Battalion Oil Corp 8-K, filed Dec 18, 2023
Battalion Oil Corp (BATL)
About this 8-K
Battalion Oil Corp filed this 8-K on December 18, 2023, reporting on events of December 14, 2023.
Items reported
- Item 1.01: Entered into a material agreement
- Item 3.02: Unregistered sale of equity
- Item 3.03: Change to shareholders' rights
- Item 5.03: Charter or bylaw amendment, or fiscal year change
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
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3505 West Sam Houston Parkway North, Suite 300, Houston, Texas 77043 | ||||||
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Item 1.01 | Entry into a Material Definitive Agreement. |
Agreement and Plan of Merger
On December 14, 2023, Battalion Oil Corporation (the “Company” or “we”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Fury Resources, Inc., a Delaware corporation (“Parent”), and San Jacinto Merger Sub, Inc. (“Merger Sub”), a Delaware corporation and a direct, wholly owned subsidiary of Parent. Capitalized terms used but not otherwise defined in this Current Report on Form 8-K have the meanings given to them in the Merger Agreement.
The Merger
The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving as a wholly owned subsidiary of Parent. Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”): (a) each of the Company’s issued and outstanding shares of Common Stock, par value $0.0001 per share (“Common Stock”) shall be converted into the right to receive $9.80 in cash, without interest (the “Merger Consideration”), and such shares shall otherwise cease to be outstanding, shall automatically be canceled and retired and cease to exist; and (b) (i) each share of Series A Redeemable Convertible Preferred Stock of the Company, par value $0.0001 per share (“Series A Preferred Stock”) shall be converted into the right to receive such consideration in respect of the Merger as is set forth in that certain Certificate of Designations of Series A Redeemable Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”) on March 24, 2023, (ii) each share of Series A-1 Redeemable Convertible Preferred Stock of the Company, par value $0.0001 per share (the “Series A-1 Preferred Stock”) shall be converted into the right to receive such consideration in respect of the Merger as is set forth in the Series A-1 CoD (as defined below), as amended by the Series A-1 CoD Amendment (as defined below), and (iii) each share of preferred stock of the Company issued following the execution and delivery of the Merger Agreement but prior to the Effective Time (the “New Preferred Stock” and, together with the Series A Preferred Stock and the Series A-1 Preferred Stock, collectively, the “Preferred Stock”) shall be converted into the right to receive such consideration in respect of the Merger as is set forth in the applicable certificate of designations (which shall be substantially in the form attached as Exhibit D to the Merger Agreement) pertaining to such series of preferred stock (the consideration described in this clause (b), “Preferred Stock Merger Consideration”). Each share of Common Stock and Preferred Stock held by the Company as treasury stock or held by Parent or Merger Sub shall be canceled and retired without any conversion thereof. Each share of Common Stock and Preferred Stock held by any direct or indirect Subsidiary of Parent (other than Merger Sub) or the Company (other than any shares of Common Stock held on behalf of third parties) immediately prior to the Effective Time shall be converted into such number of shares of common stock of the Surviving Corporation so as to maintain relative ownership percentages.
In addition, pursuant to the Merger Agreement, at the Effective Time:
| • | each time-based restricted stock unit award in respect of a share of Common Stock granted under the Company’s 2020 Long Term Incentive Plan or otherwise that is outstanding immediately prior to the Effective Time, shall fully vest and be canceled and converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration in respect of each share of Common Stock subject to such Time-Based Company RSU Award, less any applicable withholding Taxes (as such term is defined in the Merger Agreement); |
| • | each performance-based restricted stock unit award in respect of a share of Common Stock granted under the Company’s 2020 Long Term Incentive Plan or otherwise that is outstanding immediately prior to the Effective Time shall be canceled for no consideration immediately prior to the Effective Time and the holder thereof shall have no further rights with respect thereto; and |
| • | each option to purchase shares of Common Stock granted under the Company’s 2020 Long Term Incentive Plan (each, a “Company Option”), whether vested or unvested, that is outstanding immediately prior to the Effective Time, shall fully vest and be canceled and converted into the right to receive an amount in cash, without interest, equal to the product obtained by multiplying (A) the excess of the Merger Consideration over the exercise price per share of Common Stock subject to such Company Option, if any, by (B) the total number of shares of Common Stock subject to such Company Option, less any applicable withholding Taxes. Any Company Option with an exercise price per share of |
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Common Stock that is greater than or equal to the Merger Consideration shall be canceled for no consideration immediately prior to the Effective Time, and the holder of such Company Option shall have no further rights with respect thereto. |
Conditions to Closing
The obligations of the Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of certain closing conditions, including, among other things: (a) the absence of any law or order of any Governmental Authority having jurisdiction over a party to the Merger Agreement prohibiting or making illegal the consummation of the Merger, and (b) the adoption of the Merger Agreement by a majority vote of the issued and outstanding shares of Company Common Stock.
The obligations of Parent and Merger Sub to consummate the Merger are also subject to the satisfaction or waiver of certain closing conditions, including, among other things: (a) the representations and warranties made by the Company being true and correct, subject to various qualifications; (b) the Company having performed or complied in all material respects with covenants and agreements contained in the Merger Agreement; (c) the receipt by Parent and Merger Sub of a certificate executed by the Company’s Chief Executive or Chief Financial Officer confirming that the conditions precedent to Parent’s and Merger Sub’s obligations to consummate the Merger have been satisfied; (d) the consummation of Parent Preferred Stock Transactions (as defined below); and (e) the requisite approval under applicable Law of the Series A-1 CoD Amendment, and the filing of the Series A 1 CoD Amendment with the Delaware Secretary of State.
The obligations of the Company to consummate the Merger are also subject to the satisfaction or waiver of certain closing conditions, including, among other things: (a) the representations and warranties made by Parent and Merger Sub being true and correct, subject to various qualifications; (b) Parent and Merger Sub having performed or complied in all material respects with covenants and agreements contained in the Merger Agreement; and (c) the receipt by the Company of a certificate executed by Parent’s Chief Executive or Chief Financial Officer confirming that the conditions precedent to the Company’s obligations to consummate the Merger have been satisfied.
Representations, Warranties and Covenants
The Merger Agreement contains various customary representations, warranties of the Company, Parent and Merger Sub. Many of the representations made by the Company are subject to and qualified by a Material Adverse Effect and/or Knowledge of the Company standard.
The Company, Parent and Merger Sub have also made certain covenants in the Merger Agreement, including (a) covenants by the Company regarding the operation of its business and that of its Subsidiaries prior to the Effective Time; (b) a customary non-solicitation covenant prohibiting the Company from soliciting, providing non-public information in response to, or engaging in discussions or negotiations with respect to, proposals relating to alternative business combination transactions, except as permitted under the Merger Agreement; (c) a financing covenant by Parent and Merger Sub to take or cause to be taken all actions necessary, proper or advisable to arrange, consummate and obtain Parent’s committed debt financing with respect to the transactions contemplated by the Merger Agreement; (d) a customary covenant in which the Company and its Subsidiaries have agreed to provide all cooperation reasonably requested by Parent, Merger Sub and/or the Financing Sources in connection with the arranging, consummation and obtaining of the such debt financing; and (e) covenants by Parent and Merger Sub to consummate the transactions contemplated by the Parent Preferred Stock Purchase Agreement and the Contribution Agreement (each, as defined below) and obtain certain additional debt and/or equity financing such that Merger Sub has sufficient funds as of the Closing Date to consummate the Merger and pay all related fees and expenses. The Company, Parent and Merger Sub have agreed to take or cause to be taken all actions necessary, proper or advisable under any applicable Laws to consummate and make effective in the most expeditious manner possible the Merger and the other transactions contemplated by the Merger Agreement. In addition, Parent is under an obligation to deliver to the Company by February 28, 2024 evidence (the “Evidence of Funding”) reasonably satisfactory to the Company showing that, among other things, an aggregate amount in cash greater than or equal to $200,000,000 minus the Closing Failure Fee Escrow Funds (as defined below) is available for withdrawal for the purpose of financing the transactions contemplated by the Merger Agreement.
