loan A facility.

(4)

As of September 30, 2021.

Consideration to Contributor

In the transaction, Contributor will contribute all of the Contributed Interests to the Partnership, with each of the Contributed Entities becoming a wholly-owned subsidiary of the Partnership. In exchange for the contribution by Contributor, Contributor or its designees will receive an aggregate of 50,000,000 Common Units and an aggregate of 50,000,000 shares of Class C Common Stock.

As a result of the transaction, Altus’ current stockholders will continue to hold their shares of Altus Common Stock and Contributor or its designees will collectively own approximately 75% of the issued and outstanding Altus Common Stock. Apache Midstream, which currently owns approximately 79% of the issued and outstanding Altus Common Stock, will own approximately 20% of the issued and outstanding Altus Common Stock, and the remaining current stockholders will own approximately 5% of the issued and outstanding Altus Common Stock.

 

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Treatment of Altus Equity-Based Awards and Altus Warrants

No stock options, performance unit awards, phantom unit awards, restricted shares, or other equity-based awards issued by Altus or the Partnership will be affected by the transaction. The outstanding warrants to acquire shares of Class A Common Stock will not be affected by the transaction.

Voting and Support Agreement

In connection with the execution of the contribution agreement, Apache Midstream entered into the voting and support agreement, wherein Apache Midstream agreed to vote all of the Apache Midstream Support Agreement Shares (i) in favor of approving any matters necessary for the consummation of the transaction contemplated by the contribution agreement and (ii) against specified actions that would discourage, delay or adversely affect the transaction, including specified actions that contemplate alternative transactions. The Apache Midstream Support Agreement Shares constitute approximately 79% of the issued and outstanding shares of Altus Common Stock. Accordingly, as long as the Altus Board does not change its recommendation, approval of the share issuance proposal and the charter amendment proposal at the special meeting is assured. In the event that the Altus Board has changed its recommendation to its stockholders in accordance with the contribution agreement, Apache Midstream’s voting obligation is reduced to 35% of the total issued and outstanding shares of Altus Common Stock plus additional votes proportionate to the voting percentage of Altus’ other stockholders. For more information, please see the section entitled “The Contribution Agreement and Other Transaction Agreements—Voting and Support Agreement.”

Recommendation of the Altus Board

The Altus Board unanimously recommends that holders of Altus Common Stock vote:

 

   

FOR” the share issuance proposal; and

 

   

FOR” the charter amendment proposal.

See “The Altus Special Meeting—Recommendation of the Altus Board.”

The Altus Board has unanimously approved the contribution agreement and determined that the transaction is advisable and in the best interests of Altus and its stockholders. In determining whether to approve the contribution agreement and the transaction contemplated thereby, the Altus Board considered the factors described in the section entitled “The Transaction—Reasons for the Recommendation to Altus Stockholders by the Altus Board.”

Opinion of Credit Suisse, Altus’ Financial Advisor

On October 21, 2021, Credit Suisse Securities (USA) LLC (Credit Suisse) rendered its oral opinion to the Altus Board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion addressed to the Altus Board dated the same date) as to, as of October 21, 2021, the fairness, from a financial point of view, to Altus of the consideration to be paid by Altus and the Partnership in the transaction pursuant to the contribution agreement.

Credit Suisse’s opinion was directed to the Altus Board (in its capacity as such), and only addressed the fairness, from a financial point of view, to Altus of the consideration to be paid by Altus and the Partnership in the transaction pursuant to the contribution agreement and did not address any other aspect or implication (financial or otherwise) of the transaction. The summary of Credit Suisse’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which

 

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is included as Annex H to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in preparing its opinion. However, neither Credit Suisse’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and they do not constitute, advice or a recommendation to any security holder as to how such holder should vote or act on any matter relating to the transaction.

Interests of Altus’ Executive Officers and Directors in the Transaction

Certain members of the Altus Board and executive officers may be deemed to have interests in the transaction that are in addition to, or different from, the interests of other holders of Altus Common Stock. Specifically, Altus’ directors and executive officers are entitled to continued indemnification and insurance coverage under the contribution agreement. The Altus Board was aware of these interests and considered them, among other matters, in approving the contribution agreement and the transaction and in making the recommendation that the holders of Altus Common Stock approve the share issuance proposal and the charter amendment proposal.

For additional information, see “The Transaction—Interests of Altus’ Executive Officers and Directors in the Transaction.”

None of Altus’ executive officers will receive any severance or other compensation as a result of the transaction. In particular, there are no payments or benefits that Altus’ executive officers may receive that would be required to be disclosed pursuant to Item 402(t) of Regulation S-K.

Directors and Management of Altus Following the Transaction

Following the closing of the transaction, the Altus Board will consist of eleven directors, with three directors designated by Apache Midstream (two of which must be independent for purposes of service on the audit committee of Altus under Nasdaq rules), two directors designated by ISQ, including Thomas Lefebvre and Joseph Payne, three directors designated by BX Aggregator, including David I. Foley, JP Munfa and Elizabeth P. Cordia, two directors designated by BX Aggregator, both of which must be independent for purposes of service on the audit committee of Altus under Nasdaq rules, and Jamie Welch, as the Chief Executive Officer of Altus following closing. In addition, the executive officers of BCP GP are expected to serve in the same capacity as the executive officers of Altus following closing of the transaction.

No Appraisal Rights

Under applicable law, no appraisal rights will be available to holders of Altus Common Stock in connection with the transaction.

Public Trading Markets; Listing of the Class A Common Stock

The Class A Common Stock is currently listed on Nasdaq under the ticker symbol “ALTM,” and immediately after the transaction is completed, will continue to be listed on Nasdaq. Neither the Common Units nor the Class C Common Stock is listed on any national securities exchange, but the Common Units and the Class C Common Stock together are exchangeable on a one-for-one basis for shares of Class A Common Stock. Neither the Contributed Entities nor the Contributed Interests are listed on any national securities exchange.

Accounting Treatment

In accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), Altus will account for the transaction as a reverse merger using the acquisition method of accounting with

 

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Contributor as the acquiring entity. Under the acquisition method of accounting, Contributor’s assets and liabilities will retain their carrying values and Altus’ assets and liabilities will be recorded at their fair values measured as of the acquisition date. The excess of the consideration transferred over the fair values of Altus’ net assets acquired, if applicable, will be recorded as goodwill.

Regulatory Approvals Required for the Transaction

Altus and Contributor have agreed to prepare and file with the appropriate governmental entities and other third parties all authorizations, consents, notifications, certifications, registrations, declarations, and filings that are necessary in order to consummate the transaction and to diligently and expeditiously prosecute such matters and cooperate with each other in the prosecution of such matters. However, neither Altus nor Contributor, nor any of their respective affiliates, are required to pay any consideration to any third parties to obtain any such person’s authorization, approval, consent, or waiver to effectuate the transaction, other than filing, recordation, or similar fees. In connection with such matters, Altus is obligated not to agree to any actions, restrictions, or conditions with respect to obtaining any such authorizations without Contributor’s prior written consent.

In addition, Altus and Contributor have agreed to make any filings required under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), and to cooperate fully with each other and furnish to the other such necessary information and reasonable assistance as the other may reasonably request in connection with its preparation of any filings and in connection with obtaining all required consents, authorizations, orders, expirations, terminations, waivers, or approvals under any applicable antitrust laws. The required Notification and Report Forms were filed with the Antitrust Division and the FTC by Altus and Contributor on November 10, 2021.

Altus and Contributor have agreed to not take any action that could reasonably be expected to hinder or delay in any material respect the expiration or termination of the required waiting period under the HSR Act or any other applicable antitrust laws, or any consent or approval required pursuant to any other applicable antitrust laws.

For additional information, see “The Contribution Agreement and Other Transaction Agreements—Regulatory Approvals Required for the Transaction.”

Agreement Not to Solicit Other Offers

Altus has agreed to, and to cause its subsidiaries and its and their directors and officers and the directors and officers of APA Corporation to, and to use its reasonable best efforts to cause the other representatives of Altus and its subsidiaries to, immediately cease, and cause to be terminated, any discussions or negotiations with any person conducted prior to the execution of the contribution agreement by Altus or any of its subsidiaries or their respective representatives with respect to any inquiry, proposal, or offer that constitutes, or would reasonably be expected to lead to, a “Company Competing Proposal,” as defined in “The Contribution Agreement and Other Transaction Agreements—Agreement Not to Solicit Other Offers—Termination of Discussions.”

As more fully described in this proxy statement and in the contribution agreement, and subject to the terms, conditions, and exceptions described in the contribution agreement, Altus agreed that it will not, and will cause its subsidiaries and its and their respective directors and officers and the directors and officers of APA Corporation not to, and will use its reasonable best efforts to cause the other representatives of Altus and its subsidiaries not to, directly or indirectly:

 

   

initiate, solicit, propose, knowingly encourage, or knowingly facilitate any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to result in, a Company Competing Proposal;

 

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engage in, continue, or otherwise participate in any discussions or negotiations with any person relating to, or in furtherance of, a Company Competing Proposal or any inquiry, proposal, or offer that would reasonably be expected to lead to a Company Competing Proposal;

 

   

furnish any non-public information regarding Altus or its subsidiaries, or access to the properties, assets, or employees of Altus or its subsidiaries, to any person in connection with or in response to any Company Competing Proposal or any inquiry, proposal, or offer that would reasonably be expected to lead to a Company Competing Proposal;

 

   

enter into any letter of intent or agreement in principle relating to, or other agreement providing for, a Company Competing Proposal (other than a confidentiality agreement as permitted by the contribution agreement); or

 

   

submit any Company Competing Proposal to the approval of the stockholders of Altus.

For additional information, see “The Contribution Agreement and Other Transaction Agreements—Agreement Not to Solicit Other Offers—Non-Solicitation Obligations” and “The Contribution Agreement and Other Transaction Agreements—Agreement Not to Solicit Other Offers—Exceptions to Non-Solicitation Provisions.”

As discussed in this proxy statement, the Altus Board has recommended that the Altus stockholders vote “FOR” the share issuance proposal and “FOR” the charter amendment proposal (the Altus Board Recommendation). Pursuant to the terms of the contribution agreement, except as described below, neither the Altus Board nor any committee thereof, may take any of the following actions in connection with the Altus Board Recommendation:

 

   

withhold, withdraw, qualify, or modify, or publicly propose or announce any intention to withhold, withdraw, qualify, or modify, in a manner adverse to Contributor, BCP, or their respective subsidiaries, the Altus Board Recommendation;

 

   

fail to include the Altus Board Recommendation in this proxy statement;

 

   

approve, endorse, or recommend, or publicly propose or announce any intention to approve, endorse, or recommend, any Company Competing Proposal;

 

   

publicly declare advisable, or publicly propose to enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement, or other agreement (other than a confidentiality agreement permitted by the contribution agreement), in each case, relating to a Company Competing Proposal (an Altus Alternative Acquisition Agreement);

 

   

in the case of a Company Competing Proposal that is structured as a tender offer or exchange offer pursuant to Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the Exchange Act) for outstanding shares of Altus Common Stock (other than by Contributor, BCP, or their respective subsidiaries), fail to recommend, in a Solicitation/Recommendation Statement on Schedule 14D-9, against acceptance of such tender offer or exchange offer by its stockholders on or prior to 10 business days (as such term is used in Rule 14d-9 of the Exchange Act) after commencement of such tender offer or exchange offer;

 

   

if a Company Competing Proposal shall have been publicly announced or disclosed (other than pursuant to a tender offer or exchange offer pursuant to Rule 14d-2 under the Exchange Act as described above), fail to publicly reaffirm the Altus Board Recommendation on or prior to 10 business days after Contributor so requests in writing (which requests may only be made once every 30 days with respect to any specific Company Competing Proposal, absent material amendment to such Company Competing Proposal); or

 

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cause or permit Altus to enter into an Altus Alternative Acquisition Agreement.

For additional information, see “The Contribution Agreement and Other Transaction Agreements—Agreement Not to Solicit Other Offers—Obligation to Maintain Altus Board Recommendation.”

Termination of the Contribution Agreement

The contribution agreement may be terminated at any time prior to closing of the transaction:

 

   

by mutual written consent of Altus and Contributor;

 

   

by either Altus or Contributor, by written notice to the other party:

 

   

in the event that any applicable law or final writ, judgment, decree, injunction, or award of any governmental entity having jurisdiction restrains, enjoins, or otherwise prohibits or makes illegal the contribution of the Contributed Interests pursuant to the contribution agreement;

 

   

if the closing of the transaction has not occurred on or before June 30, 2022 (the Outside Date), provided, that such right to terminate the contribution agreement in such event shall not be available to any party that has breached any of its warranties or covenants set forth in the contribution agreement and such breach resulted in the failure of the closing to occur by the Outside Date;

 

   

if the Altus stockholders have not approved the share issuance proposal upon a vote held at a duly called special meeting or at any adjournment or postponement thereof;

 

   

by Altus, by written notice to Contributor:

 

   

if (i) Contributor has breached its warranties, covenants, or agreements under the contribution agreement and such breach would or does result in the failure to fulfill any condition obligating Altus to close the transaction and (ii) such breach is not capable of being cured by the Outside Date or, if curable prior to the Outside Date, has not been cured by the earlier of (a) 30 days after Altus gives written notice to Contributor of such breach and (b) two business days prior to the Outside Date; provided that Altus has not waived such breach and Altus is not then in material breach of its representations, warranties, covenants, or agreements under the contribution agreement;

 

   

by Contributor, by written notice to Altus:

 

   

if (i) Altus has breached any of its warranties, covenants, or agreements under the contribution agreement and such breach would or does result in the failure to fulfill any condition obligating Contributor to close the transaction and (ii) such breach is not capable of being cured by the Outside Date or, if curable prior to the Outside Date, has not been cured by the earlier of (a) 30 days after Contributor gives written notice to Altus of such breach and (b) two business days prior to the Outside Date; provided that Contributor has not waived such breach and Contributor is not then in material breach of its representations, warranties, covenants, or agreements under the contribution agreement;

 

   

at any time before Altus stockholders have approved the share issuance proposal and the charter amendment proposal, if an Altus Change of Recommendation (as defined in “The Contribution Agreement and Other Transaction Agreements—Agreement Not to Solicit Other Offers—Obligation to Maintain Altus Board Recommendation”) has occurred (whether or not such Altus Change of Recommendation is permitted by the contribution agreement); or

 

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if Altus, any of its subsidiaries, or any director or officer of Altus, APA Corporation, or any of their respective subsidiaries, has materially breached Altus’ non-solicitation obligations under the contribution agreement.

For additional information, see “The Contribution Agreement and Other Transaction Agreements—Agreement Not to Solicit Other Offers—Termination of the Contribution Agreement.”

Termination Fee Payable by Altus

The contribution agreement requires Altus to pay Contributor a $60.0 million termination fee if:

 

   

Contributor terminates the contribution agreement, at any time prior to the Altus stockholders approving the share issuance proposal, pursuant to its termination right arising as a result of (i) the occurrence of an Altus Change of Recommendation or (ii) a material breach by Altus, any of its subsidiaries, or any director or officer of Altus, APA Corporation or any of their respective subsidiaries of Altus’ non-solicitation obligations under the contribution agreement; or

 

   

either Contributor or Altus terminates the contribution agreement pursuant to such party’s termination right arising as a result of the failure of the Altus stockholders to approve the share issuance proposal and, at such time, Contributor would have been permitted to terminate the contribution agreement pursuant to its termination right arising as a result of (i) the occurrence of an Altus Change of Recommendation or (ii) a material breach by Altus, any of its subsidiaries, or any director or officer of Altus, APA Corporation or any of their respective subsidiaries, of Altus’ non-solicitation obligations under the contribution agreement.

 

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Summary Selected Unaudited Pro Forma Condensed Consolidated Combined Financial Information

The following summary selected unaudited pro forma condensed consolidated combined financial information is based on the Altus historical consolidated financial statements and the BCP historical consolidated financial statements as adjusted to give effect to the transaction using the acquisition method of accounting with BCP considered the accounting acquirer of Altus and incorporating preliminary estimates, assumptions and pro forma adjustments as described in the accompanying notes under “Unaudited Pro Forma Condensed Consolidated Combined Financial Statements” (the unaudited pro forma condensed consolidated combined financial statements), which are included in this proxy statement.

The unaudited pro forma condensed consolidated combined financial statements were prepared using: (a) the historical audited consolidated financial statements of Altus as of and for the year ended December 31, 2020, which have been incorporated by reference into this proxy statement; (b) the historical audited consolidated financial statements of BCP as of and for the year ended December 31, 2020, which are included in Annex A to this proxy statement; (c) the historical unaudited condensed consolidated financial statements of Altus as of and for the nine months ended September 30, 2021, which have been incorporated by reference into this proxy statement; and (d) the historical unaudited consolidated financial statements of BCP as of and for the nine months ended September 30, 2021, which are included in Annex A to this proxy statement, in each case as adjusted to give effect to the transaction. The unaudited pro forma condensed consolidated combined balance sheet gives pro forma effect to the transaction as if it had been consummated on September 30, 2021. The unaudited pro forma condensed consolidated combined statements of operations for the nine months ended September 30, 2021 and for the year ended December 31, 2020 give effect to the transaction as if it had occurred on January 1, 2020.

The summary selected unaudited pro forma condensed consolidated combined financial information is provided for illustrative purposes only and is not necessarily indicative of what the actual results of operations and financial position would have been had the transaction taken place on the dates indicated, nor is it indicative of the future consolidated results of operations or financial position of the post-transaction company. The summary selected unaudited pro forma condensed consolidated combined financial information has been derived from and should be read in conjunction with the separate historical financial statements of Altus and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations of Altus that are incorporated by reference in this proxy statement, and the separate historical financial statements and accompanying notes of BCP, the information under “BCP Raptor Holdco, LP Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Annex A to this proxy statement, and the information under “Unaudited Pro Forma Condensed Consolidated Combined Financial Statements.”

 

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As of and For the Nine Months Ended September 30, 2021 (in thousands except per share data)

 

     Historical      Transaction
Accounting
Adjustments
    Pro Forma  
     Altus      BCP  

BALANCE SHEET DATA

          

Total assets

   $ 1,865,934      $ 3,593,205      $ 602,822     $ 6,601,961  

Long-term debt, net

     657,000        2,304,192        11,762       2,972,954  

Total liabilities

     878,121        2,558,118        166,259       3,602,498  

Total liabilities, noncontrolling interests, partners’ capital, and equity

     1,865,934        3,593,205        602,822       6,601,961  

STATEMENT OF OPERATIONS DATA

          

Total revenues

   $ 104,287      $ 442,672      $ —       $ 546,959  

Total costs and expenses

     63,044        394,434        31,819       489,297  

Income before income taxes

     146,019        8,617        (42,604     112,032  

Deferred income tax expense

     —          1,207        1,455       2,662  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss)

     146,019        7,410        (44,059     109,370  

Less: Net income attributable to noncontrolling interest—Preferred Unit limited partners

     72,662        —          —         62,990  

Less: Net income attributable to noncontrolling interest—Common Unit limited partners

     56,270        —          —         43,755  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income attributable to Class A Common Stockholders

   $ 17,087        —          —       $ 2,625  
  

 

 

    

 

 

    

 

 

   

 

 

 

PER SHARE DATA

          

Net income attributable to Class A Common Stockholders, per share

          

Basic

   $ 4.56      $ —        $ —       $ 0.70  

Diluted

   $ 3.83      $ —        $ —       $ 0.59  

 

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For the Year Ended December 31, 2020 (in thousands except per share data)

 

     Historical     Transaction
Accounting
Adjustments
    Pro Forma  
     Altus     BCP  

STATEMENT OF OPERATIONS DATA

        

Total revenues

   $ 148,409     $ 410,176     $ —       $ 558,585  

Total costs and expenses

     86,793       1,429,338       66,764       1,582,895  

Income before income taxes

     79,788       (1,153,510     (19,594     (1,093,316

Current income tax benefit

     (696     —         —         (696

Deferred income tax expense

     —         968       2,279       3,247  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     80,484       (1,154,478     (21,873     (1,095,867

Less: Net income attributable to noncontrolling interest—Preferred Unit limited partners

     75,906       —         —         94,620  

Less: Net income attributable to noncontrolling interest—Common Unit limited partners

     2,987       —         —         (1,123,105
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Class A Common Stockholders

   $ 1,591       —         —       $ (67,382
  

 

 

   

 

 

   

 

 

   

 

 

 

PER SHARE DATA

        

Net income attributable to Class A Common Stockholders, per share

        

Basic

   $ 0.42     $ —       $ —       $ (17.99

Diluted

   $ 0.28     $ —       $ —       $ (17.99

 

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RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this proxy statement, including the information concerning EagleClaw Midstream contained in Annex A, in evaluating the share issuance proposal and the charter amendment proposal. The following risk factors related to EagleClaw Midstream’s business will also apply to the business and operations of the post-transaction company. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the transaction, and may have an adverse effect on the business, cash flows, financial condition, and results of operations of the post-transaction company. You should also carefully consider the following risk factors in addition to the other information included in this proxy statement, including matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” Altus may face additional risks and uncertainties that are not presently known to it, or that it may currently deem immaterial, which may also impair its business or financial condition.

Risks Related to the Transaction

Failure to complete, or significant delays in completing, the transaction could negatively affect the trading price of the Class A Common Stock and Altus’ future business and financial results.

Completion of the transaction is not assured and is subject to risks, including the risks that approval of the issuance of the equity consideration by Altus’ stockholders or approval of the transaction by governmental agencies is not obtained or that other closing conditions are not satisfied. If the transaction is not completed, or if there are significant delays in completing the transaction, the trading price of the Class A Common Stock and Altus’ future business and financial results could be negatively affected, and the Company will be subject to several risks, including the following:

 

   

Altus may be liable for damages to Contributor under the terms of the contribution agreement;

 

   

negative reactions from the financial markets, including a decline in the trading price of the Class A Common Stock due to the fact that current prices may reflect a market assumption that the transaction will be completed;

 

   

having to pay certain significant costs relating to the transaction, including, in certain circumstances, a termination fee to Contributor; and

 

   

the attention of Altus’ management will have been diverted to the transaction rather than Altus’ own operations and pursuit of other opportunities that could have been beneficial to it.

Obtaining required approvals and satisfying closing conditions may prevent or delay completion of the transaction.

The transaction is subject to a number of conditions to closing, as specified in the contribution agreement and described in the section entitled “The Contribution Agreement and Other Transaction Agreements—Conditions to Consummation of the Transaction.” These closing conditions include, among others, obtaining Altus’ stockholder approval of the share issuance proposal, the expiration or termination of any waiting period under the HSR Act, and the absence of any law, order, or injunction preventing the consummation of the transaction. The obligation of each of Altus and Contributor to consummate the transaction is also conditioned on, among other things, the accuracy of the representations and warranties as set forth by the other party in the contribution agreement, the performance by the other party, in all material respects, of its obligations and covenants under the contribution agreement required to be performed at or prior to the closing date of the transaction, and each of the Credit Agreement Consent, the Series A Preferred Consent and the Company JV Consents (each as described under “The Contribution Agreement and Other Transaction Agreements—Third Party Finance Consents; Company JV Consents”) remaining in full force and effect. The required stockholder

 

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approvals may not be obtained and the required conditions to closing may not be satisfied, and, if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions, and timing of such consents and approvals. Any delay in completing the transaction could cause Altus and Contributor not to realize, or to be delayed in realizing, some or all of the benefits that Altus and Contributor expect to achieve if the transaction is successfully consummated within its expected timeframe. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the transaction, please see “The Contribution Agreement and Other Transaction Agreements.

The contribution agreement includes restrictions relating to the conduct of Altus’ business while the transaction is pending, which could adversely affect Altus’ business and operations.

Under the terms of the contribution agreement, Altus is subject to certain restrictions on the conduct of its business prior to completing the transaction, which may adversely affect its ability to execute certain of its business strategies, including, subject to certain exceptions, to acquire or dispose of assets, incur capital expenditures, enter into contracts, incur indebtedness, or settle claims and lawsuits, unless Altus obtains the prior written consent of Contributor. Such limitations could negatively affect Altus’ business and operations prior to the completion of the transaction.

Following the transaction, Contributor or its equity owners are expected to control the Company and their interests may conflict with Altus’ other stockholders’ interests in the future.

Following the completion of the Transaction, Contributor or its designees will collectively own approximately 75% of the issued and outstanding Altus Common Stock. The BX Holders and ISQ, as BCP’s equity owners, are expected to be designated as the recipients of a substantial portion of the Consideration. In addition, BX Aggregator will have the contractual right to designate to the Altus Board (i) three directors for so long as BX Aggregator and its affiliates beneficially own 30% or more of the outstanding shares of Altus Common Stock; (ii) two directors for so long as BX Aggregator and its affiliates beneficially own 20% or more (but less than 30%) of the outstanding shares of Altus Common Stock; and (iii) one director for so long as BX Aggregator and its affiliates beneficially own 10% or more (but less than 20%) of the outstanding shares of Altus Common Stock. ISQ will have the contractual right to designate to the Altus Board (i) two directors for so long as ISQ and its affiliates beneficially own 20% or more of the outstanding shares of Altus Common Stock; and (ii) one director for so long as ISQ and its affiliates beneficially own 10% or more (but less than 20%) of the outstanding shares of Altus Common Stock. For additional information, see “The Contribution Agreement and Other Transaction Agreements—Amended and Restated Stockholders Agreement” and “The Contribution Agreement and Other Transaction Agreements—Resignations and Appointments.

As a result, Contributor or its equity owners collectively will be able to control the upfront election of a majority of Altus’ directors and thereby control Altus’ policies and operations and their interests may not in all cases be aligned with other Altus stockholders’ interests.

In addition, Contributor or its equity owners will be able to determine the outcome of all matters requiring stockholder approval and will be able to cause or prevent a change of control of Altus. This concentration of voting control could deprive Altus stockholders of an opportunity to receive a premium for their shares of Altus Common Stock as part of a sale of Altus and ultimately might affect the market price of the Class A Common Stock.

The pendency of the transaction could materially adversely affect Altus’ future business and operations or result in a loss of personnel.

Uncertainty about the effect of the transaction on personnel may have an adverse effect on Altus’ business. Retention of personnel may be particularly challenging during the pendency of the transaction because personnel may experience uncertainty about their future roles with the combined company. If, despite retention efforts, key

 

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personnel depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with or join the combined company, Altus’ business could be seriously harmed. Similar risks could affect the Contributed Entities, and, therefore, the post-transaction company if the transaction is completed.

The failure to successfully integrate the business and operations of the Contributed Entities in the expected time frame may adversely affect Altus’ future results.

Altus believes that the acquisition of the Contributed Entities will result in certain benefits, including certain cost synergies and operational efficiencies. However, to realize these anticipated benefits, the businesses of Altus and the Contributed Entities must be successfully combined. The success of the transaction will depend on Altus’ ability to realize these anticipated benefits from combining the businesses of Altus and the Contributed Entities. Due to legal restrictions, Altus and Contributor have conducted, and until the completion of the transaction will conduct, only limited planning regarding the integration of the businesses following the transaction and will not determine the exact nature in which the businesses will be combined until after the transaction has been completed. Completion of the transaction is subject to satisfaction of a number of conditions, including the receipt of certain regulatory approvals for which the timing cannot be predicted. The expiration or termination of the applicable waiting periods, and any extension of the waiting periods, under the HSR Act may take considerable time. The actual integration may result in additional and unforeseen expenses or delays. If the post-transaction company is not able to successfully integrate the Contributed Entities’ businesses and operations, or if there are delays in combining the businesses, the anticipated benefits of the transaction may not be realized fully or at all or may take longer to realize than expected.

Altus and Contributor are subject to risks related to health epidemics and pandemics, including the ongoing COVID-19 pandemic, and it is difficult to predict what effect, if any, this might have on the transaction.

The COVID-19 pandemic and the actions taken by third parties, including, but not limited to, governmental authorities, businesses, and consumers, in response to the pandemic have adversely impacted the global economy and created significant volatility in the global financial markets. Business closures, restrictions on travel, “stay-at-home” or “shelter-in-place” orders, and other restrictions on movement within and among communities have significantly reduced demand for and the prices of oil, natural gas, and NGLs. Altus and Contributor each face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the ongoing COVID-19 pandemic. The actual and potential effects of COVID-19 include, but are not limited to, its impact on general economic conditions, trade and financing markets, customer behavior and continuity in business operations, all of which create significant uncertainty. Governmental authorities may enact additional restrictions, or tighten existing measures if COVID-19 continues to spread. The unprecedented nature of the current situation resulting from the COVID-19 pandemic makes it impossible for Altus or Contributor to identify all potential risks related to the pandemic or estimate the ultimate adverse impact that the pandemic may have on their respective businesses, financial conditions, cash flows, or results of operations.

Lawsuits may be filed against Altus, the Partnership, Contributor, ECM and/or the members of the Altus Board in connection with the transaction. An adverse ruling in any such lawsuit could result in an injunction preventing the completion of the transaction and/or substantial costs to Altus and Contributor.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition or other business combination agreements like the contribution agreement. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Altus’ and Contributor’s respective liquidity and financial condition.

One of the conditions to the closing of the transaction is that no injunction or order by any governmental entity having jurisdiction be in effect and no law has been adopted, in either case, that restrains, enjoins, or

 

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otherwise prohibits the closing of the transaction. Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the transaction, that injunction may delay or prevent the transaction from being completed within the expected timeframe, or at all, which may adversely affect Altus’ and Contributor’s respective businesses, financial position, and results of operations.

Additionally, there can be no assurance that any of the defendants in any potential future lawsuits will be successful in the outcome of such lawsuits. The defense or settlement of any lawsuit or claim that remains unresolved at the time the transaction is completed may adversely affect Altus’ or Contributor’s business, financial condition, results of operations, and cash flows.

The unaudited pro forma condensed consolidated combined financial information and Altus’ and Contributor’s respective unaudited forecasted financial information included in this proxy statement are presented for illustrative purposes only and do not represent the actual financial position or results of operations of the post-transaction company following the completion of the transaction. Future results of Altus or Contributor may differ, possibly materially, from the unaudited pro forma condensed consolidated combined financial information and Altus’ and Contributor’s respective unaudited forecasted financial information presented in this proxy statement.

The unaudited pro forma condensed consolidated combined financial statements and Altus’ and Contributor’s respective unaudited forecasted financial information contained in this proxy statement are presented for illustrative purposes only, contain a variety of adjustments, assumptions, and preliminary estimates and do not represent the actual financial position or results of operations of Altus and Contributor prior to the transaction or that of the combined company following the transaction. Specifically, the transaction and post-transaction integration process may give rise to unexpected liabilities and costs, including costs associated with the defense and resolution of transaction-related litigation or other claims. Unexpected delays in completing the transaction or in connection with the post-transaction integration process may significantly increase the related costs and expenses incurred by Altus or Contributor. The actual financial positions and results of operations of Altus and Contributor prior to the transaction and that of the company following the transaction may be different, possibly materially, from the unaudited pro forma condensed consolidated combined financial statements or Altus’ and Contributor’s respective unaudited forecasted financial information included in this proxy statement. In addition, the assumptions used in preparing the unaudited pro forma condensed consolidated combined financial statements and Altus’ and Contributor’s respective unaudited forecasted financial information included in this proxy statement may not prove to be accurate and may be affected by other factors. Any significant changes in the market price of the Class A Common Stock may cause a significant change in the purchase price used for Altus’ accounting purposes and the unaudited pro forma condensed consolidated combined financial statements contained in this proxy statement.

The opinion of Credit Suisse, Altus’ financial advisor, will not reflect changes in circumstances between the signing of the contribution agreement and the completion of the transaction.

The Altus Board has received an opinion from its financial advisor in connection with the signing of the contribution agreement, but has not obtained any updated opinion from Credit Suisse as of the date of this proxy statement. Changes in the operations and prospects of Altus or ECM, general market and economic conditions, and other factors that may be beyond the control of Altus or Contributor, and on which Credit Suisse’s opinion was based, may significantly alter the value of Altus or ECM or the prices of the shares of the Class A Common Stock by the time the transaction is completed. The opinion does not speak as of the time the transaction will be completed or as of any date other than the date of such opinion. Because Altus does not currently anticipate asking Credit Suisse to update its opinion, the opinion will not address the fairness of the Consideration from a financial point of view at the time the transaction is completed.

 

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For a description of the opinion that the Altus Board received from its financial advisor, see the section titled “The TransactionOpinion of Credit Suisse, Altus’ Financial Advisor.” A copy of the opinion of Credit Suisse is attached as Annex H to this proxy statement.

Altus and Contributor own minority interests in certain Permian Basin pipelines and their respective control of each such pipeline is limited by provisions of the organizational documents of such pipeline and by its percentage ownership in such pipeline project.

The Permian Highway Pipeline is owned by an entity in which BCP and Altus each owns a 26.7% equity interest. While a subsidiary of BCP and a subsidiary of Altus will collectively own a majority of the outstanding equity interests following closing of the transaction, each of Altus and BCP do not have an ownership stake that permits it to control the day-to-day activities of Permian Highway Pipeline, which is operated by Kinder Morgan. Accordingly, BCP and Altus have a limited ability to influence the business decisions of such entity and the Permian Highway Pipeline. Additionally, Altus does not have an ownership stake in Shin Oak, Gulf Coast Express, or the EPIC crude oil pipeline that permits it to control the day-to-day activities of each such entity.

Each of BCP and Altus will likely be unable to control the amount of cash it will receive from the operation of each pipeline and could be required to contribute capital to fund its share of the pipeline’s operations, which could adversely affect its ability to invest in additional projects.

Proposed changes to U.S. federal, state, and local tax laws, if enacted, could have a material adverse effect on our business and profitability.

