ALTA MESA RESOURCES, INC. Item 1.01 Entry into a Material Definitive Agreement
As previously disclosed,Alta Mesa Resources, Inc. (the "Company") and certain subsidiaries (such subsidiaries, together with the Company, the "Alta Mesa Debtors") filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in theUnited States Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court ") and filed a motion with theBankruptcy Court seeking joint administration of their chapter 11 cases (collectively, the "Alta Mesa Chapter 11 Cases") under the caption In reAlta Mesa Resources Inc. , et al., Case No. 19-35133. Kingfisher Purchase and Sale Agreement OnDecember 31, 2019 , wholly owned subsidiaries of the Company,Kingfisher Midstream, LLC ("Kingfisher") and its subsidiaries (collectively, the "Kingfisher Sellers"), entered into a Purchase and Sale Agreement (the "Kingfisher Purchase and Sale Agreement") withBCE-Mach III LLC (the "Buyer"), pursuant to which the Kingfisher Sellers agreed to sell to the Buyer substantially all of their midstream assets, including all gathering systems, pipelines, compressor stations, and related facilities and equipment, and certain real and personal property that is used or held for use in connection with such assets (the "Kingfisher Assets") (such transaction, the "Kingfisher Transaction"). The total consideration to be received by the Kingfisher Sellers pursuant to the Kingfisher Purchase and Sale Agreement is$85,250,000 in cash (the "Kingfisher Purchase Price"), subject to adjustments to account for aJanuary 1, 2020 effective date for the transaction as set forth in the Kingfisher Purchase and Sale Agreement. In connection with the execution of the Kingfisher Purchase and Sale Agreement, the Buyer delivered into escrow a deposit of$8,525,000 . The Kingfisher Transaction is expected to close in the first quarter of 2020, subject to the satisfaction or waiver of customary closing conditions. The Kingfisher Purchase and Sale Agreement contains representations, warranties and covenants of the Kingfisher Sellers and Buyer, as well as indemnification obligations of the Buyer, customary for this type of transaction. The Kingfisher Purchase and Sale Agreement also provides, upon consummation of the Kingfisher Transaction, for mutual releases between the Kingfisher Sellers and certain of their related parties, on the one hand, and the Buyer and certain of its related parties, on the other, which releases shall be effective upon closing of the Kingfisher Transaction. In addition, closing of the Kingfisher Transaction is conditioned upon the prior or simultaneous closing of the transactions under the Alta Mesa Purchase and Sale Agreement (as defined below). The Kingfisher Purchase and Sale Agreement contemplates that the Kingfisher Transaction will be implemented through proceedings commenced under chapter 11 of the Bankruptcy Code. In the event such chapter 11 proceedings are authorized by the applicable governing bodies of the Kingfisher Sellers, the Kingfisher Sellers expect to file voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with theBankruptcy Court (the "Kingfisher Chapter 11 Cases") and expect to seek, among other relief, an order establishing bidding procedures (the "Kingfisher Bidding Procedures Order") for an auction that allows other qualified bidders to submit higher or otherwise better offers to purchase any, all or substantially all of the Kingfisher Assets (any such offer, a "Competing Kingfisher Transaction"). Subject to the receipt of qualified offers from other bidders proposing a Competing Kingfisher Transaction, the Kingfisher Sellers propose to hold an auction with respect to the Kingfisher Assets on or aboutJanuary 15, 2020 . Additional information regarding the proposed auction and the requirements for qualified bids with respect to a Competing Kingfisher Transaction can be found in the sale notice posted on https://cases.primeclerk.com/kingfisher/ and the Kingfisher Bidding Procedures Order, when entered. In the event the chapter 11 proceedings are not commenced byJanuary 12, 2020 , either the Kingfisher Sellers or the Buyer may terminate the Kingfisher Purchase and Sale Agreement. The Kingfisher Purchase and Sale Agreement also may be terminated (i) by mutual written consent of the Kingfisher Sellers and the Buyer, (ii) by the Kingfisher Sellers or the Buyer as a result of certain material breaches of the Kingfisher Purchase and Sale Agreement that remain uncured and cause the failure of certain closing conditions, (iii) by the Kingfisher Sellers or the Buyer if the closing has not occurred, or if certain closing conditions have not been met, on or beforeApril 15, 2020 , (iv) by the Kingfisher Sellers or