Western Midstream(WES) - 2025 Q2 - Quarterly Results

ARTICLE I. THE MERGERS This article outlines the structure and mechanics of the proposed multi-step merger transaction between Western Midstream Partners, LP (Parent) and Aris Water Solutions, Inc. (Company), including the OpCo Merger, Cash Merger, and Unit Merger, their effective times, and the immediate effects on organizational documents and leadership Section 1.1 The Mergers and Parent Loan This section describes the three-step merger process (OpCo Merger, Cash Merger, Unit Merger) and the Parent Loan to Arrakis Holdings to fund cash consideration and transaction expenses - The merger involves three sequential steps: the OpCo Merger, the Cash Merger, and the Unit Merger[23] - Parent will provide a loan to Arrakis Holdings to cover the cash component of the Company Merger Consideration and certain transaction expenses[27] - The OpCo Merger involves OpCo Merger Sub merging into Company OpCo, with Company OpCo surviving. The Cash Merger involves Cash Merger Sub merging into the Company, with the Company surviving. The Unit Merger involves Unit Merger Sub merging into the Surviving Corporation (the Company), with the Company surviving as an indirect wholly owned subsidiary of Parent[28][29][31] Section 1.2 Closing This section specifies the closing date and location for the mergers, emphasizing that all related transactions must be completed concurrently - The closing of the Mergers will occur on the third business day after the satisfaction or waiver of conditions outlined in Article VI[32] - All transactions described in Section 1.1 must be completed substantially concurrently[32] Section 1.3 Effects of the Mergers This section details the legal effects of the mergers, including the vesting of all properties, rights, and privileges, and the assumption of all debts and liabilities by the respective surviving entities - At the OpCo Merger Effective Time, all assets and liabilities of Company OpCo and OpCo Merger Sub will vest in the OpCo Surviving Company[33] - At the Cash Merger Effective Time, all assets and liabilities of the Company and Cash Merger Sub will vest in the Surviving Corporation[33] - At the Unit Merger Effective Time, all assets and liabilities of the Surviving Corporation and Unit Merger Sub will vest in the Surviving Corporation[33][34] Section 1.4 Organizational Documents This section specifies that the existing organizational documents of Company OpCo and the Company will continue to be the governing documents for the surviving entities post-merger - The certificate of formation and LLC Agreement of Company OpCo will remain in full force and effect for the OpCo Surviving Company[35] - The Company Charter and Company Bylaws will remain in effect for the Surviving Corporation immediately following the Cash Merger and Unit Merger[36][37] Section 1.5 Directors This section states that the directors of the Surviving Corporation will be appointed by Arrakis Holdings - Directors of the Surviving Corporation will be appointed by Arrakis Holdings, in its capacity as the sole stockholder[38] Section 1.6 Officers This section specifies that the officers of Cash Merger Sub immediately prior to the Cash Merger Effective Time will become the initial officers of the Surviving Corporation - The officers of Cash Merger Sub immediately prior to the Cash Merger Effective Time will serve as the initial officers of the Surviving Corporation[39] ARTICLE II. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES This article details the process for converting Company securities (Company OpCo Units, Class A and Class B Common Stock) into Merger Consideration, which can include a mix of cash and Parent Common Units, and outlines procedures for elections, fractional units, dissenters' rights, and exchange mechanics Section 2.1 Effect on Company OpCo Units and Company Class B Common Stock This section describes the conversion of Company OpCo Stapled Units into OpCo Merger Consideration, offering mixed, cash, or common unit election options, and specifies treatment for excluded or dissenting units - Each Company OpCo Stapled Unit (Company OpCo Unit and corresponding Company Class B Common Stock) will be converted into OpCo Merger Consideration[41] OpCo Merger Consideration Election Options | Election Type | Consideration per Company OpCo Stapled Unit | | :------------ | :------------------------------------------ | | Mixed Election | $7.00 cash + 0.450 Common Units | | Cash Election | $25.00 cash (subject to proration) | | Common Unit Election | 0.625 Common Units | | No Election | 0.625 Common Units | - Excluded Company OpCo Units (owned by Company, Parent, or their Subsidiaries) remain outstanding. Dissenting Stapled Units are cancelled, with appraisal rights limited to the Company Class B Common Stock component[48][66] Section 2.2 Effect on Company Class A Common Stock This section outlines the conversion of Company Class A Common Stock into Company Merger Consideration, mirroring the election options for OpCo Stapled Units, and addresses cancelled or subsidiary shares - Each share of Company Class A Common Stock will be converted into Company Merger Consideration, consisting of Common Units from Parent and cash from Arrakis Holdings[53] - Holders of Company Class A Common Stock have the same election options (Mixed, Cash, Common Unit, No Election) as for Company OpCo Stapled Units, with the same consideration amounts[53][54][55][56] - Cancelled Shares (treasury stock or held by Parent/Parent Parties) are retired without consideration. Subsidiary Shares convert to maintain the subsidiary's ownership percentage in the Surviving Corporation[58][59] Section 2.3 Conversion of Cash Merger Sub and Unit Merger Sub Common Stock This section details how the equity interests of Cash Merger Sub and Unit Merger Sub are converted into common stock of the Surviving Corporation, establishing Parent's ownership - At the Cash Merger Effective Time, each limited liability company interest of Cash Merger Sub converts into one share of common stock of the Surviving Corporation, held by Parent and Arrakis Holdings[60] - At the Unit Merger Effective Time, each limited liability company interest of Unit Merger Sub converts into one share of common stock of the Surviving Corporation, held as described for the Cash Merger Sub[61] Section 2.4 Fractional Units This section clarifies that no fractional Common Units will be issued in the mergers; instead, eligible holders will receive a cash payment representing their proportionate interest in the proceeds from the sale of aggregated fractional units - No fractional Common Units will be issued in the Mergers[62] - Holders otherwise entitled to a fractional Common Unit will receive a cash payment from the Exchange Agent, representing their proportionate interest in