New or amended U.S. federal, state, or local tax laws may be enacted in the future and such laws could materially impact our current or future tax planning and effective tax rates. For example, the White House and Congress have set forth proposals that would, if enacted, make significant changes to U.S. federal income tax laws applicable to domestic corporations. Such proposals include, but are not limited to, (1) an increase in the U.S. federal income tax rate applicable to corporations and (2) a minimum book income tax applicable to certain large corporations. It is uncertain whether these proposals, or similar proposals, will be enacted into law and, if enacted into law, when such laws would take effect. The passage of any legislation as a result of these proposals and other similar changes in U.S. federal income or other tax laws could materially and adversely affect our business, cash flows, and future profitability.

Risks Related to ECM’s Business

ECM may not generate sufficient cash flow to support the current dividends to Altus’ stockholders.

The amount of cash ECM generates from its operations will fluctuate from quarter to quarter based on, among other things:

 

   

the volumes of crude oil it gathers, the volumes of natural gas it gathers, and the volumes of produced water it collects, cleans, or disposes of;

 

   

market prices of crude oil, natural gas, and NGLs and their effect on ECM’s customers’ drilling and development plans and the volumes of hydrocarbons that are produced on the acreage for which it provides midstream services;

 

   

ECM’s customers’ ability to fund their drilling and development plans on the acreage for which it provides midstream services;

 

   

downstream processing and transportation capacity constraints and interruptions;

 

   

the levels of its operating, maintenance, and general and administrative expenses;

 

   

regulatory actions;

 

   

ECM’s operating costs or its operating flexibility;

 

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the rates ECM charges for its midstream services;

 

   

prevailing economic conditions; and

 

   

adverse weather conditions.

In addition, the amount of cash ECM generates from its operations will depend on other factors, some of which are beyond its control, including:

 

   

the level and timing of its capital expenditures;

 

   

its debt service requirements and other liabilities;

 

   

its ability to fund its capital expenditures and operating expenditures;

 

   

ability of its joint venture to make distributions;

 

   

fluctuations in its working capital needs;

 

   

restrictions on distributions contained in any of its debt agreements; and

 

   

other business risks affecting its cash levels.

ECM’s operating assets are currently located exclusively in the Permian Basin in Texas, making it vulnerable to risks associated with operating in a single geographic area.

ECM’s wholly-owned midstream assets are currently located exclusively in the Delaware Basin in Texas which is part of the broader Permian Basin. As a result of this concentration, ECM will be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, obtaining rights of way, market limitations, water shortages or restrictions, drought related conditions, or other weather-related conditions or interruption of the processing or transportation of crude oil, natural gas, and water. If any of these factors were to impact the Permian Basin more than other producing regions, ECM’s business, financial condition, and results of operations could be adversely affected relative to other midstream companies that have a more geographically diversified asset portfolio.

If any of ECM’s customers sell their dedicated acreage to a third party, the third party’s financial condition could be materially worse than the original customer’s, and thus ECM could be subject to the nonpayment or nonperformance by the third party.

If any of ECM’s customers sell their dedicated acreage to a third party, the third party’s financial condition could be materially worse than the original customer’s. In such a case, ECM may be subject to risks of loss resulting from nonpayment or nonperformance by the third party, which risks may increase during periods of economic uncertainty. Furthermore, the third party may be subject to their own operating and regulatory risks, which could increase the risk that that third party may default on its obligations to ECM. Any material nonpayment or nonperformance by the third party could reduce ECM’s cash flow.

Because of the natural decline in hydrocarbon production from existing wells, ECM’s success depends, in part, on its ability to maintain or increase hydrocarbon throughput volumes on its midstream systems, which depends on its customers’ levels of development and completion activity on its dedicated acreage.

The level of crude oil and natural gas volumes handled by ECM’s midstream systems depends on the level of production from crude oil and natural gas wells dedicated to its midstream systems, which may be less than expected and which will naturally decline over time. To maintain or increase throughput levels on its midstream systems, ECM must obtain production from wells completed by customers on acreage dedicated to its midstream systems or execute agreements with other third parties in its areas of operation.

ECM has no control over producers’ levels of development and completion activity in its areas of operation, the amount of reserves associated with wells connected to its systems, or the rate at which production from a well

 

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declines. In addition, ECM has no control over producers or their exploration and development decisions, which may be affected by, among other things:

 

   

the availability and cost of capital;

 

   

prevailing and projected crude oil, natural gas, and NGL prices;

 

   

demand for crude oil, natural gas, and NGLs;

 

   

levels of reserves;

 

   

geologic considerations;

 

   

changes in the strategic importance customers assign to development in the Delaware Basin as opposed to other potential future operations they may acquire, which could adversely affect the financial and operational resources such customers are willing to devote to development of their acreage in the Permian Basin;

 

   

increased levels of taxation related to the exploration and production of crude oil, natural gas, and NGLs in its areas of operation;

 

   

environmental or other governmental regulations, including the availability of permits, the regulation of hydraulic fracturing, and a governmental determination that multiple facilities are to be treated as a single source for air permitting purposes; and

 

   

the costs of producing and ability to produce crude oil, natural gas, and NGLs and the availability and costs of drilling rigs and other equipment.

Due to these and other factors, even if reserves are known to exist in areas served by ECM’s midstream assets, producers may choose not to develop those reserves. If producers choose not to develop their reserves or they choose to slow their development rate in ECM’s areas of operation, utilization of its midstream systems will be below anticipated levels. Reductions in development activity, coupled with the natural decline in production from its current dedicated acreage, would result in ECM’s inability to maintain the then-current levels of utilization of its midstream assets, which could materially adversely affect its business, financial condition, results of operations, and cash flow.

Dedicated acreage may be lost as a result of title defects in the properties in which ECM’s customers invest.

It is the practice of certain of ECM’s customers in acquiring oil and natural gas leases or interests not to incur the expense of retaining lawyers to examine the title to the mineral interests. Rather, certain customers rely on the judgement of oil and gas lease brokers or landmen who perform the fieldwork in examining records in the appropriate governmental office before attempting to acquire a lease in a specific mineral interest. The existence of a material title deficiency can render a lease worthless. If any of ECM’s customers fail to cure any title defects, such customers may be delayed or prevented from utilizing the associated mineral interest which could result in a decrease in the volumes on ECM’s systems and an associated decrease in its revenues.

Oil and natural gas producers’ operations, especially those using hydraulic fracturing, are substantially dependent on the availability of water. Restrictions on the ability for producers to obtain water could reduce drilling activity and the volume of hydrocarbons on ECM’s system, which in turn could have a subsequent adverse effect on ECM’s cash flow.

Water is an essential component of oil and natural gas production during both the drilling and hydraulic fracturing processes. However, the availability of suitable water supplies may be limited by prolonged drought conditions and changing laws and regulations relating to water use and conservation. For example, in recent years, Texas has experienced extreme drought conditions. As a result of this severe drought, some local water

 

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districts have begun restricting the use of water subject to their jurisdiction for hydraulic fracturing to protect local water supply. A reduction in the availability of water could impact the level of drilling and development activity for producers and, as a result, this could have a consequential adverse effect on ECM’s financial condition, results of operations, and cash flows.

If the third-party pipelines interconnected, or at some future point expected to be interconnected, to ECM’s pipelines become unavailable to transport or store crude oil, natural gas, or refined products, ECM’s revenue and available cash could be adversely affected.

ECM depends upon third-party downstream pipelines and associated operations to provide delivery options from its processing system. Because ECM does not control these pipelines and associated operations, their continuing operation is not within its control. If any pipeline were to become unavailable for current or future volumes of crude oil, natural gas, or refined products due to repairs, damage to the facility, lack of capacity, shut in by regulators, or any other reason, ECM’s ability to operate efficiently and continue shipping crude oil, natural gas and refined products to major demand centers could be restricted, thereby reducing revenue. Any temporary or permanent interruption at these pipelines could have a material adverse effect on ECM’s business, results of operations, financial condition, or cash flow.

ECM cannot predict the pace at which its customers will develop their dedicated acreage or the areas they will decide to develop.

ECM’s midstream services operate in a number of areas that are at the early stages of development, in areas that ECM’s customers are still determining whether to develop, and in areas where ECM may have to acquire operating assets from third parties. In addition, certain of ECM’s customers own acreage in areas that are not dedicated to ECM. Such customers’ decisions to develop acreage that is not dedicated to ECM may adversely affect its business, financial condition, results of operations, and cash flow.

ECM’s customers may suspend, reduce, or terminate their obligations under ECM’s commercial agreements with them in certain circumstances, which could have a material adverse effect on ECM’s financial condition, results of operations, and cash flow.

ECM has entered into gas gathering, compression and processing agreements, crude oil gathering agreements, and produced water gathering and disposal agreements with its customers, which include provisions that permit the customer to suspend, reduce, or terminate its obligations under each agreement if certain events occur. These events include non-performance by ECM and force majeure events which are out of ECM’s control. The customers have the discretion to make such decisions notwithstanding the fact that they may significantly and adversely affect ECM. Any such reduction, suspension, or termination of these customers’ obligations under their commercial agreements would have a material adverse effect on ECM’s financial condition, results of operations and cash flow. Please read “Information Concerning EagleClaw Midstream—Customers” in Annex A to this proxy statement.

Increased competition from other companies that provide midstream services, or from alternative fuel sources, could have a negative impact on the demand for ECM’s services, which could adversely affect its financial results.

ECM’s systems will compete for third party customers primarily with other crude oil and natural gas gathering systems and produced water service providers. Some of its competitors have greater financial resources and may now, or in the future, have access to greater supplies of crude oil, natural gas and produced water than ECM does. Some of these competitors may expand or construct gathering systems that would create additional competition for the services ECM would provide to third party customers. In addition, potential third party customers may develop their own gathering systems instead of using ECM’s systems. See “Information Concerning EagleClaw Midstream—Our Operations” in Annex A to this proxy statement.

 

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Further, hydrocarbon fuels compete with other forms of energy available to end-users, including renewable electricity and coal. Increased demand for such other forms of energy at the expense of hydrocarbons could lead to a reduction in demand for ECM’s services.

All of these competitive pressures could make it more difficult for ECM to attract new customers as it seeks to expand its business, which could have a material adverse effect on its business, financial condition, and results of operations. In addition, competition could intensify the negative impact of factors that decrease demand for crude oil, natural gas, and produced water services in the markets served by its systems, such as adverse economic conditions, weather, higher fuel costs, and taxes or other governmental or regulatory actions that directly or indirectly increase the cost or reduce demand for its services.

ECM’s exposure to commodity price risk may change over time and ECM cannot guarantee the terms of any existing or future agreements for its midstream services with its customers.

ECM currently generates revenues pursuant to a variety of different contractual arrangements, including fee-based agreements based on volumetric fees, percent-of-proceeds arrangements based on a percent of the proceeds from the sale of gathering and processing outputs on behalf of a producer and percent-of-products arrangements in which ECM is assigned a portion of the natural gas it gathers and processes as partial compensation. Consequently, ECM’s existing operations and cash flow have limited direct exposure to commodity price risk. However, ECM’s customers are exposed to commodity price risk, and extended reduction in commodity prices could reduce the production volumes available for ECM’s midstream services in the future below expected levels. Although ECM intends to maintain these pricing terms on both new contracts and existing contracts for which prices have not yet been set, its efforts to negotiate such terms may not be successful, which could have a materially adverse effect on its business.

ECM’s business involves many hazards and operational risks, some of which may not be fully covered by insurance. The occurrence of a significant accident or other event that is not fully insured could curtail its operations and have a material adverse effect on its cash flow.

ECM’s operations are subject to all of the hazards inherent in the gathering of crude oil, natural gas, and produced water, including:

 

   

damage to pipelines, centralized gathering facilities, pump stations, related equipment, and surrounding properties caused by design, installation, construction materials, or operational flaws, natural disasters, acts of terrorism, or acts of third parties;

 

   

leaks of crude oil, natural gas, or NGLs or losses of crude oil, natural gas, or NGLs as a result of the malfunction of, or other disruptions associated with, equipment or facilities;

 

   

fires, ruptures, and explosions; and

 

   

other hazards that could also result in personal injury and loss of life, pollution, and suspension of operations.

ECM may elect not to obtain insurance for any or all of these risks if it believes that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on ECM’s business, financial condition, results of operations, and cash flow.

A shortage of equipment and skilled labor could reduce equipment availability and labor productivity and increase labor and equipment costs, which could have a material adverse effect on ECM’s business and results of operations.

ECM’s gathering and other midstream services require special equipment and laborers who are skilled in multiple disciplines, such as equipment operators, mechanics, and engineers, among others. If ECM experiences

 

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shortages of necessary equipment or skilled labor in the future, its labor and equipment costs and overall productivity could be materially and adversely affected. If ECM’s equipment or labor prices increase or if ECM experiences materially increased health and benefit costs for employees, its business and results of operations could be materially and adversely affected.

The loss of key personnel could adversely affect ECM’s ability to operate.

ECM relies heavily on its management team, including its Chief Executive Officer, Jamie Welch, and other senior management. ECM does not maintain, nor does it plan to obtain, any insurance against the loss of any of these individuals. The loss of the services of any of these individuals who represent ECM’s senior management or any other key personnel could have a material adverse effect on its business, financial condition, results of operations, and cash flow.

ECM’s level of indebtedness could limit its flexibility to obtain additional financing and to pursue other business opportunities.

As of September 30, 2021, ECM had approximately $2.4 billion of total consolidated indebtedness. ECM expects to refinance all of its outstanding indebtedness in connection with or shortly after closing the transaction, subject to then-existing market conditions. Until that time, ECM’s level of debt could have important consequences to it, including the following:

 

   

its ability to make distributions;

 

   

its ability to obtain additional financing, if necessary, for working capital, capital expenditures (including building additional gathering pipelines needed for required connections and building additional centralized gathering facilities pursuant to its gathering agreements), or other purposes may be impaired or such financing may not be available on favorable terms;

 

   

its funds available for operations, future business opportunities, and available cash flow will be reduced by that portion of its cash flow required to make interest payments on its debt;

 

   

ECM may be more vulnerable to competitive pressures or a downturn in its business or the economy generally; and

 

   

its flexibility in responding to changing business and economic conditions may be limited.

ECM’s ability to service its debt will depend upon, among other things, its future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory, and other factors, some of which are beyond its control. If ECM’s operating results are not sufficient to service its indebtedness, it may be forced to take actions such as reducing or delaying its business activities, investments, or capital expenditures or selling assets. ECM may not be able to effect any of these actions on satisfactory terms or at all.

A terrorist attack, cyber-attack, or armed conflict could harm ECM’s business.

Terrorist activities, cyber-attacks, anti-terrorist efforts, and other armed conflicts involving the United States or other countries may adversely affect the United States and global economies and could prevent ECM from meeting its financial and other obligations. If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for crude oil and natural gas, potentially putting downward pressure on demand for ECM’s services and causing a reduction in its revenues. Crude oil and natural gas related facilities could be direct targets of terrorist attacks, and ECM’s operations could be adversely impacted if infrastructure integral to its operations is destroyed or damaged. Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all.

 

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A cyber incident could result in information theft, data corruption, operational disruption, and/or financial loss.

The oil and gas industry has become increasingly dependent on digital technologies to conduct day-to-day operations including certain midstream activities. For example, software programs are used to manage gathering and transportation systems and for compliance reporting. The use of mobile communication devices has increased rapidly. Industrial control systems such as SCADA (supervisory control and data acquisition) now control large scale processes that can include multiple sites and long distances, such as crude oil and natural gas pipelines.

ECM depends on digital technology, including information systems and related infrastructure as well as cloud applications and services, to process and record financial and operating data and to communicate with its employees and business service providers. ECM’s business service providers, including vendors and financial institutions, are also dependent on digital technology. The technologies needed to conduct midstream activities make certain information the target of theft or misappropriation.

As dependence on digital technologies has increased, cyber incidents, including deliberate attacks or unintentional events, also has increased. A cyber-attack could include gaining unauthorized access to digital systems or data for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption, or result in denial-of-service on websites. SCADA-based systems are potentially vulnerable to targeted cyber-attacks due to their critical role in operations. Cybersecurity attacks in particular are becoming more sophisticated and include, but are not limited to, malware, attempts to gain unauthorized access to data and systems, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data. The risk of a cybersecurity attack may increase as a result of the increased volume of “remote” work due to the spread of COVID-19.

ECM’s technologies, systems, networks, and those of its business partners may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of proprietary and other information, or other disruption of its business operations. In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period.

A cyber incident involving ECM’s information systems and related infrastructure, or that of its business service providers, could disrupt its business plans and negatively impact its operations in the following ways, among others:

 

   

a cyber-attack on a vendor or other service provider could result in supply chain disruptions, which could delay or halt development of additional infrastructure, effectively delaying the start of cash flow from the project;

 

   

a cyber-attack on downstream pipelines could prevent ECM from delivering product at the tailgate of its facilities, resulting in a loss of revenues;

 

   

a cyber-attack on a communications network or power grid could cause operational disruption resulting in loss of revenues;

 

   

a deliberate corruption of its financial or operational data could result in events of non-compliance which could lead to regulatory fines or penalties; and

 

   

business interruptions could result in expensive remediation efforts, distraction of management, damage to its reputation, or a negative impact on cash flow.

ECM’s implementation of various controls and processes, including globally incorporating a risk-based cyber security framework, to monitor and mitigate security threats and to increase security for its information, facilities, and infrastructure is costly and labor intensive. Moreover, there can be no assurance that such measures

 

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will be sufficient to prevent security breaches from occurring. As cyber threats continue to evolve, ECM may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities. Any such breakdowns or breaches, or resulting access, disclosure, or other loss of information, could significantly disrupt ECM’s business and result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to its reputation, any of which could have a material adverse effect on its business, financial position, results of operations, or cash flows.

ECM’s financial statements included in this proxy statement are prepared according to American Institute of Certified Public Accountants (AICPA) auditing standards, rather than Public Company Accounting Oversight Board (PCAOB) auditing standards. Since BCP will be considered the acquiror for accounting purposes after closing the transaction, it will be required to comply with PCAOB auditing standards.

ECM’s financial statements included in this proxy statement are prepared according to AICPA auditing standards. AICPA auditing standards differ from PCAOB auditing standards with respect to certain financial reporting matters such as materiality. The application of PCAOB auditing standards may result in certain differences with respect to ECM’s financial statements related to matters of materiality or otherwise. Any such revised or alternative treatment of ECM’s financial results under PCAOB auditing standards could have a material adverse effect on ECM’s business, financial position, results of operations, or cash flows.

Environmental and Regulatory Risk Factors Related to ECM

ECM’s construction of new midstream assets may not result in revenue increases and may be subject to regulatory, environmental, political, contractual, legal, and economic risks, which could adversely affect its cash flow, results of operations, and financial condition.

The construction of additions or modifications to ECM’s existing systems and the expansion into new production areas to service its customers involve numerous regulatory, environmental, political, and legal uncertainties beyond ECM’s control and may require the expenditure of significant amounts of capital, and ECM may not be able to construct in certain locations due to setback requirements or expand certain facilities that are deemed to be part of a single source. Regulations clarifying how crude oil and natural gas production facility emissions must be aggregated under the federal Clean Air Act permitting program were finalized in June 2016. This action clarified certain permitting requirements, yet could still impact permitting and compliance costs. As ECM builds infrastructure to meet its customers’ needs, it may not be able to complete such projects on schedule, at the budgeted cost, or at all.

ECM’s revenues may not increase immediately (or at all) upon the expenditure of funds on a particular project. For instance, if ECM builds additional gathering assets, the construction may occur over an extended period of time and it may not receive any material increases in revenues until the project is completed or at all. ECM may construct facilities to capture anticipated future production growth from its customers in an area where such growth does not materialize. As a result, new midstream assets may not be able to attract enough throughput to achieve its expected investment return, which could adversely affect its business, financial condition, results of operations, and cash flow.

The construction of additions to ECM’s existing assets may require it to obtain new rights-of-way, surface use agreements, or other real estate agreements prior to constructing new pipelines or facilities. ECM may be unable to timely obtain such rights-of-way to connect new crude oil, natural gas, and water sources to its existing infrastructure or capitalize on other attractive expansion opportunities. Additionally, it may become more expensive for ECM to obtain new rights-of-way or to expand or renew existing rights-of-way, leases, or other agreements, and its fees may only be increased above the annual year-over-year increase by mutual agreement between ECM and its customers. If the cost of renewing or obtaining new agreements increases, ECM’s cash flow could be adversely affected.

 

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ECM is subject to regulation by multiple governmental agencies, which could adversely impact its business, results of operations, and financial condition.

ECM is subject to regulation by multiple federal, state, and local governmental agencies. Proposals and proceedings that affect the midstream industry are regularly considered by Congress, as well as by state legislatures and federal and state regulatory commissions, agencies, and courts. ECM cannot predict when or whether any such proposals or proceedings may become effective or the magnitude of the impact changes in laws and regulations may have on its business. However, additions to the regulatory burden on the midstream industry can increase ECM’s cost of doing business and affect its profitability.

A change in the jurisdictional characterization of some of ECM’s assets by federal, state, or local regulatory agencies or a change in policy by those agencies may result in increased regulation of its assets, which may cause its operating expenses to increase, limit the rates it charges for certain services and decrease the amount of cash flow.

Although the Federal Energy Regulatory Commission (FERC) has not made a formal determination with respect to the facilities ECM considers to be natural gas gathering pipelines, ECM believes that its natural gas gathering pipelines meet the traditional tests that FERC has used to determine that pipelines perform primarily a gathering function and are, therefore, not subject to FERC jurisdiction. The distinction between FERC-regulated interstate transportation services and federally unregulated gathering services, however, has been the subject of substantial litigation, and FERC determines whether facilities are gathering facilities on a case-by-case basis, so the classification and regulation of ECM’s gathering facilities is subject to change based on future determinations by FERC, the courts or Congress. If FERC were to consider the status of an individual facility and determine that the facility or services provided by it are not exempt from FERC regulation the rates for, and terms and conditions of, services provided by such facility would be subject to regulation by FERC. Such regulation could decrease revenue, increase operating costs, and, depending upon the facility in question, adversely affect ECM’s results of operations and cash flow.

Even though ECM considers its natural gas gathering pipelines to be exempt from the jurisdiction of FERC under the Natural Gas Act (NGA), FERC regulation of interstate natural gas transportation pipelines may indirectly impact gathering services. FERC’s policies and practices across the range of its natural gas regulatory activities, including, for example, its policies on interstate open access transportation, ratemaking, capacity release, and market center promotion, may indirectly affect intrastate markets and gathering services. In recent years, FERC has pursued pro-competitive policies in its regulation of interstate natural gas pipelines. However, ECM cannot assure you that FERC will continue to pursue this approach as it considers matters such as pipeline rates and rules and policies that may indirectly affect the natural gas gathering services. In response to findings that emissions of carbon dioxide, methane, and other greenhouse gases (GHGs) present an endangerment to public health and the environment, FERC is considering changes to the way in which FERC-regulated natural gas pipelines are authorized, which could affect the development of such pipelines and indirectly affect demand for ECM’s services.

Natural gas gathering may receive greater regulatory scrutiny at the state level; therefore, ECM’s natural gas gathering operations could be adversely affected should they become subject to the application of state regulation of rates and services. ECM’s gathering operations could also be subject to safety and operational regulations relating to the design, construction, testing, operation, replacement, and maintenance of gathering facilities. ECM cannot predict what effect, if any, such changes might have on its operations, but it could be required to incur additional capital expenditures and increased operating costs depending on future legislative and regulatory changes.

 

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Federal and state legislative and regulatory initiatives relating to pipeline safety, which are often subject to change, may result in more stringent regulations or enforcement and could subject ECM to increased operational costs, increased capital costs, and potential operational delays.

Some of ECM’s gas pipelines are subject to regulation by the Pipeline and Hazardous Materials Safety Administration (PHMSA), pursuant to the Natural Gas Pipeline Safety Act of 1968 (NGPSA), with respect to natural gas, and the Hazardous Liquids Pipeline Safety Act of 1979 (HLPSA), with respect to crude oil and NGLs. Both the NGPSA and the HLPSA were amended by the Pipeline Safety Act of 1992, the Accountable Pipeline Safety and Partnership Act of 1996, the Pipeline Safety Improvement Act of 2002 (PSIA), as reauthorized and amended by the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006, and the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011. The NGPSA and HLPSA regulate safety requirements in the design, construction, operation, and maintenance of natural gas, crude oil, and NGL pipeline facilities, while the PSIA establishes mandatory inspections for all U.S. crude oil, NGL, and natural gas transmission pipelines in high-consequence areas (HCAs).

PHMSA has developed regulations that require pipeline operators to implement integrity management programs, including more frequent inspections and other measures to ensure pipeline safety in HCAs. The regulations require operators, including ECM, to:

 

   

perform ongoing assessments of pipeline integrity;

 

   

identify and characterize applicable threats to pipeline segments that could impact an HCA;

 

   

improve data collection, integration, and analysis;

 

   

repair and remediate pipelines as necessary; and

 

   

implement preventive and mitigating actions.

PHMSA may revise these standards from time-to-time. For example, in October 2019, PHMSA published three final rules that create or expand reporting, inspection, maintenance, and other pipeline safety obligations. PHMSA is also working on two additional rules related to gas pipeline safety that are expected to modify pipeline repair criteria and extend regulatory safety requirements to certain gathering lines in rural areas. Additional future regulatory action expanding PHMSA’s jurisdiction and imposing stricter integrity management requirements is possible. For instance, following the passage of Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2020, operators of jurisdictional pipelines must update their inspection and maintenance plans to identify procedures to prevent and mitigate both vented and fugitive pipeline methane emission by the end of 2021. Separately, the U.S. Congress reauthorized PHMSA through 2023 as part of the Consolidated Appropriations Act of 2021 and directed the agency to move forward with several regulatory actions. These include, but are not limited to, the issuance of final regulations to require operators of non-rural gas gathering lines and new and existing transmission and distribution pipeline facilities to conduct leak detection and repair programs and to require facility inspection and maintenance plans to align with those regulations. The adoption of laws or regulations that apply more comprehensive or stringent safety standards could require ECM to install new or modified safety controls, pursue new capital projects, or conduct maintenance programs on an accelerated basis, all of which could require ECM to incur increasing operating costs that may be significant. Further, should ECM fail to comply with PHMSA or comparable state regulations, it could be subject to substantial fines and penalties. As of May 2021, the maximum civil penalties PHMSA can impose are $225,134 per violation per day, with a maximum of $2,251,334 for a related series of violations.

Increased regulation of hydraulic fracturing could result in reductions or delays in crude oil and natural gas production by ECM’s customers, which could reduce the throughput on its gathering and other midstream systems, which could adversely impact its revenues.

ECM does not conduct hydraulic fracturing operations, but substantially all of the crude oil and natural gas production of its customers is developed from unconventional sources that require hydraulic fracturing as part of

 

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the completion process. Hydraulic fracturing is a well stimulation process that utilizes large volumes of water and sand combined with fracturing chemical additives that are pumped at high pressure to crack open previously impenetrable rock to release hydrocarbons. There has been increasing public controversy regarding hydraulic fracturing with regard to the use of fracturing fluids, induced seismic activity, impacts on drinking water supplies, use of water, and the potential for impacts to surface water, groundwater, and the environment generally.

Hydraulic fracturing is typically regulated by state oil and gas commissions and similar agencies. Some states and local governments, including those in which ECM operates, have adopted, and other states are considering adopting, regulations that could impose more stringent disclosure or well construction requirements on hydraulic fracturing operations. In addition, several states and local governments have banned or significantly restricted hydraulic fracturing and, over the past several years, federal agencies such as the U.S. Environmental Protection Agency (EPA) have sought to assert jurisdiction over the process. While the EPA has previously sought to relax environmental regulation and reduce enforcement efforts, including with respect to energy developed from unconventional sources, environmental groups and states have filed lawsuits challenging the EPA’s recent actions. ECM cannot predict the results of these or future lawsuits, or how such lawsuits will affect the regulation of hydraulic fracturing operations. Certain environmental groups have also suggested that additional laws at the federal, state, and local levels of government may be needed to more closely and uniformly regulate the hydraulic fracturing process. ECM cannot predict whether any such legislation will be enacted and if so, what its provisions would be. Additional levels of regulation and permits required through the adoption of new laws and regulations at the federal, state or local level could lead to delays, increased operating costs, and process prohibitions that could reduce the volumes of crude oil and natural gas that move through ECM’s gathering systems and decrease demand for its water services, which in turn could materially adversely impact its revenues.

ECM may incur significant liability under, or costs and expenditures to comply with, health, safety, and environmental laws and regulations, which are complex and subject to frequent change.

ECM is subject to various stringent and complex federal, state, and local laws and regulations governing health and safety aspects of its operations, the discharge of materials into the environment, and the protection of the environment and natural resources (including endangered or threatened species). These laws and regulations may impose on ECM’s operations numerous requirements, including the acquisition of permits, approvals, and certificates before conducting regulated activities; restrictions on the types, quantities, and concentration of materials that may be released into the environment; the application of specific health and safety criteria to protect the public or workers; and the responsibility for cleaning up pollution resulting from operations. Moreover, many of the permits required for the construction and operation of ECM’s assets may be subject to challenge by third parties, resulting in project delays or the imposition of stringent environmental controls as a precondition to issuing such permits. ECM may incur substantial costs in order to maintain compliance with these existing laws and regulations and the permits and other approvals thereunder. Additionally, ECM’s costs of compliance may increase or operational delays may occur if existing laws and regulations are revised or reinterpreted, or if new laws and regulations apply to its operations. Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued thereunder, oftentimes requiring difficult and costly response actions. Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil, and criminal penalties; the imposition of investigatory, remedial, or corrective action obligations; the incurrence of capital expenditures, the occurrence of delays in the permitting, development, or expansion of projects, and enjoining some or all of ECM’s future operations in a particular area. Compliance with more stringent standards and other environmental regulations could prohibit ECM’s ability to obtain permits for operations or require it to install additional equipment, the costs of which could be significant.

Certain environmental laws and analogous state laws and regulations impose joint and several liability, without regard to fault or legality of conduct, for costs required to clean up and restore sites where hazardous

 

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substances or other wastes have been disposed of or otherwise released. Under such laws, ECM may be liable for the full costs of removing or remediating contamination, regardless of whether it was at fault, and even when multiple parties contributed to the release or the contaminants were released in compliance with all applicable laws then in effect. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances, wastes, or other materials into the environment, or sue ECM to enforce compliance with environmental laws and regulations. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly requirements could require ECM to make significant expenditures to attain and maintain compliance or may otherwise have a material adverse effect on its operations, competitive position, or financial condition.

Public interest in the protection of the environment has increased dramatically in recent years. The trend of more expansive and stringent environmental legislation and regulations applied to the oil and natural gas industry could continue, resulting in increased costs of doing business and, consequently, affecting profitability. Additionally, fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, and technological advances in fuel economy and energy generation devices, could all reduce demand for oil and natural gas and consequently reduce demand for the midstream services ECM provides. The impact of this changing demand may have a material and adverse effect on ECM’s business, operations, and cash flows.

Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the crude oil and natural gas ECM gathers, while potential physical effects of climate change could disrupt ECM’s operations and cause it to incur significant costs in preparing for or responding to those effects.

Climate change continues to attract considerable public and scientific attention. There is a broad consensus of scientific opinion that human-caused emissions of GHGs are linked to climate change. Climate change and the costs that may be associated with its impacts and the regulation of GHGs have the potential to materially affect ECM’s business in many ways, to include negatively impacting the costs ECM incurs in providing its products and the demand for and consumption of its products.

The EPA adopted regulations requiring the reporting of GHG emissions from specific categories of higher GHG emitting sources in the United States, including certain oil and natural gas facilities, which include certain of ECM’s operations. Information in such reporting may form the basis for further GHG regulation. The EPA has also continued with its comprehensive strategy for further reducing methane and volatile organic compound (VOC) emissions from oil and gas operations, with a final rule issued in May 2016 that established specific new requirements regarding emissions from production-related wet seal and reciprocating compressors, and from pneumatic controllers and storage vessels. Additionally, the regulations placed new requirements to detect and repair VOC and methane at certain well sites and compressor stations. However, in September 2020, the EPA finalized a rule removing transportation and storage activities from the purview of the rules, thereby rescinding the VOC and methane emissions limits applicable to such activities. On January 20, 2021, the President signed an executive order calling for the suspension, revision, or rescission of the September 2020 rule, and the reinstatement or issuance of methane emissions standards for new, modified, and existing oil and gas facilities, including transmission and storage facilities. In April 2021, the U.S. Senate approved a resolution under the Congressional Review Act to repeal the September 2020 revisions, which was approved by the U.S. House of Representatives and signed into law by the President in June 2021. The passage of the resolution effectively vacates the September 2020 rule and reinstates the prior standards under the May 2016 rule. The EPA is also in the process of developing more stringent methane performance standards for both new and existing oil and gas sources, but to date no rule has been proposed. Compliance with these and other emissions rules could adversely affect ECM’s operations and restrict or delay its ability to obtain applicable permits, approvals, or certificates for new or modified facilities.

 

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Climate change remains a priority for the current administration, which could lead to additional regulations or restrictions on oil and gas development. In January 2021, the administration rejoined the Paris Agreement, a framework for parties to the Agreement to cooperate and report actions to reduce GHG emissions. The Paris Agreement calls for parties to undertake “ambitious efforts” to limit the average global temperature, and to conserve and enhance sinks and reservoirs of GHGs. The current administration, in April 2021, announced a target for the United States to achieve a 50% – 52% reduction from 2005 levels in economy-wide net GHG pollution in 2030. This target builds upon the President’s goals to create a carbon pollution-free power sector by 2035 and a net zero emissions economy by 2050. Meeting these goals may require further regulations that could adversely impact ECM’s operations and financial performance or otherwise reduce demand for the products it stores, processes, and transports.

