Item 1.01 Entry into a Material Definitive Agreement
As previously disclosed, on November 18, 2019, Approach Resources Inc.
("Approach," the "Company," the "Seller" or "we") and all of its subsidiaries
(the "Filing Subsidiaries and, together with Approach, the "Debtors") filed
voluntary petitions (collectively, the "Bankruptcy Petitions") under chapter 11
("Chapter 11"), of Title 11 of the U.S. Code (the "Bankruptcy Code") in the
United States Bankruptcy Court for the Southern District of Texas (the "Court"),
thereby commencing the Chapter 11 cases captioned In re Approach Resources Inc.,
et al., Case No. 19-36444 (Bankr. S.D. Tex.) (the "Chapter 11 Cases").
As previously disclosed, on February 4, 2020, the Company and certain of the
Filing Subsidiaries (collectively, the "Sellers") entered into an asset purchase
agreement (the "APA") with Alpine Energy Acquisitions, LLC ("Alpine"), an
affiliate of Alpine Energy Capital, LLC ("Alpine Energy" and, together with
Alpine and the Debtors, the "Parties"). Pursuant to the terms of the APA, the
Company agreed to sell substantially all of the Debtors' assets (the "Assets,"
and such sale, the "Asset Sale") for approximately $192,500,000, subject to
certain customary purchase price adjustments as set forth in the APA (the
"Purchase Price"). In addition, pursuant to the terms of the APA, Alpine
deposited $19.25 million into escrow (the "Performance Deposit") on February 6,
2020.
As previously disclosed, on March 26, 2020, the Company received, from Alpine,
written notice (the "Termination Notice") purporting to terminate the APA
pursuant to Section 13.1(c) of the APA. The Company vigorously disputed that
Alpine was entitled to terminate the APA. The Bankruptcy Court commenced an
evidentiary hearing on motions, filed by the Company and by Alpine, arising out
of the disputed termination. Prior to the completion of the hearing, on June 9,
2020, the Parties entered into a Global Compromise Settlement Agreement and
Mutual General Release (the "Settlement Agreement") to settle the outstanding
disputes between the Sellers and Alpine and the pending motions. The Settlement
Agreement is subject to approval by the Bankruptcy Court.
Under the Settlement Agreement, which includes full mutual releases and provides
for termination of the APA, Alpine is required to cause to be paid to the
Company (a) the total amount of the Performance Deposit, which includes the
principal amount of $19,250,000.00, together with any investment earnings or
income thereon; and (b) an amount of $2,875,000.00 (collectively, the
"Settlement Amount"). Upon receipt of the Settlement Amount by the Company, the
mutual releases shall take effect and the APA shall terminate.
The foregoing description of the Settlement Agreement does not purport to be
complete and is qualified in its entirety by reference to the Settlement
Agreement, which has been filed with the Court and is attached hereto as Exhibit
10.1 and incorporated herein by reference.
Information regarding the Chapter 11 Cases is available through the Company's
website under the Restructuring Information tab, which contains a link to the
claims agent's website, https://dm.epiq11.com/approachresources.
Item 1.02 Termination of a Material Definitive Agreement.
The information set forth below in Item 1.01 of this Report regarding the
Settlement Agreement is incorporated herein by reference into this Item 1.02.
Item 1.03 Bankruptcy or Receivership.
The information set forth above in Item 1.01 of this Report regarding the
Settlement Agreement is incorporated herein by reference into this Item 1.03.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
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10.1* Global Compromise Settlement Agreement and Mutual General
Release, dated June 9, 2020* Certain exhibits and schedules have been omitted and the Company agrees to
furnish supplementally to the Securities and Exchange Commission a copy of any
omitted exhibits upon request. Pursuant to Item 601(a)(6) of Regulation S-K,
certain information has been redacted or omitted and marked by brackets and
asterisks.
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