Subsequent Events | 17. SUBSEQUENT EVENTS NYSE American Update On October 4, 2021, the NYSE American informed us that we regained compliance with the NYSE American Company Guide (the “Company Guide”) by meeting the requirements of the $50 million market capitalization exemption from the stockholders’ equity requirement in Section 1003(a) of the Company Guide. At the opening of trading on October 5, 2021, the below compliance (“.BC”) indicator was no longer disseminated and the Partnership was removed from the list of NYSE American noncompliant issuers on the NYSE American’s website. Mesquite Adversary Proceeding On October 15, 2021, Mesquite and SN Catarina, LLC (collectively, the “Mesquite Plaintiffs”) initiated adversary proceeding 21-03931 (MI) against the Partnership and Catarina Midstream, LLC (“Catarina Midstream”) in the Bankruptcy Court (the “Mesquite Adversary”). In the Mesquite Adversary, the Mesquite Plaintiffs seek recharacterization of the September 2015 transaction pursuant to which the Partnership acquired from SN Catarina all of SN Catarina’s interest in Catarina Midstream, including the gathering assets then-owned by SN Catarina (the “Catarina Arrangement”), as a disguised financing. The Mesquite Plaintiffs claim that SN Catarina is the legal owner of the gathering system subject to that transaction and demand its return. The Mesquite Plaintiffs also assert various claims for constructive and actual fraudulent transfer arising from (1) the Catarina Arrangement; (2) payments made by SN Catarina to Catarina Midstream under the Gathering Agreement after Catarina Midstream increased tariff rates for interruptible throughput volumes from the eastern portion (“Eastern Catarina”) of Mesquite’s acreage position in Dimmit, La Salle and Webb counties in Texas; and (3) payments made by SN Catarina to Catarina Midstream for the incremental infrastructure fee under the Gathering Agreement amendment and on a month-to-month basis by mutual agreement of the parties after the amendment’s expiration. The Mesquite Plaintiffs seek declaratory relief related to the recharacterization claim as well as avoidance of the alleged constructive and actual fraudulent transfers and recovery of the amounts transferred to Catarina Midstream. Stonepeak Letter Agreement Election On October 29, 2021, pursuant to the terms of the Stonepeak Letter Agreement, the Partnership received written notice of Stonepeak’s election to receive distributions on the Class C Preferred Units for the quarter ended September 30, 2021, in common units. In accordance with the Stonepeak Letter Agreement, the Partnership will issue 10,832,186 common units to Stonepeak on November 22, 2021 (the “Q321 Stonepeak Units”). HOBO Transaction; New Management Team Hires On November 3, 2021, the Partnership entered into a Framework Agreement (the “Framework Agreement”) with HOBO Renewable Diesel LLC (“HOBO”). The Framework Agreement provides that, subject to the satisfaction of applicable conditions precedent, the Partnership will fund certain development expenses of HOBO as HOBO seeks to develop, construct, own and operate renewable fuels facilities. HOBO’s initial project is a 9,000 barrel per day (120 million gallons per year) renewable diesel production facility to be located in Clinton, Iowa (the “Initial Project”). Subject to the satisfaction of certain conditions, including HOBO securing a long-term strategic offtake agreement for the Initial Project, the Partnership will exclusively fund the development and construction of the Initial Project and future renewable fuels projects that can produce renewable diesel and sustainable aviation fuel (“SAF”) and contribute to the advancement of the transition to a low-carbon world. Renewable diesel and SAF are unique drop-in fuels that are immediately consumable by existing automotive and airplane engines and reduce carbon emissions relative to petroleum based products. These drop-in fuels are in increasingly high demand by customers, including the US federal government, as more organizations embrace de-carbonization. HOBO and the Partnership are also considering incorporation of additional carbon reduction opportunities into the Initial Project and future projects which the management teams believe could result in the production of some of the lowest carbon intensity fuels in the US. We refer to the transactions described above or otherwise contemplated by the Framework Agreement as the “HOBO Transaction.” In furtherance of the Initial Project and to support the Partnership’s energy transition focus, key members of the HOBO leadership team will join the Partnership’s management team effective December 1st, 2021. HOBO Co-Founder and Chief Executive Officer Randy Gibbs will join as the new Chief Executive Officer, and as a member of the Board, HOBO Co-Founder and President Mike Keuss will join as the new President and Chief Operating Officer, and HOBO’s Chief Financial Officer Jonathan Hartigan will join as the new President and Chief Investment Officer (the “New Executives”). Each of the New Executives accepted employment effective November 3, 2021, and will transition to their respective director and executive roles effective December 1, 2021. The New Executives have each had long and successful careers in both the fossil fuel and renewable energy spaces and bring extensive experience in project development, engineering, operations, and financing to the Partnership’s management team. In connection with the management team hires, the Partnership’s general partner entered into Executive Services Agreements with each of the New Executives and issued awards under the Evolve Transition Infrastructure 2021 Equity Inducement Award Plan totaling 14,100,000 common units, and under the Partnership’s Long-Term Incentive Plan (the “LTIP”) totaling 3,600,000 common units (such 17,700,000 common units, collectively, the “New Executive Units”). The New Executive Units are subject to vesting in three separate tranches if certain performance conditions with respect to the Initial Project are satisfied or if certain performance metrics relating to total unitholder return are satisfied. Resignation of Chief Executive Officer; Transition Agreement On November 3, 2021, Gerald Willinger, the current Chief Executive Officer of the Partnership’s general partner, resigned from his position as Chief Executive Officer of the Partnership’s general partner and a member of the Board, effective November 30, 2021 and at such time that is immediately prior to December 1, 2021. Mr. Willinger will assist in the onboarding of new management in November to ensure a smooth transition. In connection with Mr. Willinger’s departure, on November 3, 2021, the Partnership’s general partner entered into a Separation and Transition Agreement with Mr. Willinger. Amendments to Stonepeak Warrant As previously disclosed, the LTIP provides that upon the issuance of additional common units from time to time, the maximum number of common units that may be delivered or reserved for delivery with respect to the LTIP shall be automatically increased (each such increase, an “LTIP Increase”) by a number of common units equal to the lesser of (i) fifteen percent (15%) of such additional common units, or (ii) such lesser number of common units as determined by the Board. On October 29, 2021, the Board determined that the LTIP Increase with respect to the Q321 Stonepeak Units will be fifteen percent (15%). On November 5, 2021, the Partnership and Stonepeak entered into Amendment No. 4 to the Stonepeak Warrant to exclude from the Stonepeak Warrant the 1,624,828 Common Units included in the LTIP Increase resulting from the issuance of the Q321 Stonepeak Units, resulting in an additional 1,624,828 Common Units being reserved for delivery with respect to the LTIP. On November 9, 2021, the Board determined that the LTIP Increase with respect to the New Executive Units will be fifteen percent (15%), resulting in an additional 2,655,000 common units being reserved for delivery with respect to the LTIP. On November 9, 2021, the Partnership and Stonepeak entered into Amendment No. 5 to the Stonepeak Warrant to exclude from the Stonepeak Warrant both the New Executive Units and the 2,655,000 Common Units included in the LTIP Increase resulting from the issuance of the New Executive Units. |