The adoption of legislation or regulatory programs to reduce emissions of GHGs could require ECM to incur increased operating costs, such as costs to purchase and operate emissions and vapor control systems or to comply with new regulatory or reporting requirements. If ECM is unable to recover or pass through a significant level of its costs related to complying with climate change regulatory requirements imposed on it, it could have a material adverse effect on ECM’s results of operations and financial condition. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the natural gas ECM stores, processes, and transports. Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on ECM’s business, financial condition, and results of operations. Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for ECM’s products.

In addition, parties concerned about the potential effects of climate change have directed their attention at sources of funding for energy companies, which has resulted in certain financial institutions, funds, and other sources of capital restricting or eliminating their investment in oil and natural gas activities. Financial institutions may adopt policies that have the effect of reducing the funding provided to the fossil fuel sector. For example, the Federal Reserve recently announced that it has joined the Network for Greening the Financial System, a consortium of financial regulators focused on addressing climate-related risks in the financial sector. While ECM cannot predict what policies may result from this, a material reduction in the capital available to the fossil fuel industry could make it more difficult to secure funding for exploration, development, production, transportation, and processing activities, which could result in decreased demand for ECM’s midstream services.

Finally, it should be noted that there are increasing risks to ECM’s operations resulting from the potential physical impacts of climate change, such as drought, wildfires, damage to infrastructure and resources from flooding, storms, and other natural disasters, and other physical disruptions. One or more of these developments could have a material and adverse effect on ECM’s business, financial condition, and results of operation.

Increasing attention to environmental, social, and governance (ESG) matters and conservation measures may adversely impact ECM’s business.

Increasing attention to climate change, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary ESG disclosures, and consumer demand for alternative forms of energy, may result in increased costs, reduced demand for ECM’s products, reduced profits, increased investigations and litigation, and negative impacts on ECM’s access to capital markets. Increasing attention to climate change and environmental conservation, for example, may result in demand shifts for oil and natural gas products and additional governmental investigations, and private litigation against ECM or its customers. To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to ECM’s causation of or contribution to the asserted damage, or to other mitigating factors.

Moreover, while ECM creates and publishes voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures are based on hypothetical expectations and

 

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assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith. Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring, and reporting on many ESG matters.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable ESG ratings and recent activism directed at shifting funding away from companies with energy-related assets could lead to increased negative investor sentiment toward ECM, its customers, and its industry and to the diversion of investment to other industries, which could have a negative impact on business and ECM’s access to and costs of capital. Also, institutional lenders may decide not to provide funding for fossil fuel energy companies or the corresponding infrastructure projects based on climate change related concerns, which could affect ECM’s access to capital for potential growth projects.

Risks Related to Altus’ Business

You should read and consider risk factors specific to Altus’ business that will also affect Altus after the completion of the transaction. These risks are described in Altus’ Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2021, June 30, 2021, and September 30, 2021, each of which is incorporated by reference herein. For the location of information incorporated by reference in this proxy statement, please see the section entitled “Where You Can Find More Information.”

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement and the documents referred to in this proxy statement include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Exchange Act. All statements other than statements of historical facts included or incorporated by reference in this proxy statement, including, without limitation, statements regarding Altus’ and the Contributed Entities’ future financial position, business strategy, budgets, projected revenues, projected costs and plans, and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “continue,” “seek,” “guidance,” “might,” “outlook,” “possibly,” “potential,” “prospect,” “should,” “would,” or similar terminology, but the absence of these words does not mean that a statement is not forward looking. Although Altus and the Contributed Entities believe that the expectations reflected in such forward-looking statements are reasonable under the circumstances, they can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from Altus’ and the Contributed Entities’ expectations include, but are not limited to, assumptions about:

 

   

Altus’ and the Contributed Entities’ ability to consummate the transaction;

 

   

the timing of the consummation of the transaction;

 

   

the ability of Altus to integrate the Contributed Entities’ operations and achieve or realize any anticipated benefits, savings, or growth of the transaction;

 

   

the scope, duration, and reoccurrence of any epidemics or pandemics (including, specifically, the coronavirus disease 2019 (COVID-19) pandemic and any related variants) and the actions taken by third parties, including, but not limited to, governmental authorities, customers, contractors, and suppliers, in response to such epidemics or pandemics;

 

   

the mandate, availability, and effectiveness of any vaccine programs or other therapeutics related to the treatment of COVID-19;

 

   

the market prices of oil, natural gas, NGLs, and other products or services;

 

   

pipeline and gathering system capacity and availability;

 

   

production rates, throughput volumes, reserve levels, and development success of dedicated oil and gas fields;

 

   

Altus’ and the Contributed Entities’ future financial condition, results of operations, liquidity, and compliance with debt covenants;

 

   

Altus’ and the Contributed Entities’ future revenues, cash flows, and expenses;

 

   

Altus’ and the Contributed Entities’ access to capital and their anticipated liquidity;

 

   

Altus’ and the Contributed Entities’ future business strategy and other plans and objectives for future operations;

 

   

Altus’ and the Contributed Entities’ competitive positions;

 

   

Altus’ and the Contributed Entities’ outlook on oil and natural gas prices;

 

   

the amount, nature, and timing of Altus’ and the Contributed Entities’ future capital expenditures, including future development costs;

 

   

Altus’ and the Contributed Entities’ ability to access the capital markets to fund capital and other expenditures;

 

   

Altus’ and the Contributed Entities’ potential future asset dispositions and other transactions, the timing of closing of such transactions, and the use of proceeds, if any, from such transactions;

 

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the risks associated with potential acquisitions or alliances by Altus or the Contributed Entities;

 

   

the recruitment and retention of Altus’ and the Contributed Entities’ officers and personnel;

 

   

Altus’ and the Contributed Entities’ expected levels of compensation;

 

   

the likelihood of success of and impact of litigation on Altus and the Contributed Entities;

 

   

Altus’ and the Contributed Entities’ assessment of their counterparty risk and the ability of their counterparties to perform their future obligations;

 

   

the impact of federal, state, and local political, regulatory, and environmental developments where Altus and the Contributed Entities conduct their business operations; and

 

   

other factors disclosed under “Risk Factors” in this proxy statement and under “Risk Factors” and “Forward-Looking Statements and Risk” in Altus’ Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2021, June 30, 2021, and September 30, 2021.

Altus and Contributor expressly qualify in their entirety all forward-looking statements attributable to Altus, the Partnership, Contributor, or the Contributed Entities or any person acting on their behalf by the cautionary statements contained or referred to in this section.

These risks and uncertainties are not exhaustive. Other sections of this proxy statement describe additional factors that could adversely affect Altus’ or the Contributed Entities’ business and financial performance. Moreover, Altus and the Contributed Entities operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can Altus or Contributor assess the impact of all factors on their business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Although Altus and Contributor believe the expectations reflected in the forward-looking statements are reasonable, they cannot guarantee future results, level of activity, performance or achievements. Moreover, neither Altus, Contributor, nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Altus and Contributor are under no duty to update any of these forward-looking statements after the date of this proxy statement to conform Altus’ and Contributor’s prior statements to actual results or revised expectations, and Altus and Contributor do not intend to do so.

 

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THE ALTUS SPECIAL MEETING

This section contains information about the special meeting of Altus stockholders that has been called to approve the share issuance proposal and the charter amendment proposal.

This proxy statement is being furnished to holders of Altus Common Stock as part of the solicitation of proxies by the Altus Board for use at the Altus special meeting, to be held on [], and at any adjournment or postponement thereof. This proxy statement and enclosed proxy card is first being mailed to holders of Altus Common Stock on or about [].

Time and Place of the Altus Special Meeting

The special meeting will be held on [●], at [●] (Central time) at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400, subject to any adjournments or postponements.

Purpose of the Altus Special Meeting

The purpose of the special meeting is to vote upon the following proposals:

 

   

Share Issuance Proposal. A proposal to approve the issuance of the Consideration to Contributor or its designees in exchange for all of the equity interests of the Contributed Entities, which, following an internal reorganization to be completed before closing, will be owned directly by Contributor; and

 

   

Charter Amendment Proposal. A proposal to approve an amendment and restatement of the Second Amended and Restated Certificate of Incorporation of Altus to, among other changes, (i) allow for stockholder action by written consent in lieu of holding a meeting of the stockholders, (ii) allow for 10% or greater holders of voting stock to call special meetings of the stockholders, and (iii) further define the waiver of corporate opportunities with respect to Altus and its officers and directors, and any of their respective affiliates.

The obligations of the parties to complete the transaction are conditioned upon approval of the share issuance proposal. We will not complete the transaction unless the share issuance proposal is approved.

Other Business

Altus’ bylaws provide that at a special meeting of stockholders, the business discussed must be specified in the notice of meeting. At the special meeting, no matters may come before the stockholders other than the proposals presented herein or in any supplement to this proxy statement.

Recommendation of the Altus Board

The Altus Board recommends that you vote as follows:

 

Proposal

  

Recommended Vote

Share Issuance Proposal
(Proposal No. 1)
  

“FOR”

 

the approval of the issuance of an aggregate of 50,000,000 shares of Class C Common Stock by Altus and an aggregate of 50,000,000 Common Units by the Partnership to Contributor or its designees.

Charter Amendment Proposal (Proposal No. 2)   

“FOR”

 

 

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Proposal

  

Recommended Vote

   the approval of the amendment to the Altus Second Amended and Restated Certificate of Incorporation to, among other changes, (i) allow for stockholder action by written consent, (ii) allow for 10% or greater holders of voting stock to request special meetings of the stockholders, and (iii) further define the waiver of corporate opportunities regarding certain holders of common stock, pursuant to the Third Amended and Restated Certificate of Incorporation of Altus.

Record Date and Quorum

The Altus Board has established [●] as the record date for the special meeting. Only record holders of Altus Common Stock at the close of business on the record date for the special meeting are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting. At the close of business on the record date, there were [●] shares of Altus Class A Common Stock outstanding and entitled to vote and 12,500,000 shares of Altus Class C Common Stock outstanding and entitled to vote. Each share of Altus Common Stock entitles the holder thereof to one vote on all matters to be voted on by Altus’ stockholders. Holders of the Class A Common Stock and holders of the Class C Common Stock vote together as a single class on all matters submitted to a vote of Altus’ stockholders, except as required by law.

Holders of a majority of the voting power of all outstanding shares of Altus Common Stock entitled to vote on the record date must be represented in person or by proxy at the special meeting for there to be a quorum. Abstentions are counted as present for the purpose of determining a quorum. It is important that you provide Altus with your proxy or attend the special meeting in person so that your shares are counted towards the quorum. If you hold your shares through a bank, broker, custodian, or other record holder, please refer to your proxy card, voting instruction form, or the information forwarded by your bank, broker, custodian, or other record holder to determine how and when to vote your shares. Unless you direct your bank, broker, custodian, or other record holder on how to vote by the time and date specified by them, they will be unable to vote your shares. Altus encourages you to provide it with your proxy even if you plan to attend the special meeting in person to ensure that your vote will be counted.

All shares of Altus Common Stock represented at the special meeting, including abstentions, will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum.

Attendance

If you are a stockholder of record, you may vote by submitting a proxy. If you hold your shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee, or nominee. There are four ways to vote by proxy and voting instruction card: by Internet, by mobile device, by telephone, or by mail. For further instructions regarding how to vote, see “—Voting by Attending the Altus Special Meeting in Person” and “—Voting Without Attending the Altus Special Meeting in Person” below.

Vote Required

The required vote to approve each proposal generally is as set forth in the table below. Please see the description immediately following the table for more details on the required vote to approve each proposal.

 

Proposal

  

Vote Required

Share Issuance Proposal
(Proposal No. 1)
   Affirmative vote of a majority of the votes cast by the holders of Altus Common Stock present (in person or by proxy) at the special meeting and entitled to vote, assuming a quorum is present
Charter Amendment Proposal (Proposal No. 2)    Affirmative vote of a majority of the outstanding shares of Altus Common Stock

 

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The share issuance proposal: Assuming the presence of a quorum, the approval of the share issuance proposal requires the affirmative vote of a majority of the votes cast by the holders of shares of Altus Common Stock present (in person or by proxy) at the special meeting and entitled to vote. As a result, if you abstain from voting on the share issuance proposal, your shares of Altus Common Stock will be counted as present for purposes of establishing a quorum, but the abstention will not be considered as a vote cast on the proposal. If you fail to vote on the proposal, your failure to vote will not affect the adoption of the proposal, except to the extent such failure to vote prevents a quorum for voting on the proposal. Accordingly, it is important that you provide Altus with your proxy so that your shares are counted towards the quorum and this requirement.

The charter amendment proposal: The approval of the charter amendment proposal requires the affirmative vote of holders of a majority of the outstanding shares of Altus Common Stock. As a result, if you abstain from voting or do not vote your shares of Altus Common Stock, it will have the same effect as a vote “AGAINST” the charter amendment proposal. Accordingly, it is important that you provide Altus with your proxy so that your shares are counted towards the quorum and this requirement.

THE CONTRIBUTION AGREEMENT PROVIDES THAT RECEIPT OF THE REQUISITE ALTUS STOCKHOLDER APPROVAL OF THE SHARE ISSUANCE PROPOSAL IS A CONDITION TO CLOSING THE TRANSACTION, AS MORE FULLY DESCRIBED IN “THE CONTRIBUTION AGREEMENT AND OTHER TRANSACTION AGREEMENTS—CONDITIONS TO CONSUMMATION OF THE TRANSACTION.”

Voting by Altus Directors and Executive Officers

As of the record date for the special meeting, Altus’ directors and executive officers had the right to vote [●]% of the shares of Altus Common Stock outstanding and entitled to vote at the special meeting. Altus currently expects that its directors and executive officers will vote their shares of Altus Common Stock in favor of each of the proposals to be considered at the special meeting, although none of them has entered into any agreements obligating them to do so.

Voting by Apache Midstream

As of the record date for the special meeting, Apache Midstream had the right to vote approximately 79% of the shares of Altus Common Stock outstanding and entitled to vote at the special meeting. In connection with the contribution agreement, Apache Midstream entered into the voting and support agreement, whereby Apache Midstream has agreed, among other things and subject to the limitations therein, to vote the Apache Midstream Support Agreement Shares in a manner so as to facilitate consummation of the transaction. Specifically, pursuant to the voting and support agreement, Apache Midstream has agreed to vote all of the Apache Midstream Support Agreement Shares:

 

   

in favor of approving any matters necessary for the consummation of the transaction contemplated by the contribution agreement (transaction matters); and

 

   

against (i) any agreement, transaction, or proposal that relates to a Company Competing Proposal, without regard to the terms of such Company Competing Proposal or any other transaction, proposal, agreement, or action made in opposition to adoption of the contribution agreement or in competition or inconsistent with the transaction or matters contemplated by the contribution agreement; (ii) any action, agreement, or transaction that would reasonably be expected to result in a breach of any covenant, representation, or warranty or any other obligation or agreement of Altus or any of its subsidiaries contained in the contribution agreement or of Apache Midstream contained in the voting and support agreement; (iii) any action or agreement that would reasonably be expected to result in (x) any of the closing conditions contained in the contribution agreement not being fulfilled or (y) any change to the voting rights of any class of shares of capital stock of Altus (including by any amendments to Altus’

 

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organizational documents other than, for the avoidance of doubt, any amendments contemplated by the contribution agreement); and (iv) any other action, agreement, or transaction that would reasonably be expected to impede, interfere with, delay, discourage, postpone, or adversely affect any of the transaction matters.

The Apache Midstream Support Agreement Shares constitute approximately 79% of the issued and outstanding shares of Altus Common Stock. Accordingly, as long as there has not been an Altus Change of Recommendation, approval of the share issuance proposal and the charter amendment proposal at the special meeting is assured. If there has been an Altus Change of Recommendation, Apache Midstream’s voting obligation is reduced to 35% of the total issued and outstanding shares of Altus Common Stock plus additional votes proportionate to the voting percentage of Altus’ other stockholders. For more information, please see the section entitled “The Contribution Agreement and Other Transaction Agreements—Voting and Support Agreement.”

Notice of Internet Availability of Proxy Materials

Pursuant to rules adopted by the SEC, Altus has elected to provide our stockholders access to our proxy materials via the Internet. Accordingly, Altus is sending a Notice of Internet Availability of Proxy Materials (the Notice) to Altus stockholders. All Altus stockholders will have the ability to access the proxy materials on the website referenced in the Notice or request to receive a printed set of the proxy materials. The Notice contains instructions on how to access the proxy materials over the Internet, how to vote online, and how to request a printed copy of the materials. We encourage you to take advantage of the proxy materials on the Internet. By opting to access your proxy materials online, you will save us the cost of producing and mailing documents, reduce the amount of mail you receive, and allow us to conserve natural resources.

Voting by Attending the Altus Special Meeting in Person

Shares of Altus Common Stock held in your name as the stockholder of record may be voted in person at the special meeting. Shares for which you are the beneficial owner but not the stockholder of record may be voted in person at the special meeting only if you obtain a “legal proxy” from the broker, trustee, nominee, or other holder of record that holds your shares giving you the right to vote the shares. Even if you plan to attend the special meeting, Altus recommends that you also vote by proxy so that your vote will be counted if you are unable to attend the special meeting.

Voting Without Attending the Altus Special Meeting in Person

If you hold shares of Altus Common Stock in your own name as a stockholder of record, you may instruct Altus on how to vote your shares:

 

   

over the Internet, by following the instructions provided in the Notice; or

 

   

if you requested to receive printed proxy materials:

 

   

by scanning the QR code on the enclosed proxy card with your mobile device (specific directions for using the mobile voting system are shown on the proxy card);

 

   

by using the toll-free telephone number listed on the enclosed proxy card (specific directions for using the telephone voting system are included on the proxy card); or

 

   

by marking, signing, dating, and returning the enclosed proxy card in the postage-paid envelope provided.

When using Internet, mobile device, or telephone voting, the voting systems will verify that you are a stockholder through the use of a “company number” for Altus and a unique “control number” for you. Whichever

 

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method you use to transmit your instructions, your shares of Altus Common Stock will be voted as you direct. If you designate the proxies named on the proxy card to vote on your behalf, but do not specify how to vote your shares, they will be voted as follows: “FOR” the share issuance proposal and “FOR” the charter amendment proposal.

If you hold your shares in street name and sign the voting instruction card of your broker, trustee, or other nominee, but do not provide instructions, or if you do not make specific Internet or telephone voting choices, your shares will not be voted because your broker, trustee, or other nominee does not have discretionary authority to vote. If you instruct your broker, trustee, or other nominee to vote on the share issuance proposal, but fail to instruct them on how to vote on the charter amendment proposal, it will have the same effect as voting “AGAINST” the charter amendment proposal.

If you vote in advance using one of the methods described above, then you may still attend and vote at the special meeting. Please see “—Revocation” below for additional details.

Revocation

You may change or revoke your proxy at any time prior to the vote on the matters at the special meeting or, if the special meeting is continued, adjourned, or postponed, the date and time of such continued, adjourned, or postponed meeting.

You may revoke a proxy before it is voted by submitting a new proxy with a later date by internet, mobile device, telephone, or mail (if applicable), by voting at the meeting, by attending the special meeting in person and giving Altus’ Inspector of Elections notice of your intent to vote your shares of Altus Common Stock in person, or by filing a written revocation with Altus’ corporate secretary at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. Your attendance at the special meeting alone will not automatically revoke your proxy.

Solicitation of Proxies; Payment of Solicitation Expenses

This proxy is solicited by the Altus Board for use at the special meeting and any adjournment thereof. Solicitation of proxies for use at the special meeting may be made in person or by mail, telephone, or other electronic means by directors, officers, and regular employees, if any, of Altus. These persons will receive no special compensation for any solicitation activities.

Altus has requested banking institutions, brokerage firms, custodians, trustees, nominees, and fiduciaries to forward solicitation materials to the beneficial owners of shares of Altus Common Stock for whom they are record holder, and Altus will, upon request, reimburse reasonable forwarding expenses.

 

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PROPOSAL NO. 1—THE SHARE ISSUANCE PROPOSAL

The contribution agreement provides that Contributor will contribute all of the Contributed Interests to the Partnership, with each of the Contributed Entities becoming a wholly-owned subsidiary of the Partnership. In exchange for the contribution by Contributor, Contributor or its designees will receive an aggregate of 50,000,000 Common Units and an aggregate of 50,000,000 shares of Class C Common Stock.

We are seeking stockholder approval of the share issuance proposal in order to comply with Nasdaq Listing Rule 5635(a). Pursuant to Nasdaq Listing Rule 5635(a), stockholder approval is required prior to the issuance of securities in connection with the acquisition of stock or assets of another company that would result in (i) the issuance, or potential issuance, of shares of common stock (including upon the conversion or exercise of securities into common stock) (a) having voting power equal to or in excess of 20% of the voting power of the common stock outstanding prior to the issuance of the common stock or securities convertible into or exercisable for common stock or (b) in excess of 20% of the number of shares of common stock outstanding prior to the issuance of the common stock or securities convertible into or exercisable for common stock. Accordingly, Altus is seeking stockholder approval under Nasdaq Listing Rule 5635(a) in connection with the proposed issuance of 50,000,000 shares of Class C Common Stock to Contributor or its designees.

We are also seeking stockholder approval of the share issuance proposal in order to comply with Nasdaq Listing Rule 5635(b). Pursuant to Nasdaq Listing Rule 5635(b), stockholder approval is required prior to the issuance of securities that will result in a change of control of a listed company, which for purposes of Nasdaq Listing Rule 5635(b) is generally deemed to occur when an investor or investor group acquires or has the right to acquire 20% or more of a company’s outstanding common stock or voting power, and that investor or investor group will then be the largest holder of such common stock or voting power.

As a result of the transaction, Altus’ current stockholders will continue to hold their shares of Altus Common Stock, Contributor or its designees will collectively own approximately 75% of the issued and outstanding Altus Common Stock, Apache Midstream, which currently owns approximately 79% of the issued and outstanding Altus Common Stock, will own approximately 20% of the issued and outstanding Altus Common Stock, and the remaining current stockholders will own approximately 5% of the issued and outstanding Altus Common Stock.

Required Vote

Assuming the presence of a quorum, the approval of the share issuance proposal requires the affirmative vote of a majority of the votes cast by the holders of Altus Common Stock present (in person or by proxy) at the Altus special meeting and entitled to vote. As a result, if you abstain from voting on the share issuance proposal, your shares of Altus Common Stock will be counted as present for purposes of establishing a quorum, but the abstention will not be considered as a vote cast on the proposal. If you fail to vote on the share issuance proposal, your failure to vote will not affect the adoption of the proposal, except to the extent such failure to vote prevents a quorum for voting on the proposal. Accordingly, it is important that you provide Altus with your proxy or attend the special meeting in person so that your shares are counted towards the quorum and this requirement.

The Altus Board recommends a vote “FOR” the share issuance proposal (Proposal No. 1). For a discussion of interests of Altus’ directors and executive officers in the transaction that may be different from, or in addition to, Altus’ stockholders generally, see “ —Interests of Altus’ Executive Officers and Directors in the Transaction.”

THE CONTRIBUTION AGREEMENT PROVIDES THAT RECEIPT OF THE REQUISITE ALTUS STOCKHOLDER APPROVAL OF THE SHARE ISSUANCE PROPOSAL IS A CONDITION TO CLOSING THE TRANSACTION, AS MORE FULLY DESCRIBED IN “THE CONTRIBUTION

 

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AGREEMENT AND OTHER TRANSACTION AGREEMENTS—CONDITIONS TO CONSUMMATION OF THE TRANSACTION.”

In addition, even if the Altus stockholders approve the share issuance proposal, the transaction may not be completed if the other conditions to closing the transaction are not satisfied or, if allowed by applicable law, waived. Altus can give no assurance that the conditions to closing the transaction will be satisfied or so waived.

 

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THE TRANSACTION

General

Altus, the Partnership, Contributor, and, solely for the purposes set forth therein, BCP have entered into a contribution agreement providing for the acquisition of the Contributed Entities by the Partnership. In exchange for the contribution by Contributor, Contributor or its designees will receive an aggregate of 50,000,000 Common Units and an aggregate of 50,000,000 shares of Class C Common Stock. As a result of the transaction, Altus’ current stockholders will continue to hold their shares of Altus Common Stock, Contributor or its designees will collectively own approximately 75% of the issued and outstanding Altus Common Stock, Apache Midstream, which currently owns approximately 79% of the issued and outstanding Altus Common Stock, will own approximately 20% of the issued and outstanding Altus Common Stock, and the remaining current stockholders will own approximately 5% of the issued and outstanding Altus Common Stock.

The following diagram illustrates the structure of the transaction:

Before the Transaction

 

 

LOGO

Note: Lines represent 100% ownership, unless otherwise indicated.

(1)

Includes ownership of Common Units and shares of Class C Common Stock that together can be redeemed for shares of Class A Common Stock.

(2)

Reflects 660,694 units outstanding at the original issuance price.

 

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After the Transaction

 

 

LOGO

Note: Lines represent 100% ownership, unless otherwise indicated.

(1)

Includes ownership of Common Units and shares of Class C Common Stock that together can be redeemed for shares of Class A Common Stock.

(2)

Reflects 660,694 units outstanding as of June 30, 2021 at the original issuance price. Does not reflect redemption of 100,000 Series A Preferred Units to occur in connection with the closing of the transaction.

(3)

BCP Raptor’s 26.7% ownership interest in PHP is subject to a project finance Term Loan A facility.

(4)

As of September 30, 2021.

Background of the Transaction

Altus’ midstream infrastructure and facilities were initially constructed to service Apache Corporation’s production from Alpine High. In the second half of 2019, Apache Corporation materially reduced planned investment at Alpine High and announced it had no future drilling plans at Alpine High.

In response to this development, the Altus Board and Altus management began to look at strategic alternatives in the fall of 2019. The strategic alternatives considered by the Altus Board included a sale of Altus to a strategic or financial acquirer, a merger with another public or non-public industry participant, a substantial debt or equity investment from a private equity firm and the sale of significant assets.

In early 2020, Altus began working with Credit Suisse to evaluate strategic alternatives. In connection with this evaluation, Altus entered into several confidentiality agreements with prospective counterparties, including an affiliate of BCP, to enable confidential negotiations and the conduct of mutual due diligence. However, as a result of economic uncertainty caused by the COVID-19 pandemic and the economic shutdowns occurring in March and April of 2020, the Altus Board determined to suspend a formal process related to strategic alternatives.

 

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Notwithstanding this suspension, BCP and another private equity-backed private midstream company familiar with Altus’ asset profile approached Altus in the early summer of 2020. Altus engaged in dialogue with each of these parties.

On June 29, 2020, Altus announced a 1-for-20 reverse stock split of its outstanding common stock primarily intended to bring Altus into compliance with the minimum bid price requirement for maintaining its listing on the Nasdaq Stock Market. On July 20, 2020, Altus received non-binding proposals, subject to numerous conditions, from BCP and from the other private company, in each case, to acquire all of the equity of Altus for cash.

In early August 2020, Altus management notified both parties that their proposals did not adequately value Altus.

On August 10, 2020, BCP revised its proposal to include a $5.00 per share potential earnout payment based on the performance of the EPIC crude pipeline and the Shin Oak NGL pipeline. The other party did not submit a revised proposal.

In late August 2020, Altus management notified BCP that its revised offer continued to be unacceptable.

In September 2020, the Altus Board and Altus management again suspended their outreach on strategic alternatives. Certain members of Altus management then began to shift focus to the adoption of a regular quarterly dividend in order to deliver value to the Altus stockholders. Construction of the Permian Highway Pipeline was nearing completion and was expected to be in commercial service in the first quarter of 2021. Altus management estimated that Altus would have sufficient positive cash flow to fund a cash dividend once the Permian Highway Pipeline was placed in commercial service.

In October 2020, Altus management met with the Altus Board to discuss various financing and capital allocation alternatives. Both agreed that initiating a cash dividend policy would be the optimal path to maximizing stockholder returns.

On November 4, 2020, Altus management announced that they planned to recommend to the Altus Board the payment of a quarterly dividend of $1.50 per share beginning in March 2021. At this time, the Altus Board determined that Altus would resume evaluating strategic alternatives if Altus’ stock price increased to align more closely with the trading prices for Altus’ peers.

On May 17, 2021, Altus management restarted internal discussions regarding strategic alternatives in light of Altus’ then-current share price, which had increased approximately 550% from September 2020, when Altus suspended its outreach on strategic alternatives. Altus discussed with Credit Suisse an approach to gauge interest of potentially interested parties in a transaction with Altus.

On June 3, 2021, the Altus Board received an update from Altus management on strategic alternatives and agreed that Altus should continue exploring strategic alternatives.

On June 9, 2021, Ben C. Rodgers, Altus’ Chief Financial Officer and Treasurer and a member of the Altus Board, met with Jamie Welch, the President and Chief Executive Officer of BCP. At this meeting, Messrs. Rodgers and Welch discussed whether BCP had considered obtaining a public listing by combining with a public company rather than by means of a possible initial public offering. Messrs. Rodgers and Welch both agreed that the prospect of combining their respective organizations and keeping Altus public was of interest and should be considered further.

On June 10, 2021, Mr. Rodgers met with the chief financial officer of another private equity-backed private midstream company operating in the Permian Basin to discuss a combination with Altus where Altus would

 

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remain as a public company. Altus and this company entered into a confidentiality agreement in early July 2021 to enable confidential negotiations and the conduct of mutual due diligence. In late July and early August, Altus received projections from this company and had continued discussions related to a potential combination between the company and Altus. Ultimately, however, this company did not deliver any transaction proposal.

On June 15, 2021, BCP presented Altus with an overview of the BCP business and preliminary views around a potential combination between BCP and Altus.

In June 2021, Altus management had a discussion with a private equity sponsor of a large midstream operator in the Permian Basin to gauge interest in a potential transaction with Altus. Ultimately, however, this company elected not to proceed with due diligence or negotiations.

Also in June 2021, Credit Suisse had a discussion with a private midstream operator in the Permian Basin to gauge interest in a potential transaction with Altus. Ultimately, however, this company elected not to proceed with due diligence or negotiations given its focus on receiving cash in a sale or a liquid and readily saleable security.

On June 21, 2021, Mr. Welch met with Stephen J. Riney, Executive Vice President and Chief Financial Officer of APA Corporation, Clay Bretches, Altus’ Chief Executive Officer and President and a member of the Altus Board, and Mr. Rodgers and presented Altus with an outline for a combination transaction that would keep Altus as a public company. Altus and BCP exchanged counterproposals throughout the summer, which included a focus by Altus on the need for a higher implied relative valuation of Altus by BCP based on, among other things, pro forma ownership of Common Units by BCP. During these exchanges, both management teams discussed how to address the various counterparty rights held by the lenders under the Partnership’s credit agreement, the Series A Preferred Unit holders under the Partnership’s agreement of limited partnership, and Altus’ joint venture partners under its various pipeline joint ventures. Both management teams noted BCP’s unique position to address transfer restrictions related to Permian Highway Pipeline and Gulf Coast Express pipeline because a subsidiary of BCP was also a partner in the Permian Highway Pipeline and both pipelines are operated by Kinder Morgan.

By email on June 29, 2021 and at an Altus Board meeting held August 3, 2021, Altus management updated the Altus Board on discussions with all prospects to date. At the Altus Board meeting, Altus management also provided a detailed review of discussions with BCP and the structure of a proposed transaction. The Altus Board authorized continued engagement with BCP and other parties with which Altus had had a dialogue.

In August and September 2021, Altus and BCP discussed how to approach Altus’ joint venture partners and the Series A Preferred Unit holders and began to discuss what waivers and amendments to existing agreements would be required to permit an Altus and BCP combination. Altus and BCP also engaged credit rating agencies for ratings previews of the pro forma combined company.

On September 16, 2021, Mr. Rodgers had a brief discussion previewing the transaction with the lead Series A Preferred Unit holder representing 48% of the Series A Preferred Units.

On September 21, 2021, BCP proposed a business combination with Altus in which BCP would receive 53,800,000 Common Units for its contribution of the business of BCP reflecting a 76.86% pro forma ownership for the unitholders of BCP in the combined company.

At an Altus Board meeting on September 22, 2021, Altus management apprised the Altus Board of developments in the negotiations with BCP, including the proposed pro forma ownership communicated to Altus on September 21. Credit Suisse also attended the Altus Board meeting and reviewed on a preliminary basis with the Altus Board certain financial information and other data, including financial aspects relating to capital structure and certain financial metrics relating to peer companies. After the meeting, Mr. Rodgers informed Mr. Welch that the proposed BCP implied relative valuation and pro forma ownership of Altus was inadequate

 

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and Altus was not willing to transact on that basis. BCP amended its proposal to have Altus issue to BCP 50,000,000 Common Units (and an equal number of shares of Class C Common Stock), which was expected to result in pro-forma ownership of Altus of approximately 75% for the unitholders of BCP, approximately 20% for Apache Midstream and approximately 5% for the existing stockholders of Altus (other than Apache Midstream), in exchange for the contribution of BCP’s business to the Partnership. Altus rejected a proposed stock price collar from BCP but otherwise agreed to the proposed alternative terms with respect to governance. Altus and BCP agreed in principle on the Altus proposal and the parties agreed to begin negotiating definitive agreements.

On September 30, 2021, Altus and BCP received favorable responses from the credit rating agencies with respect to the proposed transaction. Altus also discussed the proposed transaction on a preliminary basis with the administrative agent under the Partnership’s credit agreement.

On October 1, 2021, Altus provided BCP with a first draft of the contribution agreement.