the proceeds from the sale of aggregated fractional Common Units[62][63] Section 2.5 Adjustments This section provides for equitable adjustments to the merger consideration in the event of changes to the outstanding shares of Company Common Stock, Company OpCo Units, or Common Units due to reclassifications, splits, or similar transactions - The Mixed Election Consideration, Cash Election Consideration, Common Unit Election Consideration, and other dependent items will be equitably adjusted if there are changes in outstanding Company Common Stock, Company OpCo Units, or Common Units due to reclassification, splits, or similar transactions between the agreement date and closing[64] Section 2.6 Dissenters Rights This section specifies that stockholders properly exercising appraisal rights for Company Class A and Class B Common Stock will receive appraised value, not merger consideration, and clarifies that no dissenters' rights apply to Company OpCo Units - Shares of Company Class A Common Stock and Company Class B Common Stock held by stockholders properly exercising appraisal rights ('Dissenting Shares') will not be converted into Merger Consideration but will represent the right to receive their appraised value under Delaware law[65] - If appraisal rights are lost or withdrawn, such shares will convert into the Common Unit Election Consideration (or, at Parent's option, the Mixed or Cash Election Consideration)[65][66] - No dissenters' or appraisal rights are available for Company OpCo Units; for Company OpCo Stapled Units, appraisal rights are limited solely to the fair value of the Company Class B Common Stock component[66] Section 2.7 Election Procedures This section outlines the process for holders to elect their preferred form of consideration (Mixed, Cash, or Common Unit) via an Election Form, including deadlines and revocation rules - An Election Form will be mailed to holders of record of Company Common Stock and Company OpCo Units no less than 30 days prior to the anticipated Closing Date[67] - The Election Form allows holders to specify the number of shares/units for Mixed, Cash, or Common Unit Election. Shares/units without an effective election by the Election Deadline will be deemed 'No Election Securities' and convert to Common Unit Election Consideration[68][69] - Elections can be revoked or changed by written notice to the Exchange Agent prior to the Election Deadline. Revoked elections become 'No Election Securities'[71] Section 2.8 Exchange Mechanics This section details the appointment of an Exchange Agent, the deposit of the Exchange Fund, and the procedures for surrendering certificates and receiving the Merger Consideration, including provisions for distributions and lost certificates - Parent will appoint an Exchange Agent and deposit Common Units and cash into an 'Exchange Fund' to facilitate the delivery of Merger Consideration[72] - Holders will surrender their Certificates (representing Company Class A Common Stock or Company OpCo Stapled Units) with a letter of transmittal to receive the applicable Merger Consideration, cash in lieu of fractional Common Units, and any distributions[73] - No interest will be paid on any amounts for fractional Common Units or distributions. Any portion of the Exchange Fund remaining undistributed after one year will be delivered to Parent[74][77] Section 2.9 Book-Entry Common Shares This section describes the process for exchanging uncertificated (book-entry) shares of Company Class A Common Stock, particularly those held through The Depositary Trust Company (DTC), for Merger Consideration - Parent and Company will cooperate to establish procedures with the Exchange Agent and DTC for the exchange of uncertificated Company Class A Common Stock held through DTC for Merger Consideration[81] - For book-entry shares not held through DTC, the Exchange Agent will issue book-entry whole Common Units and mail cash payments for any cash consideration or distributions[82] Section 2.10 Withholding This section states that the Parent Parties and the Exchange Agent are entitled to deduct and withhold taxes from the consideration otherwise payable pursuant to the agreement, as required by applicable tax laws - Parent Parties and the Exchange Agent are entitled to deduct and withhold amounts from the consideration payable as required by the Code or any other Tax Law[83] - Amounts so withheld and paid to the Governmental Entity will be treated as having been paid to the person from whom they were withheld. Withholding may be taken in Common Units, treated as a deemed sale[83][84] ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES This article details the representations and warranties made by the Company Parties to the Parent Parties regarding various aspects of their business, financial condition, legal compliance, and operational status, with exceptions for disclosures in SEC filings or the Company Disclosure Schedule Section 3.1 Qualification, Organization, Subsidiaries, etc This section represents that the Company and its subsidiaries are duly organized, validly existing, and in good standing, possessing the necessary corporate power and authority to conduct their businesses, and defines what constitutes a 'Company Material Adverse Effect' - The Company and each of its Subsidiaries are duly organized, validly existing, and in good standing under applicable laws, possessing all requisite power and authority to own, lease, operate assets, and conduct business as currently performed[86] - A 'Company Material Adverse Effect' is defined as an event, change, effect, development, or occurrence that prevents or materially delays the Company's ability to consummate the transactions or has a material adverse effect on the business, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole. Exclusions apply for general economic/market conditions, industry changes, announcement effects, Parent-requested actions, regulatory changes, GAAP changes, force majeure events, and failures to meet projections or changes in stock price, unless disproportionately affecting the Company[87][88] - The Company has provided true and complete copies of its organizational documents (Company Charter, Company Bylaws, Company OpCo LLC Agreement, Company OpCo Certificate) and is in material compliance with their terms[89] Section 3.2 Equity Interests This section details the authorized and outstanding capital stock and equity interests of the Company and its subsidiaries, including Company Class A and B Common Stock, Company OpCo Units, and Company Equity Awards, affirming their valid issuance and absence of certain rights or encumbrances Company Equity Interests as of August 4, 2025 (Measurement Date) | Equity Type | Amount | | :-------------------------- | :------------- | | Company Class A Common Stock (outstanding) | 