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Termination
The Merger Agreement may be terminated on or prior to the Closing Date by each of the Company and Parent under certain circumstances, including (a) by either the Company or Parent if the Merger is not consummated by April 13, 2024 (except that a party will not be able to exercise such termination right if it has materially breached any provision of the Merger Agreement which breach was the primary cause of the failure of the Closing to occur before such date); (b) by the Company if Parent fails to deliver Qualifying Additional Financing Documents to the Company on or before the later of (i) February 13, 2024 at 5:00 p.m. Central Time and (ii) the date that the Proxy Statement is mailed to the Company’s stockholders (the “Additional Financing Documents Trigger”); (c) by the Company if Parent fails to deliver the Evidence of Funding on or before 5:00 p.m. Central Time on February 28, 2024 (the “Evidence of Funding Trigger”); and (d) by the Company if Parent fails to consummate the Full Escrow Funding on or before 5:00 p.m. Central Time on January 23, 2024 (the “Full Escrow Funding Trigger”).
Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Parent a termination fee of up to $8,000,000 (the “Company Termination Fee”) in cash. If the Merger Agreement is terminated because the Company Stockholder Approval is not obtained, under circumstances that do not otherwise result in the Company Termination Fee becoming due and payable, then the Company will be required to pay certain expenses of Parent, in an amount not to exceed $1,375,000.
Upon termination of the Merger Agreement under specified circumstances, including (a) Parent’s material uncured breach, (b) Parent’s failure to cause the Additional Financing to be arranged, (c) the Additional Financing Documents Trigger, (d) the Evidence of Funding Trigger and (e) the Full Escrow Funding Trigger, Parent will be required to pay the Company a termination fee of $10,000,000 (“Closing Failure Fee”) in cash; provided, that if any of the circumstances specified in the Merger Agreement that result in the Closing Failure Fee becoming due and payable occurs at any time after 5:00 p.m. Central Time on January 23, 2024, the “Closing Failure Fee” shall be equal to $20,000,000.
The Merger and the Merger Agreement were unanimously approved by the Company Board based upon the recommendation of the special committee of disinterested directors of the Company Board that was established to evaluate potential strategic transactions, including those contemplated by the Merger Agreement, and the Company Board has recommended that stockholders of the Company vote in favor of the approval and adoption of the Merger and the Merger Agreement.
The foregoing description of the Merger Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and incorporated herein by reference.
The Merger Agreement, and the foregoing description of the Merger Agreement, have been included to provide investors and our stockholders with information regarding the terms of the Merger. The assertions embodied in the representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement, were solely for the benefit of the parties to the Merger Agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by information in a confidential disclosure letter provided by the Company to Parent in connection with the signing of the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed as material to stockholders, or may have been used for the purpose of allocating risk between the parties to the Merger Agreement. Accordingly, the representations and warranties in the Merger Agreement should not be relied on by any persons as characterizations of the actual state of facts and circumstances about the Company, Parent or Merger Sub at the time they were made or otherwise, and information in the Merger Agreement should be considered in conjunction with the entirety of the factual disclosure about the Company in the Company’s public reports filed with the U.S. Securities and Exchange Commission (the “SEC”). Information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
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Certain Related Agreements
Contribution, Rollover and Sale Agreement
In connection with the transactions contemplated by the Merger Agreement, on December 14, 2023, Parent entered into a Contribution, Rollover and Sale Agreement (the “Contribution Agreement”) with Luminus Energy Partners Master Fund, Ltd (“Luminus”) and OCM HLCN Holdings, L.P. (“Oaktree” and, together with Luminus, the “Rollover Sellers”) pursuant to which the Rollover Sellers have agreed, prior to the Effective Time, to contribute to Parent certain shares of the Company’s Series A Preferred Stock, Series A-1 Preferred Stock, Series A-2 Preferred Stock (as defined below) and New Preferred Stock (if issued prior to the Effective Time) (collectively, the “Rollover Shares”), in exchange for shares of the Series A Preferred Stock, par value $0.0001 per share, of Parent (the “Parent Preferred Stock”). In the event that the aggregate Rollover Value (as defined below) of a Rollover Seller’s Rollover Shares exceeds such Rollover Seller’s Maximum Rollover Amount (as defined below), then each Rollover Seller has agreed, prior to the Effective Time, to sell to Parent the shares of Series A-2 Preferred Stock and New Preferred Stock (if issued prior to the Effective Time) that have an aggregate Rollover Value (as defined below) equal to such excess, for a cash purchase price equal to the aggregate Rollover Value of such shares of Series A-2 Preferred Stock (i.e., a cash purchase price equal to such excess). For purposes of the Contribution Agreement: (a) the “Rollover Value” of each share of the Company’s (i) Series A Preferred Stock is $1,240, (ii) Series A-1 Preferred Stock is $1,086, and (iii) Series A-2 Preferred Stock and New Preferred Stock is the redemption price determined pursuant to Section 8(a) of the Series A-2 CoD (as defined below) for such Series A-2 Preferred Stock, or the Certificate of Designations for such New Preferred Stock, as applicable, in each case as of the closing of the transactions contemplated by the Contribution Agreement; provided, that in the case of the foregoing clauses (i) and (ii), if such closing does not take place on or prior to February 5, 2024, such amount shall increase at an annual rate of 16% until such closing occurs; and (b) the “Maximum Rollover Amount” of (1) Luminus is $42,519,662 and (2) Oaktree is $27,556,191.
The Contribution Agreement contains representations, warranties, and covenants of Parent and each of the Rollover Sellers, as well as other obligations of the parties. The closing of the transactions contemplated by the Contribution Agreement is conditioned on the satisfaction or waiver of certain customary closing conditions, including the accuracy of the representations and warranties in the Contribution Agreement, the compliance by the parties with the covenants in the Contribution Agreement, the satisfaction or waiver of all conditions to the closing of the Merger, and the consummation by Parent of a common equity financing for total aggregate cash proceeds of at least $200,000,000 (the “Common Equity Investments”).
Parent Preferred Stock Purchase Agreement
In connection with the transactions contemplated by the Merger Agreement, on December 14, 2023, Parent entered into a Series A Preferred Stock Purchase Agreement (each, a “Parent Preferred Stock Purchase Agreement”) with Luminus, Oaktree and Lion Point Master, LP (“Lion Point” and, together with Luminus and Oaktree, the “Parent Preferred Stock Purchasers”) pursuant to which each Parent Preferred Stock Purchaser has agreed, prior to the Effective Time, to purchase certain shares of Parent Preferred Stock from Parent at a purchase price of $1,000 per share. The aggregate purchase price for the shares of Parent Preferred Stock that Luminus and Oaktree have agreed to purchase pursuant to the Parent Preferred Stock Purchase Agreement is calculated based on the Rollover Value of the Rollover Shares contributed by each of them to Parent pursuant to the Contribution Agreement, such that if the Rollover Value of such Rollover Shares equals or exceeds such Parent Preferred Stock Purchaser’s agreed aggregate purchase price (which is equal to each such Parent Preferred Stock Purchaser’s Maximum Rollover Amount), such Parent Preferred Stock Purchaser will not have any obligation to purchase any additional shares of Parent Preferred Stock. Lion Point has agreed to purchase an aggregate of $9,420,478 in shares of Parent Preferred Stock.
The Parent Preferred Stock Purchase Agreement contains representations, warranties, and covenants of Parent and each of the Parent Preferred Stock Purchasers, as well as other obligations of the parties. The closing of the transactions contemplated by the Parent Preferred Stock Purchase Agreement is conditioned on certain customary closing conditions, including the accuracy of the representations and warranties in the Parent Preferred Stock Purchase Agreement, the compliance by the parties with the covenants in the Parent Preferred Stock Purchase Agreement, the satisfaction of all conditions to the closing of the Merger, the consummation of the transactions contemplated by the Contribution Agreement, and the consummation by Parent of the Common Equity Investments. The transactions
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contemplated by the Contribution Agreement and the Parent Preferred Stock Purchase Agreement are referred to herein as the “Parent Preferred Stock Transactions”.
The foregoing summaries of the material terms of the Contribution Agreement and the Parent Preferred Stock Purchase Agreement are not complete and are qualified in their entirety by reference to the full text thereof, copies of which are filed herewith as Exhibits B and C to the Merger Agreement and incorporated by reference herein.