During the week of October 4, 2021, Altus approached the banks representing approximately 58% of the commitments under the Partnership’s credit agreement to obtain a waiver of the change in control covenant in the credit agreement and obtain amendments to the credit agreement. Additionally, Mr. Welch discussed the proposed transaction in detail with the lead Series A Preferred Unit holder representing 48% of the Series A Preferred Units. BCP entered into a confidentiality agreement with these holders. Altus and BCP began negotiating the terms of a waiver and amendments to the Partnership’s agreement of limited partnership. See the section entitled “The Contribution Agreement and Other Transaction Agreements—Third Amended and Restated Agreement of Limited Partnership of the Partnership.

On October 5, 2021, the Altus Board held a meeting, at which members of Altus management and Altus’ legal advisor, Bracewell LLP, and financial advisor, Credit Suisse, were present, to receive an update on the discussions with BCP and the other parties with which Altus had had a dialogue.

On October 7, 2021, BCP provided Altus with a revised draft of the contribution agreement.

On October 8, 2021, the Altus Board met, together with members of Altus management and Altus’ legal and financial advisors. At the meeting, Credit Suisse reviewed updated financial information regarding the proposed transaction with BCP.

During the week of October 11, 2021, BCP entered into a confidentiality agreement with a Series A Preferred Unit holder representing approximately 30% of the Series A Preferred Units. Altus and BCP continued to negotiate the terms of a waiver and amendments to the Partnership’s agreement of limited partnership with Series A Preferred Unit holders representing more than two-thirds of the Series A Preferred Units. Discussions also continued with the joint venture partners and the lenders under the Partnership’s credit agreement.

On October 12, 2021, BCP provided initial drafts of a stockholders agreement among Altus, Apache Midstream, APA Corporation, and the unitholders of BCP and a registration rights agreement among Altus, Apache Midstream, the unitholders of BCP, and the other parties thereto. From October 12 through October 20, 2021, Altus and BCP traded drafts of the contribution agreement, the stockholders agreement, the registration rights agreement and other ancillary agreements.

On October 18, 2021, the Altus Board held a meeting, at which members of Altus management and Altus’ legal and financial advisors were present. Bracewell reviewed with the Altus Board its fiduciary obligations, summarized the material terms of the proposed contribution agreement and ancillary documents, and reported on the resolution of open issues during the course of negotiations with BCP. Altus management noted that all necessary consents from the lenders under the Partnership’s credit agreement had been obtained. Altus management also noted that the proposed structure would include a commitment by Apache Midstream and the unitholders of BCP to reinvest a portion of the cash dividends they would receive from Altus and cash

 

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distributions they would receive from the Partnership in a dividend reinvestment plan that would be open to all Altus stockholders. The Altus Board requested that Altus management provide additional details on the reinvestment program at the next Altus Board meeting.

On October 20, 2021, the Altus Board held a meeting, at which members of Altus management and Altus’ legal and financial advisors were present. Credit Suisse reviewed with the Altus Board certain preliminary financial analysis of the proposed transaction with BCP. Altus management noted that the terms of the dividend reinvestment program would be memorialized between signing and closing pursuant to a commitment and high level terms contained in the amended and restated stockholders agreement entered into at signing. Specifically, Apache Midstream and the recipients of the Consideration would commit to mandatorily reinvest at least 20% and, depending on Altus’ audit committee determination, up to 100% of the cash dividends received by them from Altus and cash distributions received by them from the Partnership until the date dividends are declared for the quarter ending December 31, 2023. The Altus Board instructed Credit Suisse to update its analysis to reflect the cash impact attributable to Apache Midstream and the unitholders of BCP reinvesting 20% of dividends and distributions received. Altus management noted that all consents from the joint venture partners under various pipeline joint ventures had been obtained.

On October 21, 2021, the Altus Board held a meeting, at which members of Altus management and Altus’ legal and financial advisors were present. Credit Suisse referred to its financial analyses reviewed on October 20, 2021 regarding the proposed transaction, and reviewed, as requested at the preceding Altus Board meeting, analysis relating to the cash impact attributable to Apache Midstream and unitholders of BCP reinvesting at least 20% of dividends and distributions received. Thereafter, at the request of the Altus Board, Credit Suisse rendered its oral opinion to the Altus Board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion addressed to the Altus Board dated the same date) as to, as of October 21, 2021, the fairness, from a financial point of view, to Altus of the consideration to be paid by Altus and the Partnership in the transaction pursuant to the contribution agreement. Credit Suisse’s opinion is more fully described in “—Opinion of Credit Suisse, Altus’ Financial Advisor” and the full text of the written opinion of Credit Suisse is attached as Annex H hereto. Altus management noted that all necessary consents from the Series A Preferred Unit holders under the Partnership’s agreement of limited partnership had been obtained. After discussions, including as to the matters discussed below in the section entitled “—Reasons for the Recommendation to Altus Stockholders by the Altus Board,” the Altus Board, by unanimous vote of all of its members, approved the contribution agreement and determined that the contribution agreement and the transaction contemplated thereby are advisable and in the best interests of Altus and its stockholders, and resolved to recommend that Altus stockholders vote to approve the transaction contemplated by the contribution agreement. Following the conclusion of the Altus Board meeting, Altus, BCP and their respective counsel finalized the transaction documentation, and the parties executed the contribution agreement and certain of the ancillary documents.

In the afternoon of October 21, 2021, the parties publicly released a joint announcement of the transaction.

Reasons for the Recommendation to Altus Stockholders by the Altus Board

After careful consideration, the Altus Board unanimously determined that the transaction is in the best interests of Altus and its stockholders and unanimously approved the transaction. This explanation of the Altus Board’s reasons for recommending the proposed transaction and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Statement Regarding Forward-Looking Statements.”

The Altus Board considered the following material factors that it believes support its determinations:

Strategic considerations and aggregate value

 

   

the aggregate value of the Class A Common Stock to be retained by Altus’ current stockholders after giving effect to the combination of Altus’ and EagleClaw Midstream’s businesses, relative to the value

 

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of the Class A Common Stock on a standalone basis if Altus were not to engage in the transaction, including the fact that, following the transaction, Altus stockholders will have the opportunity to participate in the potential value created by combining Altus and EagleClaw Midstream and benefit from any increases in the value of the Class A Common Stock;

 

   

the limitations and risks associated with continuing as a standalone entity, including the risks associated with Altus’ limited financial flexibility in light of the equity value of the Class A Common Stock and Altus’ debt level and obligations in respect of the Series A Preferred Units;

 

   

that the combined company’s cash flow will allow deleveraging over time, and greater overall scale would provide the combined company with improved access to capital markets;

 

   

the view that the proposed transaction meets the strategic objectives established by the Altus Board and management with respect to achieving improved financial strength and operational scale relative to Altus’ publicly traded peers and other operators, and that the proposed transaction would be superior, both operationally and with respect to stockholder value, than the alternative of continuing to operate its business as an independent, standalone company;

 

   

that the combined company will have a larger, more diverse customer base, which would mitigate Altus’ revenue concentration with APA Corporation and its affiliates;

 

   

the agreement among APA Corporation, ISQ, and Blackstone in respect of maintaining a $6.00 per share annual dividend and the commitment by each of them to reinvest a portion of their respective dividends in Altus (see “The Contribution Agreement and Other Transaction Agreements—Amended and Restated Stockholders Agreement—Dividends and Distributions” and “The Contribution Agreement and Other Transaction Agreements—Amended and Restated Stockholders Agreement—Dividend Reinvestment Plan”);

 

   

that Altus actively explored strategic alternatives over a lengthy period of time, solicited interest for a variety of potential transactions and structures, and that, since the fall of 2019, Altus had contacted or been contacted by several potentially interested parties regarding a transaction involving Altus and had engaged in discussions and, in some cases, due diligence with many of those parties;

 

   

that BCP was able to navigate all of the transfer restrictions with each of Altus’ pipeline joint ventures;

 

   

that the proposal from BCP was the only available alternative found to be in the best interests of Altus and its stockholders relative to the alternative of continuing to operate its business as an independent, standalone company;

Operational benefits and enhanced asset portfolio

 

   

meaningful anticipated growth to the combined company’s asset portfolio, including the complementary combined operating footprint between Altus’ and EagleClaw Midstream’s assets within the Permian Basin;

 

   

significant operational synergies to be realized, including improved reliability and flow assurance, relocation of excess compression and Altus’ idle amine treating equipment to optimize the combined system and, following an additional capital investment to connect the legacy systems of Altus and EagleClaw Midstream, additional bidirectional throughput capacity;

 

   

significant financial synergies to be realized, including general and administrative cost savings from terminating the current service agreements with Apache Corporation;

 

   

the combined company’s improved flexibility to allocate capital to the projects in the combined company’s portfolio and geographic footprint with the highest rate of return;

 

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Financial projections

 

   

the financial projections prepared by Altus’ management and ECM’s management (described in “—Certain Unaudited Financial Forecasts of Altus and ECM”), and the judgment, advice, and analysis of Altus’ management, including their favorable recommendation of the transaction;

Opinion of Credit Suisse

 

   

the financial analyses reviewed and discussed with the Altus Board by representatives of Credit Suisse as well as the oral opinion of Credit Suisse rendered to the Altus Board on October 21, 2021 (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion addressed to the Altus Board dated the same date) as to, as of October 21, 2021, the fairness, from a financial point of view, to Altus of the consideration to be paid by Altus and the Partnership in the transaction pursuant to the contribution agreement, which opinion was based upon and subject to the factors, assumptions, limitations, and qualifications set forth therein, as more fully described in “—Opinion of Credit Suisse, Altus’ Financial Advisor”;

Favorable terms of the transaction documents

 

   

all of the terms and conditions of the contribution agreement, including, among other things, the representations, warranties, covenants, and agreements of the parties, the conditions to closing and the form and structure of the Consideration and the termination rights, and the terms and conditions of the stockholders agreement;

 

   

the terms of the contribution agreement that permit Altus, prior to the time that Altus stockholders approve the share issuance proposal and the charter amendment proposal, to discuss and negotiate, under specified circumstances, an unsolicited Company Competing Proposal should one be made, if the Altus Board determines in good faith, after consultation with its financial advisor and outside legal counsel, that such Company Competing Proposal constitutes a Company Superior Proposal;

 

   

the fact that the contribution agreement allows the Altus Board, under specified circumstances, to change or withdraw its recommendation to the Altus stockholders with respect to the approval of the share issuance proposal and the charter amendment proposal in response to a Company Superior Proposal or a Company Intervening Event, and, if such change or withdraw occurs, Apache Midstream, rather than being obligated to vote all of the Altus Common Stock held by it in favor of such proposals, shall instead be obligated to vote 35% of the Altus Common Stock held by it in favor of such proposals and the remaining Altus Common Stock held by it in proportion to the votes for or against such proposals cast by Altus stockholders other than Apache Midstream; and

 

   

the likelihood, considering the terms of the contribution agreement, and the fact that Altus has obtained the requisite consents of lenders under the Partnership’s credit agreement, the Series A Preferred Unit holders under the Partnership’s agreement of limited partnership, and Altus’ joint venture partners under its various pipeline joint ventures, that the transaction would be completed.

Risks and potentially negative factors

The Altus Board also considered a variety of risks and other potentially negative factors concerning the contribution agreement and the transaction, including the following:

 

   

the risk that because the Consideration is a fixed number of Common Units and shares of Class C Common Stock, the value of the percentage ownership in Altus that current Altus stockholders would have after the transaction may decrease relative to the value of their existing interests in Class A Common Stock and the fact that the contribution agreement does not provide Altus with a price-based termination right or other similar protection;

 

   

the risk that the potential benefits of the transaction (including the amount of potential efficiencies) may not be fully achieved;

 

   

the fact that there may be disruption of Altus’ operations following the announcement of the contribution agreement and the transaction;

 

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the fact that, while Altus expects the transaction will be consummated, there can be no guarantee that all conditions to the parties’ obligations to consummate the transaction will be satisfied, and, as a result, the transaction may not be consummated and the risks and costs to Altus in such event;

 

   

the risk that the transaction may be delayed or may not be completed, as well as the potential loss of value to Altus stockholders and the potential negative impact on the operations and prospects of Altus if for any reason the transaction is delayed or is not completed;

 

   

the terms of the contribution agreement that place restrictions on the conduct of the business of Altus prior to the completion of the transaction, which may delay or prevent Altus from undertaking business opportunities that may arise pending completion of the transaction;

 

   

the significant costs involved in connection with negotiating the contribution agreement and completing the transaction, including the required redemption for cash of 100,000 Series A Preferred Units, the substantial time and effort required of management to effectuate the transaction and the related disruption to Altus’ day-to-day operations and the risk of diverting management’s focus and resources from other strategic opportunities during the pendency of the transaction;

 

   

the fact that, under certain circumstances, Altus may be required to pay a termination fee upon termination of the contribution agreement;

 

   

that equity ownership of Altus will continue to be focused among a small number of stakeholders, from approximately 79% of Altus being held by Apache Midstream prior to consummation of the transaction to approximately 75% of the combined company being held by BCP’s unitholders, principally funds affiliated with Blackstone and I Squared Capital, and approximately 20% of the combined company being held by Apache Midstream following consummation of the transaction;

 

   

the potential challenges and difficulties with integrating the operations of the combined company; and

 

   

the fact that the analyses and projections on which the Altus Board made its determinations are uncertain.

The Altus Board also considered a variety of other risks and other countervailing factors, including the risks of the type and nature described under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

The Altus Board concluded that the benefits of the transaction to Altus and its stockholders outweighed the perceived risks. In view of the wide variety of factors considered, and the complexity of these matters, the Altus Board did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors it considered. Rather, the Altus Board viewed the decisions as being based on the totality of the information available to it. In addition, individual members of the Altus Board may have given differing weights to different factors.

Opinion of Credit Suisse, Altus’ Financial Advisor

On October 21, 2021, Credit Suisse rendered its oral opinion to the Altus Board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion addressed to the Altus Board dated the same date) as to, as of October 21, 2021, the fairness, from a financial point of view, to Altus of the consideration to be paid by Altus and the Partnership in the transaction pursuant to the contribution agreement.

Credit Suisse’s opinion was directed to the Altus board (in its capacity as such), and only addressed the fairness, from a financial point of view, to Altus of the consideration to be paid by Altus and the Partnership in the transaction pursuant to the contribution agreement and did not address any other aspect or implication (financial or otherwise) of the transaction. The summary of Credit Suisse’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which

 

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is included as Annex H to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in preparing its opinion. However, neither Credit Suisse’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and they do not constitute, advice or a recommendation to any security holder as to how such holder should vote or act on any matter relating to the transaction.

In arriving at its opinion, Credit Suisse:

 

   

reviewed the contribution agreement and certain publicly available business and financial information relating to Altus and ECM;

 

   

reviewed certain other information relating to Altus and ECM, including:

 

   

financial forecasts relating to Altus for the fiscal years ending December 31, 2021 through December 31, 2024 prepared and provided to Credit Suisse by Altus’ management (Altus Projections); and

 

   

financial forecasts relating to ECM for the fiscal years ending December 31, 2021 through December 31, 2024 prepared and provided to Credit Suisse by the management of ECM, as adjusted by Altus’ management (Adjusted ECM Projections);

 

   

reviewed estimates prepared and provided to Credit Suisse by Altus’ management with respect to the cost savings and synergies, net of costs necessary to achieve such cost savings and synergies (Synergies Estimates), anticipated by such management to result from the transaction;

 

   

reviewed estimates of Altus’ management relating to Altus’ anticipated utilization of its net operating losses, including the amount and timing thereof (Altus NOL Utilization Estimates);

 

   

met with Altus’ management and certain of Altus’ representatives to discuss the businesses and prospects of Altus and ECM;

 

   

considered certain financial and stock market data of Altus and certain financial data of ECM, and compared that data with similar data for other companies with publicly traded equity securities in businesses Credit Suisse deemed similar to those of Altus and ECM, respectively;

 

   

considered, to the extent publicly available, the financial terms of certain other business combinations and other transactions that had been effected; and

 

   

considered such other information, financial studies, analyses and investigations and financial, economic and market criteria that Credit Suisse deemed relevant.

In connection with its review, Credit Suisse did not independently verify any of the foregoing information, and with Altus’ consent, Credit Suisse assumed and relied upon such information being complete and accurate in all respects material to its analyses and opinion. With respect to the Altus Projections and the Adjusted ECM Projections, Credit Suisse had been advised by Altus’ management, and Credit Suisse assumed, with Altus’ consent, that such forecasts and estimates were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of Altus’ management as to the future financial performance of Altus and ECM, respectively. With respect to the Synergies Estimates, Credit Suisse had been advised by Altus’ management, and Credit Suisse assumed, with Altus’ consent, that such estimates were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of Altus’ management as to the cost savings and synergies, net of costs necessary to achieve such cost savings and synergies, anticipated by such management to result from the transaction. With respect to the Altus NOL Utilization Estimates, Credit Suisse had been advised by Altus’ management, and Credit Suisse assumed with Altus’ consent, that such estimates were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of Altus’ management as to Altus’ anticipated utilization of its net operating losses, including the amount and timing thereof. In addition, Credit Suisse relied upon, without independent verification, the

 

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assessment of Altus’ management as to (i) its ability to retain key employees, (ii) the strategic benefits anticipated to result from the transaction, (iii) the existing products and services of Altus and ECM and the validity or marketability of, and risks associated with, the future products and services of Altus and ECM, and (iv) Altus’ ability to integrate the businesses of Altus and ECM. At the direction of the Altus Board, Credit Suisse assumed that the Altus Projections, the Adjusted ECM Projections, the Synergies Estimates and the Altus NOL Utilization Estimates were a reasonable basis upon which to evaluate Altus, ECM and the transaction, and at the direction of the Altus Board, Credit Suisse relied upon the Altus Projections, the Adjusted ECM Projections, the Synergies Estimates and the Altus NOL Utilization Estimates for purposes of its analyses and opinion. Credit Suisse expressed no view or opinion with respect to the Altus Projections, the Adjusted ECM Projections, the Synergies Estimates or the Altus NOL Utilization Estimates, or the assumptions and methodologies upon which any of the foregoing were based.

Credit Suisse assumed, with the consent of the Altus Board, that, in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the transaction, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Altus, ECM or the contemplated benefits of the transaction (including, without limitation, with respect to interests of Altus and ECM in certain joint ventures or other entities with pipeline assets) that would be material to Credit Suisse’s analysis or opinion and that the transaction would be consummated in compliance with all applicable laws and regulations and in accordance with the terms of the contribution agreement, without waiver, modification or amendment of any term, condition or agreement thereof that would be material to Credit Suisse’s analyses or opinion. In addition, Credit Suisse was not requested to, and did not, make an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Altus or ECM, and Credit Suisse was not furnished with any such evaluations or appraisals.

Credit Suisse’s opinion addressed only the fairness, from a financial point of view, to Altus of the consideration to be paid by Altus and the Partnership in the transaction pursuant to the contribution agreement and did not address any other aspect or implication (financial or otherwise) of the transaction or any agreement, arrangement or understanding entered into in connection therewith or otherwise, including, without limitation, the form or structure of the transaction, the internal reorganization of ECM to be completed before the closing of the transaction or the Consideration, the agreements with the holders of Series A Preferred Units in contemplation of the transaction or otherwise, any agreements with joint venture partners in contemplation of the transaction or otherwise, the amendment of that certain commercial arrangement between Apache Corporation and Altus referred to in Altus’ Form 8-K filed on October 14, 2021 (together with any other agreements, amendments or waivers entered into between Apache Corporation and Altus, the Commercial Amendments), and the fairness of the amount or nature of, or any other aspect relating to, any compensation or consideration to be received or otherwise payable to any officers, directors, employees, securityholders or affiliates of any party to the transaction, or class of such persons, relative to the Consideration or otherwise. At Altus’ direction, Credit Suisse assumed that the Commercial Amendments would have no impact on the Altus Projections that would be material to its analyses or opinion. Furthermore, Credit Suisse did not express any advice or opinion regarding matters that require legal, regulatory, accounting, insurance, intellectual property, tax, environmental, executive compensation or other similar professional advice. Credit Suisse assumed that Altus had or would obtain such advice or opinions from the appropriate professional sources. The issuance of Credit Suisse’s opinion was approved by its authorized internal committee.

Credit Suisse noted that it had been advised and for purposes of its analyses and opinion it had assumed, that there was, and as of the closing of the transaction there will be, an outstanding share of Class C Common Stock associated with each outstanding Common Unit not held by Altus, that each holder of outstanding shares of Class C Common Stock held, and as of the closing of the transaction will hold, an equivalent number of Common Units and that, pursuant to the Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of June 12, 2019 (as amended, the Partnership Agreement), holders of Common Units other than Altus have the right to require the Partnership to redeem its Common Units together with the associated shares of Class C Common Stock for, at the Partnership’s election, an equal number of shares of Class A

 

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Common Stock or cash based on the fair market value of Class A Common Stock as determined in accordance with the Partnership Agreement, and, consequently, for purposes of its analyses and opinion, Credit Suisse, at Altus’ direction, treated one share of Class C Common Stock and the associated Common Unit as a single integrated security equivalent in value and identical in all other respects to a share of Class A Common Stock.

Credit Suisse’s opinion was necessarily based upon information made available to Credit Suisse as of the date of its opinion and upon financial, economic, market and other conditions as they existed and could be evaluated on the date of its opinion. Credit Suisse did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion. Credit Suisse did not express any opinion as to what the value of the shares of Class C Common Stock or the Common Units actually would be when issued in the transaction pursuant to the contribution agreement or the prices or ranges of prices at which shares of Class A Common Stock or Class C Common Stock, or the Common Units, may be purchased, sold or otherwise transferred at any time. Credit Suisse’s opinion did not address the relative merits of the transaction as compared to alternative transactions or strategies that might have been available to Altus or the Partnership, nor did it address the underlying business decision of the Altus Board, Altus or the Partnership to proceed with or effect the transaction.

In preparing its opinion to the Altus Board, Credit Suisse performed a variety of analyses, including those described below. The summary of Credit Suisse’s financial analyses is not a complete description of the analyses underlying Credit Suisse’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaptation and application of those methods to the unique facts and circumstances presented. As a consequence, neither Credit Suisse’s opinion nor the analyses underlying its opinion are readily susceptible to partial analysis or summary description. Credit Suisse arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, analytic method or factor. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting portions of its analyses, analytic methods and factors, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

In performing its analyses, Credit Suisse considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company, business or transaction used in Credit Suisse’s analyses for comparative purposes is identical to Altus, ECM or the proposed transaction. While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, from a financial point of view, to Altus of the consideration to be paid by Altus and the Partnership in the transaction pursuant to the contribution agreement, Credit Suisse did not make separate or quantifiable judgments regarding individual analyses. The reference ranges indicated by Credit Suisse’s financial analyses are illustrative and not necessarily indicative of actual or relative values nor predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond Altus’ control and the control of Credit Suisse. Much of the information used in, and accordingly the results of, Credit Suisse’s analyses are inherently subject to substantial uncertainty.

Credit Suisse’s opinion and analyses were provided to the Altus Board (in its capacity as such) in connection with its consideration of the proposed transaction and were among many factors considered by the Altus Board in evaluating the proposed transaction. Neither Credit Suisse’s opinion nor its analyses were determinative of the Consideration or of the views of the Altus Board with respect to the proposed transaction. Under the terms of its engagement by Altus, neither Credit Suisse’s opinion nor any other advice or services rendered by it in connection with the proposed transaction or otherwise, should be construed as creating, and Credit Suisse should not be deemed to have, any fiduciary duty to the Altus Board, Altus, ECM, any

 

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securityholder or creditor of Altus or ECM or any other person, regardless of any prior or ongoing advice or relationships.

Financial Analyses of Altus’ Financial Advisor

The following is a summary of certain financial analyses reviewed by Credit Suisse with the Altus Board in connection with the rendering of its opinion to the Altus Board on October 21, 2021. The summary does not contain all of the financial data securityholders of Altus may want or need for purposes of making an independent determination of fair value. Securityholders of Altus are encouraged to consult their own financial and other advisors before making any investment decision in connection with the proposed transaction. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations in connection with each analysis, could create a misleading or incomplete view of Credit Suisse’s analyses.

In arriving at its view expressed in its opinion, Credit Suisse compared the pro forma ownership splits for the Altus’ stockholders and ECM equity interest holders implied by its various financial analyses with the pro forma ownership split implied by the consideration to be paid in the transaction. While Credit Suisse reviewed with the Altus Board for illustrative purposes the potential financial implications of the Synergies Estimates of Altus’ management, Credit Suisse conducted its financial analyses described below for Altus and ECM on a standalone basis without synergies.

For purposes of its analyses, Credit Suisse reviewed a number of financial metrics including:

 

   

Enterprise Value—generally the value as of a specified date of the relevant company’s outstanding equity securities (taking into account its options and other outstanding convertible securities) plus the value as of such date of its net debt (the value of its outstanding indebtedness, preferred stock and capital lease obligations less the amount of cash on its balance sheet).

 

   

EBITDA—generally the amount of the relevant company’s earnings before interest, taxes, depreciation, and amortization for a specified time period. For Altus and ECM, Credit Suisse used and relied upon, for purposes of its analyses, estimates of EBITDA as described in the section entitled “—Certain Unaudited Financial Forecasts of Altus and ECM”.

 

   

Levered Free Cash Flow—generally the amount of the relevant company’s EBITDA less interest expense, preferred equity distributions, capital expenditures, taxes and changes in working capital for a specified time period.

Selected Companies Analyses

Credit Suisse considered certain financial data for Altus, ECM and selected companies with publicly traded equity securities Credit Suisse deemed relevant. The selected companies were selected because they were deemed to be similar to Altus or ECM in one or more respects. For purposes of these analyses, (1) except as otherwise noted, share prices for the selected companies were closing prices as of October 15, 2021 and (2) financial and certain other data for the selected companies were based on publicly available consensus research analysts’ estimates, public filings and other publicly available information.

The financial data reviewed included:

 

   

Enterprise Value as a multiple of estimated EBITDA for the year ended December 31, 2022, or “2022E EBITDA”;

 

   

Enterprise Value as a multiple of estimated EBITDA for the year ended December 31, 2023, or “2023E EBITDA”;

 

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The yield implied by a company’s equity market capitalization and estimated Levered Free Cash Flow for the year ended December 31, 2022, or “2022E FCFY”; and

 

   

The yield implied by a company’s equity market capitalization and estimated Levered Free Cash Flow for the year ended December 31, 2023, or “2023E FCFY.”

Altus. The selected companies with respect to Altus and corresponding financial data based on publicly available research analyst estimates were:

 

     Enterprise Value      Equity Market Capitalization  

Company Name

   2022E EBITDA      2023E EBITDA      2022E FCFY     2023E FCFY  

Kinder Morgan Inc.

     10.4x        10.3x        9.5     10.2

Williams Companies Inc.

     11.0x        10.8x        8.6     9.6 %

ONEOK, Inc.

     12.2x        11.9x        8.3     9.3 %

Magellan Midstream Partners, LP

     10.8x        10.3x        11.6     10.5 %

DT Midstream, Inc.

     10.0x        9.5x        9.5     10.2 %

Taking into account the results of the selected companies analysis and trading multiples implied by the Class A Common Stock price as of October 15, 2021, Credit Suisse applied (x) multiple ranges of 10.0x to 12.0x to Altus’ 2022E EBITDA and 9.0x to 11.0x to Altus’ 2023E EBITDA in each case based on the Altus Projections and (y) yield ranges of 10.5% to 13.5% to Altus’ 2022E Levered Free Cash Flow and 11.5% to 14.5% to Altus’ 2023E Levered Free Cash Flow in each case based on the Altus Projections. The selected companies analysis indicated implied reference ranges for the equity value of Altus of $977 million to $1.437 billion (based on 2022E financial metrics) and $590 million to $1.210 billion (based on 2023E financial metrics).

ECM. The selected companies with respect to ECM and corresponding financial data based on publicly available research analyst estimates were:

 

     Enterprise Value      Equity Market Capitalization  

Company Name

   2022E EBITDA      2023E EBITDA      2022E FCFY     2023E FCFY  

Western Midstream Partners LP

     8.5x        8.2x        14.9     15.0

DCP Midstream, LP

     9.5x        9.4x        13.8     14.8 %

Equitrans Midstream Corp.

     10.3x        9.3x        0.9     15.1 %

EnLink Midstream LLC

     9.5x        9.5x        15.5     18.2 %

Antero Midstream Corp.

     9.7x        9.2x        8.9     10.5 %

Crestwood Equity Partners LP

     8.8x        8.7x        17.6     17.5

Taking into account the results of the selected companies analysis, Credit Suisse applied (x) multiple ranges of 8.5x to 10.5x to ECM’s 2022E EBITDA and 8.5x to 9.5x to ECM’s 2023E EBITDA in each case based on the Adjusted ECM Projections and (y) yield ranges of 9.5% to 14.5% to ECM’s 2022E Levered Free Cash Flow and 10.5% to 15.5% to ECM’s 2023E Levered Free Cash Flow in each case based on the Adjusted ECM Projections. The selected companies analysis indicated implied reference ranges for the equity value of ECM of $1.928 billion to $3.677 billion (based on 2022E financial metrics) and $2.168 billion to $3.530 billion (based on 2023E financial metrics).

The selected companies analysis indicated implied ownership ranges by Altus’ stockholders in the pro forma company of 21% to 43% (based on 2022E financial metrics) and 14% to 36% (based on 2023E financial metrics), as compared to the pro forma ownership for Altus’ stockholders implied by the transaction of approximately 24.5%.

 

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Discounted Cash Flow Analysis

Altus. Credit Suisse performed a discounted cash flow analysis with respect to Altus by calculating the estimated net present value of the projected after-tax, unlevered, free cash flows of Altus based on the Altus Projections and other information provided by Altus, taking into account the present value of Altus’ anticipated utilization of its net operating losses. Credit Suisse applied terminal multiples of 10.0x – 12.0x to Altus’ estimated EBITDA for the year ending December 31, 2024 based on the Altus Projections and discount rates ranging from 6.5% to 8.5% to the projected unlevered free cash flows and calculated terminal values. The discounted cash flow analysis for Altus indicated an implied reference range for the equity value of Altus of $879 million to $1.310 billion.

ECM. Credit Suisse performed a discounted cash flow analysis with respect to ECM by calculating the estimated net present value of the projected after-tax, unlevered, free cash flows of ECM based on the Adjusted ECM Projections. Credit Suisse applied terminal multiples of 8.5x – 10.5x to ECM’s estimated EBITDA for the year ending December 31, 2024 based on the Adjusted ECM Projections and discount rates ranging from 7.0% to 9.0% to the projected unlevered free cash flows and calculated terminal values. The discounted cash flow analysis for ECM indicated an implied reference range for the equity value of ECM of $2.984 billion to $4.195 billion.

The discounted cash flow analysis indicated an implied ownership range by Altus’ stockholders in the pro forma company of 17% to 31%, as compared to the pro forma ownership for Altus’ stockholders implied by the transaction of approximately 24.5%.

Sum of the Parts Analysis

Credit Suisse also considered a sum of the parts analysis using the Altus Projections and the Adjusted ECM Projections in which it performed a discounted cash flow analysis with respect to Altus’ gathering and process business (Alpine High G&P) and ECM’s gathering and processing business (ECM G&P) and applied selected multiple ranges to certain applicable financial metrics attributable to Altus’ and ECM’s respective equity interests in pipeline assets.

For purposes of selecting the ranges of terminal multiples for Alpine High G&P and ECM G&P described below, Credit Suisse considered the trading multiples for the selected companies described under the selected companies analysis for ECM. For purposes of selecting the multiple ranges to apply to different pipeline assets, Credit Suisse considered certain trading multiples of selected companies with publicly traded equity securities Credit Suisse deemed relevant for the applicable pipeline (taking into account the pipeline’s relevant commodity exposure). For purposes of these analyses, (1) except as otherwise noted, share prices for the selected companies were closing prices as of October 15, 2021 and (2) financial and certain other data for the selected companies were based on publicly available consensus research analysts’ estimates, public filings and other publicly available information.

The selected companies with respect to Altus’ and ECM’s respective equity interests in Permian Highway Pipeline and Altus’ interest in Gulf Coast Express Pipeline were TC Energy Corporation, Kinder Morgan Inc., Williams Companies, Inc. and DT Midstream, Inc., and the high, low, mean and median trading multiples of 2022E EBITDA based on publicly available research analyst estimates were 11.8x, 10.0x, 10.8x and 10.7x, respectively. The selected companies with respect to Altus’ equity interest in Shin Oak NGL Pipeline were Enterprise Products Partners L.P., ONEOK, Inc. and Targa Resources, Inc., and the high, low, mean and median trading multiples of 2022E EBITDA based on publicly available research analyst estimates were 12.2x, 9.9x, 10.7x and 10.0x, respectively. Credit Suisse considered both sets of selected companies described in this paragraph in selecting the multiple range applicable to Epic Crude Oil Pipeline.

Altus. For its discounted cash flow analysis with respect to Alpine High G&P, Credit Suisse calculated the estimated net present value of the projected after-tax, unlevered, free cash flows of Alpine High G&P based on

 

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the Altus Projections. Credit Suisse applied terminal multiples of 8.5x to 10.5x to Alpine High G&P’s estimated EBITDA for the year ending December 31, 2024 based on the Altus Projections and discount rates ranging from 7.0% to 9.0% to the projected unlevered free cash flows and calculated terminal values. Credit Suisse then applied selected ranges of multiples to estimated EBITDA for the year ending December 31, 2022 for Gulf Coast Express Pipeline (11.0x to 13.0x), Permian Highway Pipeline (11.0x to 13.0x), Shin Oak NGL Pipeline (9.5x to 10.5x) and Epic Crude Oil Pipeline (10.5x to 12.5x). Credit Suisse summed up the resultant ranges indicated by the discounted cash flow analysis for Alpine High G&P, an estimated range for the present value of Altus’ anticipated utilization of its net operating losses based on the Altus Projections and the implied value ranges for the interests in the pipeline joint ventures noted above as adjusted for debt. The sum of the parts analysis for Altus indicated an implied reference range for the equity value of Altus of $874 million to $1.230 billion.