32,682,577 shares | | Company Class B Common Stock (outstanding) | 26,493,565 shares | | Company Class A Common Stock (treasury) | 993,473 shares | | Company Preferred Stock (outstanding) | 0 shares | | Company OpCo Units (held by Company) | 32,682,577 units | | Company OpCo Units (held by others) | 26,493,565 units | | Shares underlying Company RSUs | 1,891,286 shares | | Shares underlying Company PSUs (max payout) | 1,567,214 shares | - All outstanding shares of Company Common Stock and Company OpCo Units are duly authorized, validly issued, fully paid (to the extent required), nonassessable (subject to DLLCA exceptions), and free of preemptive rights[90] - Except as disclosed, there are no outstanding subscriptions, options, warrants, or similar rights obligating the Company or its Subsidiaries to issue or acquire equity interests, or granting preemptive/antidilutive rights[91] - The Company or a Subsidiary owns, directly or indirectly, all issued and outstanding equity interests of each Subsidiary (other than Company OpCo Units held by Other Company OpCo Members), free and clear of Liens other than Company Permitted Liens[94] Section 3.3 Corporate Authority Relative to this Agreement; No Violation This section asserts the Company's and Company OpCo's corporate authority to enter into the merger agreement, confirms the necessary approvals (Company Stockholder Approval), and warrants that the transaction will not violate laws or contracts, subject to certain exceptions - Each of the Company and Company OpCo has the requisite power and authority to enter into this Agreement and other Company Transaction Documents, subject to obtaining the Company Stockholder Approval[98] - The Board of Directors of the Company has unanimously resolved to recommend adoption of this Agreement by its stockholders[98] - The execution and delivery of this Agreement and the consummation of the transactions will not materially violate Company Organizational Documents, applicable Laws, or result in material breaches or Liens under contracts, except for those that would not have a Company Material Adverse Effect[101] - The Tax Receivable Agreement Amendment was entered into in compliance with the Tax Receivable Agreement and approved by the audit committee of the Board of Directors[102] Section 3.4 Reports and Financial Statements This section confirms that all Company SEC Documents filed since January 1, 2023, comply materially with SEC requirements and that the consolidated financial statements fairly present the Company's financial position in accordance with GAAP - All Company SEC Documents filed or furnished since January 1, 2023, complied in all material respects with the Securities Act and Exchange Act and did not contain any untrue statement of a material fact or omit any material fact[103][104] - The consolidated financial statements included in the Company SEC Documents fairly present in all material respects the Company's consolidated financial position, results of operations, and cash flows in conformity with GAAP[105] Section 3.5 Internal Controls and Procedures This section states that the Company has established and maintains adequate disclosure controls and internal control over financial reporting, and that management's assessment for 2024 concluded these controls were effective - The Company maintains disclosure controls and procedures and internal control over financial reporting as required by Rule 13a-15 under the Exchange Act[106] - Management's assessment of internal control over financial reporting for the year ended December 31, 2024, concluded that such controls were effective[106] Section 3.6 No Undisclosed Liabilities This section asserts that, except as reflected in the Company's financial statements, incurred under the agreement, or in the ordinary course of business, the Company and its subsidiaries have no material undisclosed liabilities - Neither the Company nor any Subsidiary has any liabilities or obligations of any nature that would be required by GAAP to be reflected on a consolidated balance sheet, other than those reflected or reserved against in SEC filings, incurred under this Agreement, incurred in the ordinary course of business since March 31, 2025, or discharged/paid in full, provided such undisclosed liabilities would not be material to the Company and its Subsidiaries, taken as a whole[107][108] Section 3.7 Compliance with Law; Permits This section confirms the Company's and its subsidiaries' compliance with applicable laws and possession of all necessary permits for their operations, without material non-compliance or defaults - The Company and its Subsidiaries are in compliance with all applicable Laws and have not received written notice of any actual or possible violation since January 1, 2023, except where such non-compliance would not have a Company Material Adverse Effect[109] - The Company and its Subsidiaries possess all necessary Company Permits, which are valid and in full force and effect, and are in compliance with their terms, except where failure would not have a Company Material Adverse Effect[110] Section 3.8 Environmental Laws and Regulations This section represents the Company's and its subsidiaries' material compliance with environmental laws, absence of material environmental liabilities, and the integrity of their operational systems - There are no material investigations, actions, or proceedings pending or threatened against the Company or its Subsidiaries alleging non-compliance with Environmental Law[111] - The Company and its Subsidiaries are in compliance with all Environmental Laws and have not had any material release of Hazardous Materials or outstanding environmental orders[111] - To the Company's knowledge, there are no defects, corrosion, or other damage to the Company's Systems that would reasonably be expected to result in a pipeline integrity failure[111] Section 3.9 Employee Benefit Plans This section describes the Company's employee benefit plans, affirming their material compliance with applicable laws and terms, and addresses the limited impact of the merger on employee compensation and benefits - Each Non-PEO Plan and, to the Company Parties' knowledge, each PEO Plan has been maintained and administered in material compliance with its terms and applicable Law (including ERISA and the Code)[118] - Neither the Company nor its Subsidiaries maintains or contributes to any plan providing retiree medical or welfare benefits, except for continuation coverage requirements[119] - The consummation of the transactions contemplated by this Agreement will not, either alone or in combination with another event, materially entitle any current/former employee to payment, accelerate vesting, or increase compensation, except as set forth in Section 5.6[122] - No amount or benefit received