Escrow Agreement
Concurrently with the execution and delivery of the Merger Agreement, the Company and Parent entered into the Escrow Agreement (in the form attached as Exhibit D to the Merger Agreement) (the “Escrow Agreement”), pursuant to which, on December 15, 2023, Parent deposited an amount in cash equal to $10,000,000 into a segregated escrow account established pursuant to and in accordance with the Escrow Agreement. Pursuant to the Merger Agreement, prior to January 23, 2024, Parent shall deposit into the escrow account such amounts of cash as are necessary to cause the aggregate funds contained in the escrow account as of 5:00 p.m. Central Time on January 23, 2024, to equal $20,000,000 (the amount in cash contained in such escrow account, the “Closing Failure Fee Escrow Funds”). The escrow account is being established for purposes of securing Parent’s obligations to pay either amount of the Closing Failure Fee (as described more fully above). In the event that the Closing Failure Fee does not become due and payable in accordance with the Merger Agreement, the Closing Failure Fee Escrow Funds shall be used towards making the payments contemplated by the Merger Agreement or returned to Parent, as applicable.
Voting Agreement
Concurrently with the execution and delivery of the Merger Agreement, Parent entered into a voting agreement (the “Voting Agreement”) with each of the Rollover Sellers, who in the aggregate beneficially own shares of Common Stock representing approximately 61.61% of the voting power of the Company’s outstanding capital stock in the aggregate.
Under the Voting Agreement, the Rollover Sellers agreed to, among other things, vote shares of common stock of the Company representing approximately 38% of the voting power of the Company’s outstanding capital stock (the “Covered Shares”) in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, subject to the limitations set forth in the Voting Agreement. Each of the Stockholders’ respective obligations under the Voting Agreement will automatically terminate upon the earliest to occur of (i) the effective time of the Merger, (ii) the termination of the Merger Agreement in accordance with its terms, (iii) any amendment, modification or waiver of any provision of the Merger Agreement that (a) reduces the amount of Merger Consideration payable pursuant thereto or otherwise modifies the form of consideration for the Merger, (b) is adverse to any Rollover Seller relative to the other stockholders of the Company or (c) would reasonably be expected to materially jeopardize the Closing of the Merger, in the case of each of the foregoing clauses (a), (b) and (c), without the express written approval of the Rollover Sellers, or (iv) written notice of termination of the Voting Agreement by Parent to the Rollover Sellers.
The information set forth under “Series A-2 Preferred Stock Issuance and Certificate of Designations” and “Series A-2 Preferred Stock Purchase Agreement” in Item 5.03 is incorporated by reference into this Item 1.01.
Item 3.02 | Unregistered Sale of Equity Securities. |
The information regarding the Series A-2 Preferred Stock Transaction set forth in Item 1.01 and Item 5.03 of this Current Report on Form 8-K, is incorporated by reference into this Item 3.02.
The private placement of the Series A-2 Preferred Stock pursuant to the Series A-2 Purchase Agreement was undertaken in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof.
Item 3.03 | Material Modification to Rights of Security Holders. |
The information set forth under Item 5.03 is incorporated by reference into this Item 3.03.
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Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
Amendment to Series A-1 Preferred Stock Certificate of Designations
On December 15, 2023, the Company filed a certificate of amendment to the Certificate of Designations of Series A- 1 Redeemable Convertible Preferred Stock (the “Series A-1 CoD”) with the Delaware Secretary of State (such amendment, the “Series A-1 CoD Amendment”). The Series A-1 CoD Amendment, which has been approved by the requisite holder(s) of Company Series A-1 Preferred Stock, amends, among other things, certain provisions of the Series A-1 CoD, as follows: (a) the period during which holders of Series A-1 Preferred Stock may convert their shares of Series A-1 Preferred Stock into Common Stock shall not commence until the date that is two hundred forty (240) days following the Issuance Date (as defined in the Series A-1 CoD); (b) the period during which the Company may redeem shares of Series A-1 Preferred Stock at a price per share equal to one hundred and two percent (102%) of the then-current Liquidation Preference (as defined in the Series A-1 CoD) has been changed such that the period shall begin on the date that is one hundred twenty (120) days after the Issuance Date and end on the date that is two hundred thirty-nine (239) days after such Issuance Date; (c) the period during which the Company may redeem shares of Series A-1 Preferred Stock at a price per share equal to one hundred and five percent (105%) of the then-current Liquidation Preference (as defined in the Series A-1 CoD) has been changed such that the period shall begin on the date that is two hundred and forty (240) days after the Issuance Date and end on the first (1st) anniversary of the Issuance Date; (d) (i) with respect to the option of the holders of Series A-1 Preferred Stock to convert their Series A-1 Preferred Stock into a right to receive a cash payment per share of Series A-1 Preferred Stock in connection with a Change of Control (as defined in the Series A-1 CoD), the cash price has been changed from an amount equal to the then-applicable Liquidation Preference to an amount equal to the then-applicable Redemption Price (as defined in the Series A-1 CoD) per share of such Series A-1 Preferred Stock, and (ii) the period during which holders of Series A-1 Preferred Stock may exercise such conversion option in connection with a Change of Control has been changed from any time on or prior to the one hundred fiftieth (150th) day to the two hundred fortieth (240th) day following the Issuance Date; (e) the period during which the Company must offer each holder of Series A-1 Preferred Stock a cash payment per share of Series A-1 Preferred Stock equal to the then-applicable Redemption Price in connection with a Change of Control has been changed from the period following the occurrence of both the one hundred fiftieth (150th) day following the Issuance Date and the end of the Term Loan Restricted Period (as described in the Series A-1 CoD) to the period following the occurrence of both the two hundred fortieth (240th) day following the Issuance Date and the end of the Term Loan Restricted Period, and (f) the period during which the Company shall have the option to offer each holder of Series A-1 Preferred Stock a cash payment per share of Series A-1 Preferred Stock equal to the then-applicable Redemption Price in connection with a Change of Control has been changed from the period beginning on the one hundred fiftieth (150th) day following the Issuance Date and ending at the end of the Term Loan Restricted Period to the period beginning on the two hundred fortieth (240th) day following the Issuance Date and ending at the end of the Term Loan Restricted Period.
The Series A-1 CoD Amendment is filed as Exhibit 3.1 to this Current Report on Form 8-K. The foregoing description of the Series A-1 CoD Amendment does not purport to be complete and is qualified in its entirety by reference to such Exhibit.
Series A-2 Preferred Stock Issuance and Certificate of Designations
On December 15, 2023, the Company entered into a purchase agreement (the “Series A-2 Purchase Agreement”) with each of the purchasers set forth on Schedule A thereto (the “Series A-2 Purchasers”), pursuant to which the Company agreed to sell to the Series A-2 Purchasers, in a private placement, an aggregate of 35,000 shares of Series A-2 Redeemable Convertible Preferred Stock, par value $0.0001 per share (the “Series A-2 Preferred Stock” and the purchase and sale of such shares of Series A-2 Preferred Stock, the “Series A-2 Preferred Stock Transaction”). A description of the material terms of the Series A-2 Preferred Stock Transaction is set forth below and is qualified in its entirety by reference to the documents attached hereto as Exhibit 3.2, Exhibit 10.1 and Exhibit 10.2, which are incorporated herein by reference.
The Series A-2 Purchasers included certain funds managed by Luminus, Oaktree, and LSP Investment Advisors, LLC, our largest three (3) existing shareholders whose appointed representatives make up fifty percent (50%) of our board of directors. The Series A-2 Preferred Stock Transaction was approved by our board of directors upon recommendation by a special committee of disinterested directors that was established to evaluate the proposed terms
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of the Series A-2 Preferred Stock Transaction. The aggregate purchase price paid by the Series A-2 Purchasers for the shares of Series A-2 Preferred Stock was approximately $34,125,000, with related expenses and fees to be paid out of the proceeds. The Company intends to use the proceeds for general corporate and working capital purposes including scheduled debt principal and interest payments.
Series A-2 Preferred Stock Purchase Agreement
The Series A-2 Purchase Agreement entered into by the Company and the Series A-2 Purchasers contains representations, warranties, and covenants of the Company and each of the Series A-2 Purchasers, as well as indemnification rights and other obligations of the parties. The closing of the transaction, including the issuance of the shares of Series A-2 Preferred Stock, occurred on December 15, 2023 (the “Issuance Date”), and was conditioned on customary closing conditions, including the accuracy of the representations and warranties in the Series A-2 Purchase Agreement, the compliance by the parties with the covenants in the Series A-2 Purchase Agreement, and no material adverse effect occurred with respect to the Company.
Description of Series A-2 Preferred Stock
The powers, preferences, rights, qualifications, limitations and restrictions applicable to the Series A-2 Preferred Stock issued in the transaction are set forth in the Series A-2 Certificate of Designations of the Company (the “Series A-2 CoD”), which form is attached as Exhibit 3.2 to this Current Report on Form 8-K. The Series A-2 CoD is filed with the Delaware Secretary of State.