ECM. For its discounted cash flow analysis with respect to ECM G&P, Credit Suisse calculated the estimated net present value of the projected after-tax, unlevered, free cash flows of ECM G&P based on the Adjusted ECM Projections. Credit Suisse applied terminal multiples of 8.5x to 10.5x to ECM G&P’s estimated EBITDA for the year ending December 31, 2024 based on the Adjusted ECM Projections and discount rates ranging from 7.0% to 9.0% to the projected unlevered free cash flows and calculated terminal values. Credit Suisse then applied a selected range of multiples to estimated EBITDA for the year ending December 31, 2022 for Permian Highway Pipeline of 11.0x to 13.0x. Credit Suisse summed up the resultant ranges indicated by the discounted cash flow analysis for ECM G&P and the implied value ranges for ECM’s interests in Permian Highway Pipeline. The sum of the parts analysis for ECM indicated an implied reference range for the equity value of ECM of $3.109 billion to $4.321 billion.

The sum of the parts analysis indicated an implied ownership range by Altus’ stockholders in the pro forma company of 17% to 28%, as compared to the pro forma ownership for Altus’ stockholders implied by the transaction of approximately 24.5%.

Other Matters

Altus retained Credit Suisse as its financial advisor in connection with the transaction based on Credit Suisse’s qualifications, experience and reputation as an internationally recognized investment banking and financial advisory firm. Pursuant to the engagement letter between Altus and Credit Suisse, Altus agreed to pay Credit Suisse a fee of $10.5 million, $2.5 million of which became payable to Credit Suisse upon the delivery of its opinion to the Altus Board and the remainder of which is contingent upon the consummation of the transaction. In addition, Altus has agreed to reimburse certain of Credit Suisse’s expenses and to indemnify Credit Suisse and certain related parties for certain liabilities and other items arising out of or related to its engagement.

Credit Suisse and its affiliates have in the past provided and currently are providing investment banking and other financial advice and services to Altus and its affiliates, including Apache Corporation, for which advice and services Credit Suisse and its affiliates have received and would expect to receive compensation, including among since January 2019, having acted as a placement agent to the Partnership in connection with a sale of preferred partnership units in June 2019, as a co-managing underwriter in connection with an offering by Apache Corporation of debt securities in August 2020, and as a counterparty to Apache Corporation in connection with certain hedging transactions effected in December 2019 and April 2020, for which Credit Suisse and its affiliates received approximately $4.4 million in fees in the aggregate. Credit Suisse or one or more of its affiliates are lenders or participants in credit facilities of the Partnership and Apache Corporation, an affiliate of Altus. With Altus’ approval, Credit Suisse and its affiliates may arrange or otherwise participate in refinancing transactions to be undertaken in contemplation, or as a result, of the transaction to replace or refinance existing indebtedness of the parties to the transaction. Credit Suisse and its affiliates may in the future provide investment banking and other financial advice and services to the parties to the transaction and their respective affiliates, including Apache Corporation, for which advice and services we and our affiliates would expect to receive compensation. In addition, Credit Suisse and its affiliates in the past have provided, currently are providing and in the future may provide investment banking and other financial advice and services to the investment firms that are invested in Contributor (collectively, the Sponsors) and certain of their respective affiliates unrelated to the proposed

 

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transaction, for which services Credit Suisse and its affiliates have received, and expect to receive, compensation, including, among other things since January 2019, having acted or acting (i) as financial advisor to the Sponsors and certain of their affiliates and portfolio companies in connection with certain sale and acquisition transactions, (ii) in various roles in connection with securities offerings by the Sponsors and certain of their affiliates and portfolio companies and (iii) as a lender or participant in credit facilities of the Sponsors and certain of their affiliates and portfolio companies. Since January 2019 through the date of Credit Suisse’s opinion, Credit Suisse received from the Sponsors aggregate fees for investment banking services of approximately $150 million. Credit Suisse and certain of its affiliates, and certain of its and their respective employees and certain investment funds affiliated or associated with Credit Suisse, have invested in investment funds managed or advised by the Sponsors. In the ordinary course of business, Credit Suisse and its affiliates may acquire, hold or sell, for its and its affiliates’ own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of Altus, counterparties to the transaction, and any other company that may be involved in transaction, as well as provide investment banking and other financial advice and services to such companies and their affiliates.

Certain Unaudited Financial Forecasts of Altus and ECM

Altus and ECM do not as a matter of course make public long-term projections as to future sales, earnings, or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. As a result, Altus and ECM do not endorse the unaudited financial forecasts as a reliable indication of future results. However, the management of Altus and ECM have included the unaudited financial forecasts set forth below to present the financial information made available and utilized in connection with the Altus Board’s evaluation of the transaction contemplated by the contribution agreement. At the direction of the Altus Board, Credit Suisse used and relied upon certain of the unaudited financial forecasts in connection with its financial analyses and opinion described in the section entitled “—Opinion of Credit Suisse, Altus’ Financial Advisor.” The inclusion of this information should not be regarded as an indication that any of Altus, ECM, their respective advisors, or other representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future performance or events, or that it should be construed as financial guidance, and such summary projections set forth below should not be relied on as such. The unaudited financial forecasts are not being included in this proxy statement in order to influence any holder of Altus Common Stock to make an investment decision with respect to the transaction or to influence any holder of Altus Common Stock as to whether such unitholder should deliver a written consent or act with respect to the approval of the contribution agreement, the transaction or any other matter.

This information was prepared solely for internal use and is subjective in many respects. The Altus unaudited financial forecasts and the ECM unaudited financial forecasts were based solely upon information available to Altus’ management and ECM’s management, respectively, at the time of their preparation.

While presented with numeric specificity, the unaudited financial forecasts reflects numerous estimates and assumptions that were deemed to be reasonable as of the respective dates the estimates and assumptions were made, but are inherently uncertain and may be beyond the control of Altus’ and ECM’s management. These assumptions include, but are not limited to, Altus’ and ECM’s future results, oil and gas industry activity, commodity prices, demand for natural gas and crude oil, capital availability, general economic and regulatory conditions, and other matters described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.” The unaudited financial forecasts reflect both assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Altus and ECM can give no assurance that the unaudited financial forecasts and the underlying estimates and assumptions will be realized.

In addition, since the unaudited financial forecasts are inherently forward looking and cover multiple years, such information by its nature becomes less predictive with each successive year. Actual results may differ

 

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materially from those set forth below, and important factors that may affect actual results and cause the unaudited financial forecasts to be inaccurate include, but are not limited to, risks and uncertainties relating to Altus’ and ECM’s businesses, industry performance, the regulatory environment, general business and economic conditions, and other matters described under the sections of this proxy statement entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

The accompanying unaudited financial forecasts were not prepared with a view toward public disclosure, nor was they prepared with a view toward compliance with GAAP, published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of Altus’ and ECM’s management, were prepared on a reasonable basis, reflect the best estimates and judgments then-available, and present, to the best of management’s knowledge and belief, the then-expected course of action and financial performance of Altus and ECM, as applicable. Neither Altus’ independent registered public accounting firm nor ECM’s independent auditor, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the unaudited financial forecasts contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the unaudited financial forecasts. The report of the independent registered public accounting firm of Altus contained in its Annual Report on Form 10-K for the year ended December 31, 2020, which is incorporated by reference into this proxy statement, and the report of the independent auditor of ECM contained in Annex A to this proxy statement, relate to historical financial information of Altus and ECM, respectively, and such reports do not extend to the unaudited financial forecasts included below and should not be read to do so. The unaudited financial forecasts set forth in this proxy statement have been prepared by, and are the responsibility of, Altus’ and ECM’s management.

Furthermore, the unaudited financial forecasts do not take into account any circumstances or events occurring after the date they were prepared. Altus and ECM can give no assurance that, had the unaudited financial forecasts been prepared either as of the date of the contribution agreement or as of the date of this proxy statement, similar estimates and assumptions would be used. Except as required by applicable securities laws, Altus and ECM do not intend to, and disclaim any obligation to, make publicly available any update or other revision to the unaudited financial forecasts to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, including with respect to the accounting treatment of the transaction under GAAP, or to reflect changes in general economic or industry conditions.

The unaudited financial forecasts do not take into account the effect on Altus or ECM of any possible failure of the transaction to occur. None of Altus, ECM, or their respective affiliates, officers, directors, advisors, or other representatives has made, makes or is authorized in the future to make any representation to any holder of Altus Common Stock or other person regarding Altus’ or ECM’s ultimate performance compared to the information contained in the unaudited financial forecasts or that the forecasted results will be achieved. The inclusion of the unaudited financial forecasts should not be deemed an admission or representation by Altus, ECM, their respective advisors, or any other person that it is viewed as material information of Altus or ECM, particularly in light of the inherent risks and uncertainties associated with such forecasts. The summary of the unaudited financial forecasts included below is not being included to influence your decision whether to consent to the approval of the contribution agreement or any other matter for which Altus is soliciting consents of the holders of Altus Common Stock, but is being provided solely because certain of such information was among the financial information made available to and utilized in connection with the Altus Board’s evaluation of the transaction contemplated by the contribution agreement.

In light of the foregoing, and considering the uncertainties inherent in any forecasted information, holders of Altus Common Stock are cautioned not to place undue reliance on such information, and Altus urges all holders of Altus Common Stock to review Altus’ most recent SEC filings for a description of Altus’ reported financial results and ECM’s historical financial statements included in Annex A attached hereto for a description of ECM’s reported financial results. See the section entitled “Where You Can Find More Information.”

 

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Altus Unaudited Financial Forecasts

In developing the Altus unaudited financial forecasts, Altus’ management made numerous assumptions regarding Altus’ business, including, but not limited to:

 

   

No rig activity or well connects for Alpine High G&P; and

 

   

Majority of future capital expenditures associated with maintenance-related items at Alpine High G&P.

 

     Year ended December 31,  
($ in millions, except per share amounts)    2022E      2023E      2024E  

Adjusted EBITDA (1)

   $ 237      $ 223      $ 214  

Capital expenditures

   $ 8      $ 6      $ 3  

Unlevered free cash flow (2)

   $ 208      $ 197      $ 190  

Distributable cash flow (3)

   $ 160      $ 140      $ 116  

Dividend per share

   $ 6.00      $ 6.00      $ 6.00  

 

(1)

Adjusted EBITDA is defined as net income (loss) including noncontrolling interest before financing costs (net of capitalized interest), net interest expense, income taxes, depreciation, and accretion and adjusting for such items, as applicable, from income from equity method interests.

(2)

Unlevered Free Cash Flow is defined as EBITDA less capital expenditures less working capital and other cash items. Estimates of Altus’ unlevered free cash flow for the year ending December 31, 2022 used by Credit Suisse in its analyses at the direction of Altus was approximately $214 million.

(3)

Distributable Cash Flow is defined as EBITDA less maintenance capital expenditures, cash tax, preferred unit distributions (whether in kind or in cash) and interest expense.

For purposes of its financial analyses and opinion, Credit Suisse also used and relied upon estimates for Altus of EBITDA (defined generally as Adjusted EBITDA less equity interests’ Adjusted EBITDA plus cash distributions from equity interests) and Levered Free Cash Flow (defined generally as EBITDA less interest expense, preferred equity distributions, capital expenditures, taxes, and changes in working capital). Altus management’s estimates provided to and relied upon by Credit Suisse of (x) EBITDA for Altus for the years ending December 31, 2022, 2023 and 2024 were approximately $222 million, $204 million and $193 million, respectively, and (y) Levered Free Cash Flow for Altus for the years ending December 31, 2022 and 2023 were approximately $151 million and $139 million, respectively, as approved by Altus.

ECM Unaudited Financial Forecasts

In preparing the ECM unaudited financial forecasts described below, ECM’s management assumed the following oil and natural gas prices (with oil prices based on NYMEX WTI pricing and natural gas prices based on Henry Hub pricing), in each case based on ECM management’s generated outlook for future commodity price levels as of September 17, 2021:

 

     Year ended December 31,  
     2022E      2023E      2024E  

Commodity Prices:

        

Oil ($/Bbl)

   $ 67.67      $ 62.36      $ 58.40  

HH Gas ($/MMBtu)

   $ 4.05      $ 3.24      $ 2.94  

In developing the ECM unaudited financial forecasts, ECM’s management made numerous assumptions regarding ECM’s business, including, but not limited to:

 

   

Upstream activity and well connects generally reflecting a recovery and stabilization in ECM’s operating areas consistent with the commodity price assumptions above and ECM management’s commercial discussions and perspectives regarding future activity;

 

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Gross margin derived from existing contracts, which also includes incremental processing margin of currently non-processed gas from several producers beginning in 2022;

 

   

Capital expenditures largely consists of well connects, maintenance, line looping and additional compression, with an expansion in processing capacity required in 2024; and

 

   

Existing BCP I and BCP II term loans are assumed to be refinanced with senior notes in the first quarter of 2024.

 

     Year ended December 31,  
($ in millions)    2022E      2023E      2024E  

Adjusted EBITDA (1)

   $ 511      $ 543      $ 588  

Capital expenditures

   $ 53      $ 80      $ 82  

Unlevered free cash flow (2)

   $ 446      $ 455      $ 483  

 

(1)

Adjusted EBITDA is defined as net income (loss) including noncontrolling interest before financing costs (net of capitalized interest), net interest expense, income taxes, depreciation, and accretion and adjusting for such items, as applicable, from income from equity method interests.

(2)

Unlevered Free Cash Flow is defined as EBITDA less capital expenditures less working capital and other cash items.

For purposes of its financial analyses and opinion, Credit Suisse also used and relied upon estimates for ECM of EBITDA and Levered Free Cash Flow. Altus management’s estimates provided to and relied upon by Credit Suisse of (x) EBITDA for ECM for the years ending December 31, 2022, 2023 and 2024 were approximately $511 million, $539 million and $584 million, respectively, and (y) Levered Free Cash Flow for ECM for the years ending December 31, 2022 and 2023 were approximately $349 million and $371 million, respectively, as approved by Altus. EBITDA for ECM reflects an adjustment by Altus management to ECM’s Adjusted EBITDA to account for ECM’s interest in the Permian Highway Pipeline (PHP) using the same approach Altus uses to account for its interest in PHP.

Other Information

Certain of the measures included in the Altus unaudited financial forecasts and the ECM unaudited financial forecasts are non-GAAP financial measures, including, but not limited to, Adjusted EBITDA, Unlevered Free Cash Flow, and Distributable Cash Flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Altus and ECM are not reported by all of their competitors and may not be comparable to similarly titled amounts used by other companies.

ALTUS AND ECM DO NOT INTEND TO, AND DISCLAIM ANY OBLIGATION TO, UPDATE, CORRECT OR OTHERWISE REVISE THE ALTUS UNAUDITED FINANCIAL FORECASTS OR THE ECM UNAUDITED FINANCIAL FORECASTS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE OF THE CONTRIBUTION AGREEMENT OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE ALTUS UNAUDITED FINANCIAL FORECASTS OR THE ECM UNAUDITED FINANCIAL FORECASTS ARE NO LONGER APPROPRIATE (EVEN IN THE SHORT TERM).

Interests of Altus’ Executive Officers and Directors in the Transaction

When Altus stockholders are considering the recommendation of the Altus Board with respect to approving the proposals, Altus stockholders should be aware that certain members of the Altus Board and executive officers of Altus have interests in the transaction as individuals that are in addition to, or different from, their interests as Altus’ stockholders. Specifically, Altus’ directors and executive officers are entitled to continued indemnification

 

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and insurance coverage under the contribution agreement. The Altus Board was aware of these factors and considered them, among other matters, in approving the contribution agreement and the transaction and in making the recommendation that the Altus stockholders approve the share issuance proposal and the charter amendment proposal.

None of Altus’ executive officers will receive any severance or other compensation as a result of the transaction. In particular, there are no payments or benefits that Altus’ executive officers may receive that would be required to be disclosed pursuant to Item 402(t) of Regulation S-K.

Continued Indemnification and Insurance Coverage

Pursuant to the terms of the contribution agreement, Altus’ directors and executive officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies from Altus following the effective time of the transaction. For additional information, see “The Contribution Agreement and Other Transaction Agreements—Indemnification; Directors’ and Officers’ Insurance.”

Treatment of Altus Equity-Based Awards and Altus Warrants

No stock options, performance unit awards, phantom unit awards, restricted shares, or other equity-based awards issued by Altus or the Partnership will be affected by the transaction. The outstanding warrants to acquire shares of Class A Common Stock will not be affected by the transaction.

Directors and Management of Altus Following the Transaction

Following the closing of the transaction, the Altus Board will consist of eleven directors, with three directors designated by Apache Midstream (two of which must be independent for purposes of service on the audit committee of Altus under Nasdaq rules), two directors designated by ISQ, including Thomas Lefebvre and Joseph Payne, three directors designated by BX Aggregator, including David I. Foley, JP Munfa and Elizabeth P. Cordia, two directors designated by BX Aggregator, both of which must be independent for purposes of service on the audit committee of Altus under Nasdaq rules, and Jamie Welch, as the Chief Executive Officer of Altus following closing. In addition, the executive officers of BCP GP are expected to serve in the same capacity as the executive officers of Altus following the closing of the transaction.

The following table sets forth the names, ages and titles of such individuals following the closing of the transaction:

 

Name

   Age     

Position

Jamie Welch

     54      Chief Executive Officer, President, Chief Financial Officer and Director

Matthew Wall

     38      EVP, Chief Operating Officer

Steven Stellato

     47      EVP, Chief Accounting and Administrative Operating Officer

Todd Carpenter

     60      General Counsel, Secretary and Chief Compliance Officer

Anne Psencik

     58      Chief Strategy Officer

David I. Foley

     54      Director

John-Paul (JP) Munfa

     39      Director

Elizabeth P. Cordia

     29      Director

Thomas Lefebvre

     45      Director

Joe Payne

     41      Director

Laura A. Sugg

     60      Director

Kevin S. McCarthy

     62      Director

Ben C. Rodgers

     42      Director

[●]

     [●]      Director

[●]

     [●]      Director

 

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Jamie Welch. Mr. Welch serves as President, Chief Executive Officer and Chief Financial Officer of BCP GP, a position he has held since July 2017. He has also served as director of BCP GP since June 2017. Prior to joining BCP GP, he was the Group Chief Financial Officer and Head of Business Development for the Energy Transfer Equity, L.P. (ETE) family from June 2013 to February 2016. Mr. Welch also served on the Board of Directors of ETE, Energy Transfer Partners and Sunoco Logistics from June 2013 to February 2016. From February 2016 to June 2016, Mr. Welch evaluated other opportunities before joining Blackstone Energy Partners as a Senior Advisor in July 2016, a position which he continues to hold. Before joining ETE, Mr. Welch was Head of the EMEA Investment Banking Department and Head of the Global Energy Group at Credit Suisse. He was also a member of the Investment Banking Division Global Management Committee and the EMEA Operating Committee. Mr. Welch joined Credit Suisse First Boston in 1997 from Lehman Brothers Inc. in New York, where he was a Senior Vice President in the global utilities and project finance group. Prior to that he was an attorney in New York with Milbank, Tweed, Hadley & McCloy and a barrister and solicitor with Minter Ellison in Melbourne, Australia. Mr. Welch received a Bachelors of Law and a Diploma of Legal Practice from Queensland University of Technology.

Matthew Wall. Mr. Wall joined BCP GP in July 2017 as Vice President, Operations and was appointed Chief Operating Officer in May 2019. His industry experience has focused on midstream gas gathering/processing design and commissioning, as well as on operational support engineering. He is responsible for the safe, reliable and efficient operation of BCP GP’s measurement, gathering and processing facilities. Prior to joining BCP GP, Mr. Wall served as Manager of Engineering at Aka Energy Group LLC from April 2014 to June 2017. His team of Engineers, GIS, CAD and Construction specialists were responsible for capital project design and execution as well as operational engineering support for BCP GP’s midstream assets in northern Colorado, Kansas, Oklahoma, Texas Panhandle Area and Southeast New Mexico. Prior to Aka Energy, Mr. Wall was a Sr. Process Engineer at BCCK Engineering, responsible for process design and commissioning for company’s EPC projects. His career in midstream began as a Project Engineer at Southern Union Gas Services, where he performed design engineering and project management for expansion and operational projects. He also worked closely with commercial gas supply to provide various engineering evaluations for system expansions. Mr. Wall received a B.S. in Chemical Engineering from Texas Tech University.

Steven Stellato. Mr. Stellato serves as Executive Vice President, Chief Administrative Officer and Chief Accounting Officer of BCP GP, a position he has held since July 2017. In this capacity, he oversees Human Resources, IT and Sustainability and Communications, in addition to Accounting, Tax and Insurance/Risk Management functions. He has significant experience leading teams in accounting, finance, treasury, tax and mergers and acquisitions. In addition, Mr. Stellato has overseen investor relations, as well. He’s spent nearly one decade working in publicly traded master limited partnerships. Prior to joining BCP GP, Mr. Stellato served as Vice President and Chief Accounting Officer of CST Brands and CrossAmerica Partners from June 2015 to June 2017. He also served as Vice President and Controller of Energy Transfer Partners, LP for six years. Prior to joining Energy Transfer, he was a Senior Manager with the public accounting firm KPMG LLP, where he focused on clients in the energy industry. Mr. Stellato is a Certified Public Accountant and holds the CGMA designation, as well as a B.B.A. in Accounting from the University of Texas at San Antonio.

Todd Carpenter. Mr. Carpenter serves as General Counsel of BCP GP, a position he has held since November 2017. He has more than 25 years’ experience in all phases of commercial and international law, with representation in the energy, manufacturing and real estate industries. His specialties include mergers and acquisitions, energy law, commercial and financial transactions, real estate, information technology, international trade and compliance. Prior to joining BCP GP, Mr. Carpenter held several roles for the Energy Transfer group from April 2008 to November 2017, including Associate General Counsel for Energy Transfer Partners, General Counsel for Regency Energy Partners and PennTex Midstream, and Manager of Energy Transfer Partners’ liquefied natural gas business. He also previously served as Associate General Counsel for Southern Union Company, Senior Counsel for Cooper Industries, and General Counsel for a private real estate and finance company in Tokyo. Mr. Carpenter holds a B.B.A. in Finance and a J.D., both from the University of Texas in Austin.

 

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Anne Psencik. Ms. Psencik serves as the Chief Strategy Officer of BCP GP, a position she has held since July 2019. With over 30 years of experience in the oil and gas industry, Ms. Psencik has a proven track record of management and leadership in midstream business development, trading, and engineering and construction. Prior to joining BCP GP, Ms. Psencik ran her own consulting business from May 2016 to July 2019 providing strategic development on midstream projects for Crestwood Equity Partners, Momentum Midstream and BCP GP with primary focus in the Permian Basin. At Crestwood, she initiated and closed the Chevron Phillips Chemical demand-pull project in addition to the investment in EPIC. Prior to her role as owner in Psencik Consulting, she started the Marketing and Midstream business at AEP-LP in Oklahoma City, where she negotiated over $3 billion in non-operated equity interest in midstream assets for AEP-LP. These midstream assets are currently known as Traverse Midstream. She also was a part of the executive team at TEJAS NGL, LLC, which negotiated the original conveyance of Shell midstream assets to Enterprise Products, LP. She has held positions as SVP Midstream Business Development for Continuum Energy, LLC, Director of Midstream and Marketing for AEP-LP, Manager of Business Development for Harvest Pipeline, VP Commercial Development for Buckeye Pipeline Partners, VP of Gulf Coast Trading for Aquila, VP of Risk Management Natural Gas for Enterprise Products, LP, and VP of Marketing and Trading for TEJAS NGL, LLC. Anne graduated from The University of Texas at Austin (1986) with a B.S. in Petroleum Engineering. Early in her career, Anne served as a Field Supervisor for Schlumberger in well logging, cementing and stimulation work, as well as designing and constructing pipelines at ConocoPhillips.

David I. Foley. Mr. Foley will be appointed to the Altus Board in connection with the closing of the transaction and has served as a director of BCP GP since June 2017. Mr. Foley is a Senior Managing Director in the Private Equity group and Global Head of Blackstone Energy Partners. Mr. Foley is based in New York and is responsible for overseeing Blackstone Energy Partners’ private equity investment activities in the energy sector on a global basis. Since joining Blackstone Energy Partners in 1995, Mr. Foley has been responsible for building the Blackstone Energy Partners energy practice and has played an integral role in every energy-sector private equity deal that the firm has made. Mr. Foley actively leads BCP GP’s investment activities and provides guidance and support to the other senior investment professionals, who each have primary responsibility for specific sub-sectors. Before joining Blackstone Energy Partners, Mr. Foley worked with AEA Investors, and prior to that he worked as a management consultant for Monitor Company. Mr. Foley serves as a director of several energy companies and joint ventures, including: Beacon Offshore Energy, Grand Prix, Permian Highway Pipeline, Rover, Siccar Point Energy and Transmission Developers, Inc. He also serves as the Chairman of the Columbia University Medical Center Ophthalmology Board of Advisors. Mr. Foley received a B.A. and M.A. in Economics, with honors, Phi Beta Kappa, from Northwestern University and received an M.B.A. with distinction from Harvard Business School.

John-Paul (JP) Munfa. Mr. Munfa will be appointed to the Altus Board in connection with the closing of the transaction and has served as a director of BCP GP since June 2017. Mr. Munfa is a Senior Managing Director in the Private Equity group at Blackstone. Since re-joining Blackstone in 2011, Mr. Munfa has focused on investments in the midstream and transmission sectors. Mr. Munfa has played an integral role in the execution of Blackstone’s investments in Cheniere, Cliff Swallow, Custom Truck One Source, EagleClaw Midstream, Grand Prix, Global Offshore Wind, GridLiance, Permian Highway Pipeline, Rover and Sabre. Mr. Munfa serves as a Director of Sabre and Custom Truck One Source. From 2006 to 2009, Mr. Munfa was an Analyst with Blackstone’s Private Equity group, where he was involved in the analysis and execution of private equity investments in energy and other industries. He began his career in 2004 as an Analyst in Blackstone’s Restructuring & Reorganization group. Mr. Munfa received an A.B. in Economics from Harvard College and an M.B.A. from the Stanford Graduate School of Business, where he graduated as an Arjay Miller Scholar.

Elizabeth P. Cordia. Ms. Cordia will be appointed to the Altus Board in connection with the closing of the transaction and has served as a director of BCP GP since March 2020. Ms. Cordia is a Senior Associate in the Private Equity group at Blackstone. Since joining Blackstone in 2016, Ms. Cordia has been involved in Blackstone’s investments in Custom Truck One Source, EagleClaw Midstream, Falcon Minerals, Grand Prix and Permian Highway Pipeline. Before joining Blackstone, Ms. Cordia worked as an Investment Banking Analyst at

 

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Barclays in the Global Natural Resources group. Ms. Cordia received an A.B. in Economics from Princeton University, where she graduated summa cum laude and Phi Beta Kappa.

Thomas Lefebvre. Mr. Lefebvre will be appointed to the Altus Board in connection with the closing of the transaction and has served as a director of BCP GP since November 2018. Based in Miami, Mr. Lefebvre is a Partner of I Squared Capital, responsible for the firm’s infrastructure strategy in North America. Since joining ISQ as a founding member in 2012, Mr. Lefebvre has overseen the acquisition, development and transformational strategies of eleven platforms and companies spanning the power and utilities, oil and gas, transportation and logistics, and telecommunications sectors across the Americas. Mr. Lefebvre currently serves as a director of Atlantic Power & Utilities, Inkia Energy, Whiptail Midstream, FlexiVan, Star Leasing, Ezee Fiber and HTEC. He has also led the firm’s investment in Venture Global, and the successful divestments of various assets, notably Lincoln Clean Energy, Cube Hydro, Cube District Energy, and Curtis Palmer. Formerly, Mr. Lefebvre was a portfolio manager for the Americas at Morgan Stanley Infrastructure, where he led the group’s investment activities in the power, utilities, and oil and gas sectors across the Americas. He began his investment career at Morgan Stanley Principal Investments, the bank’s proprietary tactical operations fund, where he focused on investing and asset management activities in the power, utilities and commodities sectors in the Americas. Earlier in his career, Mr. Lefebvre worked out of London and Paris at Morgan Stanley’s Investment Banking Division covering industrials, digital infrastructure, and aerospace and defense. Prior to starting his financial career, Mr. Lefebvre was the CEO and cofounder of Natika, a Paris-based software engineering company, and also served as a sub-lieutenant in the French Navy Commandos, based in Toulon, France. Mr. Lefebvre holds an M.B.A. from Harvard Business School, an M.Sc. in Engineering from École Nationale Supérieure des Télécommunications in Paris, and an M.Sc. in Engineering from École Polytechnique in Paris.

Joseph Payne. Mr. Payne will be appointed to the Altus Board in connection with the closing of the transaction and has served as a director of BCP GP since November 2018. Mr. Payne is a Managing Director and the Chief Operating Officer of the Americas Portfolio at I Squared Capital. Mr. Payne brings more than 17 years of investing and advisory experience across the midstream, power, transportation and utilities sectors. Since joining I Squared Capital in 2014, Mr. Payne has held investing and operating roles in the firm’s New York, Houston and Miami offices. In his current role, Mr. Payne is principally responsible for operating strategy and asset management for the firm’s portfolio companies in North America. Prior to assuming the COO role, Mr. Payne focused on I Squared Capital’s midstream and transportation investment strategies. From 2004 to 2014, Mr. Payne was with KPMG LLP, one of the Big Four accounting firms. As a Managing Director in KPMG’s Deal Advisory Practice, Mr. Payne originated and executed financial advisory engagements for infrastructure-focused private equity clients. Mr. Payne holds an M.B.A. from Columbia Business School at Columbia University (high distinction), an M.S. in Accounting from the University of Notre Dame (summa cum laude) and a B.S. in Business Administration from the University of Colorado at Boulder (high distinction).

Laura A. Sugg. Ms. Sugg will be appointed to the Board in connection with the closing of the transaction and has served as a director of BCP GP since December 2020. Ms. Sugg is a retired executive of ConocoPhillips, a Fortune 100 company. Prior to her retirement in 2010, she held diverse global and domestic roles leading multiple divisions including the Australasia, Midstream, and Global Gas Divisions, as well as serving as the VP Human Resources Upstream. Additionally, she has had management positions across the company in Engineering and Operations, Corporate and Strategic Planning, Mergers and Acquisitions, Treasury, and Marketing. Ms. Sugg currently serves on two public company boards, Public Service Enterprise Group since 2019, and Murphy Oil since 2015. She previously served as an independent director for The Williams Companies, Denbury Resources, and Mariner Energy. Her board committee leadership has included serving as the Chair of the Strategic Transaction Committee for the Williams/Energy Transfer merger, Chair of the Operations and Cyber Security Committee and Chair of the Compensation Committee. Additionally, she has been a committee member of the Governance, Audit, Finance, and EHS Committees for the various Boards. Ms. Sugg has a B.S. in Chemical Engineering from Oklahoma State University and has completed numerous

 

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advanced management and board of director education programs. She is a member of G100 Board Excellence, National Association of Corporate Directors, Tapestry Cyber Risk Director Network, and Women’s Corporate Directors.

Kevin S. McCarthy. Mr. McCarthy has served as a director since June 2017. He previously served as Altus’ Chairman from March 2017 until November 2018 and as its Chief Executive Officer from December 2016 (inception) until February 2017. Mr. McCarthy is vice chair and a managing partner at Kayne Anderson Capital Advisors, L.P. where he co-founded and oversees the firm’s energy infrastructure activities. Prior to joining Kayne Anderson in 2004, Mr. McCarthy was global head of energy at UBS Securities LLC. In this role, he had senior responsibility for all of UBS’ energy investment banking activities, including direct responsibilities for securities underwriting and mergers and acquisitions in the MLP industry. From 1995 to 2000, Mr. McCarthy led the energy investment banking activities of Dean Witter Reynolds and then PaineWebber Incorporated. He began his investment banking career in 1984. In addition to his directorships at Kayne’s closed-end funds, he previously served on the board of directors of several publicly traded energy companies, including Range Resources Corporation, ONEOK, Inc., Emerge Energy Services LP and K-Sea Transportation Partners L.P. Mr. McCarthy earned a B.A. in Economics and Geology from Amherst College in 1981 and an M.B.A. in Finance from the Wharton School at the University of Pennsylvania in 1984.

Ben C. Rodgers. Mr. Rodgers has served as our Chief Financial Officer and Treasurer and a member of the Altus Board since November 9, 2018, immediately following consummation of our initial business combination. Mr. Rodgers also has served as Senior Vice President and Treasurer of APA Corporation since January 2020, overseeing treasury, midstream and marketing, and market strategies, having previously served as Vice President and Treasurer since May 2018. Prior to joining APA Corporation, Mr. Rodgers served as Senior Vice President of EIG Global Energy Partners and led an investment team focusing on originating and managing oil and gas debt and equity investments in North America from 2016 until 2018. Before that, he was with Concho Resources serving in a variety of leadership roles including Vice President of Commodities and Midstream and Vice President and Treasurer from 2012 until 2016. From 2008 until 2012, he also held the role of Vice President, Syndicated and Leveraged Finance, in the Investment Banking Division of J.P. Morgan Securities. Before that, he was senior consultant in the Advisory Services group at Ernst & Young from 2002 until 2007.

Controlled Company and Altus Board Independence

Because Contributor or its designees may control a majority of the voting power of the Altus Common Stock following the closing of the transaction, Altus may be a “controlled company” under the Nasdaq corporate governance standards. A controlled company need not comply with the Nasdaq corporate governance rules that require its board of directors to have a majority of independent directors and independent compensation and nominating and corporate governance committees. Notwithstanding Altus’ status as a controlled company, Altus will remain subject to the Nasdaq corporate governance standard that requires it to have an audit committee composed entirely of independent directors.