by any 'disqualified individual' is expected to be characterized as an 'excess parachute payment' under Section 280G of the Code[123] Section 3.10 Absence of Certain Changes or Events This section represents that since the Balance Sheet Date (March 31, 2025), the Company's business has been conducted in the ordinary course and no Company Material Adverse Effect has occurred - From the Balance Sheet Date (March 31, 2025) through the date of this Agreement, the businesses of each Company Party and their Subsidiaries have been conducted in all material respects in the ordinary course of business[126] - From the Balance Sheet Date through the date of this Agreement, there has been no event, change, effect, development, or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have, a Company Material Adverse Effect[127] Section 3.11 Investigations; Litigation This section asserts the absence of material investigations, litigation, or orders against the Company or any of its subsidiaries since January 1, 2023 - Except as would not have a Company Material Adverse Effect, there are no, and since January 1, 2023, there have been no, investigations or reviews pending or threatened by any Governmental Entity with respect to the Company or its Subsidiaries[128] - Except as would not have a Company Material Adverse Effect, there are no, and since January 1, 2023, there have been no, actions, suits, charges, claims, or proceedings pending or threatened against or affecting the Company or its Subsidiaries[128] Section 3.12 Information Supplied This section warrants that information provided by the Company for inclusion in the Form S-4 and Proxy Statement/Prospectus will be materially accurate and compliant with securities laws - Information provided in writing by the Company for the Form S-4 and Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading[129] - The Proxy Statement/Prospectus and the Form S-4 (excluding Parent-supplied information) will comply as to form in all material respects with the requirements of the Securities Act and the Exchange Act[129] Section 3.13 Tax Matters This section provides representations regarding the Company's tax compliance, including timely filing of returns, payment of taxes, absence of liens, and proper tax classification of entities, all without material adverse effect - All required Tax Returns have been duly and timely filed and are complete and accurate. All Taxes owed have been timely paid in full or an adequate reserve established[130] - There are no Liens (other than Company Permitted Liens) on assets related to unpaid Taxes, and no audits, examinations, or claims regarding Taxes are pending or threatened[130] - Company OpCo is, and has been since its formation, properly classified as a partnership or disregarded entity for U.S. federal income tax purposes. The Company is, and has been since its formation, properly classified as a corporation for U.S. federal income tax purposes[131] - Certain Subsidiaries of Company OpCo are classified as disregarded entities, Solaris Services Holdings, LLC as a corporation, and Solaris Water Midstream Services, LLC as a partnership for U.S. federal income tax purposes[131] - Neither the Company nor its Subsidiaries are aware of any fact or circumstance that could reasonably be expected to prevent or impede the issuance of the Closing Tax Opinions[132] Section 3.14 Employment and Labor Matters This section states that the Company is not party to any collective bargaining agreements, has no material labor disputes, and is in compliance with all applicable employment and labor laws - No Company Party is, or has been, a party or subject to any collective bargaining agreement or similar contract with a labor union. There are no organizing activities, strikes, or material labor disputes pending or threatened[134] - The Company Parties are, and since January 1, 2023, have been, in compliance with all applicable Laws respecting terms and conditions of employment, wages and hours, and labor and employment practices, except where non-compliance would not be material to the Company and its Subsidiaries, taken as a whole[135] Section 3.15 Intellectual Property This section asserts the Company's ownership or valid rights to use necessary intellectual property, the absence of material infringement claims, and the implementation of commercially reasonable measures to protect its intellectual property and IT assets - Either the Company or a Subsidiary owns, or is licensed to use, all Company Intellectual Property necessary for their businesses, free and clear of Liens other than Company Permitted Liens, except where failure would not have a Company Material Adverse Effect[136] - There are no pending or threatened claims of infringement by the Company or its Subsidiaries of any intellectual property rights of any person, and the Company's business does not infringe any intellectual property rights, except where such would not have a Company Material Adverse Effect[136] - The Company and its Subsidiaries have implemented commercially reasonable measures to protect the confidentiality, integrity, and security of IT Assets and have data backup, storage, redundancy, and disaster recovery procedures consistent with industry standards[137] Section 3.16 Real Property This section represents the Company's good and valid title or leasehold interest in its material real properties and Rights-of-Way, free of material encumbrances or defaults, and confirms the sufficiency of Rights-of-Way for current operations - The Company or a Subsidiary has good and valid title to Company Owned Real Property and a good and valid leasehold interest in Company Leased Real Property, free and clear of Liens other than Company Permitted Liens and Permitted Encumbrances, except where failure would not have a Company Material Adverse Effect[139] - Each Company Real Property Lease is valid, binding, and in full force and effect, with no uncured material default by the Company or, to its knowledge, the landlord, subject to Remedies Exceptions[139] - The Company and its Subsidiaries have necessary Rights-of-Way for their assets and properties as currently used and operated, which are valid and free of Liens (other than Company Permitted Liens), and there are no gaps in such Rights-of-Way that would prevent current operations, except where such would not have a Company Material Adverse Effect[141][142] Section 3.17 Company Assets This section confirms the Company's possession and good title to all necessary assets, including Systems, their good operating condition, and the compliance and sufficiency of Disposal Wells for current operations and customer contracts - The Company and its Subsidiaries have physical possession and good and valid title to, or valid rights to use, all Company Assets necessary for their business