The holders of shares of the Series A-2 Preferred Stock generally have no voting rights, except as required by the General Corporation Law of the State of Delaware (the “DGCL”), other applicable law, the Certificate of Incorporation (as amended from time to time in accordance with its terms and the DGCL, the “Certificate of Incorporation”), or as otherwise described in the Series A-2 CoD, and except that the consent of the holders of at least two-thirds of the outstanding Series A-2 Preferred Stock is required to: (a) authorize, create, or increase the authorized amount of, or issue any class or series of class or series that ranks senior to the Series A-2 Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Company (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such capital stock, the “Senior Stock”), or reclassify or amend the provisions of any existing class of securities of the Company into shares of Senior Stock; (b) authorize, create or issue any stock or debt instrument or other obligation that is convertible or exchangeable into shares of its Senior Stock (or that is accompanied by options or warrants to purchase such Senior Stock); (c) amend, alter or repeal any provision of the Certificate of Incorporation or the Series A-2 CoD, in either case, in a manner that materially adversely affects the special rights, preferences, privileges or voting powers of the Series A-2 Preferred Stock; (d) declare or pay any dividends or other distributions in cash or property with respect to the Company’s Common Stock or other class or series of capital stock of the Company, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the Series A-2 Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Company (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such capital stock, the “Junior Stock”); (e) redeem, repurchase or acquire shares of its Common Stock or other Junior Stock (other than with respect to customary repurchase rights or tax withholding arrangements with respect to equity awards or benefit plans); or (f) redeem, repurchase, recapitalize or acquire shares of its stock on a parity with any class or series of capital stock of the Company, the terms of which provide that such class or series ranks on a parity with the Series A-2 Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Company (such capital stock, including the Company Series A Preferred Stock and the Company Series A-1 Preferred Stock, together with any warrants, rights, calls or options exercisable for or convertible into such capital stock, the “Parity Stock”) other than (i) pro rata offers to purchase all, or a pro rata portion, of the Series A-2 Preferred Stock and such Parity Stock, (ii) as a result of a reclassification of Parity Stock for or into other Parity Stock or Junior Stock, (iii) the exchange or conversion of Parity Stock for or into other Parity Stock or Junior Stock, or (iv) the purchase of fractional interests in shares of Parity Stock pursuant to the conversion or exchange provisions of such Parity Stock or the security being converted or exchanged.
Holders of Series A-2 Preferred Stock are entitled to receive dividends at the rate per share of Series A-2 Preferred Stock equal to the Series A-2 Dividend Rate (the “Series A-2 Dividend”). The “Series A-2 Dividend Rate” means fourteen and one-half percent (14.50%) per annum on the then-applicable liquidation preference. If a Series A-2 Dividend is not declared and paid in cash on a Dividend Payment Date, then in full discharge of such Series A-2
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Dividend for such Dividend Period, the Liquidation Preference of each outstanding share of Series A-2 Preferred Stock, regardless of its date of issue, automatically increases on such Dividend Payment Date by an amount equal to sixteen percent (16.00%) per annum multiplied by the Liquidation Preference in effect immediately after the immediately prior Dividend Payment Date (or the Issuance Date in respect of the first Dividend Period) (such automatic increase, the “Unpaid Dividend Accrual”), which, for the avoidance of doubt, will be pro-rated for the period of time elapsed during such Dividend Period. The period from the Issuance Date to and including December 31, 2023, and each period from but excluding a Dividend Payment Date to and including the following Dividend Payment Date is herein referred to as a “Dividend Period.” “Dividend Payment Date” means March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2023, and the “Liquidation Preference” equals one thousand dollars ($1,000) per share of Series A-2 Preferred Stock, which amount shall be adjusted as the result of any Unpaid Dividend Accrual (or payment thereof), and as otherwise set forth in the Series A-2 CoD.
Commencing on the date that is one hundred twenty (120) days after the Issuance Date, each Series A-2 Purchaser has the option from time to time to convert all or a portion of such Series A-2 Purchaser’s shares of Series A-2 Preferred Stock into Common Stock at the Conversion Ratio. The “Conversion Ratio” means, for each share of Series A-2 Preferred Stock, the quotient of (i) the Liquidation Preference as of the date of the conversion and (ii) the then applicable Conversion Price. The “Conversion Price” is initially $6.21, which may be adjusted from time to time as set forth in the Series A-2 CoD.
Third Amendment to Registration Rights Agreement
In connection with the Series A-2 Purchase Agreement, the Company also entered into the Third Amendment, dated December 15, 2023, by and between the Company and the parties identified thereto (the “Amendment No. 3”) to the Registration Rights Agreement, dated as of October 8, 2019, as amended (the “Registration Rights Agreement”). Under Amendment No. 3, the Company granted the parties certain registration rights with respect to Common Stock issuable upon conversion of the Series A-2 Preferred Stock.
The foregoing summaries of the material terms of the Series A-2 Purchase Agreement, the Series A-2 CoD, and the Registration Rights Agreement (as amended by Amendment No. 3) are not complete and are qualified in their entirety by reference to the full text thereof, copies of which are filed herewith as Exhibit 3.2, Exhibit 10.1 and Exhibit 10.2, respectively, and incorporated by reference herein.
Item 8.01 | Other Events. |
On December 15, 2023, the Company issued a press release announcing its entry into the Merger Agreement with Parent and Merger Sub. A copy of this press release is furnished with this Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
Important Information for Investors and Stockholders
This communication is being made in respect of the proposed transaction involving the Company and Parent. In connection with the proposed transaction, the Company intends to file the relevant materials with the SEC, including a proxy statement on Schedule 14A and a transaction statement on Schedule 13e-3 (the “Schedule 13e-3”). Promptly after filing its definitive proxy statement with the SEC, the Company will mail the definitive proxy statement, the Schedule 13e-3 and a proxy card to each stockholder of the Company entitled to vote at the special meeting relating to the proposed transaction. This communication is not a substitute for the proxy statement, the Schedule 13e-3 or any other document that the Company may file with the SEC or send to its stockholders in connection with the proposed transaction. The materials to be filed by the Company will be made available to the Company’s investors and stockholders at no expense to them and copies may be obtained free of charge on the Company’s website at www.battalionoil.com. In addition, all of those materials will be available at no charge on the SEC’s website at www.sec.gov. Investors and stockholders of the Company are urged to read the proxy statement, the Schedule 13e-3 and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed transaction because they contain important information about the Company and the proposed transaction.
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The Company and its directors, executive officers, other members of its management and employees may be deemed to be participants in the solicitation of proxies of the Company stockholders in connection with the proposed transaction under SEC rules. Investors and stockholders may obtain more detailed information regarding the names, affiliations and interests of the Company’s executive officers and directors in the solicitation by reading the Company’s Annual Report on Form 10-K, as amended on Form 10-K/A, for the fiscal year ended December 31, 2022, and the proxy statement, the Schedule 13e-3 and other relevant materials that will be filed with the SEC in connection with the proposed transaction when they become available. Information concerning the interests of the Company’s participants in the solicitation, which may, in some cases, be different than those of the Company’s stockholders generally, will be set forth in the proxy statement relating to the proposed transaction and the Schedule 13e-3 when they become available.
Forward-Looking Statements
All statements and assumptions in this communication that do not directly and exclusively relate to historical facts could be deemed “forward-looking statements.” Forward-looking statements are often identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “may,” “could,” “should,” “forecast,” “goal,” “intends,” “objective,” “plans,” “projects,” “strategy,” “target” and “will” and similar words and terms or variations of such. These statements represent current intentions, expectations, beliefs or projections, and no assurance can be given that the results described in such statements will be achieved. Forward-looking statements include, among other things, statements about the potential benefits of the proposed transaction; the prospective performance and outlook of the Company’s business, performance and opportunities; the ability of the parties to complete the proposed transaction and the expected timing of completion of the proposed transaction; as well as any assumptions underlying any of the foregoing. Such statements are subject to numerous assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside of the Company’s control. Important factors that could cause actual results to differ materially from those described in forward-looking statements include, but are not limited to, (i) the risk that the proposed transaction may not be completed in a timely manner or at all; (ii) the failure to receive, on a timely basis or otherwise, the required approvals of the proposed transaction by the Company’s stockholders; (iii) the possibility that any or all of the various conditions to the consummation of the proposed transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); (iv) the possibility that competing offers or acquisition proposals for the Company will be made; (v) the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the proposed transaction, including in circumstances, which would require the Company to pay a termination fee; (vi) the effect of the announcement or pendency of the proposed transaction on the Company’s ability to attract, motivate or retain key executives and employees, its ability to maintain relationships with its customers, suppliers and other business counterparties, or its operating results and business generally; (vii) risks related to the proposed transaction diverting management’s attention from the Company’s ongoing business operations; (viii) the amount of costs, fees and expenses related to the proposed transaction; (ix) the risk that the Company’s stock price may decline significantly if the Merger is not consummated; (x) the risk of shareholder litigation in connection with the proposed transaction, including resulting expense or delay; and (xi) other factors as set forth from time to time in the Company’s filings with the SEC, including its Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2022, as may be updated or supplemented by any subsequent Quarterly Reports on Form 10-Q or other filings with the SEC. Readers are cautioned not to place undue reliance on such statements which speak only as of the date they are made. The Company does not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events except as required by law.