While these exemptions will apply to Altus as long as Altus remains a “controlled company,” Altus expects that, as of the closing of the transaction, it will have a majority of independent directors and establish compensation and nominating and corporate governance committees within the meaning of the Nasdaq corporate governance standards currently in effect. It is expected that the Altus Board will have [●] independent directors following the transaction.

It has not yet been determined which persons will serve as members of the Audit Committee of the Altus Board or any other board committee.

Regulatory Approvals Required for the Transaction

Altus and Contributor have agreed to prepare and file with the appropriate governmental entities and other third parties all authorizations, consents, notifications, certifications, registrations, declarations, and filings that

 

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are necessary in order to consummate the transaction and to diligently and expeditiously prosecute such matters and cooperate with each other in the prosecution of such matters. However, neither Altus nor Contributor, nor any of their respective affiliates, are required to pay any consideration to any third parties to obtain any such person’s authorization approval, consent, or waiver to effectuate the transaction, other than filing, recordation, or similar fees. In connection with such matters, Altus is obligated not to agree to any actions, restrictions, or conditions with respect to obtaining any such authorizations without Contributor’s prior written consent.

In addition, Altus and Contributor have agreed to make any filings required under the HSR Act, and to cooperate fully with each other and furnish to the other such necessary information and reasonable assistance as the other may reasonably request in connection with its preparation of any filings and in connection with obtaining all required consents, authorizations, orders, expirations, terminations, waivers, or approvals under any applicable antitrust laws. The required Notification and Report Forms were filed with the Antitrust Division and the FTC by Altus and Contributor on November 10, 2021.

Altus and Contributor have agreed not take any action that could reasonably be expected to hinder or delay in any material respect the expiration or termination of the required waiting period under the HSR Act or any other applicable antitrust laws, or any consent or approval required pursuant to any other applicable antitrust laws.

Accounting Treatment

In accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), Altus will account for the transaction as a reverse merger using the acquisition method of accounting with Contributor as the acquiring entity. Under the acquisition method of accounting, Contributor’s assets and liabilities will retain their carrying values and Altus’ assets and liabilities will be recorded at their fair values measured as of the acquisition date. The excess of the consideration transferred over the fair values of Altus’ net assets acquired, if applicable, will be recorded as goodwill.

Public Trading Markets; Listing of the Class A Common Stock

The Class A Common Stock is currently listed on Nasdaq under the ticker symbol “ALTM,” and immediately after the transaction is completed, will continue to be listed on Nasdaq. Neither the Common Units nor the Class C Common Stock is listed on any national securities exchange, but the Common Units and the Class C Common Stock together are exchangeable on a one-for-one basis for shares of Class A Common Stock. Neither the Contributed Entities nor the Contributed Interests are listed on any national securities exchange.

No Appraisal Rights

Under applicable law, no appraisal rights will be available to holders of Altus Common Stock in connection with the transaction.

 

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THE CONTRIBUTION AGREEMENT AND OTHER TRANSACTION AGREEMENTS

This section of this proxy statement describes the material terms of the contribution agreement and certain other transaction agreements. The following summary must be read in conjunction with and is qualified by the terms of the contribution agreement, a copy of which is attached as Annex B; the form of the Second Amended and Restated Registration Rights Agreement, a copy of which is attached as Annex C; the form of the Third Amended and Restated Certificate of Incorporation of Altus, a copy of which is attached as Annex D; the Amended and Restated Stockholders Agreement, a copy of which is attached as Annex E; the Third Amended and Restated Agreement of Limited Partnership of the Partnership, a copy of which is attached as Annex F; and the form of the Amended and Restated Bylaws of Altus, a copy of which is attached as Annex G. You are urged to read the full text of the contribution agreement and these other transaction agreements, which are incorporated herein by reference, carefully.

This summary and the copy of the contribution agreement attached as Annex B are included solely to provide investors with information regarding the terms of the contribution agreement. They are not intended to provide factual information about the parties or any of their respective subsidiaries or affiliates. The representations, warranties, and covenants in the contribution agreement were made solely for the benefit of the parties to the contribution agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the contribution agreement instead of establishing such matters as facts.

Investors are not third-party beneficiaries under the contribution agreement, and in reviewing the representations, warranties, and covenants contained in the contribution agreement or any descriptions thereof in this summary, it is important to bear in mind that such representations, warranties, and covenants or any descriptions thereof were not intended by the parties to the contribution agreement to be characterizations of the actual state of facts or conditions of the parties or any of their respective subsidiaries or affiliates.

Structure of the Transaction

At the closing of the transaction, upon the terms and subject to the satisfaction or waiver of the conditions set forth in the contribution agreement, Contributor will contribute all of the Contributed Interests to the Partnership, with the Contributed Entities each becoming a wholly-owned subsidiary of the Partnership. In exchange for the contribution by Contributor, Contributor or its designees’ equity owners will receive 50,000,000 Common Units and 50,000,000 shares of Class C Common Stock. As a result of the transaction, Altus’ current stockholders will continue to hold their shares of Altus Common Stock, Contributor or its designees will collectively own approximately 75% of the issued and outstanding Altus Common Stock, Apache Midstream, which currently owns approximately 79% of the issued and outstanding Altus Common Stock, will own approximately 20% of the issued and outstanding Altus Common Stock, and the remaining current stockholders will own approximately 5% of the issued and outstanding Altus Common Stock.

Approval of the share issuance proposal by the Altus stockholders is a condition to the consummation of the transaction. Pursuant to the contribution agreement, at the closing of the transaction, Altus’ bylaws will be amended and restated in the form of the Amended and Restated Bylaws of Altus attached as Annex G and, in the event the charter amendment proposal is approved, Altus’ Second Amended and Restated Certificate of Incorporation will be amended and restated as approved in the form of the Third Amended and Restated Certificate of Incorporation of Altus attached as Annex D.

Closing and Effective Time of the Transaction

Unless otherwise mutually agreed to by Altus and Contributor, the closing of the transaction will take place on the third business day after the satisfaction or waiver of the conditions to consummation of the transaction, which conditions are described below under “—Conditions to Consummation of the Transaction.”

 

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Assuming timely satisfaction of the necessary closing conditions, the closing is currently expected to occur in the first quarter of 2022.

Effect of the Transaction on Altus Common Stock

All currently outstanding shares of Altus Common Stock will remain outstanding after the transaction, and no changes will be made to any class of Altus Common Stock as a result of the transaction.

No Appraisal Rights

Under applicable law, no appraisal rights will be available to holders of Altus Common Stock in connection with the transaction.

Treatment of Altus Equity-Based Awards and Altus Warrants

No stock options, performance unit awards, phantom unit awards, restricted shares, or other equity-based awards issued by Altus or the Partnership will be affected by the transaction. The outstanding warrants to acquire shares of Class A Common Stock will not be affected by the transaction.

Conditions to Consummation of the Transaction

The obligations of each party to consummate the transaction are subject to the satisfaction or waiver (to the extent such waiver is permitted by applicable law) at or prior to the closing of the following conditions:

 

   

approval of the share issuance proposal by the Altus stockholders;

 

   

any waiting period applicable to the transaction under the HSR Act has terminated or expired;

 

   

there is in effect no order or law of any governmental entity having jurisdiction restraining, enjoining, or otherwise prohibiting or making illegal the consummation of the transaction; and

 

   

each of the Credit Agreement Consent, the Series A Preferred Consent and each Company JV Consent (as such terms are discussed under “—Third Party Finance Consents; Company JV Consents”) remaining in full force and effect.

The obligations of Altus to consummate the transaction are also subject to the satisfaction or waiver (to the extent such waiver is permitted by applicable law) at or prior to the closing of the following conditions:

 

   

each of (i) the fundamental representations and warranties made by Contributor (a) are true and correct in all respects on and as of the closing date as though made on and as of the closing date (other than those fundamental representations and warranties expressly made as of an earlier date) and (b) in the case of fundamental representations and warranties expressly made as of an earlier date, are true and correct in all respects as of such earlier date, except, in the case of each of clauses (a) and (b), for de minimis inaccuracies; and (ii) the other representations and warranties made by Contributor in Article III of the contribution agreement are, without giving effect to any materiality or “Material Adverse Effect” qualifier contained therein (other than for purposes of defining “Contributor Real Property Leases” and “Material Contributor Insurance Policies,” Section 3.5 of the contribution agreement (Financial Statements), or Section 3.6(a) of the contribution agreement (Absence of Certain Changes)), (y) are true and correct in all respects on and as of the closing date as though made on and as of the closing date (other than such representations and warranties expressly made as of an earlier date), and (z) in the case of such representations and warranties expressly made as of an earlier date, are true and correct in all respects as of such earlier date, except in the case of such representations and warranties subject to clauses (y) and (z) where the failure to be true and correct would not have a “Contributor Material Adverse Effect”;

 

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Contributor will have performed and complied in all material respects with all material covenants required to be performed or complied with by it under the contribution agreement prior to the closing date, the performance of which is within the control of Contributor; and

 

   

no “Contributor Material Adverse Effect” shall have occurred between the execution date of the contribution agreement and the closing date; provided, that, for purposes of the foregoing closing condition, the definition of “Contributor Material Adverse Effect” is deemed to exclude clause (ii) of the definition of “Material Adverse Effect.”

The obligations of Contributor to consummate the transaction are also subject to the satisfaction or waiver (to the extent such waiver is permitted by applicable law) at or prior to the closing of the following conditions:

 

   

each of (i) the fundamental representations and warranties made by Altus and the Partnership (a) are true and correct in all respects on and as of the closing date as though made on and as of the closing date (other than those fundamental representations and warranties expressly made as of an earlier date) and (b) in the case of fundamental representations and warranties expressly made as of an earlier date, are true and correct in all respects as of such earlier date, except, in the case of each of clauses (a) and (b), for de minimis inaccuracies; and (ii) the other representations and warranties made by Altus and the Partnership in Article IV of the contribution agreement are, without giving effect to any materiality or “Material Adverse Effect” qualifier contained therein (other than for purposes of defining “Company Real Property Leases” and “Material Company Insurance Policies,” Section 4.5(b)(y) of the contribution agreement (Financial Statements), or Section 4.6(a) of the contribution agreement (Absence of Certain Changes)), (y) are true and correct in all respects on and as of the closing date as though made on and as of the closing date (other than such representations and warranties expressly made as of an earlier date), and (z) in the case of such representations and warranties expressly made as of an earlier date, are true and correct in all respects as of such earlier date, except in the case of such representations and warranties subject to clauses (y) and (z) where the failure to be true and correct would not have a “Company Material Adverse Effect”;

 

   

Altus and the Partnership will have performed and complied in all material respects with all material covenants required to be performed or complied with by it under the contribution agreement prior to the closing date, the performance of which is within the control of Altus or the Partnership;

 

   

no “Company Material Adverse Effect” shall have occurred between the execution date of the contribution agreement and the closing date; provided, that, for purposes of the foregoing closing condition, the definition of “Company Material Adverse Effect” is deemed to excluded clause (ii) of the definition of “Material Adverse Effect”;

 

   

the shares of Class A Common Stock issuable upon the exchange of the Common Units and shares of Class C Common Stock issued to Contributor or its designees as consideration in the contribution agreement have been approved for listing by Nasdaq; and

 

   

if the approval of the share issuance proposal and the charter amendment proposal by the Altus stockholders has not occurred on or prior to January 15, 2022, Altus will have filed with the SEC its Annual Report on Form 10-K for the twelve months ended December 31, 2021.

“Company Material Adverse Effect” and “Contributor Material Adverse Effect” mean, respectively, a “Material Adverse Effect” on Altus or Contributor, respectively, and such party’s subsidiaries, taken as a whole.

“Material Adverse Effect” means, when used with respect to any party, any change, circumstance, development, state of facts, effect, or condition that, individually or in the aggregate, (i) is or could reasonably be expected to be materially adverse to the assets, condition (financial or otherwise and taking into account and giving effect to any insurance proceeds and indemnification payments actually received by such party or its subsidiaries), results of operations, or business of such party and its subsidiaries, taken as a whole, or (ii) prevents, materially delays, or materially impairs the ability of

 

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such party to perform its obligations under the contribution agreement or to consummate the transaction; provided, however, that any change, circumstance, development, state of facts, effect, or condition arising from, or relating to, the following shall not be deemed to constitute a Material Adverse Effect for purposes of clause (i) above: (a) general economic or industry conditions (including any change in the prices or production levels of hydrocarbons, or the demand for related transportation, processing, or storage services or conditions generally affecting the oil and gas industry); (b) changes, events, effects, or developments generally applicable to the onshore oil and gas industry in Texas; (c) changes in law or accounting rules (including U.S. GAAP); (d) changes in financial, credit, currency, banking, or securities markets in general (including the failure of any financial institution), including any disruption thereof and any decline in the price of any security or any market index, or any change in prevailing interest rates, monetary policy, or inflation; (e) acts of God, including earthquakes, fires, tornadoes, flooding, and other natural disasters; (f) local, regional, national, or international political or social conditions, including the occurrence of any military or terrorist attack or the engagement by the United States of America in hostilities, whether or not pursuant to the declaration of a national emergency or war; (g) any local, regional, national or international health conditions (including any epidemic, pandemic or disease outbreak (including SARS-CoV-2 or COVID-19, and any evolutions thereof (COVID-19)), including any material worsening of such conditions or any law, directive, guidelines or recommendations issued by the Centers for Disease Control and Prevention, the World Health Organization, or any other governmental entity providing for business closures, “sheltering-in-place,” curfews or other restrictions that relate to, or arise out of, an epidemic, pandemic or disease outbreak (including COVID-19), or any change in such law, directive, guidelines, recommendations or interpretation thereof, (h) any failure by such party or its subsidiaries to meet any internal or analyst projections or forecasts or estimates of revenues, earnings, or other financial metrics for any period (it being understood that the underlying cause of any such failure, not otherwise excluded by the exceptions set forth in this definition, may be taken into consideration in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur); (i) with respect to Altus, changes to the market price or trading volume of the Class A Common Stock; (j) the effects on such party’s or its subsidiaries’ business arising from departures of personnel providing services to such party or its subsidiaries, whether such departures result from the announcement of the transaction or otherwise; and (k) the announcement of the transaction and the taking of any actions contemplated by the contribution agreement (other than with respect to any representation or warranty that is intended to address the consequences of the execution or delivery of the contribution agreement or the announcement or consummation of the transaction); provided, however, except to the extent such effects directly or indirectly resulting from, arising out of, attributable to or related to the matters described in the foregoing clauses (a) through (g) disproportionately adversely affect such party and its subsidiaries, taken as a whole, as compared to similarly situated participants operating in the oil and gas midstream industry in the geographies in which they operate (in which case, such adverse effects (if any) shall be taken into account when determining whether a “Material Adverse Effect” has occurred or may or could occur solely to the extent they are disproportionate).

Obligations with Respect to the Altus Special Meeting and Recommendation to Stockholders

Under the terms of the contribution agreement, Altus agreed to take, in accordance with applicable law, Nasdaq rules, and its certificate of incorporation and bylaws, all action necessary to call, hold, and convene the special meeting to approve the share issuance proposal and the charter amendment proposal as promptly as reasonably practicable after the filing of this proxy statement in definitive form with the SEC (and in any event, to use reasonable best efforts to convene such meeting within 45 days thereof). Once the special meeting has been called and noticed, Altus agreed not to postpone or adjourn the special meeting without Contributor’s consent other than to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure that Altus has determined in good faith, after consultation with its outside legal advisors, is necessary under applicable law, and for such supplemental or amended disclosure to be disseminated to and reviewed by

 

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the Altus stockholders prior to the special meeting, provided that the special meeting may not be adjourned or postponed to a date on or after two business days prior to the Outside Date. Subject to the Altus Board’s ability to effect an Altus Change of Recommendation in the circumstances described below, Altus agreed to take all reasonable lawful action to solicit the approval of the share issuance proposal and the charter amendment proposal, to solicit from the Altus stockholders proxies in favor of the transaction, and to include the Altus Board’s recommendation in favor of the transaction in this proxy statement. Altus agreed to use reasonable best efforts to provide Contributor with voting tabulation reports relating to the special meeting that have been prepared by Altus or its transfer agent, proxy solicitor or other representative, and to otherwise keep Contributor reasonably informed regarding the status of the solicitation of votes with respect thereto. Altus agreed not to change the record date or establish a different record date for the special meeting once a record date has been established without Contributor’s prior written consent, unless required to do so by applicable law or Altus’ certificate of incorporation or bylaws or in connection with a postponement or adjournment permitted under the contribution agreement.

Unless the contribution agreement has been terminated in accordance with its terms, Altus has agreed that its obligation to hold the special meeting in accordance with the terms of the contribution agreement will not be affected by the making of an Altus Change of Recommendation or the commencement, announcement, disclosure, or communication to Altus of any Company Competing Proposal or other proposal, including a Company Superior Proposal, or the occurrence or disclosure of any Company Intervening Event.

Agreement Not to Solicit Other Offers

Termination of Discussions

Altus has agreed to, and to cause its subsidiaries and its and their directors and officers and the directors and officers of APA Corporation to, and to use its reasonable best efforts to cause the other representatives of Altus and its subsidiaries to, immediately cease, and cause to be terminated, any discussions or negotiations with any person conducted prior to the execution of the contribution agreement by Altus or any of its subsidiaries or their respective representatives with respect to any inquiry, proposal, or offer that constitutes, or would reasonably be expected to lead to, a “Company Competing Proposal.” Altus further agreed, within two business days of execution of the contribution agreement, to (i) deliver a written notice to each person that has received non-public information regarding Altus within the six months prior to execution of the contribution agreement pursuant to a confidentiality agreement with Altus for purposes of evaluating any transaction that could reasonably be expected to be a Company Competing Proposal and for whom no similar notice has been delivered prior to execution of the contribution agreement requesting the prompt return or destruction of all confidential information concerning Altus and its subsidiaries furnished to such person and (ii) notify each officer and director of Altus of the terms of its non-solicitation obligations under the contribution agreement. Altus further agreed to immediately terminate any physical and electronic data access related to any such potential Company Competing Proposal previously granted to such persons.

“Company Competing Proposal” means any contract, proposal, offer, or indication of interest relating to any transaction or series of related transactions (other than transactions only with BCP, Contributor, or any of the Contributor subsidiaries) involving, directly or indirectly: (a) any acquisition (by asset purchase, stock purchase, merger, or otherwise) by any person or group of any business or assets of Altus or any of its subsidiaries (including capital stock of or other interest in any Altus subsidiary, and Altus’ or its subsidiaries’ interest in the Company JVs (as such term is defined in the contribution agreement)) that consist of 20% or more of Altus’ and the Altus subsidiaries’ (taken as a whole) assets (by fair market value), or that generated 20% or more of Altus’ and Altus subsidiaries’ (taken as a whole) net revenue or earnings before interest, taxes, depreciation, and amortization for the preceding twelve months, or any license, lease, or long-term commercial agreement having a similar economic effect, (b) any acquisition of beneficial ownership by any person or group of 20% or more of the outstanding shares of Altus Common Stock or any other securities entitled to vote on the election of directors of Altus or any tender or exchange offer that if consummated would result in any person or

 

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group beneficially owning 20% or more of the outstanding shares of Altus Common Stock or any other securities entitled to vote on the election of directors of Altus, or (c) any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution, or similar transaction involving Altus or any of the Altus subsidiaries that generated 20% or more of Altus’ and Altus subsidiaries’ (taken as a whole and including, for the avoidance of doubt, revenue or earnings attributable to the Company JVs) net revenue or earnings before interest, taxes, depreciation, and amortization for the preceding twelve months.

Non-Solicitation Obligations

As more fully described in the contribution agreement, and subject to the terms and conditions described in the contribution agreement, Altus has agreed that it will not, and will cause its subsidiaries and its and their directors and officers and the directors and officers of APA Corporation not to, and will use its reasonable best efforts to cause the other representatives of Altus and its subsidiaries not to, directly or indirectly:

 

   

initiate, solicit, propose, knowingly encourage, or knowingly facilitate any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to result in, a Company Competing Proposal;

 

   

engage in, continue, or otherwise participate in any discussions or negotiations with any person relating to, or in furtherance of a Company Competing Proposal or any inquiry, proposal, or offer that would reasonably be expected to lead to a Company Competing Proposal;

 

   

furnish any non-public information regarding Altus or its subsidiaries, or access to the properties, assets, or employees of Altus or its subsidiaries, to any person in connection with or in response to any Company Competing Proposal or any inquiry, proposal, or offer that would reasonably be expected to lead to a Company Competing Proposal;

 

   

enter into any letter of intent or agreement in principle relating to, or other agreement providing for, a Company Competing Proposal (other than a confidentiality agreement as permitted by the contribution agreement); or

 

   

submit any Company Competing Proposal to the approval of the stockholders of Altus.

Exceptions to Non-Solicitation Provisions

Notwithstanding the foregoing, at any time before the Altus stockholders approve the share issuance proposal and the charter amendment proposal, Altus, its subsidiaries, and their respective representatives may engage in discussions or negotiations with any person relating to or in furtherance of a Company Competing Proposal (or any inquiry, proposal, or offer that would reasonably be expected to lead to a Company Competing Proposal) and may furnish non-public information regarding Altus and its subsidiaries and afford access to the properties, assets, or employees of Altus and its subsidiaries to any person in connection with or in response to a Company Competing Proposal (or any inquiry, proposal, or offer that would reasonably be expected to lead to a Company Competing Proposal), if:

 

   

Altus receives a bona fide, written Company Competing Proposal from such person that (i) was not solicited at any time following the execution of the contribution agreement by Altus, any of its subsidiaries, APA Corporation, their respective officers or directors, or any of the representatives of Altus or its subsidiaries and (ii) did not otherwise arise from a material breach of Altus’ non-solicitation obligations under the contribution agreement; and

 

   

before taking any such actions, (i) the Altus Board or any committee thereof determines in good faith, after consultation with its financial advisors and outside legal counsel, that such Company Competing Proposal is, or would reasonably be expected to lead to, a “Company Superior Proposal,” and (ii) the Altus Board determines in good faith after consultation with its outside legal counsel that failure to take such action would reasonably be expected to be inconsistent with the fiduciary duties owed by the Altus Board to the stockholders of Altus under applicable law;

 

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except that, (1) Altus will not deliver any information that is prohibited from being furnished until Altus receives an executed confidentiality agreement from such person containing limitations on the use and disclosure of non-public information furnished to such person by or on behalf of the Altus that are no less favorable to Altus in the aggregate than the terms of the confidentiality agreement between the Partnership and a subsidiary of BCP and which does not contain provisions which prohibit Altus from complying with its obligations to provide such information to Contributor pursuant to the contribution agreement; (2) any such non-public information that has previously been made available to, or is made available to, Contributor prior to or concurrently with (or in the case of oral non-public information only, promptly (and in any event within 24 hours after)) the time such information is made available to such person.

“Company Superior Proposal” means an unsolicited bona fide written proposal that is made after the execution of the contribution agreement by any person or group (other than APA Corporation or any of its affiliates) to acquire, directly or indirectly, (a) any business or assets of Altus or any of the Altus subsidiaries (including capital stock of or other interest in any Altus subsidiary and Altus’ and its subsidiaries’ interest in the Company JVs) that consist of more than 50% of Altus’ and its subsidiaries’ (taken as a whole) assets (by fair market value), or that generated more than 50% of Altus’ and its subsidiaries’ (taken as a whole) net revenue or earnings before interest, taxes, depreciation, and amortization for the preceding 12 months or (b) beneficial ownership of more than 50% of the outstanding shares of Altus Common Stock, that in the good faith determination of the Altus Board, after consultation with its financial advisors and outside legal counsel, (x) if consummated, would result in a transaction more favorable to the Altus stockholders from a financial point of view than the transaction (after taking into account the impact on (i) the Series A Preferred Consent, the Credit Agreement Consent, and the Company JV Consents, and the availability of any replacement thereof, (ii) the time likely to be required to consummate such proposal and (iii) any adjustments or revisions to the terms of this Agreement offered by Contributor in a binding proposal in accordance with the contribution agreement in response to such proposal), (y) is reasonably likely to be consummated on substantially the terms proposed, taking into account any legal, financial, regulatory, and stockholder approval requirements, the likelihood of termination, the timing of closing, the identity of the person or persons making the proposal, and any other aspects considered relevant by the Altus Board, and (z) for which, if applicable, financing is fully committed or reasonably determined to be available by the Altus Board.

Altus has also agreed to promptly (and in any event within 24 hours) notify Contributor of the receipt by Altus (directly or indirectly) of any Company Competing Proposal or any expression of interest, inquiry, proposal, or offer with respect to a Company Competing Proposal made on or after the execution of the contribution agreement, any request for non-public information or data relating to Altus or any Altus subsidiary made by any person in connection with a Company Competing Proposal or any request for discussions or negotiations with Altus or a representative of Altus relating to a Company Competing Proposal (including the identity of such person), and provide to Contributor promptly (and in any event within 24 hours) (i) an unredacted copy of any such expression of interest, inquiry, proposal, or offer with respect to a Company Competing Proposal made in writing provided to Altus or any Altus subsidiary or (ii) if any such expression of interest, inquiry, proposal, or offer with respect to a Company Competing Proposal is not (or any portion thereof is not) made in writing, a written summary of the material financial and other material terms thereof. Altus has further agreed to keep Contributor reasonably informed, on a prompt basis (and in any event within 24 hours), of any material development regarding the status or terms of any such expressions of interest, proposals, or offers (including any amendments thereto) or material requests with respect to any Company Competing Proposal and promptly (and in any event within 24 hours) apprise Contributor of the status of any such discussions or negotiations and provide to Contributor as soon as practicable after receipt or delivery thereof (and in any event within 24 hours) copies of all material written correspondence and other material written materials provided to Altus or its representatives from any person. Altus has further agreed to notify Contributor if Altus determines to begin providing information or to engage in discussions or negotiations concerning a Company Competing Proposal, prior to or substantially contemporaneously with providing any such information or engaging in any such discussions or negotiations.

 

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Obligation to Maintain Altus Board Recommendation

As discussed above, the Altus Board has recommended that the Altus stockholders approve the share issuance proposal and the charter amendment proposal (the Altus Board Recommendation). Except as described below, neither the Altus Board nor any committee thereof, may take any of the following actions, each of which is considered an “Altus Change of Recommendation”:

 

   

withhold, withdraw, qualify, or modify, or publicly propose or announce any intention to withhold, withdraw, qualify, or modify, in a manner adverse to Contributor, BCP or their respective subsidiaries, the Altus Board Recommendation;

 

   

fail to include the Altus Board Recommendation in the proxy statement;

 

   

approve, endorse, or recommend, or publicly propose or announce any intention to approve, endorse, or recommend, any Company Competing Proposal;

 

   

publicly declare advisable or publicly propose to enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement, or other agreement (other than a confidentiality agreement permitted pursuant to the contribution agreement), in each case, relating to a Company Competing Proposal (an Altus Alternative Acquisition Agreement);

 

   

in the case of a Company Competing Proposal that is structured as a tender offer or exchange offer pursuant to Rule 14d-2 under the Exchange Act for outstanding shares of Altus Common Stock (other than by Contributor, BCP or their respective subsidiaries), fail to recommend, in a Solicitation/Recommendation Statement on Schedule 14D-9, against acceptance of such tender offer or exchange offer by its stockholders on or prior to 10 business days (as such term is used in Rule 14d-9 of the Exchange Act) after commencement of such tender offer or exchange offer;

 

   

if a Company Competing Proposal shall have been publicly announced or disclosed (other than pursuant to a tender offer or exchange offer pursuant to Rule 14d-2 under the Exchange Act as described above) fail to publicly reaffirm the Altus Board Recommendation on or prior to 10 business days after Contributor so requests in writing (which requests may only be made once every 30 days with respect to any specific Company Competing Proposal, absent material amendment to such Company Competing Proposal); or

 

   

cause or permit Altus to enter into an Altus Alternative Acquisition Agreement.

Right to Change Altus Board Recommendation or in Connection with a Superior Proposal or Intervening Event

Superior Proposals

Notwithstanding the foregoing, at any time before the Altus stockholders approve the share issuance proposal and the charter amendment proposal, the Altus Board is permitted to make an Altus Change of Recommendation if (i) Altus receives a bona fide, written Company Competing Proposal from a third party that (a) was not solicited at any time following the execution of the contribution agreement by Altus, APA Corporation, their respective officers or directors, or any of the representatives of Altus or its subsidiaries, and (b) did not otherwise arise from a material breach by Altus, any of its subsidiaries, or any director or officer of Altus, APA Corporation or any of their respective subsidiaries of Altus’ non-solicitation obligations under the contribution agreement; (ii) the Altus Board determines in good faith, after consultation with its financial advisors and outside legal counsel, that such Company Competing Proposal is a Company Superior Proposal; and (iii) the Altus Board determines in good faith, after consultation with its outside legal counsel, that failure to effect an Altus Change of Recommendation in response to such Company Superior Proposal would be inconsistent with the fiduciary duties owed by the Altus Board to the Altus stockholders of under applicable law.

 

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However, prior to taking such action, Altus must:

 

   

provide Contributor written notice of such proposed action and the basis thereof at least four business days in advance, which notice shall set forth in writing that the Altus Board intends to consider whether to take such action and include a copy of the available proposed Company Competing Proposal and copies of any applicable definitive transaction or financing documents;

 

   

after giving such notice, Altus negotiates (and causes its officers, employees, financial advisor, and outside legal counsel to negotiate) in good faith with Contributor (to the extent Contributor wishes to negotiate) during such four-business day period to make such adjustments or revisions to the terms of the contribution agreement as would permit the Altus Board not to take such action in response thereto; and

 

   

at the end of such four-business day period, the Altus Board takes into account any adjustments or revisions to the terms of the contribution agreement proposed by Contributor in writing in a binding proposal and any other information offered by Contributor in response to the notice, and determines in good faith, after consultation with its financial advisors and outside legal counsel, that the Company Competing Proposal remains a Company Superior Proposal and that the failure to effect an Altus Change of Recommendation in response to such Company Superior Proposal would be inconsistent with the fiduciary duties owed by the Altus Board to the Altus stockholders under applicable Law; provided, that in the event of any material amendment or material modification to any Company Superior Proposal (including any amendment or modification to the economic terms of any such Company Superior Proposal, which are deemed material), Altus is again required to comply with the foregoing obligations with respect to a new written notice and negotiation period, provided that in such event, the four-business day period will instead be a three-business day period.

Intervening Event

In addition, at any time before the Altus stockholders approve the share issuance proposal and the charter amendment proposal, the Altus Board is permitted to make an Altus Change of Recommendation in response to a “Company Intervening Event” that occurs or arises after the execution date of the contribution agreement if (i) the Altus Board determines in good faith after consultation with its financial advisors and outside legal counsel that a Company Intervening Event has occurred; and (ii) the Altus Board determines in good faith, after consultation with its outside legal counsel, that failure to effect an Altus Change of Recommendation in response to such Company Intervening Event would be inconsistent with the fiduciary duties owed by the Altus Board to the Altus stockholders under applicable law.

However, prior to taking such action, Altus must:

 

   

provide Contributor written notice of such proposed action and the basis thereof at least four business days in advance, which notice shall set forth in writing that the Altus Board intends to consider whether to take such action and includes a reasonably detailed description of the facts and circumstances of the Company Intervening Event;

 

   

after giving such notice, Altus negotiates (and causes its officers, employees, financial advisor, and outside legal counsel to negotiate) in good faith with Contributor (to the extent Contributor wishes to negotiate) during such four-business day period to make such adjustments or revisions to the terms of the contribution agreement as would permit the Altus Board not to take such action in response thereto; and

 

   

at the end of such four-business day period, the Altus Board takes into account any adjustments or revisions to the terms of the contribution agreement proposed by Contributor in writing in a binding proposal and any other information offered by Contributor in response to the notice, and determines in good faith, after consultation with its financial advisors and outside legal counsel, that the failure to effect an Altus Change of Recommendation in response to such Company Intervening Event would be

 

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inconsistent with the fiduciary duties owed by the Altus Board to the Altus stockholders under applicable Law; provided, that in the event of any material changes regarding any Company Intervening Event, Altus is again required to comply with the foregoing obligations with respect to a new written notice and negotiation period, provided that in such event, the four-business day period will instead be a three-business day period.

“Company Intervening Event” means a material development or change in circumstance that occurs or arises after the execution of the contribution agreement and that was not known to or reasonably foreseeable by the Altus Board as of the execution of the contribution agreement (or, if known or reasonably foreseeable, the magnitude or material consequences of which were not known to or reasonably foreseeable by the Altus Board as of the execution of the contribution agreement); provided, however, that in no event shall the following events, changes, or developments constitute a Company Intervening Event: (i) the receipt, existence, or terms of a Company Competing Proposal or any inquiry, proposal, offer, request for information, or expression of interest that may reasonably be expected to lead to, or result in, a Company Competing Proposal, (ii) any fact, circumstance, effect, change, event, or development relating to the Contributor or any of the Contributor subsidiaries that does not amount to a Contributor Material Adverse Effect, or (c) changes in the market price or trading volume of Altus Class A Common Stock or any other securities of Altus or any of its subsidiaries, any change in credit rating, or the fact that Altus meets or exceeds (or that Contributor fails to meet or exceed) internal or published estimates, projections, forecasts, or predictions for any period (it being understood that for each of the foregoing, the underlying cause thereof may be taken into account for purposes of determining whether a Company Intervening Event has occurred).