operations, free and clear of Liens other than Company Permitted Liens, and these assets are in good operating condition and repair (excluding normal wear and tear)[143] - None of the Disposal Wells are subject to orders requiring plugging/abandonment, currently scheduled for abandonment outside past practices, or restricted from injecting produced water from third-party operations, except where such would not be material to the Company and its Subsidiaries, taken as a whole[144] - To the Company's knowledge, the pore space and geological characteristics of each Disposal Well's injection zone are sufficient for operation at rated capacity, and the collective injection capacity is sufficient to comply with all Top Customer Contracts[145] Section 3.18 Insurance This section states that the Company and its subsidiaries maintain customary insurance coverage and have not received notice of any material adverse changes to their policies - The Company and its Subsidiaries maintain insurance in amounts and against risks customary for their industries[146] - Neither the Company nor its Subsidiaries have received notice of any pending or threatened cancellation or premium increase that would have a Company Material Adverse Effect[146] Section 3.19 Opinion of the Company's Financial Advisor This section notes that the Company's Board of Directors received a fairness opinion from Citigroup Global Markets Inc. regarding the Merger Consideration - The Board of Directors of the Company received an opinion from Citigroup Global Markets Inc. stating that the Merger Consideration to be received by holders of Company Class A Common Stock and Company OpCo Units is fair, from a financial point of view[147] Section 3.20 Key Customers This section refers to the Company Disclosure Schedule for a list of the Company's ten largest customers - Section 3.20 of the Company Disclosure Schedule sets forth a true, correct, and complete list of the ten largest customers ('Top Customer') based on revenue received in the 12 months ended June 30, 2025[148] Section 3.21 Outstanding Capital Commitments This section discloses any capital projects in process that could result in significant capital expenditures by Parent after the Closing Date - Except as disclosed, there are no capital projects in process that are binding on Company Assets and reasonably expected to result in capital expenditures by Parent after the Closing Date exceeding $5,000,000[149] Section 3.22 Material Contracts This section lists various types of material contracts to which the Company or its subsidiaries are party, affirming their validity and the absence of material breaches or defaults - Company Material Contracts include 'material contracts' as defined by SEC Regulation S-K, contracts generating over $15,000,000 in annual revenue for certain services, acquisition/divestiture contracts over $5,000,000, contracts materially limiting competition, capital commitment contracts over $10,000,000, related party contracts, exclusivity/take-or-pay clauses, indebtedness over $10,000,000, joint venture agreements, material IP contracts, distribution restrictions, acquisition earn-out obligations over $5,000,000, material real property leases, governmental contracts, commodity hedging contracts, call/option contracts on Company Assets, and Top Customer Contracts[150][151] - Neither the Company nor any Subsidiary is in material breach or default under any Company Material Contract, and to the Company Parties' knowledge, no other party is in breach or default. Each Company Material Contract is a valid and binding obligation, in full force and effect, subject to Remedies Exceptions[153] Section 3.23 Finders or Brokers This section identifies the investment bankers or brokers employed by the Company in connection with the transactions - The Company has employed Citigroup Global Markets Inc. and Houlihan Lokey, Inc. as investment bankers/brokers in connection with the transactions contemplated by this Agreement[154] Section 3.24 State Takeover Statutes This section confirms that the Company Stockholder Approval is the only required vote and that the Company Board's approval renders certain state takeover statutes inapplicable to the mergers - Assuming Parent Parties are not 'interested stockholders' under the Company Charter, the Company Stockholder Approval is the only vote of Company securities holders required to approve this Agreement and the Mergers[155] - The Company Board's approval of this Agreement is sufficient to render inapplicable the restrictions on 'business combinations' in the Company Charter and other Takeover Laws to the Mergers[155] Section 3.25 No Additional Representations This section clarifies that the Company Parties acknowledge that Parent Parties make no representations or warranties beyond those expressly set forth in Article IV, and that the Company Parties rely solely on their independent review and those specified representations - Each Company Party acknowledges that Parent Parties make no representations or warranties except as expressly set forth in Article IV or in any certificate delivered by Parent to the Company[156] - Company Parties have conducted their own independent review and analysis of Parent Parties and their Subsidiaries and rely solely upon their independent investigation and the representations in Article IV[157] ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PARENT PARTIES This article outlines the representations and warranties made by the Parent Parties to the Company Parties, covering their organizational status, equity interests, corporate authority, financial reporting, legal compliance, and other business aspects, with specific exclusions for SEC filings or the Parent Disclosure Schedule Section 4.1 Qualification, Organization, Subsidiaries, etc This section represents that Parent and its subsidiaries are duly organized, validly existing, and in good standing, possessing the necessary power and authority to conduct their businesses, and defines what constitutes a 'Parent Material Adverse Effect' - Parent and each of its Subsidiaries are duly organized, validly existing, and in good standing under applicable laws, possessing all requisite power and authority to own, lease, operate assets, and conduct business as currently performed[161] - A 'Parent Material Adverse Effect' is defined similarly to a 'Company Material Adverse Effect', with comparable exclusions for general economic/market conditions, industry changes, announcement effects, Company-requested actions, regulatory changes, GAAP changes, force majeure events, and failures to meet projections or changes in unit price, unless disproportionately affecting Parent[163] - Parent has provided true and complete copies of its organizational documents (Parent Certificate of Limited Partnership, Parent