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Item 9.01 | Financial Statements and Exhibits. |
(d)Exhibits. The following exhibits are furnished as part of this Current Report on Form 8-K:
Exhibit No. |
| Description |
|---|---|---|
|
|
|
2.1 | | |
3.1 | | |
3.2 | | |
10.1 | | |
10.2 | | |
99.1 | | |
104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BATTALION OIL CORPORATION | |
|
| |
|
|
|
December 15, 2023 | By: | /s/ Matthew B. Steele |
| Name: | Matthew B. Steele |
| Title: | Chief Executive Officer |
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by and among
BATTALION OIL CORPORATION,
FURY RESOURCES, INC.
and
SAN JACINTO MERGER SUB, INC.
Dated as of December 14, 2023
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THIS AGREEMENT AND PLAN OF MERGER is made as of December 14, 2023, by and among Battalion Oil Corporation, a Delaware corporation (the “Company”), Fury Resources, Inc., a Delaware corporation (“Parent”), and San Jacinto Merger Sub, Inc., a Delaware corporation (“Merger Sub”). Certain capitalized terms used herein are defined in Article I.
WHEREAS, the parties hereto intend that, subject to the terms and conditions of this Agreement and the applicable provisions of the DGCL, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger and as a wholly owned subsidiary of Parent (the “Surviving Corporation”);
WHEREAS, the board of directors of the Company (the “Company Board”) has established a special committee of the Company Board, comprised solely of independent and disinterested directors (the “Company Special Committee”) to, among other things, (a) review and consider the Merger, (b) review, consider and evaluate capital resources available to the Company and provide recommendations to the Company Board with respect those capital resources relative to the Merger, including the Company’s ability to remain a going concern, sources of debt and equity capital reasonably available to the Company, and the Company’s ability to comply with covenants and principal amortization requirements under the Company’s existing term loan and (c) make one or more recommendations, as appropriate, to the Company Board as to what action should be taken by the Company Board, if any, with respect to the Merger;
WHEREAS, the Company Special Committee has unanimously (a) determined that this Agreement and the transactions contemplated herein (the “Transactions”) are advisable and fair to, and in the best interests of, the Company and its Unaffiliated Company Stockholders, (b) recommended that the Company Board approve this Agreement and the Transactions and determine that this Agreement and the Transactions are advisable, fair to, and in the best interest of the Company and the Unaffiliated Company Stockholders, and (c) recommended that, subject to the Company Board’s approval, the Company Board submit this Agreement to the Company’s stockholders for their approval, in each case, on the terms and subject to the conditions of this Agreement;
WHEREAS, the Company Board, after considering the recommendation of the Company Special Committee, has unanimously (a) determined that this Agreement and the Transactions are advisable and fair to, and in the best interests of, the Company and its stockholders, including the Unaffiliated Company Stockholders, (b) declared it advisable to enter into this Agreement, (c) approved the execution, delivery and performance by the Company of this Agreement and the consummation of the Transactions, (d) resolved to recommend that the stockholders of the Company adopt this Agreement and (e) directed that this Agreement be submitted to the Company’s stockholders for their approval, in each case, on the terms and subject to the conditions of this Agreement;
WHEREAS, the board of directors of Parent has unanimously (a) approved and declared advisable this Agreement and the Transactions and (b) determined that this Agreement and the Transactions are fair to, and in the best interests of, Parent and its stockholders;
WHEREAS, the board of directors of Merger Sub has unanimously (a) determined that this Agreement and the Transactions are advisable and fair to, and in the best interests of, Merger Sub and Parent, (b) declared it advisable to enter into this Agreement, (c) approved the execution, delivery and performance by Merger Sub of this Agreement and the consummation of the Transactions, and (d) resolved to recommend that Parent (as Merger Sub’s sole stockholder) adopt this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s willingness to enter into this Agreement, certain stockholders of the Company are entering into a Voting Agreement in the form attached as Exhibit A hereto (the “Voting Agreement”) pursuant to which, and subject to the terms and conditions thereof, each such Person has agreed, among other things, to vote the shares of Common Stock held by such Person in favor of the adoption of this Agreement and the approval of the Transactions, including the Merger at the Company Stockholders Meeting;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s willingness to enter into this Agreement, (a) the Insider Stockholders and certain other Persons (collectively, the “Purchasers”) are entering into a Series A Preferred Stock Purchase Agreement in the form attached as Exhibit B hereto (the “Purchase Agreement”) with Parent, pursuant to which the Purchasers will purchase from Parent, prior to the Effective Time and on the terms and subject to the conditions set forth in the Purchase Agreement, shares of the Series A Preferred Stock of Parent (such shares, the “Parent Preferred Stock” and such transaction, the “Preferred Stock Financing”), and (b) the Insider Stockholders are entering into a Contribution, Rollover and Sale Agreement in the form attached as Exhibit C hereto (the “Contribution Agreement”) with Parent, pursuant to which the Insider Stockholders will contribute and/or sell to Parent, prior to the Effective Time and on the terms and subject to the conditions set forth in the Contribution Agreement, all of the issued and outstanding shares of Preferred Stock held by the Insider Stockholders in exchange for shares of Parent Preferred Stock (such transaction, the “Preferred Stock Contribution” and, together with the Preferred Stock Financing, the “Preferred Stock Transactions”); and
WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection with this Agreement and the Transactions.
NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth in this Agreement, the parties, intending to be legally bound, agree as follows:
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“Acceptable Confidentiality Agreement” means a confidentiality agreement on terms that, with respect to confidentiality and use, are no less restrictive to the Company’s counterparty thereto than those contained in the Confidentiality Agreement (including the standstill provision contained therein, but only to the extent such provisions apply after giving effect to Section 6.4(h)), and except for such changes to permit the Company to comply with its obligations under this Agreement.
“Additional Financing” has the meaning set forth in Section 6.10(a)(ii).
“Additional Financing Bank Account” has the meaning set forth in Section 6.10(a)(ix).
“Additional Financing Documents” means any binding Contracts entered into by Parent or any of its Affiliates in connection with the Additional Financing.
“Affiliate” means, with respect to any specified Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person. For purposes of this Agreement, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of securities, by contract, management control, or otherwise. “Controlled” and “Controlling” shall be construed accordingly.
“Agreement” means this Agreement, including the Company Disclosure Letter, the Parent Disclosure Letter and the annexes and exhibits hereto, as it and they may be amended from time to time.
“Alternative Financing” has the meaning set forth in Section 6.10(a)(iv).
“Book-Entry Shares” means shares of Common Stock or Preferred Stock which, immediately prior to the Effective Time, are not represented by stock certificates, but are represented in book-entry form.
“Business Day” means any day other than a Saturday, Sunday or other day on which banking institutions in the State of Texas or New York are authorized or required by Law or other action of a Governmental Authority to close.
“Buyer’s 401(k) Plan” has the meaning set forth in Section 6.7(d).
“Bylaws” means the Seventh Amended and Restated Bylaws of the Company, as amended from time to time.
“Canceled Shares” has the meaning set forth in Section 3.1(b)(ii).
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“Capitalization Date” has the meaning set forth in Section 4.1(c)(ii).
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136) and all rules, regulations and guidance issued by any Governmental Authority with respect thereto, in each case as in effect from time to time.
“Certificate of Designation” means, with respect to any series of Preferred Stock that is authorized and issued by the Company on or after the date of this Agreement, the Certificate of Designations applicable to such series of Preferred Stock, which shall be in the form attached as Exhibit D hereto.
“Certificate of Incorporation” means the Amended and Restated Certificate of Incorporation of the Company, as amended from time to time.