the Buyer if the Alta Mesa Purchase and Sale Agreement (as defined below) is terminated in accordance with its terms, (v) by the Buyer if there is a termination of the cash collateral order issued by theBankruptcy Court in connection with the Kingfisher Chapter 11 Cases and use of cash collateral is not reinstated or replaced within 15 days, (vi) by the Buyer if theBankruptcy Court does not approve a supplement to the Kingfisher Bidding Procedures relating to the Kingfisher Purchase and Sale Agreement on or beforeJanuary 14, 2020 , (vii) by the Buyer if the Kingfisher Sellers withdraw or seek authority to withdraw any sale order issued by theBankruptcy Court authorizing and approving, among other things, the sale of the Kingfisher Assets to the Buyer at any time after the filing of such sale order or if the Kingfisher Sellers otherwise announce a standalone plan of reorganization or liquidation with respect to the Kingfisher Assets other than as set forth in the Kingfisher Purchase and Sale Agreement, (viii) by the Kingfisher Sellers or the Buyer if theBankruptcy Court enters an order dismissing the Kingfisher Chapter 11 Cases or converting the Kingfisher Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code, (ix) by the Kingfisher Sellers or the Buyer if a governmental authority has issued an order, injunction or judgment that restrains, prohibits or enjoins the transactions contemplated by the Kingfisher Purchase and Sale Agreement and such order, injunction or judgment subsequently becomes final and non-appealable, (x) by 1
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the Kingfisher Sellers or the Buyer if the Kingfisher Sellers enter into (or provide notice to the Buyer of the Kingfisher Sellers' intent to enter into) one or more agreements to sell, transfer or otherwise dispose of (A) any material portion of the Kingfisher Assets having a fair market value in excess of$20.0 million other than in the ordinary course of business with one or more persons other than the Buyer or any successful bidder in the proposed auction or (B) any, all or substantially all of the Kingfisher Assets in a transaction that constitutes a "highest or best" proposal for the Kingfisher Assets, (xii) by the Kingfisher Sellers if Buyer has not delivered its financing commitments on or beforeJanuary 15, 2020 , or (xi) by the Kingfisher Sellers or the Buyer upon the occurrence of certain other events specified in the Kingfisher Purchase and Sale Agreement, in each case, subject to the terms and conditions of the Kingfisher Purchase and Sale Agreement. In certain circumstances, the Kingfisher Sellers have agreed to pay the Buyer a combined break-up fee and expense reimbursement equal to 3.0% of the Kingfisher Purchase Price upon the termination of the Kingfisher Purchase and Sale Agreement, in each case subject to the terms and conditions of the Kingfisher Purchase and Sale Agreement, including the approval of such fee by theBankruptcy Court . If the Kingfisher Chapter 11 Cases are commenced, creditors and other parties in interest may object to approval of these bid protections.Alta Mesa Purchase and Sale Agreement OnDecember 31, 2019 , certain wholly owned subsidiaries of the Company (the "Alta Mesa Sellers") entered into a Purchase and Sale Agreement (the "Alta Mesa Purchase and Sale Agreement" and, together with the Kingfisher Purchase and Sale Agreement, the "Purchase and Sale Agreements") with Buyer and, for the limited purposes set forth therein, the Company, pursuant to which the Alta Mesa Sellers agreed to sell to the Buyer substantially all of their assets, including substantially all of their wells, leases and related equipment (the "Alta Mesa Assets") (such transaction, the "Alta Mesa Transaction" and, together with the Kingfisher Transaction, the "Transactions"). The total consideration to be received by the Alta Mesa Sellers pursuant to the Alta Mesa Purchase and Sale Agreement is$224,750,000 in cash (the "Alta Mesa Purchase Price"), subject to customary adjustments for this type of transaction, including adjustments related to environmental and title defects. In connection with the execution of the Alta Mesa Purchase and Sale Agreement, the Buyer delivered into escrow a deposit of$22,475,000 . The Alta Mesa Transaction, which has an effective date ofJanuary 1, 2020 , is expected to close in the first quarter of 2020, subject to the satisfaction or waiver of certain customary closing conditions and approval of theBankruptcy Court . The Alta Mesa Purchase and Sale Agreement contains representations, warranties, covenants and indemnification obligations customary for this type of transaction. The Alta Mesa Purchase and Sale Agreement also provides, upon