Partnership Agreement) and is in material compliance with their terms[164][165] Section 4.2 Equity Interests This section details the authorized and outstanding equity interests of Parent and its subsidiaries, including Common Units and General Partner Units, affirming their valid issuance and absence of certain rights or encumbrances Parent Equity Interests as of August 4, 2025 (Measurement Date) | Equity Type | Amount | | :-------------------------- | :------------- | | Common Units (outstanding) | 381,328,604 units | | General Partner Units (outstanding) | 9,060,641 units | - All outstanding equity securities of Parent are duly authorized, validly issued, fully paid (to the extent required), nonassessable (subject to DLPA exceptions), and free of preemptive rights (except as set forth in the Parent Partnership Agreement)[166] - Arrakis Holdings' authorized capital stock consists of 1,000 shares of common stock, all validly issued and outstanding and held by Parent. All interests of OpCo Merger Sub, Unit Merger Sub, and Cash Merger Sub are directly or indirectly owned by Parent[169][170] - The Common Units constituting Merger Consideration, when issued, will be duly authorized, validly issued, fully paid, nonassessable (subject to DLPA exceptions), and free of preemptive rights[172] Section 4.3 Partnership / Corporate Authority Relative to this Agreement; No Violation This section asserts the Parent Parties' corporate authority to enter into the merger agreement, confirms the necessary approvals, and warrants that the transaction will not violate laws or contracts, subject to certain exceptions - Each of the Parent Parties has the requisite power and authority to enter into this Agreement and other Parent Transaction Documents and to consummate the transactions[176] - Parent, as the sole member of OpCo Merger Sub and Unit Merger Sub, and Arrakis Holdings, as the sole member of Cash Merger Sub, have approved the Mergers. The Board of Directors of Parent GP has approved the Agreement, Mergers, and Unit Issuance[176] - No vote of Parent equity holders is required to approve the Mergers or the Unit Issuance[176] - The execution and delivery of this Agreement and the consummation of the transactions will not materially violate Parent Organizational Documents, applicable Laws, or result in material breaches or Liens under contracts, except for those that would not have a Parent Material Adverse Effect[178] Section 4.4 Reports and Financial Statements This section confirms that all Parent SEC Documents filed since January 1, 2023, comply materially with SEC requirements and that the consolidated financial statements fairly present Parent's financial position in accordance with GAAP - All Parent SEC Documents filed or furnished since January 1, 2023, complied in all material respects with the Securities Act and Exchange Act and did not contain any untrue statement of a material fact or omit any material fact[179] - The consolidated financial statements included in the Parent SEC Documents fairly present in all material respects Parent's consolidated financial position, results of operations, and cash flows in conformity with GAAP[180] Section 4.5 Internal Controls and Procedures This section states that Parent has established and maintains adequate disclosure controls and internal control over financial reporting, and that management's assessment for 2024 concluded these controls were effective - Parent maintains disclosure controls and procedures and internal control over financial reporting as required by Rule 13a-15 under the Exchange Act[181] - Management's assessment of internal control over financial reporting for the year ended December 31, 2024, concluded that such controls were effective[181] Section 4.6 No Undisclosed Liabilities This section asserts that, except as disclosed in Parent's financial statements or incurred in the ordinary course of business, Parent and its subsidiaries have no material undisclosed liabilities - Neither Parent nor any Subsidiary has any liabilities or obligations of any nature that would be required by GAAP to be reflected on a consolidated balance sheet, other than those reflected or reserved against in SEC filings, incurred under this Agreement, incurred in the ordinary course of business since the Balance Sheet Date, or discharged/paid in full, provided such undisclosed liabilities would not have a Parent Material Adverse Effect[182] Section 4.7 Compliance with Law; Permits This section confirms Parent's and its subsidiaries' compliance with applicable laws and possession of all necessary permits for their operations, without material non-compliance or defaults - Parent and its Subsidiaries are in compliance with all applicable Laws and have not received written notice of any actual or possible violation since January 1, 2023, except where such non-compliance would not have a Parent Material Adverse Effect[184] - Parent and its Subsidiaries possess all necessary Parent Permits, which are valid and in full force and effect, and are in compliance with their terms, except where failure would not have a Parent Material Adverse Effect[185] Section 4.8 Environmental Laws and Regulations This section represents Parent's and its subsidiaries' material compliance with environmental laws, absence of material environmental liabilities, and the integrity of their operational systems - There are no material investigations, actions, or proceedings pending or threatened against Parent or its Subsidiaries alleging non-compliance with Environmental Law[186] - Parent and its Subsidiaries are in compliance with all Environmental Laws and have not had any material release of Hazardous Materials or outstanding environmental orders[186] - To the Parent Parties' knowledge, there are no defects, corrosion, or other damage to Parent's Systems that would reasonably be expected to result in a pipeline integrity failure[186] Section 4.9 Absence of Certain Changes or Events This section represents that since the Balance Sheet Date, Parent's business has been conducted in the ordinary course and no Parent Material Adverse Effect has occurred - From the Balance Sheet Date through the date of this Agreement, the businesses of each of Parent and its Subsidiaries have been conducted in all material respects in the ordinary course of business[187] - From the Balance Sheet Date through the date of this Agreement, there has been no event, change, effect, development, or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have, a Parent Material Adverse Effect[188] Section 4.10 Investigations; Litigation This section asserts the absence of material investigations, litigation, or orders against Parent or any of its subsidiaries - Except as would not have a Parent Material Adverse Effect, there are no investigations or reviews pending