In the event that the Altus Board effects an Altus Change of Recommendation (whether or not permitted by the contribution agreement and whether or not in response to a Company Superior Proposal or Company Intervening Event), Altus must pay Contributor a $60.0 million termination fee if Contributor elects to terminate the contribution agreement pursuant to its termination rights arising as a result of the occurrence of an Altus Change of Recommendation or if Altus or Contributor terminate the contribution agreement pursuant to such party’s termination right arising as a result of the failure of the stockholders to approve the share issuance proposal and the charter amendment proposal, as more fully described below under “ —Termination Fee Payable by Altus.”

Treatment of Representatives

Altus agreed that any violation of the restrictions set forth in the non-solicitation provisions applicable to Altus by any of the directors and officers of Altus, APA Corporation, and their respective subsidiaries, is deemed to be a breach of such restriction by Altus. Further, as described in more detail below under “ —Voting and Support Agreement—No Solicitation,” each of APA Corporation and Apache Midstream have agreed to comply and to be bound by certain of Altus’ non-solicitation obligations contained in the contribution agreement.

Termination of the Contribution Agreement

The contribution agreement may be terminated at any time prior to closing of the transaction:

 

   

by mutual written consent of Altus and Contributor;

 

   

by either Altus or Contributor, by written notice to the other party:

 

   

in the event that any applicable law or final writ, judgment, decree, injunction, or award of any governmental entity having jurisdiction restrains, enjoins, or otherwise prohibits or makes illegal the contribution of the Contributed Interests pursuant to the contribution agreement;

 

   

if the closing of the transaction has not occurred on or before June 30, 2022 (the Outside Date), provided, that such right to terminate the contribution agreement in such event shall not be

 

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available to any party that has breached any of its warranties or covenants set forth in the contribution agreement and such breach resulted in the failure of the closing to occur by the Outside Date;

 

   

if the Altus stockholders have not approved the share issuance proposal upon a vote held at a duly called special meeting or at any adjournment or postponement thereof;

 

   

by Altus, by written notice to Contributor:

 

   

if (i) Contributor has breached its warranties, covenants, or agreements under the contribution agreement and such breach would or does result in the failure to fulfill any condition obligating Altus to close the transaction and (ii) such breach is not capable of being cured by the Outside Date or, if curable prior to the Outside Date, has not been cured by the earlier of (a) 30 days after Altus gives written notice to Contributor of such breach and (b) two business days prior to the Outside Date; provided that Altus has not waived such breach and Altus is not then in material breach of its representations, warranties, covenants, or agreements under the contribution agreement;

 

   

by Contributor, by written notice to Altus:

 

   

if (i) Altus has breached any of its warranties, covenants, or agreements under the contribution agreement and such breach would or does result in the failure to fulfill any condition obligating Contributor to close the transaction and (ii) such breach is not capable of being cured by the Outside Date or, if curable prior to the Outside Date, has not been cured by the earlier of (a) 30 days after Contributor gives written notice to Altus of such breach and (b) two business days prior to the Outside Date; provided that Contributor has not waived such breach and Contributor is not then in material breach of its representations, warranties, covenants, or agreements under the contribution agreement;

 

   

at any time before Altus stockholders have approved the share issuance proposal and the charter amendment proposal, if an Altus Change of Recommendation has occurred (whether or not such Altus Change of Recommendation is permitted by the contribution agreement); or

 

   

if Altus, any of its subsidiaries, or any director or officer of Altus, APA Corporation or any of their respective subsidiaries, has materially breached Altus’ non-solicitation obligations under the contribution agreement.

Effect of Termination

If the contribution agreement is validly terminated, the contribution agreement (other than Altus’ obligation to pay the termination fee and certain other provisions of the contribution agreement which survive in accordance with their terms) shall become void and of no further force or effect, except that such termination shall not extinguish any right or remedy of any party that has accrued under the contribution agreement prior to any such termination, or release any party from any liability, for any knowing and intentional breach by such party of the terms of the contribution agreement prior to such termination.

Termination Fee Payable by Altus

The contribution agreement requires Altus to pay Contributor a $60.0 million termination fee if:

 

   

Contributor terminates the contribution agreement, at any time prior to the Altus stockholders approving the share issuance proposal, pursuant to its termination right arising as a result of (i) the occurrence of an Altus Change of Recommendation or (ii) a material breach by Altus, any of its subsidiaries, or any director or officer of Altus, APA Corporation, or any of their respective subsidiaries of Altus’ non-solicitation obligations under the contribution agreement; or

 

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either Contributor or Altus terminates the contribution agreement pursuant to such party’s termination right arising as a result of the failure of the Altus stockholders to approve the share issuance proposal and, at such time, Contributor would have been permitted to terminate the contribution agreement pursuant to its termination right arising as a result of (i) the occurrence of an Altus Change of Recommendation or (ii) a material breach by Altus, any of its subsidiaries, or any director or officer of Altus, APA Corporation, or any of their respective subsidiaries of Altus’ non-solicitation obligations under the contribution agreement.

Representations and Warranties

The contribution agreement contains representations and warranties made by Altus and the Partnership to Contributor, and by Contributor to Altus and the Partnership, relating to a number of matters, including the following:

 

   

corporate organization, standing, and power;

 

   

capital structure and title to interests;

 

   

corporate authority and enforceability, absence of violations with governing documents, applicable laws, contracts, and required third-party consents;

 

   

required governmental consents;

 

   

financial statements and, with respect to Altus, Altus’ SEC documents;

 

   

absence of certain changes since December 31, 2020;

 

   

undisclosed liabilities;

 

   

information supplied;

 

   

permits and compliance with applicable law;

 

   

employee compensation and benefits;

 

   

labor matters;

 

   

taxes;

 

   

litigation;

 

   

intellectual property;

 

   

real property;

 

   

rights-of-way and midstream facilities;

 

   

environmental matters;

 

   

material contracts;

 

   

derivative transactions;

 

   

insurance;

 

   

brokers;

 

   

related party transactions;

 

   

with respect to Altus, the fairness opinion of Altus’ financial advisor;

 

   

with respect to Altus, compliance by Altus with takeover laws;

 

   

with respect to Altus, absence of Altus stockholder rights plans;

 

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with respect to Contributor, the absence of ownership of Altus Common Stock by Contributor or any of its subsidiaries;

 

   

with respect to Altus, compliance with securities laws related to the consideration issued by Altus;

 

   

with respect to Contributor, the investor suitability of Contributor;

 

   

regulatory status; and

 

   

Contributor business conduct.

Many of the representations and warranties contained in the contribution agreement are qualified by a materiality standard, including in some cases a “Material Adverse Effect” standard. The representations and warranties do not survive the closing. Moreover, the representations and warranties contained in the contribution agreement are complicated and are not easily summarized. You are urged to carefully read Article III and Article IV of the contribution agreement, a copy of which is attached as Annex B to this proxy statement.

The representations and warranties contained in the contribution agreement were made solely for purposes of the contribution agreement and solely for the benefit of the parties to the contribution agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by reference to forms, reports, certifications, schedules, statements, and documents filed or furnished by Altus with the SEC and by reference to confidential disclosures made by the contracting parties, made for the purposes of allocating contractual risk among the parties to the contribution agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to stockholders. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the contribution agreement, which subsequent information may or may not be fully reflected in Altus’ public disclosures. Altus, or its affiliates, will provide additional disclosure in its public reports to the extent that it is aware of the existence of any material facts that are required to be disclosed under federal securities laws that might otherwise contradict the terms and information contained in the contribution agreement and will update such disclosures as required by federal securities laws.

Conduct of Business Pending the Transaction

Each of Altus and Contributor have agreed to, and to cause their respective subsidiaries to, (i) conduct their operations in the ordinary course of business, in a manner materially consistent with their respective capital expenditure budgets for 2021, and (ii) use reasonable best efforts to preserve intact their respective present business organizations, preserve, maintain, and protect their respective material assets, and maintain, with financially responsible insurance companies, insurance in such amounts and against such risks and losses as is maintained by such party at present, except, in each case for required COVID-19 measures and as otherwise specifically provided for in the contribution agreement.

In addition, each party has agreed to restrictions on certain specified actions, described in more detail below, which may not be taken without the other party’s prior written consent or approval, not to be unreasonably withheld, conditioned, or delayed.

Contributor has agreed, except in connection with the pre-closing reorganization, not to:

 

   

create any encumbrance (other than any permitted encumbrance or any encumbrance that will be released at or prior to the closing) against any of the Contributed Interests;

 

   

sell, transfer, convey, or otherwise dispose of any of the Contributed Interests; or

 

   

agree or commit to do any of the foregoing.

 

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Contributor has also agreed, except in connection with the pre-closing reorganization, as is in the ordinary course of business (except with respect to certain restrictions), or as may be required by applicable law, to cause its subsidiaries not to:

 

   

amend or propose to amend the organizational documents of any Contributor subsidiary;

 

   

(i) authorize, propose to offer, issue, sell, grant, or deliver any interest of any Contributor subsidiary (other than to another Contributor subsidiary) or (ii) amend in any material respect any of the terms of any interests of any Contributor subsidiary outstanding as of the execution date of the contribution agreement;

 

   

(i) split, combine, or reclassify any interests in any Contributor subsidiary, (ii) declare, set aside, or pay any dividends (other than tax distributions pursuant to the organizational documents of a Contributor subsidiary) on, or make any other distribution in respect of, any outstanding interests in any Contributor subsidiary (other than to another Contributor subsidiary), (iii) repurchase, redeem, or otherwise acquire, or offer to repurchase, redeem, or otherwise acquire, any Interests of any Contributor subsidiary, or (iv) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing a liquidation, dissolution, merger, consolidation, restructuring, recapitalization, or other reorganization of any Contributor subsidiary;

 

   

create, incur, guarantee, or assume any indebtedness for borrowed money or otherwise become liable or responsible for the obligations of any other person;

 

   

sell, transfer, convey, or otherwise dispose of, or encumber (other than permitted encumbrances), any (i) individual asset or group of related assets with a fair market value greater than $100,000,000, (ii) individual asset or group of related assets when, after including all other assets sold, transferred, conveyed, or otherwise disposed of during the interim period, the fair market value of all of the assets sold during the interim period would be greater than $250,000,000, or (iii) interest in Permian Highway Pipeline LLC;

 

   

(i) acquire (by merger, consolidation, or acquisition of stock or assets, or otherwise) any corporation, partnership, limited liability company, or other business organization or division thereof, (ii) form any joint venture or similar arrangement, or (iii) except as required by the organizational documents of Permian Highway Pipeline LLC, make any loans, advances, or capital contributions to, or investments in, any person;

 

   

acquire any (i) individual asset or group of related assets with a fair market value greater than $50,000,000 or (ii) individual asset or group of related assets when, after including all other assets acquired during the interim period, the fair market value of all of the assets acquired during the interim period would be greater than $150,000,000;

 

   

change in any material respect any of the financial accounting principles, practices, or methods used by any Contributor subsidiary, except for any change required by reason of a concurrent change in U.S. GAAP;

 

   

(i) make (inconsistent with past practice) or change any material tax election, (ii) settle or compromise any audit or proceeding in respect of material taxes, or (iii) enter into a material tax allocation, sharing, or indemnity contract or arrangement (in each case, other than pursuant to any customary tax sharing or indemnification provisions contained in any agreement entered into in the ordinary course of business and not primarily relating to tax (e.g., leases, credit agreements, or other commercial agreements));

 

   

enter into, terminate, assign or waive any material rights under any Contributor material contract, Contributor right-of-way, or Contributor real property lease;

 

   

cancel, modify, or waive any debts or claims held by any Contributor subsidiaries or waive any rights held by any Contributor subsidiaries having, in each case, a value in excess of $50,000,000 in the aggregate;

 

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waive, release, assign, settle, or compromise or offer or propose to waive, release, assign, settle, or compromise, any proceeding (excluding any proceeding with respect to taxes, which are addressed above) other than (i) the settlement of such proceedings involving only the payment of monetary damages by a Contributor subsidiary of an amount not exceeding $25,000,000 in the aggregate and (ii) as would not result in any restriction on future activity or conduct or a finding or admission of a violation of law;

 

   

fail to preserve and maintain all of its material Contributor permits;

 

   

(i) adopt, establish, enter into, materially amend, or terminate any Contributor benefit plan (except for amendments required by law), (ii) accelerate the payment, the right to payment, funding, or vesting of any compensation or benefits under any Contributor benefit plan, (iii) materially increase base wages, compensation, or fringe benefits of, or grant or announce any, bonus, incentive award, or similar compensation to, any current or former employee, consultant, manager, director, or officer of any Contributor subsidiary other than in the ordinary course of business, (iv) grant any severance or termination pay to any current or former manager, director, officer, or employee of any Contributor subsidiary, (v) terminate any employee or individual service provider whose compensation or severance would exceed $2,000,000 on an annualized basis, or (vi) hire or otherwise enter into any employment or consulting agreement or arrangement with any individual person whose annual base and bonus compensation would exceed $1,500,000; or

 

   

agree or commit to do any of the foregoing.

Altus has agreed, except as is in the ordinary course of business (except with respect to certain restrictions, or any matter that would require approval of the conflicts committee of the Altus Board) or as may be required by applicable law, not to, and to cause its subsidiaries not to:

 

   

amend or propose to amend the organizational documents of Altus or any of the Altus subsidiaries;

 

   

(i) authorize, propose to offer, issue, sell, grant, or deliver any interest of Altus or any Altus subsidiary (other than to Altus or another Altus subsidiary, upon the exercise of Altus warrants outstanding as of the execution date of the contribution agreement, or upon the exchange of Common Units and Class C Common Stock in accordance with the organizational documents of the Partnership and Altus, respectively) or (ii) amend in any material respect any of the terms of any interests of Altus or any Altus subsidiary outstanding as of the execution date of the contribution agreement;

 

   

(i) split, combine, or reclassify any interests in Altus, (ii) declare, set aside, or pay any dividends on, or make any other distribution in respect of, any outstanding interests in Altus or the Partnership, (iii) repurchase, redeem, or otherwise acquire, or offer to repurchase, redeem, or otherwise acquire, any interests in Altus, or (iv) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing a liquidation, dissolution, merger, consolidation, restructuring, recapitalization, or other reorganization of Altus or any of the Altus subsidiaries;

 

   

create, incur, guarantee, or assume any indebtedness for borrowed money or otherwise become liable or responsible for the obligations of any other person;

 

   

sell, transfer, convey, or otherwise dispose of, or encumber (other than permitted encumbrances), any (i) individual asset or group of related assets with a fair market value greater than $5,000,000, (ii) individual asset or group of related assets when, after including all other assets sold, transferred, conveyed, or otherwise disposed of during the interim period, the fair market value of all of the assets sold during the interim period would be greater than $5,000,000 or (iii) interests in any Company JV;

 

   

(i) acquire (by merger, consolidation, or acquisition of stock or assets, or otherwise) any corporation, partnership, limited liability company, or other business organization or division thereof, (ii) form any joint venture or similar arrangement, or (iii) except as required by the organizational documents of the Company JVs, make any loans, advances, or capital contributions to, or investments in, any person;

 

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acquire any (i) individual asset or group of related assets with a fair market value greater than $5,000,000 or (ii) individual asset or group of related assets when, after including all other assets acquired during the interim period, the fair market value of all of the assets acquired during the interim period would be greater than $5,000,000;

 

   

change in any material respect any of the financial accounting principles, practices, or methods used by Altus or any Altus subsidiary, except for any change required by reason of a concurrent change in U.S. GAAP;

 

   

(i) make (inconsistent with past practice) or change any material tax election, (ii) settle or compromise any audit or proceeding in respect of material taxes, or (iii) enter into a material tax allocation, sharing, or indemnity contract or arrangement (in each case, other than pursuant to any customary tax sharing or indemnification provisions contained in any agreement entered into in the ordinary course of business and not primarily relating to tax (e.g., leases, credit agreements, or other commercial agreements));

 

   

enter into, terminate, assign, or waive any material rights under any Altus material contract, Altus right-of-way, or Altus real property lease;

 

   

cancel, modify, or waive any debts or claims held by Altus or any Altus subsidiaries or waive any rights held by Altus or any Altus subsidiaries having, in each case, a value in excess of $5,000,000 in the aggregate;

 

   

waive, release, assign, settle, or compromise or offer or propose to waive, release, assign, settle, or compromise, any proceeding (excluding any proceeding with respect to taxes, which are addressed above) other than (i) the settlement of such proceedings involving only the payment of monetary damages by Altus or any Altus subsidiaries of an amount not exceeding $50,000 in the aggregate and (ii) as would not result in any restriction on future activity or conduct or a finding or admission of a violation of law;

 

   

fail to preserve and maintain all of its material Altus permits;

 

   

(i) adopt, establish, enter into, materially amend, or terminate any Altus benefit plan (except for amendments required by law), (ii) accelerate the payment, the right to payment, funding, or vesting of any compensation or benefits under any Altus benefit plan, (iii) materially increase base wages, compensation, or fringe benefits of, or grant or announce any, bonus, incentive award, or similar compensation to, any current or former employee, consultant, manager, director, or officer of Altus or any Altus subsidiary other than in the ordinary course of business, (iv) grant any severance or termination pay to any current or former manager, director, officer, or employee of Altus or any Altus subsidiary other than in the ordinary course of business, (v) terminate any employee or individual service provider whose compensation or severance would exceed $600,000 on an annualized basis, or (vi) hire or otherwise enter into any employment or consulting agreement or arrangement with any individual person whose annual base and bonus compensation would exceed $300,000; or

 

   

agree or commit to do any of the foregoing.

Employee Benefits Matters

Pursuant to the terms of the contribution agreement, for a period of at least one year following the closing date, Altus will provide each Apache Corporation employee who transfers employment to Altus after closing with (i) an annual base salary or hourly wage rate and target bonus opportunity that is substantially similar to similarly situated employees of Contributor and (ii) employee benefits that are no less valuable, in the aggregate, than the employee benefits provided by Contributor to similarly situated employees of Contributor.

In addition, Altus has agreed to cause each Apache Corporation employee who transfers employment to Altus after closing to be immediately eligible to participate in each Contributor benefit plan after closing and to credit each such transferred employee service with Apache Corporation and its affiliates for purposes of

 

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eligibility to participate, vesting, and benefit accrual (other than for purposes of defined benefit pension accrual or post-employment retiree welfare benefits) with respect to the Contributor benefit plans in which any such transferred employee is eligible to participate after closing; provided, however, that such service need not be recognized to the extent that such recognition would result in any duplication of benefits for the same period of service. Further, Altus is obligated, for purposes of each Contributor benefit plan in which any transferred employee is eligible to participate after closing, to (i) cause all pre-existing condition exclusions, waiting periods, evidence of insurability, and actively-at-work requirements to be waived for each transferred employee and their covered dependents, to the extent such conditions were inapplicable or waived under the comparable Apache Corporation or Altus benefit plan in which such transferred employee participated immediately prior to closing and (ii) give full credit for all co-payments, coinsurance, maximum out-of-pocket requirements, and deductibles under applicable Apache Corporation or Altus benefit plans to the extent incurred or satisfied, as applicable, in the plan year in which closing occurs as if there had been a single continuous employer. Altus is also obligated to take all action necessary to allow each transferred employee to rollover his or her full account balance (including participant loans) in the Apache Corporation 401(k) Savings Plan to the EagleClaw Midstream 401(k) Plan.

In the event Altus or any of its subsidiaries terminates the employment of any transferred employee for reasons other than cause, death, or disability prior to the one year period following closing, Altus has agreed to provide such terminated transferred employee with severance benefits that are no less favorable than the greater of (i) those that would have been provided to such transferred employee under the severance plan or program applicable to such transferred employee immediately prior to the closing date or (ii) those that may be provided to such transferred employee under the terms of an Altus benefit plan or Contributor benefit plan applicable to similarly situated employees, whichever is more favorable to such transferred employee; provided, that, Altus is not required to provide severance payments and benefits to a terminated transferred employee in excess of 100% of such transferred employee’s annual base salary. Such severance benefits may be contingent upon the employee’s execution, and non-revocation of, a standard general release and waiver agreement and compliance with confidentiality and other restrictive covenants.

With respect to each existing APA Corporation equity, equity-based, or incentive award held immediately prior to closing by any transferred employee that will be forfeited pursuant to the terms of the applicable APA Corporation plan or award as a result of the transfer of employment of such transferred employee, Altus has agreed to grant such transferred employee an equity, equity-based, or incentive award that has an equivalent monetary value and substantially similar terms (including the same vesting dates, triggers and settlement terms) to that of the forfeited award.

Regulatory Approvals Required for the Transaction

Altus and Contributor have agreed to prepare and file with the appropriate governmental entities and other third parties all authorizations, consents, notifications, certifications, registrations, declarations, and filings that are necessary in order to consummate the transaction and to diligently and expeditiously prosecute such matters and cooperate with each other in the prosecution of such matters. However, neither Altus nor Contributor, nor any of their respective affiliates, are required to pay any consideration to any third parties to obtain any such person’s authorization approval, consent or waiver to effectuate the transaction, other than filing, recordation, or similar fees. In connection with such matters, Altus is obligated not to agree to any actions, restrictions, or conditions with respect to obtaining any such authorizations without Contributor’s prior written consent.

In addition, Altus and Contributor have agreed to make any filings required under the HSR Act, and to cooperate fully with each other and furnish to the other such necessary information and reasonable assistance as the other may reasonably request in connection with its preparation of any filings and in connection with obtaining all required consents, authorizations, orders, expirations, terminations, waivers, or approvals under any applicable antitrust laws. Altus and Contributor have each agreed to use reasonable best efforts to ensure the prompt expiration or termination of any applicable waiting period under the HSR Act and to promptly respond to any request for information or documents from any governmental entity charged with enforcing, applying,

 

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administering, or investigating the HSR Act or any other antitrust laws, including the Federal Trade Commission, the Department of Justice, and any attorney general of any state of the United States (Antitrust Authorities). Altus and Contributor have agreed to keep each other apprised of the status of any communications with, and any inquiries or requests for additional information from any Antitrust Authority, and to promptly provide each other with copies of any written communications with any Antitrust Authority. Altus and Contributor have further agreed to use reasonable best efforts to (i) cooperate with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party, (ii) provide each other with advance copies and a reasonable opportunity to comment on all proposed notices, submissions, filings, applications, undertakings, and information and correspondence proposed to be supplied to or filed with any Antitrust Authority, except the parties’ HSR Act filings, regarding the transaction, (iii) resolve any objections as may be asserted by any Antitrust Authority with respect to the transaction, (iv) contest and resist any proceeding instituted (or threatened in writing to be instituted) by any Antitrust Authority challenging the transaction or contribution agreement as being in violation of any law, and (v) to the extent permitted by applicable law, provide each other a reasonable opportunity to attend and participate in any meetings, discussions, telephone conversations, or correspondence with an Antitrust Authority (provided that materials required to be provided in connection therewith may be redacted to remove certain sensitive information). Notwithstanding each party’s obligations in connection with obtaining necessary approvals under the HSR Act and other antitrust laws, neither Altus nor Contributor, nor any of their respective affiliates, are required to, and may not, without the other party’s consent, take any action that would reasonably be expected to have a material adverse effect on the financial condition, business, revenue, or earnings of Altus and its subsidiaries from and after closing. Further, any action required to be taken in connection with each party’s obligation to seek necessary antitrust approvals may be conditioned upon the occurrence of the closing.

Altus and Contributor have agreed not take any action that could reasonably be expected to hinder or delay in any material respect the expiration or termination of the required waiting period under the HSR Act or any other applicable antitrust laws, or any consent or approval required pursuant to any other applicable antitrust laws.

Indemnification; Directors’ and Officers’ Insurance

Altus has agreed, for a period of six years after closing, to maintain in effect and continue to provide to the fullest extent permitted by applicable law all rights to indemnification, advancement of expenses, exculpation, and other limitations on liability currently existing in favor of any current or former officer, manager, director, or similar individual of the Contributed Entities, the Contributor subsidiaries, Altus, the Altus subsidiaries, or the Company JVs (solely with respect to the Company JVs, to the extent such person was appointed by Altus) under, and on terms no less favorable than, those contained in, the organizational documents of such entities in effect as of closing and any written indemnification agreements with any such indemnified person. Under the terms of the contribution agreement, any successor to Altus or the Altus subsidiaries must succeed to and be bound by such indemnification obligations. Such indemnification obligations may not be terminated or modified in such a manner as to materially and adversely affect any person entitled to indemnification thereunder without such person’s prior written consent.

In addition, prior to closing:

 

   

the Contributed Entities are obligated to obtain and fully pay the premium for “tail” insurance policies for the extension of the directors’ and officers’ liability insurance coverage of the Contributed Entities’ existing directors’ and officers’ liability insurance policies, in each case, with a claims period of six years from the closing date and with at least the same coverage and amounts and containing terms and conditions that are not less advantageous to such directors and officers, in each case with respect to claims arising out of or relating to events which occurred before or at the closing (including in connection with the transaction); and

 

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subject to the Contributed Entities’ written consent (not to be unreasonably withheld, conditioned, or delayed), Altus is obligated to either:

 

   

obtain and fully pay the premium for “tail” insurance policies for the extension of the directors’ and officers’ liability insurance coverage of Altus’ existing directors’ and officers’ liability insurance policies, in each case, with a claims period of six years from the closing date and with at least the same coverage and amounts and containing terms and conditions that are not less advantageous to such directors and officers, in each case with respect to claims arising out of or relating to events which occurred before or at the closing (including in connection with the transaction), provided that Altus is not required to expend an annual premium for such coverage in excess of 300% of the last annual premium paid by Altus or the Contributed Entities, as applicable; or

 

   

continue existing directors’ and officers’ liability insurance coverage under Altus’ existing directors’ and officers’ liability insurance policies following closing to cover the post-transaction directors and officers of Altus, subject to obtaining any consents necessary to continue such coverage following closing.

Altus has agreed, at closing, to enter into customary indemnification agreements with the post-transaction directors and officers of Altus, which indemnification agreements shall continue to be effective following the closing. Any indemnification agreements with the pre-transaction directors and officers of Altus or the Contributed Entities in effect as of the execution date of the contribution agreement shall continue to be effective following closing, and Altus has agreed to honor and fully perform such indemnification agreements.

Expenses

Except as expressly provided in the contribution agreement, including payment of the Altus termination fee, Altus and EagleClaw Midstream have agreed that all fees and expenses incurred in connection with the contribution agreement and the transaction will be paid by the party incurring such fee or expense, whether or not the closing occurs (it being understood that expenses incurred by BCP and its subsidiaries will not be borne by Contributor or any of its equity owners).

Transition Services

Altus and Contributor have agreed to use reasonable best efforts to negotiate in good faith and agree on a form transition services agreement, pursuant to which Altus and its subsidiaries will agree to provide certain transition services to Contributor and its subsidiaries from and after closing, which transition services will include certain items agreed to by the parties at execution of the contribution agreement and such other items as may be mutually agreed and are reasonably required to conduct the business and operations of Altus and its subsidiaries in a manner substantially similar as conducted prior to closing.

Third Party Finance Consents; Company JV Consents

Altus has agreed, prior to closing, not to, and not to permit its subsidiaries to, amend, rescind, supplement, supersede, or otherwise modify the Credit Agreement Consent, the Series A Preferred Consent, or any of the Company JV Consents (each as described below), in each case in effect as of the execution of the contribution agreement, and to cause all of the conditions to the obligations of the counterparties to such consents to be satisfied and to deliver all deliverables required to be delivered by Altus or its subsidiaries, in each case, to the extent the satisfaction of such conditions or the delivery of such deliverables is within the control of Altus or its subsidiaries and is required prior to closing pursuant to the terms of such consent.

On October 15, 2021, the Partnership entered into (i) a limited waiver and third amendment to its Credit Agreement, dated as of November 9, 2018, with the lenders and issuing banks party thereto and JPMorgan Chase

 

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Bank, N.A., as administrative agent, and (ii) a lender fee letter with JPMorgan Chase Bank, N.A., as administrative agent (together, the Credit Agreement Consent), pursuant to which the administrative agent, lenders, and issuing banks waive the change-of-control default that would occur upon consummation of the transaction and agree to certain related amendments giving effect to the combined company, and the Partnership agrees to pay a fee equal to 5.0 basis points of each signing lender’s commitment. The Credit Agreement Consent would become effective on closing the transaction and satisfaction of other customary conditions.

On October 21, 2021, the Partnership entered into a waiver and consent agreement (Series A Preferred Consent) with requisite holders of the Series A Preferred Units and the Third Amended and Restated Agreement of Limited Partnership of the Partnership (as described under “—Third Amended and Restated Agreement of Limited Partnership of the Partnership”). Pursuant to the Series A Preferred Consent, among other things, such holders of Series A Preferred Units consented to the execution of the contribution agreement, the Amended and Restated Stockholders Agreement, and the Second Amended and Restated Registration Rights Agreement and the consummation of the transaction, and waived their right to cause a redemption of the Series A Preferred Units with respect to the transaction. The Series A Preferred Consent provides that on the closing date of the transaction, the Partnership will (i) redeem for cash 100,000 Series A Preferred Units for the redemption price specified in the Third Amended and Restated Agreement of Limited Partnership of the Partnership and (ii) pay a consent fee of $2,625,000 to the holders of Series A Preferred Units pro rata among such holders.

In connection with the contribution agreement, the Partnership entered into agreements consenting to the transaction (the Company JV Consents) with the partners in the Partnership’s joint venture pipeline interests (the Company JVs).

Dividends and Distributions Pending Closing

Altus and the Partnership, respectively, have agreed, during the interim period, to declare and pay regular quarterly cash dividends to holders of Class A Common Stock and regular cash distributions to the holders of the Common Units, in each case consistent with past practice, subject to applicable law and in accordance with the organizational documents of Altus and the Partnership, respectively. Altus and the Partnership have further agreed that, during the interim period, Altus’ management will continue recommending to the Altus Board a quarterly dividend no greater than $1.50 per share or per unit on the Class A Common Stock and the Common Units, respectively, with payment to occur towards the end of each quarter.

The contribution agreement does not prohibit or restrict the Partnership from complying with its distribution obligations in respect of the Partnership’s Series A Preferred Units.

Resignations and Appointments

Altus has agreed to use reasonable best efforts to cause each director and officer of Altus and its subsidiaries to resign such director’s or officer’s position with Altus or its subsidiaries, as applicable, effective as of the closing. At the closing, Altus has agreed to cause the Altus Board to consist of (i) the chief executive officer of Altus following closing, (ii) three directors designated by BX Aggregator, (iii) two directors designated by ISQ, (iv) one director designated by Apache Midstream, and (v) four directors that would qualify as independent for purposes of service on the audit committee of Altus under Nasdaq rules, the Exchange Act, and the Sarbanes-Oxley Act of 2002, two of whom will be designated by Apache Midstream and two of whom will be designated by BX Aggregator; provided, that Apache Midstream shall have one (but no more than one) opportunity to veto one of the two proposed independent directors designated by BX Aggregator, and BCP shall have one (but no more than one) opportunity to veto one of the two proposed independent directors designated by Apache Midstream.

Dividend Reinvestment Plan

Altus and Contributor have agreed that, as promptly as practicable after closing, Altus will take all action reasonably necessary to implement a dividend reinvestment plan with respect to the Class A Common Stock and

 

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maintain such plan for so long as limited partners of the Partnership are entitled to reinvest distributions from the Partnership under the organizational documents of the Partnership. For additional information on the dividend reinvestment plan, see “Amended and Restated Stockholders Agreement—Dividend Reinvestment Plan” below.

Other Covenants and Agreements

The contribution agreement contains additional covenants and agreements between the parties relating to the following matters:

 

   

granting the other party reasonable access to such party’s assets, books and records, contracts, documents, officers, employees, agents, legal advisors, and accountants, and furnishing such additional information as may be reasonably requested;

 

   

certain tax matters;

 

   

making certain public announcements regarding the terms of the contribution agreement or the transaction;

 

   

replacing existing credit support obligations currently provided by APA Corporation, Contributor, or their respective affiliates;

 

   

providing each other notice of the occurrence of certain events and using reasonable best efforts to consummate the transaction in an expeditious manner;

 

   

cooperating in the defense or settlement of litigation proceedings relating to the transaction;

 

   

terminating existing intercompany accounts and certain affiliate contracts between Contributor or its affiliates, on the one hand, and any Contributor subsidiary, on the other hand;

 

   

avoiding actions that would cause the transaction to be subject to applicable state takeover laws;

 

   

obtaining Nasdaq’s approval for the listing of shares of Class C Common Stock issued at closing and shares of Class A Common Stock issuable upon the exchange of the Common Units issued at closing.

 

   

assigning to Altus certain trademarks used by Altus that are currently owned by APA Corporation or its subsidiaries;

 

   

providing Contributor assistance with financing efforts to reflect the consolidation of the assets of Altus with those of the Contributed Entities;

 

   

maintaining Altus’ eligibility to use Form S-3 promulgated under the Securities Act;

 

   

taking certain actions to ensure that Altus is exempt under Rule 16b-3 under the Exchange Act;

 

   

allowing Contributor and its affiliates to consummate the internal reorganization agreed to by the parties; and

 

   

obligating Altus not to elect the cash settlement option pursuant to any exchanges or redemptions of Common Units pursuant to certain provisions of the voting and support agreement.

Waivers; Amendments

Any party to the contribution agreement may waive any inaccuracies in the warranties of the other contained in the contribution agreement or in any document, certificate, or writing delivered pursuant thereto or waive compliance by the other parties with any of the other parties’ agreements or fulfillment of any conditions to its own obligations contained therein, provided that such waiver is set forth in writing and signed by or on behalf of such waiving party. The contribution agreement may not be amended except by an instrument in writing signed by or on behalf of all parties.

 

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Voting and Support Agreement

In connection with the contribution agreement, on October 21, 2021, Contributor, BCP, Apache Midstream, and solely for the limited purposes set forth therein, APA Corporation, entered into a voting and support agreement in support of the transaction (the voting and support agreement).

