On June 23, 2020, certain affiliates of each Occidental Petroleum Corp., The Blackstone Group and GSO Capital Partners each filed a complaint (collectively, the “Rejection Lawsuits”) against Mesquite and certain of its subsidiaries requesting, among other things, that the Bankruptcy Court not approve the rejection of certain commercial agreements, as set forth in the Settlement Agreement, in connection with Mesquite’s Comanche Asset.
On June 30, 2020, the SN Debtors emerged from the Mesquite Chapter 11 Case, with Mesquite becoming a privately held corporation.
The commercial agreements contemplated by the Settlement Agreement will not become effective until, among other things, the Rejection Lawsuits have been resolved in favor of the SN Debtors and the Bankruptcy Court has approved the rejection of the certain commercial agreements underlying the Rejection Lawsuits. The Rejection Lawsuits were not resolved by October 1, 2020, and as a result the parties to the Settlement Agreement may terminate the Settlement Agreement at any time pursuant to its terms. To date, none of the parties of the Settlement Agreement have provided notice of termination.
On September 7, 2020, SP Capital Holdings, LLC (“SP Capital”), SP Common Equity LLC (“SPCE”), and Stonepeak Catarina, entered into a Contribution and Exchange Agreement (the “Contribution Agreement”), pursuant to which (i) SP Capital contributed 100% of the issued and outstanding membership interest in SP Holdings to Stonepeak Catarina, (ii) SPCE irrevocably committed to contribute 100 % of the issued and outstanding membership interests in SP Common Equity Subsidiary LLC (“SPCE Sub”) to Stonepeak Catarina, and (iii) as consideration for the contributions, Stonepeak Catarina issued 10,000 Class B Units in Stonepeak Catarina to SP Capital and 5,000 Class C Units in Stonepeak Catarina to SPCE. Such transactions were completed in their entirety on October 5, 2020. As a result of these transactions, Stonepeak gained control of our general partner and SP Holdings.
Pursuant to our partnership agreement, the general partner conducts, directs and manages all activities of the Partnership under the authority of the Board. Pursuant to the Limited Liability Company Agreement of our general partner, dated March 2, 2015, as amended, SP Holdings appoints all of the members of the Board, other than two directors which Stonepeak is entitled to designate pursuant to the Representation and Standstill Agreement.
On October 6, 2020, Amendment No. 8 to Schedule 13D (the “Catarina 13D”) was filed on behalf of each of (i) SPCE Sub, (ii) Stonepeak Catarina, (iii) Stonepeak Catarina Upper Holdings LLC, (iv) Stonepeak Infrastructure Fund (Orion AIV) LP, (v) Stonepeak Associates LLC, (vi) Stonepeak GP Holdings LP, (vii) Stonepeak GP Investors LLC, (viii) Stonepeak GP Investors Manager LLC, (ix) Michael Dorrell, and (x) Trent Vichie, in it was disclosed that SP Holdings began engaging in non-binding discussions with the Board about terminating or, alternatively, amending and restating the Shared Services Agreement. The Shared Services Agreement can be terminated (i) by either party at any time by 180 days’ prior written notice to the other party, (ii) by SP Holdings if there is an uncured material breach thereunder by the Partnership, or (iii) by the Partnership, subject to Board approval, if (1) there is an uncured material breach thereunder by SP Holdings or (2) there is a change in control of SP Holdings. Pursuant to the Standstill Agreement, the Partnership must obtain Stonepeak Catarina’s consent to its termination of the Shared Services Agreement. The Shared Services Agreement provides that if there is a termination other than by either party at the end of the Service Agreement’s term, by the Partnership for an uncured breach by SP Holdings, or by the Partnership upon a change of control of SP Holdings, then the Partnership will owe a termination payment to SP Holdings in an amount equal to $5,000,000 plus 5% of the transaction value of all asset acquisitions theretofore consummated. We estimate that this amount was in excess of $35.0 million as of December 31, 2020. Such termination fee may be payable in cash or common units. If the Partnership terminates upon 180 days’ prior notice then the Partnership must also pay to SP Holdings all costs and expenses of SP Holdings that result from such termination. The Catarina 13D reports that SP Holdings may terminate the Shared Services Agreement upon 180 days’ prior written notice to the Partnership and such termination would trigger the Partnership’s obligation to pay the termination fee in an amount equal to $5,000,000 plus 5% of the transaction value of all asset acquisitions theretofore consummated. To date, no notice of termination of the Shared Services Agreement has been delivered by SP Holdings.
On November 11, 2020, the Board declared that after establishing a cash reserve for the payment of certain amounts outstanding under the Credit Agreement, the Partnership did not have any available cash and, as a result, there would be no cash distribution on the Partnership’s common units. Section 5.9(b)(ii) of the Amended Partnership Agreement requires