or threatened by any Governmental Entity with respect to Parent or its Subsidiaries[189] - Except as would not have a Parent Material Adverse Effect, there are no actions, suits, charges, claims, or proceedings pending or threatened against or affecting Parent or its Subsidiaries[189] Section 4.11 Information Supplied This section warrants that information provided by Parent for inclusion in the Form S-4 and Proxy Statement/Prospectus will be materially accurate and compliant with securities laws - Information provided in writing by Parent for the Form S-4 and Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading[190] - The Proxy Statement/Prospectus and the Form S-4 (excluding Company-supplied information) will comply as to form in all material respects with the requirements of the Securities Act and the Exchange Act[190] Section 4.12 Tax Matters This section provides representations regarding Parent's tax compliance, including timely filing of returns, payment of taxes, absence of liens, and proper tax classification of entities, all without material adverse effect - All required Tax Returns have been duly and timely filed and are complete and accurate. All Taxes owed have been timely paid in full or an adequate reserve established[191] - There are no Liens (other than Parent Permitted Liens) on assets related to unpaid Taxes, and no audits, examinations, or claims regarding Taxes are pending or threatened[191] - Parent is, and has been since its formation, properly classified as a partnership or disregarded entity for U.S. federal income tax purposes and is not, and has never been, treated as a corporation[192] - For each taxable year since its IPO, at least 90% of Parent's gross income has been from 'qualifying income' under Section 7704(d) of the Code[192] - Parent is not aware of any fact or circumstance that could reasonably be expected to prevent or impede the issuance of the Closing Tax Opinions[192] Section 4.13 Finders or Brokers This section identifies the investment bankers or brokers employed by Parent in connection with the transactions - Parent has employed BofA Securities, Inc. as an investment banker/broker in connection with the transactions contemplated by this Agreement[193] Section 4.14 Availability of Funds This section asserts that Parent has and will have immediately available cash and other sources of funds sufficient to consummate the Mergers and satisfy all payment obligations, and clarifies that financing is not a closing condition - Parent has, and as of the Closing will have, immediately available cash and other sources of funds to consummate the Mergers and satisfy all payment obligations under this Agreement, including the full Merger Consideration[194] - The receipt or availability of any funds or financing by any Parent Party is not a condition to the Closing[194] Section 4.15 Ownership of Company Common Stock This section represents that neither Parent nor its subsidiaries (excluding certain benefit plans) own or have owned Company Common Stock in the three years preceding the agreement date - Neither Parent nor any of its Subsidiaries (excluding pension or benefit plans) owns or has owned any shares of Company Common Stock beneficially or of record at any time in the three years preceding the date of this Agreement[195] Section 4.16 No Additional Representations This section clarifies that the Parent Parties acknowledge that Company Parties make no representations or warranties beyond those expressly set forth in Article III, and that the Parent Parties rely solely on their independent review and those specified representations - Each Parent Party acknowledges that Company Parties make no representations or warranties except as expressly set forth in Article III or in any certificate delivered by the Company to the Parent Parties[196] - Parent Parties have conducted their own independent review and analysis of the Company and its Subsidiaries and rely solely upon their independent investigation and the representations in Article III[197] ARTICLE V. COVENANTS AND AGREEMENTS This article details the various covenants and agreements between the Company and Parent Parties, outlining their obligations regarding the conduct of business, regulatory approvals, employee matters, public announcements, indemnification, and other actions necessary to facilitate the merger and ensure its smooth completion Section 5.1 Conduct of Business by the Company Parties This section specifies restrictions on the Company's and its subsidiaries' business operations between the agreement date and the Effective Time, requiring ordinary course conduct and prohibiting certain actions without Parent's consent, subject to specific exceptions - From the date of the Agreement until the Effective Time, Company Parties must conduct their business in the ordinary course and use commercially reasonable efforts to preserve business lines, rights, permits, and relationships with customers and suppliers[200] - Without Parent's written consent (not unreasonably withheld), the Company is prohibited from: amending organizational documents; splitting/reclassifying capital stock (with exceptions); authorizing/paying dividends or distributions (with exceptions for inter-company, regular quarterly cash dividends up to $0.14/share, tax distributions, and TRA termination payments); adopting liquidation plans (with exceptions); making acquisitions/investments exceeding specified budget amounts or $5,000,000 in aggregate (with exceptions); selling/leasing/transferring non-cash assets (with exceptions); authorizing capital expenditures exceeding 105% of budget (with emergency exceptions); increasing compensation/benefits or entering employment agreements (with exceptions); materially changing accounting policies (with exceptions); issuing/selling/pledging capital stock (with exceptions); purchasing/redeeming capital stock (with exceptions); incurring/guaranteeing indebtedness (with exceptions); materially modifying/amending/terminating Company Material Contracts or Permits; waiving/settling actions exceeding specified amounts; changing fiscal year or material tax accounting; or prepaying/redeeming indebtedness (with exceptions)[201][202][203][204][205][206] Section 5.2 Conduct of Business by the Parent Parties This section specifies restrictions on Parent's and its subsidiaries' business operations between the agreement date and the Effective Time, requiring ordinary course conduct and prohibiting certain actions without Company's consent, subject to specific exceptions - From the date of the Agreement until the Effective Time, Parent Parties must conduct their business in the ordinary course and use commercially reasonable efforts to preserve business lines, rights, permits, and relationships with customers and suppliers[207] - Without Company's