“Certificate of Merger” has the meaning set forth in Section 2.3.
“Certificated Shares” means shares of Preferred Stock which, immediately prior to the Effective Time, are represented by stock certificates.
“Change of Recommendation” has the meaning set forth in Section 6.4(d).
“Closing” means the consummation of the Transactions.
“Closing Date” has the meaning set forth in Section 2.2.
“Closing Failure Fee” has the meaning set forth in Section 8.3(b)(iv).
“Code” means the Internal Revenue Code of 1986, as amended.
“Committed Debt Financing” has the meaning set forth in Section 5.8(a).
“Committed Financing” has the meaning set forth in Section 5.8(a).
“Common Stock” has the meaning set forth in Section 4.1(c)(i).
“Company” has the meaning set forth in the Preamble.
“Company 401(k) Plan” has the meaning set forth in Section 6.7(d).
“Company Acquisition Agreement” has the meaning set forth in Section 6.4(d).
“Company Benefit Plan” means each compensatory arrangement (including each “employee benefit plan” within the meaning of Section 3(3) of ERISA and each other equity or equity-based incentive, compensation, severance, employment, consulting, change-in-control, retention, vacation, paid time off, fringe benefit, bonus, incentive, savings, retirement, deferred compensation, or other compensatory or benefit plan, agreement, program, policy or arrangement, whether or not subject to ERISA), (a) entered into, contributed to (or required to be contributed to), sponsored by or maintained by the Company or any of its Subsidiaries or (b) for which the
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Company or any of its Subsidiaries has any Liability (contingent or otherwise), in any case other than a Multiemployer Plan.
“Company Board” has the meaning set forth in the Recitals.
“Company Disclosure Documents” has the meaning set forth in Section 4.5.
“Company Disclosure Letter” has the meaning set forth in the introductory language to Article IV.
“Company Equity Awards” means, collectively, the Company Options and the Company RSU Awards.
“Company Equity Plan” means the Company’s 2020 Long-Term Incentive Plan.
“Company Independent Petroleum Engineers” has the meaning set forth in Section 4.18(a).
“Company Intellectual Property” means all Intellectual Property owned or purported to be owned by Company or any of its Subsidiaries.
“Company Material Adverse Effect” means any Effect that, individually or in the aggregate, is or would reasonably be expected to be materially adverse to the business, assets, liabilities, financial condition or operations of the Company and its Subsidiaries taken as a whole; provided, however, that none of any of the following, nor any Effects resulting or arising from any of the following, shall constitute or be taken into account in determining whether there has been, is, or would reasonably be expected to be, a Company Material Adverse Effect:
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except, with respect to clauses (a), (b), (d), (e) and (g), to the extent (and for the avoidance of doubt, only to the extent) that such impact is materially and disproportionately adverse to the Company and its Subsidiaries, taken as a whole, relative to other similarly situated and comparable companies in the industries and in the geographic markets in which the Company and its Subsidiaries operate (it being understood and agreed that, for the purposes of determining whether the Company has been materially and disproportionately adversely affected compared to other similarly situated similarly situated and comparable companies, the Company shall be compared to independent exploration and production companies primarily focused in the Delaware Basin), in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur.
“Company Material Contracts” has the meaning set forth in Section 4.8(a).
“Company Option” means an option to purchase shares of Common Stock granted under the Company Equity Plan.
“Company Registered Intellectual Property” means Company Intellectual Property that is Registered Intellectual Property.
“Company Related Parties” has the meaning set forth in Section 8.3(f).
“Company Reserve Report” has the meaning set forth in Section 4.18(a).
“Company RSU Award” means each performance- and/or time-based restricted stock unit award in respect of a share of Common Stock granted under the Company Equity Plan or otherwise.
“Company SEC Documents” has the meaning set forth in Section 4.4(a).
“Company Securities” has the meaning set forth in Section 4.1(c)(iii).
“Company Special Committee” has the meaning set forth in the Recitals.
“Company Stockholder Approval” has the meaning set forth in Section 4.3.
“Company Stockholders Meeting” has the meaning set forth in Section 6.5(c).
“Company Superior Proposal” means an unsolicited bona fide, written Company Takeover Proposal (with references to twenty percent (20%) and eighty percent (80%) being deemed to be replaced with references to fifty percent (50%), respectively) by a third party, that is fully financed
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or has fully committed financing, which the Company Board (after considering the recommendation of the Company Special Committee) determines in good faith, after consultation with the Company’s outside legal and financial advisors, to be more favorable from a financial point of view to the Company and its stockholders than the Transactions (including any adjustment to the terms of the Transactions proposed by Parent pursuant to clause (B) of Section 6.4(d) and taking in consideration the timing and likelihood of consummation of such Company Superior Proposal).
“Company Takeover Proposal” means any offer, proposal or indication of interest that is not withdrawn from a Person or “group” (as defined in or under Section 13(d) of the Exchange Act) of Persons (other than a proposal or offer by Parent or any Subsidiary of Parent) made after the date hereof relating to any transaction or series of related transactions involving: (a) any acquisition or purchase by any Person or “group” of Persons, directly or indirectly, of more than twenty percent (20%) of any class of outstanding voting or equity securities of the Company, or any tender offer or exchange offer that, if consummated, would result in any Person or “group” of Persons beneficially owning more than twenty percent (20%) (on a non-diluted basis) of any class of outstanding voting or equity securities of the Company, (b) any merger, consolidation, share exchange, business combination, recapitalization, reorganization or other similar transaction involving the Company and a Person or “group” (as defined in or under Section 13(d) of the Exchange Act) of Persons pursuant to which the stockholders of the Company immediately preceding such transaction hold less than eighty percent (80%) of the equity interests in the surviving or resulting entity of such transaction or (c) any sale, lease, exchange, transfer, license or other disposition to a Person or “group” of Persons of more than twenty percent (20%) of the consolidated assets of the Company and its Subsidiaries, taken as a whole (measured by the fair market value thereof), or that generate twenty percent (20%) or more of the consolidated net revenues or net income of the Company and its Subsidiaries (for the twelve (12)-month period ending on the last day of the Company’s most recently completed fiscal quarter).
“Company Termination Fee” means an amount equal to $8,000,000.
“Confidentiality Agreement” means that certain confidential information agreement between Ruckus Energy Holdings, LLC, a Delaware limited liability company, and the Company, dated as of March 28, 2023.
“Continuing Employee” has the meaning set forth in Section 6.7(a).
“Contract” means any contract, note, bond, mortgage, indenture, deed of trust, license, Lease, agreement, arrangement, commitment or other instrument or obligation that is legally binding; provided that Contracts shall exclude (a) statements of work, sales orders and purchase orders entered into in the ordinary course of business that do not contain any material terms other than pricing, and (b) the Company Equity Plan (or any award agreements entered into thereunder).
“Contribution Agreement” has the meaning set forth in the Recitals.
“Converted Shares” has the meaning set forth in Section 3.1(b)(iii).
“COPAS” means the accounting standards promulgated by the Council of Petroleum Accountants Society.
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“Copyrights” has the meaning set forth in the definition of “Intellectual Property.”
“Covered Persons” has the meaning set forth in Section 6.9(a).
“COVID-19” means SARS-CoV-2 or COVID-19, and any variants, evolutions, mutations or additional waves thereof or related or associated epidemics, pandemics or disease outbreaks.
“COVID-19 Measures” means (a) any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shutdown, closure, vaccination, sequester or any other applicable Law, Order or recommendations of a Governmental Authority, or any applicable directive or guidance from any applicable industry group, or (b) any commercially reasonable measures adopted by the Company or any of its Subsidiaries (i) for the protection of the health and safety of the Company’s employees, customers, vendors, service providers or any other persons who physically interact with Representatives of the Company or visit any location over which the Company exercises any control, (ii) to preserve the assets utilized in connection with the business of the Company and its Subsidiaries or (iii) otherwise substantially consistent with actions taken by Parent or any of its Subsidiaries or others in the industries and geographic regions in which affected businesses of the Company and its Subsidiaries operate, in each case in connection with or in response to COVID-19 or any other global or regional health event, including the CARES Act.
“D&O Claim” has the meaning set forth in Section 6.9(a).
“Data Security Requirements” means all of the following, in each case to the extent relating to data privacy, protection, or security and applicable to the conduct of the business of the Company or Subsidiary of the Company: (a) all applicable Laws; (b) the Company’s and its Subsidiaries’ own respective policies, and procedures; and (c) material Contracts to which the Company or any of its Subsidiaries is bound.