Voting Requirements

Pursuant to the voting and support agreement, Apache Midstream has agreed to vote all of its shares of Altus Common Stock:

 

   

in favor of approving any matters necessary for the consummation of the transaction contemplated by the contribution agreement (transaction matters); and

 

   

against (i) any agreement, transaction, or proposal that relates to a Company Competing Proposal, without regard to the terms of such Company Competing Proposal or any other transaction, proposal, agreement, or action made in opposition to adoption of the contribution agreement or in competition or inconsistent with the transaction or matters contemplated by the contribution agreement; (ii) any action, agreement, or transaction that would reasonably be expected to result in a breach of any covenant, representation, or warranty or any other obligation or agreement of the Altus or any of its subsidiaries contained in the contribution agreement or of Apache Midstream contained in the voting and support agreement; (iii) any action or agreement that would reasonably be expected to result in (x) any of the closing conditions contained in the contribution agreement not being fulfilled or (y) any change to the voting rights of any class of shares of capital stock of Altus (including by any amendments to the Altus’ organizational documents other than, for the avoidance of doubt, any amendments contemplated by the contribution agreement); and (iv) any other action, agreement or transaction that would reasonably be expected to impede, interfere with, delay, discourage, postpone, or adversely affect any of the transaction matters.

Notwithstanding the foregoing, in the event the Altus Board makes an Altus Change of Recommendation in accordance with the contribution agreement, the obligations of Apache Midstream will be modified such that the number of shares of Altus Common Stock that Apache Midstream must vote pursuant to the foregoing will be equal to the sum of:

 

  (a)

the number of shares of Altus Common Stock owned by Apache Midstream that would represent, as of the time of such Altus Change of Recommendation, 35% of the aggregate voting power of the outstanding shares of Altus Common Stock entitled to vote thereon (such shares, Apache Midstream locked-up shares); plus

 

  (b)

the number of shares of Altus Common Stock owned by Apache Midstream the aggregate voting power of which, as a percentage of the aggregate voting power of all shares of Altus Common Stock (other than the Apache Midstream locked-up shares), is equal to the percentage of aggregate voting power with respect to all shares of Altus Common Stock voted by the Altus common stockholders (excluding Apache Midstream) either in favor of or against approving the transaction matters, voting in favor of approving the transaction matters.

For an example of the calculation under (b) above, if 50% of the total aggregate voting power with respect to all shares of Altus Common Stock voted by Altus common stockholders (excluding Apache Midstream) either to approve or reject the transaction matters votes to approve the transaction matters, Apache Midstream must vote 50% of the aggregate voting power represented by all shares of Altus Common Stock owned by Apache Midstream (that are not Apache Midstream locked-up shares) to approve the transaction matters.

Following any Altus Change of Recommendation, Apache Midstream is entitled to vote any of its shares of Altus Common Stock that are not otherwise obligated to be voted pursuant to the foregoing in its sole discretion with respect to the transaction matters, including to abstain from voting on any such matter.

 

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Proxy

Apache Midstream irrevocably appointed BCP, and any person designated in writing by BCP, as its proxy and attorney-in-fact, to consent to or vote the shares of Altus Common Stock owned by Apache Midstream as required by the voting and support agreement, provided that such proxy does not apply to any other matters for which Apache Midstream is entitled to vote any shares of Altus Common Stock. The proxy granted under the voting and support agreement will be automatically revoked immediately following the conclusion of any meeting of Altus common stockholders concerning the transaction matters at which the shares of Altus Common Stock owned by Apache Midstream have been voted as required by the voting and support agreement.

Transfer Restrictions

Apache Midstream has further agreed not to transfer any of its shares of Altus Common Stock prior to closing (or the earlier termination of the contribution agreement), provided that Apache Midstream is permitted to sell in one or more registered offerings up to four million shares of Class A Common Stock, so long as Apache Midstream agrees to use at least $75 million of the first proceeds from such offerings for well drilling and completion activity at the Alpine High resource play within 18 months of the closing of any such offerings, and, in any offering that is not an underwritten offering, so long as Apache Midstream uses reasonable best efforts to sell such shares to no fewer than eight unaffiliated persons.

No Solicitation

APA Corporation and Apache Midstream agreed not to, and to cause their subsidiaries and their respective officers, directors, and other representatives not to, directly or indirectly, take certain of the actions Altus is prohibited from taking pursuant to the non-solicitation covenants contained in the contribution agreement. Further, APA Corporation and Apache Midstream agreed to immediately cease any discussions or negotiations with any person with respect to any inquiry, proposal, or offer that constitutes, or would reasonably be expected to lead to, a Company Competing Proposal, and to cause their respective subsidiaries, directors, and officers and other representatives to do the same. APA Corporation and Apache Midstream also agreed to be subject to the covenant contained in the contribution agreement obligating Altus to inform Contributor of any permitted discussions or negotiations relating to a Company Competing Proposal, and to keep Contributor apprised of the status thereof, as if APA Corporation or Apache Midstream, as applicable, were “the Company” thereunder. In addition, APA Corporation and Apache Midstream agreed not to, and to cause their respective affiliates (other than Altus or its subsidiaries) not to, directly or indirectly, modify, alter, or amend, or offer or agree to, directly or indirectly, modify, alter, or amend any contract with Altus or its subsidiaries to facilitate a Company Competing Proposal.

Employee Matters

APA Corporation and Apache Midstream also agreed to, and to cause their respective affiliates to, and to use reasonable best efforts to cause their representatives to, comply with certain of Altus’ covenants relating to employee matters contained in the contribution agreement that are (i) applicable to APA Corporation as if APA Corporation and Apache Midstream were parties thereto and (ii) applicable to Altus as if APA Corporation and Apache Midstream were “the Company” thereunder.

Commercial Agreements

APA Corporation further agreed, at the closing, to cause the termination of (i) the construction, operations and maintenance agreement, dated as of November 9, 2018, by and between Apache Corporation and Altus (COMA), and (ii) the April 23, 2019 letter from Apache Corporation to Altus regarding the waiver of direct general and administrative costs under the COMA.

 

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APA Corporation also agreed to cause Apache Corporation to (i) execute and deliver a trademark assignment in an agreed form, pursuant to which, Apache Corporation would assign to Altus certain trademarks and (ii) record the fully executed trademark assignment in the U.S. Patent and Trademark Office.

Amended and Restated Stockholders Agreement

In connection with the contribution agreement, on October 21, 2021, APA Corporation, Apache Midstream, Altus, Contributor, the BX Holders, ISQ and, solely for the limited purposes set forth therein, BCP, entered into an Amended and Restated Stockholders Agreement (as amended and restated, the stockholders agreement), which stockholders agreement is to be effective as of closing, if ever, provided that the obligation of the parties to negotiate the dividend reinvestment plan described below, so that it can be implemented promptly following closing, is effective as of October 21, 2021. The stockholders agreement amends and replaces the existing stockholders agreement, dated November 9, 2018, among Altus, Kayne Anderson Sponsor, LLC, and Apache Midstream.

Corporate Governance

Under the stockholders agreement, Apache Midstream, BX Aggregator, and ISQ will each be entitled, effective as of the closing date, to designate directors to the Altus Board as follows:

 

   

Apache Midstream will have the right to designate to the Altus Board one director for so long as Apache Midstream and its affiliates beneficially own 10% or more of the outstanding shares of Altus Common Stock;

 

   

ISQ will have the right to designate to the Altus Board (i) two directors for so long as ISQ and its affiliates beneficially own 20% or more of the outstanding shares of Altus Common Stock; and (ii) one director for so long as ISQ and its affiliates beneficially own 10% or more (but less than 20%) of the outstanding shares of Altus Common Stock; and

 

   

BX Aggregator will have the right to designate to the Altus Board (i) three directors for so long as BX Aggregator and its affiliates beneficially own 30% or more of the outstanding shares of Altus Common Stock; (ii) two directors for so long as BX Aggregator and its affiliates beneficially own 20% or more (but less than 30%) of the outstanding shares of Altus Common Stock; and (iii) one director for so long as BX Aggregator and its affiliates beneficially own 10% or more (but less than 20%) of the outstanding shares of Altus Common Stock.

For purposes of determining beneficial ownership percentages applicable to each party’s director designation rights set forth above, any shares issued by Altus in any primary issuance that occurs on a date between October 21, 2021 and December 31, 2022 shall not be considered outstanding until the day following Altus’ annual meeting that occurs in the 2023 calendar year.

In addition, each of Apache Midstream and BX Aggregator have the one-time right to designate to the Altus Board, solely as of the closing date, two directors (each) who qualify as independent under the listing rules of the principal national securities exchange on which shares of Class A Common Stock are listed for trading, provided that Apache Midstream is entitled to reject one of the two proposed independent directors designated by BX Aggregator, and BCP is entitled to reject one of the two proposed independent directors designated by Apache Midstream, in which case, BX Aggregator or Apache Midstream, as applicable, has the right to designate an alternative independent director.

Further, the parties to the stockholders agreement have agreed that BX Aggregator will have the right to designate one of its director designees as the non-executive chairperson of the Altus Board until the earlier of December 31, 2024 and such time as BX Aggregator and its affiliates are no longer entitled to designate directors under the stockholders agreement.

 

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Lockup and Transfer Restrictions

Each of APA Corporation, Apache Midstream, Contributor, the BX Holders, and ISQ have agreed to certain lockup and transfer restrictions pursuant to the stockholders agreement. For a period of 12 months following closing, neither APA Corporation, Apache Midstream, Contributor, the BX Holders, or ISQ or their respective affiliates may, without Altus’ prior written consent, transfer any shares of Altus Common Stock owned by such party, subject to certain limited exceptions, including Apache Midstream’s ability to engage in certain permitted offerings up until the end of the 90-day period following the closing date of the transaction (the Apache priority window) pursuant to the registration rights agreement (see “—Second Amended and Restated Registration Rights Agreement—Permitted Apache Offering” below for more detail).

Dividends and Distributions

The stockholders agreement also provides that, for so long as Apache Midstream, ISQ, or BX Aggregator is entitled to designate a director thereunder, Altus may not take any action to reduce, delay, or discontinue a dividend of $1.50 per share of Class A Common Stock per quarter, commencing on the closing date and ending on December 31, 2023, without the prior written consent of each of Apache Midstream, ISQ, and BX Aggregator, as applicable, permitting such action, subject to compliance with Altus’ governing documents and applicable provisions of law, regulation, legal duty (including fiduciary duty) or requirement, or rule of the primary national securities exchange on which the shares of Class A Common Stock are then listed for trading.

Dividend Reinvestment Plan

The parties to the stockholders agreement have also agreed to negotiate and enter into definitive documentation that contain the terms agreed to by the parties with respect to the adoption by Altus of a dividend reinvestment plan to be implemented promptly following the closing date. Under such terms, each of Apache Midstream, ISQ, the BX Holders, and Contributor would be obligated to reinvest in shares of Class A Common Stock at least 20% of all distributions on Common Units, or dividends on shares of Class A Common Stock (as of the closing date), held by such party immediately after closing, including shares of Class A Common Stock received at a later date in exchange for Common Units held immediately after closing. The audit committee of the Altus Board shall have the authority to increase the percentage of the mandatory dividend reinvestment to up to 100% of such distributions or dividends. The mandatory obligations of each party pursuant to such dividend reinvestment plan would continue from closing until the date dividends are declared by Altus for the quarter ending December 31, 2023. In addition, all other holders of shares of Class A Common Stock will have the optional right to reinvest all or part of any dividends on the shares of Class A Common Stock on substantially the same terms as apply to Apache Midstream, ISQ, the BX Holders, and Contributor. All shares of Class A Common Stock issued in connection with the dividend reinvestment plan will be issued at a 3% discount to the volume weighted average price of the Class A Common Stock for the five trading days prior to the applicable record date.

Related Party Transactions

The stockholders agreement provides that any transaction between Altus or its subsidiaries, on the one hand, and any stockholder subject to the stockholders agreement, or any affiliate of such stockholder, on the other hand, that constitutes a related party transaction such that disclosure would be required pursuant to Item 404(a) of Regulation S-K under the Exchange Act (provided that all references to “$120,000” thereunder are deemed to be references to “$5,000,000” for purposes of the stockholders agreement), require the prior approval of 66% or more of the disinterested directors on the Altus Board, as determined by the Altus Board.

Corporate Opportunities Waiver

The stockholders agreement also provides for a limited waiver of the doctrine of corporate opportunity with respect to Altus and its officers and directors and the Sponsors, and any of their respective affiliates (each, an

 

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Identified Person), except with respect to any of the directors or officers of Altus in connection with a corporate opportunity (i) that was offered to such person solely in his or her capacity as a director or officer of Altus, (ii) that is one Altus is legally and contractually permitted to undertake and would otherwise be reasonable for Altus to pursue, and (iii) to the extent the director or officer is permitted to refer such opportunity to Altus without violating any legal obligation. Any Identified Person may, among other things, engage in a corporate opportunity in the same or similar business activities or lines of business as Altus or otherwise compete with Altus.

Voting Agreements

In connection with the stockholders agreement, each of (i) Apache Midstream and APA Corporation, (ii) ISQ, and (iii) the BX Holders entered into separate voting agreements with Altus, each dated as of October 21, 2021 (each a “voting agreement” and collectively, the voting agreements), which voting agreements are to be effective as of the closing date, if ever.

The voting agreements require each of the stockholders party thereto to cast all votes to which such stockholder is entitled in respect of shares of Altus Common Stock beneficially owned by such stockholder, whether at any annual or special meeting, by written consent or otherwise, so as to cause to be elected to the Altus Board the directors designated by the other stockholder parties pursuant to the stockholders agreement (excluding any independent directors). To the extent there are directors to be selected in addition to the directors designated pursuant to the stockholders agreement, each stockholder is free to vote for its preferred candidate or candidates. The voting agreements also provide that each stockholder may not take action to remove any director designated by another stockholder pursuant to the stockholders agreement (excluding any independent directors). The voting agreements each terminate automatically as to the applicable stockholder upon such stockholder ceasing to beneficially own 10% of the outstanding shares of Altus Common Stock.

Second Amended and Restated Registration Rights Agreement

At the closing, Altus will enter into a Second Amended and Restated Registration Rights Agreement (as amended and restated, the registration rights agreement) with Apache Midstream, the BX Holders, ISQ, and Contributor (collectively, with their respective permitted transferees, the principal holders) and certain individual holders party thereto (the existing holders and, together with the principal holders, the holders), which registration rights agreement will amend and restate the existing amended and restated registration rights agreement, dated as of November 9, 2018, among Altus, Kayne Anderson Sponsor, LLC, and Apache Midstream (the existing registration rights agreement).

The registration rights agreements provides the holders with certain registration rights with respect to (i) the private placement warrants (including any shares of Class A Common Stock issued or issuable upon the exercise of such private placement warrants) held by any existing holders, (ii) any outstanding shares of Class A Common Stock or any other equity security (including the shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of Altus owned by any holder as of the date of the registration rights agreement, (iii) the shares of Class A Common Stock issued or issuable upon the redemption or exchange of any Common Units and Class C Common Stock owned by any holder, in each case in accordance with the terms of the Partnership’s partnership agreement, (iv) any shares of Class A Common Stock issued or issuable upon the exercise of any warrants held by Apache Midstream, (v) any other equity security of Altus issued or issuable with respect to any registrable security by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, or reorganization, (vi) the shares of Altus Common Stock, if any, issued to Apache Midstream in connection with the earn-out consideration pursuant to the contribution agreement dated August 8, 2018 among Altus, the Partnership, Apache Midstream, and the other parties thereto, and (vii) any shares of Class A Common Stock issued to any holder in connection with the dividend reinvestment plan (collectively, registrable securities).

 

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Initial Registration

The registration rights agreement will require Altus to file, within 90 days of the closing date, a registration statement on Form S-3 (or, if Form S-3 is not then available, on Form S-1) to permit the public resale of all registrable securities held by the principal holders, other than any registrable securities that are registered for sale on a registration statement filed prior to the execution of the registration rights agreement and effective as of the closing date. Altus is required to use its commercially reasonable efforts to cause such registration statement to be declared effective as soon as practicable after the filing thereof, but in any event no later than the earlier of (i) 90 days (or 120 days if the SEC notifies Altus that it will review the registration statement) after the closing date and (ii) the tenth business day after the date Altus is notified (orally or in writing, whichever is earlier) by the SEC that such registration statement will not be reviewed or will not be subject to further review.

Demand Registration, Underwritten Offering and Piggyback Rights

Subject to certain restrictions, each holder will be entitled to make a written demand that Altus register the resale of its registrable securities on Form S-3 (or, if Form S-3 is not then available, on Form S-1) (such written demand, a demand registration), provided that Altus is not required to effect a demand registration unless the dollar amount of the registrable securities of the demanding holders and their respective affiliates to be included in such registration is reasonably likely to result in gross sale proceeds of at least $75 million based on the five-day volume weighted average price of the Class A Common Stock as of the date of such demand registration (the minimum amount). Subject to certain exceptions, Altus will be obligated to file a registration statement covering all of the registrable securities requested in a demand registration within 45 days of receipt of such demand registration. Additionally, Altus will not be required to effect (i) more than four demand registrations for any one demanding holder in any 12-month period or (ii) a demand registration if a registration statement covering all of the registrable securities held by the demanding holder becomes effective after the closing date and remains effective and is sufficient to permit offers and sales of the number and type of registrable securities on the terms and conditions specified in the demand registration in accordance with the intended timing and method or methods of distribution thereof specified in the demand registration.

Subject to certain limitations, including restrictions on the maximum number of securities that may be included in an underwritten offering, any holder entitled to effect a demand registration will also be entitled to require Altus to effectuate a distribution of any or all of its registrable securities by means of an underwritten offering, provided that Altus will not be obligated to effect an underwritten offering unless the dollar amount of the registrable securities of the demanding holders and their respective affiliates to be included therein is reasonably likely to result in gross sale proceeds that exceed the minimum amount. Altus will not be required to effect an underwritten offering within 90 days of the closing of another underwritten offering, other than a permitted Apache offering (as described below). Altus is not required to effect more than four underwritten offerings for any one demanding holder in any 12-month period.

The holders will also have certain “piggy back” registration rights with respect to certain registration statements filed by Altus, including registration statements filed pursuant to a demand registration under the registration rights agreement, and in connection with underwritten offerings conducted by Altus, either for Altus’ own account or pursuant to an underwritten offering conducted pursuant to a demand registration under the registration rights agreement, other than a permitted Apache offering.

Lock-Up Period

Except for a permitted Apache offering or as required in connection with the initial registration of registrable securities on Form S-3 (or Form S-1 if Form S-3 is not then available) pursuant to the registration rights agreement, no registration shall be effected or permitted with respect to any registrable securities held by any holder until after the expiration of the lock-up period, which occurs, with respect to the principal holders, 12 months after the closing of the transaction.

 

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Permitted Apache Offering

Notwithstanding the lock-up period, Apache and its permitted transferees (the Apache holders) are entitled, during the Apache priority window, to sell up to four million shares of Class A Common Stock in one or more registered offerings, provided that the Apache holders agree to use at least $75 million of the aggregate first proceeds from such offerings for new well drilling and completion activity at the Alpine High resource play within 18 months of the closing of the earliest of such offerings (such amount to be reduced on a dollar-for-dollar basis for any such investment by the Apache holders incurred after the execution date of the contribution agreement), and provided that, with respect to any such offering that is not an underwritten offering, the Apache holders use commercially reasonable efforts to sell such shares of Class A Common Stock to no fewer than eight unaffiliated persons.

ISQ Priority Window

The principal holders have agreed that, for a period of time after the 12-month lock-up period (three months with respect to the Apache holders and six months with respect to the Blackstone holders), ISQ will have certain priority registration rights over each of the Apache holders and the Blackstone holders, subject, in each case, to certain limitations contained in the registration rights agreement.

Registration Expenses

Altus will bear the registration expenses of all registrations effected pursuant to the registration rights agreement, provided that the holders will bear all incremental selling expenses relating to the sale of registrable securities, such as underwriters’ commissions and discounts, brokerage fees, underwriter marketing costs, and certain legal fees and expenses not otherwise borne by Altus pursuant to the registration rights agreement.

Third Amended and Restated Certificate of Incorporation of Altus

Pursuant to the terms of the contribution agreement, upon the closing of the transaction, Altus will amend and restate its Second Amended and Restated Certificate of Incorporation (its Charter and, as so amended and restated, the Third A&R Charter) to, among other things, (a) provide that stockholders of Altus may act by consent in accordance with the General Corporation Law of the State of Delaware (DGCL) in lieu of holding a meeting of the stockholders, (b) revise director removal procedures so that directors on the Altus Board may be removed with or without cause, (c) provide that stockholders of Altus that own at least 10% of the voting power of all then-outstanding shares of Altus Common Stock may call a special meeting of the stockholders, (d) revise the corporate opportunities article to modify and clarify the obligations and duties owed by Contributor or its designees and their non-employee directors and affiliates and (e) revise the voting requirements to require the affirmative vote of the holders of at least 6623% of the of the voting power of all then outstanding shares of capital stock of Altus entitled to vote generally in the election of directors, voting together as a single class, to amend the corporate opportunities article of the proposed Third A&R Charter.

For more information about the amendments to the Charter, see the section entitled “Proposal No. 2—The Charter Amendment Proposal.” The foregoing description of the Third A&R Charter does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Third A&R Charter, which is attached as Annex D to this proxy statement.

Amended and Restated Bylaws of Altus

Pursuant to the terms of the contribution agreement, upon the closing of the transaction, Altus will amend and restate its Bylaws (as so amended and restated, the A&R Bylaws) to, among other things, (a) provide that any stockholder of Altus that owns at least 10% of the voting power of all then-outstanding shares of Altus Common Stock entitled to vote generally in the election of directors may call a special meeting of the

 

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stockholders and (b) provide that stockholders of Altus may act by written consent in accordance with the DGCL in lieu of holding a meeting of the stockholders. The A&R Bylaws, the form of which is attached as Annex G to this proxy statement, provide that written consents delivered in lieu of any annual or special meeting must be delivered in accordance with the DGCL.

The foregoing description of the A&R Bylaws does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the A&R Bylaws, which is attached as Annex G to this proxy statement.

Third Amended and Restated Agreement of Limited Partnership of the Partnership

Concurrently with the execution of the contribution agreement, on October 21, 2021, a Third Amended and Restated Agreement of Limited Partnership of the Partnership (the Third A&R LPA) was adopted by the general partner and limited partners holding more than 67% of the outstanding Series A Preferred Units and 100% of the outstanding Common Units of the Partnership. The Third A&R LPA will become effective concurrently with the effective time of the transaction and provides for, among other things, admission of Contributor, the BX Holders and ISQ as limited partners thereunder, updates to certain tax-related provisions, and amendment of certain provisions relating to the Series A Preferred Units.

Specifically, with respect to the Series A Preferred Units, the Third A&R LPA provides for mandatory redemptions by the Partnership of 50,000 Series A Preferred Units at or prior to each of the six-, twelve- and eighteen-month anniversaries of the effectiveness of the Third A&R LPA, for an aggregate of 150,000 Series A Preferred Units over such eighteen-month period. The foregoing scheduled mandatory redemptions will be made on a pro rata basis from the holders thereof and are in addition to the pro rata redemption of 100,000 Series A Preferred Units that the Partnership has agreed to consummate on the closing date of the transaction under that certain Waiver and Consent Agreement entered into with certain holders of Series A Preferred Units on October 21, 2021. The Third A&R LPA also provides the Partnership with an option to redeem Series A Preferred Units so long as at least 25,000 Series A Preferred Units are redeemed in such redemption, without any dollar-value threshold. In addition, the Third A&R LPA increases the Series A Distribution Rate (as defined therein) from 7% to 10% effective the first quarter following December 31, 2023, rather than the quarter ending June 30, 2024, increases the IRR (as defined therein) applicable to the Series A Redemption Price (as defined therein) from 11.5% to 15% effective January 1, 2024, and permits distributions, redemptions or repurchases on Series A Junior Securities (as defined therein) to the extent they are solely attributable to cash from ordinary course operations and so long as the Total Leverage Ratio (as defined therein) is (a) less than or equal to 4.5x for distributions, redemptions or repurchases occurring prior to December 31, 2023 and (b) less than or equal to 4.0x for distributions, redemptions or repurchases occurring on or after January 1, 2024 (provided, however, that the Series A Preferred Units (and any accrued but unpaid distributions thereon) are treated as debt solely for the purpose of calculating the Total Leverage Ratio for distributions, redemptions or repurchases occurring on or after January 1, 2024).

The foregoing description of the Third A&R LPA does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Third A&R LPA, which is attached as Annex F to this proxy statement.

Governing Law

The contribution agreement is governed by and shall be construed and enforced in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law.

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated combined financial statements are provided to aid you in your analysis of the financial aspects of the transaction. The unaudited pro forma condensed consolidated combined financial statements are based on the Altus historical consolidated financial statements and the BCP historical consolidated financial statements as adjusted to give effect to the transaction. The unaudited pro forma condensed consolidated combined balance sheet gives pro forma effect to the transaction as if it had been consummated on September 30, 2021. The unaudited pro forma condensed consolidated combined statements of operations for the nine months ended September 30, 2021 and for the year ended December 31, 2020 give effect to the transaction as if it had occurred on January 1, 2020.

The unaudited pro forma condensed consolidated combined financial statements have been derived from and should be read in conjunction with:

 

   

the accompanying notes to the unaudited pro forma condensed consolidated combined financial statements;

 

   

the historical audited consolidated financial statements of BCP as of and for the year ended December 31, 2020, included in Annex A to this proxy statement;

 

   

the historical unaudited consolidated financial statements of BCP as of and for the nine months ended September 30, 2021, included in Annex A to this proxy statement;

 

   

the historical audited consolidated financial statements of Altus as of and for the year ended December 31, 2020, which are incorporated by reference from its Annual Report on Form 10-K for the year ended December 31, 2020 (filed with the SEC on February 26, 2021);

 

   

the historical unaudited condensed consolidated financial statements of Altus as of and for the nine months ended September 30, 2021, which are incorporated by reference from its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 (filed with the SEC on November 5, 2021); and

 

   

other information relating to BCP and Altus included elsewhere or incorporated by reference in this proxy statement.

The unaudited pro forma condensed consolidated combined financial statements are provided for illustrative purposes only and are not necessarily indicative of what the actual results of operations and financial position would have been had the transaction taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the combined company.

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 2021

(in thousands)

 

    Historical     Transaction
Accounting
Adjustments
   

 

  Pro Forma Balance
Sheet
 
    Altus     BCP  

ASSETS

         

Current assets:

         

Cash and cash equivalents

  $ 108,988     $ 35,179     $ 11,762     5(o)   $ 35,179  
        (120,750   5(d)  

Accounts receivable

    —         208,226       —           208,226  

Accounts receivable from Apache Corporation

    1,018       —         10,981     5(u)     11,999  

Revenue receivables

    10,981       —         (10,981   5(u)     —    

Inventories

    3,286       —         —           3,286  

Other current assets

    6,030       16,175       (509   5(p)     21,696  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total current assets

    130,303       259,580       (109,497       280,386  

Property, plant and equipment, net

    177,584       1,850,521       328,918     5(a)     2,357,023  

Intangible assets, net

    11,799       830,570       1,401     5(n)     843,770  

Operating lease right-of-use assets

        67,337     5(p)     68,213  
        876     5(t)  

Equity method interests

    1,537,907       629,413       317,093     5(b)     2,484,413  

Deferred charges and other assets

    8,341       23,121       (2,430   5(f)     28,156  
        (876   5(t)  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total assets

  $ 1,865,934     $ 3,593,205     $ 602,822       $ 6,061,961  
 

 

 

   

 

 

   

 

 

     

 

 

 

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY

         

Current liabilities:

         

Accounts payable

  $ —       $ 11,227     $ —         $ 11,227  

Accrued expenses

    —         157,262       17,900     5(g)     181,445  
        6,283     5(l)  

Derivative liability

    —         3,761       —           3,761  

Dividends payable

    11,562       —         —           11,562  

Mandatorily redeemable preferred unit limited partners, current

    —         —         117,424     5(k)     117,424  

Other current liabilities

    15,907       3,658       (332   5(p)     18,563  
        (670   5(t)  

Current portion of operating lease liabilities

        35,806     5(p)     36,476  
        670     5(t)  

Current portion of long-term debt, net

    —         53,992       —           53,992  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total current liabilities

    27,469       229,900       177,081         434,450  

Long-term debt, net

    657,000       2,304,192       11,762      5(f,o)     2,972,954  

Derivative liabilities

    120,522       2,029       (52,978   5(c)     69,573  

Contingent liability

    —         1,123       2,851     5(s)     3,974  

Deferred revenue

    —         12,118       —           12,118  

Deferred tax liabilities

    —         6,532       3,734     5(q)     10,266  

Operating lease liabilities

        31,612     5(p)     31,818  
        206     5(t)  

Asset retirement obligation

    67,234       —         (67,234   5(h)     —    

 

105


Table of Contents
    Historical     Transaction
Accounting
Adjustments
   

 

  Pro Forma Balance
Sheet
 
    Altus     BCP  

Mandatorily redeemable preferred unit limited partners, noncurrent

    —         —         58,485     5(k)     58,485  

Other noncurrent liabilities

    5,896       2,224       946     5(r)     8,860  
        (206   5(t)  
 

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities

  $ 878,121     $ 2,558,118     $ 166,259       $ 3,602,498  
 

 

 

   

 

 

   

 

 

     

 

 

 

COMMITMENTS AND CONTINGENCIES

         

Redeemable noncontrolling interest—Common Unit limited partners

    837,158       —         (21,158   5(e)     1,851,082  
        1,035,082     5(m)  

Redeemable noncontrolling interest—Preferred Unit limited partners

    634,795       —         (120,750   5(d)     370,376  
        (143,669   5(e)  

EQUITY:

         

Partners’ capital

    —         1,035,087       (1,035,087   5(m)     —    

Class A Common Stock

    1       —         —           1  

Class C Common Stock

    1       —         5     5(m)     6  

Additional paid-in capital

    —         —         245,485     5(j)     244,539  
        (946   5(r)  

Accumulated deficit

    (484,142     —         (17,900   5(g)     (6,541
        502,042     5(i)  
        (6,283   5(l)  
        (258   5(p)  

Accumulated other comprehensive loss

    —         —         —       —    
 

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities, noncontrolling interests, partners’ capital, and equity

  $ 1,865,934     $ 3,593,205     $ 602,822       $ 6,061,961  
 

 

 

   

 

 

   

 

 

     

 

 

 

 

106


Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

(in thousands, except per share amounts)

 

    Historical     Transaction
Accounting
Adjustments
   

 

  Pro Forma
Statement of
Operations
     
    Altus     BCP  

OPERATING REVENUES:

           

Service revenue

  $ 98,544     $ 205,279     $ —           303,823    

Product revenue

    5,743       233,778       —           239,521    

Other revenue

    —         3,615       —           3,615    
 

 

 

   

 

 

   

 

 

     

 

 

   

Total revenues

    104,287       442,672       —           546,959    

OPERATING EXPENSES:

           

Cost of sales (exclusive of depreciation and amortization shown separately below)

    5,344       133,228       —           138,572    

Depreciation, amortization and accretion

    12,094       170,291       (5,970   6(a)     176,415    

Operating expenses

    24,384       63,575       101     6(h)     88,060    

General and administrative expenses

    10,350       17,920       37,351     6(i)     65,845    
        180     6(k)    
        44     6(h)    

Taxes other than income

    10,431       9,003       —           19,434    

Loss on disposal of assets

    —         417       113     6(h)     530    

Impairment expense

    441       —         —           441    
 

 

 

   

 

 

   

 

 

     

 

 

   

Total costs and expenses

    63,044       394,434       31,819         489,297    
 

 

 

   

 

 

   

 

 

     

 

 

   

OPERATING INCOME

    41,243       48,238       (31,819       57,662    

Interest and other income

    —         4,141       —           4,141    

Gain on debt extinguishment

    —         4       —           4    

Interest expense

    —         (88,458     104     6(f)     (88,354  

Warrants valuation adjustment

    222       —         —           222    

Equity in earnings of unconsolidated affiliate

    82,633       44,692       15,336     6(e)     142,661    

Unrealized derivative instrument loss

    18,487       —         (27,100   6(c)     (8,613  

Other

    11,321       —         —           11,321    
 

 

 

   

 

 

   

 

 

     

 

 

   

Total other income (expenses), net

    112,663       (39,621     (11,660       61,382    

Financing costs, net of capitalized interest

    7,887       —         (875   6(g)     7,012    
 

 

 

   

 

 

   

 

 

     

 

 

   

INCOME BEFORE INCOME TAXES

  $ 146,019     $ 8,617     $ (42,604     $ 112,032    

Deferred income tax expense

    —         1,207       1,455     6(j)     2,662    
 

 

 

   

 

 

   

 

 

     

 

 

   

NET INCOME (LOSS)

  $ 146,019     $ 7,410     $ (44,059     $ 109,370    
 

 

 

   

 

 

   

 

 

     

 

 

   

Less: Net income attributable to noncontrolling interest—Preferred Unit limited partners

    72,662             62,990    

Less: Net income attributable to noncontrolling interest—Common Unit limited partners

    56,270             43,755    
 

 

 

         

 

 

   

NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCKHOLDERS

  $ 17,087           $ 2,625    
 

 

 

         

 

 

   

NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCKHOLDERS, PER SHARE

           

Basic

  $ 4.56           $ 0.70    
 

 

 

         

 

 

   

Diluted

  $ 3.83           $ 0.59    
 

 

 

         

 

 

   

WEIGHTED AVERAGE SHARES

           

Basic

    3,746             3,746     6(l)
 

 

 

         

 

 

   

Diluted

    33,322             76,929     6(l)