written consent (not unreasonably withheld), Parent is prohibited from: adopting/proposing materially adverse amendments to Parent Organizational Documents; splitting/reclassifying equity interests (with exceptions); authorizing/paying dividends or distributions (with exceptions for inter-company, required by organizational documents, and regular quarterly cash distributions); adopting liquidation plans (with exceptions); taking actions causing Parent to be treated as a corporation for U.S. federal income tax purposes; engaging in activities causing less than 90% of gross income to be 'qualifying income' under Section 7704(d) of the Code; or making acquisitions/investments that would materially impede the Mergers[209] Section 5.3 Access This section requires Company Parties to afford Parent Parties reasonable access to personnel, properties, records, and information, subject to limitations such as avoiding disruption, agreement violations, privilege loss, or legal violations, and includes an indemnification clause for Parent's actions on Company property - Company Parties must provide Parent Parties reasonable access to personnel, properties, contracts, books, records, and other data during normal business hours[210] - Access is subject to limitations, including not unreasonably disrupting operations, violating agreements, causing loss of privilege, or violating applicable law. Parent is not permitted to perform invasive onsite procedures[210] - Parent agrees to indemnify, defend, and hold harmless the Company and its Subsidiaries from losses arising out of Parent's or its Representatives' actions on Company properties[210] - All information provided is governed by the Mutual Confidentiality Agreement[211] Section 5.4 Non-Solicitation by the Company This section prohibits the Company from soliciting or engaging in discussions regarding alternative acquisition proposals, with exceptions for unsolicited superior offers under specific conditions, and defines key terms related to such proposals - The Company must not solicit, initiate, encourage, or facilitate any Acquisition Proposal, furnish non-public information, or engage in discussions regarding an Acquisition Proposal[212][213] - The Board of Directors may, prior to Company Stockholder Approval, furnish non-public information and engage in discussions in response to an unsolicited written Acquisition Proposal if it determines in good faith that it constitutes or is reasonably expected to lead to a Superior Offer, and if fiduciary duties require, subject to notice to Parent and a confidentiality agreement[213] - The Company must promptly (within 24 hours) advise Parent of any Acquisition Proposal, including the identity of the person and material terms[215] - The Board of Directors generally cannot make a 'Change of Recommendation' (e.g., withdrawing recommendation, endorsing an Acquisition Proposal, failing to reaffirm recommendation), but may do so for a Superior Offer or Intervening Event if fiduciary duties require, after providing Parent with a 4-business day (or 2-business day for modified proposals) notice and negotiation opportunity[217][218][219][220][221] - Key definitions include: 'Acquisition Proposal' (bona fide offer for an Acquisition Transaction), 'Acquisition Transaction' (acquisition of 25% or more of consolidated assets or voting equity), 'Intervening Event' (material event not known or reasonably foreseeable by the Board, excluding Acquisition Proposals or certain Parent-related events), and 'Superior Offer' (written Acquisition Proposal for 50% or more of assets/equity, more favorable financially, considering Parent's counter-proposals)[223][224] Section 5.5 Filings; Other Actions This section outlines the responsibilities of Parent and Company for preparing and filing the Form S-4 and Proxy Statement/Prospectus, obtaining SEC effectiveness, and holding the Stockholders' Meeting, including provisions for amendments and postponements - Parent and Company will prepare, and Parent will file, the Form S-4 (including the Proxy Statement/Prospectus) with the SEC, using reasonable best efforts to have it declared effective and mailed to stockholders[225] - No filing or amendment to the Form S-4 or Proxy Statement/Prospectus will be made without the other party's prior consent and opportunity to review and comment[226] - The Company will convene and hold a Stockholders' Meeting to consider adoption of the Agreement, and (except in case of a Change of Recommendation) the Board will recommend adoption and solicit proxies[227] - The Company may postpone or adjourn the Stockholders' Meeting to solicit additional proxies, for absence of quorum, to allow time for supplemental disclosure, or if a notice period for a Change of Recommendation or Intervening Event has not expired[228] Section 5.6 Equity-Based Awards This section details the treatment of Company RSUs and PSUs upon the Effective Time, specifying conversion to Assumed RSU Awards for continuing employees, cash payments for non-continuing employees, and cash payments for non-employee directors - Outstanding Company RSUs and PSUs held by Continuing Employees will be assumed by Parent and converted into Assumed RSU Awards (restricted unit awards with respect to Common Units)[230] - For Company PSUs, performance periods not ended prior to the Effective Time will be deemed earned at the greater of target or actual performance. Assumed RSU Awards will retain time-based vesting and other terms, with full vesting upon involuntary termination without Cause or death/disability post-closing[230] - Company RSUs and PSUs held by Non-Continuing Employees will be cancelled and converted into a cash payment (based on greater of target or actual performance for PSUs). Company RSUs held by non-employee directors will also be cancelled for a cash payment[231][233] - Parent will file a registration statement on Form S-8 for the Common Units subject to Assumed RSU Awards[235] Section 5.7 Employee Matters This section addresses post-merger employee compensation and benefits for Continuing Employees, including provisions for base salary, incentive opportunities, severance, service credit, and welfare plan waivers, and the potential termination of the Company's 401(k) plan - For one year post-Effective Time, Parent will provide Continuing Employees with annual base salary/wage and target short-term cash incentive compensation opportunities no less favorable than prior to the Effective Time, and substantially comparable aggregate employee benefits[237] - Severance benefits will be provided to Continuing Employees involuntarily terminated without Cause and to Non-Continuing Employees[238] - Continuing Employees' years of service with the Company/predecessors will be recognized for eligibility, benefits, vesting, and accruals under Parent's ben