Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on June 24, 2021, Evolve Transition Infrastructure LP (“Evolve”) increased the tariff rate for interruptible throughput volumes from the eastern portion (“Eastern Catarina”) of Mesquite Energy, Inc.’s (“Mesquite”) acreage position in Dimmitt, La Salle, and Webb counties in Texas (“Catarina Acreage”). Despite the increase, Mesquite continued to short-pay invoices and was paying the fees being charged for throughput volumes from the western portion of Mesquite’s Catarina Acreage (“Western Catarina”) for all throughput volumes from Eastern Catarina (the “Tariff Short-Pay”). As previously disclosed, on August 30, 2021, Catarina Midstream, LLC, Evolve’s wholly owned subsidiary (“Catarina Midstream”) initiated a non-administered arbitration against SN Catarina, LLC (“SN Catarina”) pursuant to the International Institute for Conflict Prevention & Resolution Non-Administered Arbitration Rules (the “Catarina Arbitration”). The Catarina Arbitration sought to bring commercial resolution to the tariff rate on Eastern Catarina. Notwithstanding the Tariff Short-Pay, all disputed amounts were held in accounts receivable during the pendency of the Catarina Arbitration. Thereafter, Mesquite and SN Catarina initiated adversary proceeding 21-03931 (MI) (the “Mesquite Adversary”) against Evolve and Catarina Midstream in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”).
Also as previously disclosed, on May 27, 2022, in order to resolve the various claims, defenses, causes of action, and other disputes between and among SN Catarina, Catarina Midstream, Mesquite, Evolve, Evolve Transition Infrastructure GP, LLC, the general partner of Evolve (“Evolve GP”), SP Holdings, LLC (“SP Holdings”), and SN Operating LLC (“SN Operating,” collectively, with SN Catarina, Catarina Midstream, Mesquite, Evolve, Evolve GP, and SP Holdings, the “Settlement Parties”), including the Catarina Arbitration and the Mesquite Adversary, (i) the Settlement Parties entered into that certain Settlement Agreement (the “Settlement Agreement”); and (ii) Mesquite, SN Catarina, and SN Operating filed with the Bankruptcy Court a motion pursuant to Rule 9019 of the Bankruptcy Rules seeking the approval of the Settlement Agreement on an expedited basis (the “9019 Motion”). On June 7, 2022, Evolve issued a press release announcing the Bankruptcy Court’s granting of the 9019 Motion and issuance of the Approval Order.
The Approval Order became final and non-appealable on June 21, 2022, thereby triggering the Effective Date (as defined in the Settlement Agreement) of the Settlement Agreement.
Payment of Settlement Amount
In accordance with the terms of the Settlement Agreement, on June 23, 2022, Mesquite paid $10 million (the “Settlement Amount”) to Evolve.
Mutual Release
Also on June 23, 2022, concurrently with the payment of the Settlement Amount, each of the Settlement Parties executed and delivered to each other Settlement Party that certain Mutual Release Agreement, which provides for, among other things, the release of any and all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, contracts, damages, judgments, claims, and demands whatsoever, in law or equity, known or unknown, asserted or