“Debt Financing” means the Committed Debt Financing and/or any Alternative Financing obtained in replacement of all or any portion of the Committed Debt Financing.
“Debt Financing Commitments” has the meaning set forth in Section 5.8.
“Derivative Transaction” means any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction or collar transaction relating to one or more currencies, commodities (including natural gas, natural gas liquids, crude oil and condensate), bonds, equity securities, loans, interest rates, catastrophe events, weather-related events, credit-related events or conditions or any indexes, or any other similar transaction (including any put, call or other option with respect to any of these transactions) or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to such transactions.
“DGCL” means the General Corporation Law of the State of Delaware, as amended from time to time.
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“Disclosed Conditions” has the meaning set forth in Section 5.8(c).
“Dissenting Shares” has the meaning set forth in Section 3.2.
“Effect” means any change, effect, development, circumstance, event or occurrence.
“Effective Time” has the meaning set forth in Section 2.3.
“Enforceability Exceptions” has the meaning set forth in Section 4.2(c).
“Environmental Law” means any applicable Law (a) relating to pollution or the protection, preservation or restoration of the environment (including air, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or any exposure to or release of, or the management, use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production or disposal of, any hazardous or toxic materials, substances or wastes or (b) that regulates, imposes liability (including for enforcement, investigatory costs, cleanup, removal or response costs, natural resource damages, contribution, injunctive relief, personal injury or property damage), with respect to any of the foregoing, or (c) that establishes standards of care with respect to any of the foregoing.
“Environmental Permits” means any Permit required under any applicable Environmental Law.
“Escrow Account” has the meaning set forth in Section 8.4(a).
“Escrow Agent” has the meaning set forth in Section 8.4(a).
“Escrow Agreement” has the meaning set forth in Section 8.4(a).
“Escrow Funds” has the meaning set forth in Section 8.4(b).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
“Evidence of Funding” has the meaning set forth in Section 6.10(a)(ix).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Existing Credit Agreement” means that certain Amended and Restated Senior Secured Credit Agreement, dated as of November 24, 2021, by and among Halcón Holdings, LLC, Macquarie Bank Limited, as administrative agent, the lenders from time to time party thereto, the guarantors party thereto and the Company, as amended or supplemented from time to time, including by (a) that certain First Amendment to the Senior Secured Credit Agreement, dated as of August 2, 2022, and (b) that certain Second Amendment to the Senior Secured Credit Agreement, dated as of November 14, 2022.
“Financing” means, collectively, the Committed Financing, any Alternative Financing and the Additional Financing.
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“Financing Source Parties” means, collectively, the Financing Sources, their Affiliates and such Persons’ and their Affiliates’ respective current, former and future directors, officers, general or limited partners, shareholders, members, managers, controlling Persons, employees, Representatives and agents, and the respective successors and assigns of each of the foregoing.
“Financing Sources” means the entities that have committed to provide or to cause to provide, or otherwise entered into agreements in connection with, the Financing, including the parties to the Debt Financing Commitments, the Purchase Agreement, the Contribution Agreement, and the Additional Financing Documents, and any commitments to purchase the Debt Financing, the Parent Preferred Stock, or the Additional Financing, or any part thereof from such entities, and to any joinder agreements, credit agreements, purchase agreements or indentures (including the definitive agreements executed in connection with the Debt Financing Commitments (and the related fee letters), the Purchase Agreement, the Contribution Agreement and the Additional Financing Documents) relating thereto.
“Full Escrow Funding” has the meaning set forth in Section 8.4(a).
“GAAP” means U.S. generally accepted accounting principles, consistently applied.
“Governmental Authority” means any U.S., state, local or foreign government, any governmental, regulatory or administrative body, agency or authority, any court or judicial authority or arbitration tribunal (public or private), whether national, federal, state, provincial or local or otherwise, including any stock exchange, or any Person lawfully empowered by any of the foregoing to enforce or seek compliance with any applicable Law.
“Hazardous Materials” means any (a) chemical, substance, waste, pollutant, or contaminant that is regulated under any Environmental Law; (b) asbestos containing materials, whether in a friable or non-friable condition, lead-containing material, polychlorinated biphenyls, naturally occurring radioactive materials or radon; and (c) any Hydrocarbons.
“Hutchings Sealy #4 Well” means the Hutchings Sealy #4 vertical oil and gas well, formerly producing from the Ellenberger formation.
“Hydrocarbons” means any hydrocarbon-containing substance, crude oil, natural gas, condensate, drip gas and natural gas liquids, coalbed gas, ethane, propane, iso-butane, nor-butane, gasoline, scrubber liquids and other liquids or gaseous hydrocarbons or other substances (including minerals or gases), or any combination thereof, produced or associated therewith.
“Insider Stockholders” means, collectively, Luminus Management, LLC, Oaktree Capital Management, L.P., and each of their respective Affiliates that directly or indirectly hold any shares of Common Stock or Preferred Stock.
“Intellectual Property” means any and all common law or statutory rights in: (a) patents, patent applications, statutory invention registrations, registered designs, and similar or equivalent rights in inventions and designs, and all rights therein provided by international treaties and conventions (“Patents”); (b) trademarks, service marks, trade dress, trade names, logos and other designations of origin (“Marks”); (c) domain names, uniform resource locators, Internet Protocol addresses, social media handles and other names, identifiers and locators associated with Internet
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addresses, sites and services; (d) copyrights and any other equivalent rights in works of authorship (including rights in Software as a work of authorship) and any other related rights of authors and mask work rights (“Copyrights”); (e) trade secrets and industrial secret rights, and rights in know-how, data and confidential or proprietary business or technical information that derives independent economic value, whether actual or potential, from not being known to other persons (“Trade Secrets”); and (f) other similar or equivalent intellectual property rights anywhere in the world.
“Interim Covenant Exceptions” has the meaning set forth in Section 6.2(a).
“Interim Period” has the meaning set forth in Section 6.1(a).
“Intervening Event” means an event, fact, circumstance, development or occurrence that is material to the Company and its Subsidiaries, taken as a whole, that is not actually known or reasonably foreseeable to the Company Board or the Company Special Committee as of the date of this Agreement (or if actually known or reasonably foreseeable as of the date of this Agreement, the material consequences of which were not known by the Company Board or the Company Special Committee at such time) and does not relate to: (a) a Company Takeover Proposal, (b) any actions required to be taken pursuant to this Agreement, (c) any change in price or trading volume of the Common Stock or (d) changes in the Company’s reserves estimates (including categorization thereof) or production volumes as compared to expected, forecasted or previously estimated amounts.
“IRS” has the meaning set forth in Section 4.10(a).
“IT Assets” means the computers, Software and Software platforms, databases, websites, servers, routers, hubs, switches, circuits, networks, data communications lines and all other information technology infrastructure and equipment of the Company and its Subsidiaries that are required in connection with the operation of the business of the Company and its Subsidiaries.
“Joint Operating Agreements” has the meaning set forth in Section 4.8(c).
“Knowledge of Parent” means the actual knowledge of the individuals set forth on Section 1.1(a) of the Parent Disclosure Letter.
“Knowledge of the Company” means the actual knowledge of the individuals set forth on Section 1.1(a) of the Company Disclosure Letter.
“Laws” has the meaning set forth in Section 4.13(a).
“Leased Real Property” means real property that the Company or any of its Subsidiaries leases, subleases or occupies as tenant, subtenant or occupant pursuant to any Lease, excluding the Oil and Gas Properties.
“Leases” means leases, subleases, licenses, or other occupancy agreements (together with any and all amendments and modifications thereto and any guarantees thereof).
“Lenders” has the meaning set forth in Section 5.8(a).
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“Liabilities” means any and all debts, liabilities and obligations, whether fixed, contingent or absolute, matured or unmatured, accrued or not accrued, determined or determinable, secured or unsecured, disputed or undisputed, subordinated or unsubordinated, or otherwise.
“Liens” means liens, encumbrances, mortgages, charges, claims, restrictions, pledges, security interests, rights of first refusal, title defects, easements, rights-of-way, covenants, encroachments or other adverse claims of any kind with respect to a property or asset.
“Litigation” has the meaning set forth in Section 4.12.
“Marks” has the meaning set forth in the definition of “Intellectual Property.”
“Merger” has the meaning set forth in the Recitals.
“Merger Consideration” has the meaning set forth in Section 3.1(b)(i).