consummation of the Alta Mesa Transaction, for mutual releases between the Alta Mesa Sellers, the Company, and certain of their related parties, on the one hand, and the Buyer and certain of its related parties, on the other, which releases shall be effective upon closing of the Alta Mesa Transaction. In addition, closing of the Alta Mesa Transaction is conditioned upon the prior or simultaneous closing of the transactions under the Kingfisher Purchase and Sale Agreement. The Alta Mesa Debtors have filed the Alta Mesa Purchase and Sale Agreement with theBankruptcy Court and are seeking theBankruptcy Court's approval of the break-up fee and expense reimbursement described below. Creditors of the Alta Mesa Debtors and other parties in interest may object to approval of these bid protections, and if such objections are successful, the Buyer would have the right to terminate the Alta Mesa Purchase and Sale Agreement. Pursuant to the order of theBankruptcy Court establishing bidding procedures for theAlta Mesa Assets (the "Alta Mesa Bidding Procedures Order"), bidders will have the opportunity to submit higher or otherwise better offers to purchase all or substantially all of the Alta Mesa Assets (any such offer, a "Competing Alta Mesa Transaction"). Subject to the receipt of qualified offers from other bidders proposing a Competing Alta Mesa Transaction, the Alta Mesa Debtors propose to hold an auction with respect to the Alta Mesa Assets on or aboutJanuary 15, 2020 . Additional information regarding the proposed auction and the requirements for qualified bids with respect to a Competing Alta Mesa Transaction can be found in the Alta Mesa Bidding Procedures Order, which can be accessed at the following website: https://cases.primeclerk.com/altamesa/Home-Index.The Bankruptcy Court will consider the approval of the Alta Mesa Transaction at a hearing currently scheduled forJanuary 21, 2020 . The Alta Mesa Purchase and Sale Agreement may be terminated, subject to certain exceptions, (i) by mutual written consent of the Alta Mesa Sellers and the Buyer, (ii) by the Alta Mesa Sellers or the Buyer as a result of certain material breaches of the Alta Mesa Purchase and Sale Agreement that remain uncured and cause the failure of certain closing conditions, (iii) by the Alta Mesa Sellers or the Buyer if the closing has not occurred, or if certain closing conditions have not been met, on or beforeApril 15, 2020 , (iv) by the Buyer if a governmental authority has issued a final order that restrains, prohibits or enjoins the transactions contemplated by the Alta Mesa Purchase and Sale Agreement and such final order is no longer subject to appeal and no appeal of such final order is pending, (v) by the Buyer if there is a termination of the cash collateral order issued by theBankruptcy Court in connection with the Alta Mesa Chapter 11 Cases, (vi) by the Buyer if theBankruptcy Court does not approve a stalking horse order on or beforeJanuary 10, 2020 or if such stalking horse order ceases to be in full force and effect, (vii) by the Buyer if theBankruptcy Court has not entered a sale order authorizing and approving, among other things, the sale of the Alta Mesa Assets to the Buyer (an "Alta Mesa Sale Order") byJanuary 22, 2020 , (viii) by the Buyer if the Alta Mesa Sellers withdraw or seek authority to withdraw anyAlta Mesa Sale Order at any time after the filing of suchAlta Mesa Sale Order or if the Alta Mesa Sellers otherwise announce a standalone plan of reorganization or liquidation with respect 2
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to the Alta Mesa Assets other than as set forth in the Alta Mesa Purchase and
Sale Agreement, (ix) by the Alta Mesa Sellers or the Buyer if Sellers enter into
a Competing Alta Mesa Transaction in which the Buyer is not a backup bidder or
consummates the Alta Mesa Transaction pursuant to a Competing Alta Mesa
Transaction, (x) by the Alta Mesa Sellers or the Buyer if the
Item 9.01. Financial Statements and Exhibits. (d) Exhibits. Exhibit No. Description 10.1 Purchase and Sale Agreement, datedDecember 31, 2019 , by and amongKingfisher Midstream, LLC ,Oklahoma Produced Water Solutions, LLC ,Kingfisher STACK Oil Pipeline, LLC andCimarron Express Pipeline, LLC , collectively as Seller, andBCE-Mach III LLC , as Buyer. 10.2 Purchase and Sale Agreement, datedDecember 31, 2019 , by and amongAlta Mesa Holdings, LP ,Alta Mesa Holdings GP, LLC ,OEM GP, LLC ,Alta Mesa Finance Services Corp. ,Alta Mesa Services, LP ,Oklahoma Energy Acquisitions, LP , collectively as Seller,BCE-Mach III LLC , as Buyer, and, for the limited purposes set forth therein,Alta Mesa Resources, Inc. 3
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