“Merger Sub” has the meaning set forth in the Preamble.
“Multiemployer Plan” has the meaning set forth in Section 3(37) of ERISA or 4001(a)(3) of ERISA.
“Multiple Employer Plan” means any plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA.
“NYSE American” means the NYSE American Stock Exchange.
“Oil and Gas Leases” means all Leases or similar agreements (including any series of related Leases with the same lessor) under which a Person leases, subleases or licenses or otherwise acquires or obtains rights to produce Hydrocarbons from real property interests.
“Oil and Gas Properties” means all interests in and rights with respect to (a) oil, gas, mineral, and similar properties of any kind and nature, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, production payments, net profit interests and other non-working interests and non-operating interests (including all Oil and Gas Leases, operating agreements, unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, and in each case, interests thereunder), surface interests, fee interests, reversionary interests, reservations and concessions and (b) all Wells located on or producing from such Leases and properties.
“Order” means any award, judgment, injunction, binding ruling, decree or order (whether temporary, preliminary or permanent) issued, adopted, granted, awarded or entered by any Governmental Authority of competent jurisdiction.
“Organizational Documents” means the certificate of incorporation, articles of incorporation, charter, bylaws, articles of formation, certificate of formation, regulations, operating agreement, certificate of limited partnership, partnership agreement and all other similar documents, instruments or certificates executed, adopted or filed in connection with the creation,
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formation or organization of a Person, including any amendments, restatements and supplements thereto.
“Owned Real Property” means all real property owned by the Company or any of its Subsidiaries, together with all structures, facilities, improvements and fixtures presently or hereafter located thereon or attached thereto, excluding the Oil and Gas Properties.
“Parent” has the meaning set forth in the Preamble.
“Parent Disclosure Letter” has the meaning set forth in the introductory language to Article V.
“Parent Expenses” has the meaning set forth in Section 8.3(b).
“Parent Material Adverse Effect” means, with respect to Parent and Merger Sub, any Effect that has a material adverse effect on Parent’s or Merger Sub’s ability to timely consummate the Transactions (including the payment of the Merger Consideration and Preferred Stock Merger Consideration).
“Parent Preferred Stock” has the meaning set forth in the Recitals.
“Parent Related Parties” means, collectively, Parent, Merger Sub, or any of their respective former, current or future general or limited partners, stockholders, financing sources (including the Financing Source Parties), managers, members, Representatives or Affiliates.
“Patents” has the meaning set forth in the definition of “Intellectual Property.”
“Paying Agent” has the meaning set forth in Section 3.3(a).
“Payment Fund” has the meaning set forth in Section 3.3(a).
“Permit” means any permit, certificate, registration, approval, identification number, license, notice, consent or other authorization required under any applicable Law.
“Permitted Liens” means: (a) Liens for Taxes, assessments and governmental charges or levies not yet delinquent or that are being contested in good faith through appropriate proceedings and for which adequate reserves have been recorded on the Company’s balance sheet in accordance with GAAP; (b) materialmen’s, warehouseman’s, mechanics’, carriers’, workmen’s and repairmen’s Liens, any statutory Liens for amounts that are not yet due or that are being contested in good faith and by appropriate proceedings, arising in the ordinary course of business; (c) pledges or deposits to secure obligations under workers’ compensation Laws or similar legislation or to secure public or statutory obligations, in each case in the ordinary course of business that, in the aggregate, are not material in amount; (d) deposits to secure the performance of bids, trade Contracts, Leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business consistent with past practice; (e) Liens (other than Liens securing indebtedness for borrowed money), defects or irregularities in title, easements, rights-of-way, covenants, restrictions, and other, similar matters that, in the aggregate, are not material in amount and that do not, individually or in the aggregate, materially
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impair the continued use and operation of the assets to which they relate or do not materially interfere with the operation, value or use of the property or assets affected; (f) with respect to any Owned Real Property, Leased Real Property, or Rights-of-Way, easements, zoning restrictions, rights-of-way, servitudes, Permits, surface Leases and other similar rights in respect of surface operations, and easements for pipelines, streets, alleys, highways, telephone lines, power lines, railways and other easements and rights-of-way, on, over or in respect of any of such properties of the Company or any its Subsidiaries, that are customarily granted in the oil and gas industry and do not materially interfere with the operation, value or use of such property or asset affected, but excluding, in any case, any monetary Lien; (g) Liens securing obligations under or secured pursuant to the Existing Credit Agreement; (h) Liens securing indebtedness or Liabilities that are reflected in the Company SEC Documents; (i) non-exclusive licenses, sublicenses, covenants not to sue or similar rights granted with respect to Intellectual Property in the ordinary course of business; (j) with respect to the equity interests of the Company and its Subsidiaries, Liens arising under this Agreement or any of the Organizational Documents of the Company or any of its Subsidiaries; (k) Production Burdens payable to third parties that are deducted in the calculation of discounted present value in the Company Reserve Report and any Production Burdens payable to third parties affecting any Oil and Gas Properties that were acquired subsequent to the date of the Company Reserve Report in the ordinary course of business pursuant to Contracts that have been made available to Parent and its Representatives; (l) with respect to the Oil and Gas Properties, Liens (other than Liens securing indebtedness for borrowed money) arising in the ordinary course of business under operating agreements, joint venture agreements, partnership agreements, Oil and Gas Leases, farm-out agreements, division orders, Contracts for the sale, purchase, transportation, processing or exchange of oil, gas or other Hydrocarbons, unitization and pooling declarations and agreements, area of mutual interest agreements, development agreements, joint ownership arrangements and other agreements that are customarily granted in the oil and gas industry, do not materially interfere with the operation of such assets, and are not yet due or delinquent or, if delinquent, which are being contested in good faith by appropriate procedures; and (m) the matters set forth on Sections 1.1(b), 4.8(a)(iii) or 4.18(i) of the Company Disclosure Letter and (n) with respect to the Oil and Gas Leases, Liens (other than Liens securing indebtedness for borrowed money), defects or irregularities in title, easements, rights-of-way, covenants, restrictions, and other, similar matters that, in the aggregate, are not material in amount and that do not, individually or in the aggregate, materially impair the continued use and operation of such affected assets, and, would not otherwise reduce the net revenue interest share of the Company or Parent, as applicable, or such party’s Subsidiaries, in any Oil and Gas Lease below the net revenue interest share shown in the Company Reserve Report, with respect to such Lease, or increase the working interest of the Company or Parent, as applicable, or of such party’s Subsidiaries, in any Oil and Gas Lease above the working interest shown on the Company Reserve Report, with respect to such Oil and Gas Lease.
“Person” means an individual, corporation, partnership, joint venture, trust, association, estate, joint stock company, limited liability company, Governmental Authority or any other organization or entity of any kind.
“Preferred Stock” has the meaning set forth in Section 4.1(c)(i).
“Preferred Stock Contribution” has the meaning set forth in the Recitals.
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“Preferred Stock Financing” has the meaning set forth in the Recitals.
“Preferred Stock Merger Consideration” has the meaning set forth in Section 3.1(b)(iv).
“Preferred Stock Transactions” has the meaning set forth in the Recitals.
“Production Burdens” means any royalties (including lessor’s royalties), overriding royalties, production payments, net profit interests or other burdens upon, measured by or payable out of oil, gas or mineral production.
“Proxy Statement” has the meaning set forth in Section 4.3.
“Purchase Agreement” has the meaning set forth in the Recitals.
“Purchasers” has the meaning set forth in the Recitals.
“Qualifying Additional Financing Documents” means Additional Financing Documents that contemplate Additional Financing in an amount that, in the aggregate and when taken together with the aggregate proceeds contemplated by the Committed Financings and other financial resources of Parent and Merger Sub, including cash, cash equivalents and marketable securities of Parent, Merger Sub, the Company and the Company’s Subsidiaries on the Closing Date, be sufficient for Parent and Merger Sub to consummate the Merger upon the terms contemplated by this Agreement and pay all related fees and expenses.
“Recommendation” has the meaning set forth in Section 4.2(b).
“Registered Intellectual Property” means all United States, international or foreign (a) issued Patents and Patent applications; (b) registered Marks and applications to register Marks; (c) registered Copyrights and applications for Copyright registration; and (d) any other Intellectual Property right that is subject to any filing or recording with any Governmental Authority or other public or quasi-public legal authority (including domain names).
“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into, or migrating through, the environment.
“Representatives” means, with respect to a Person, such Person’s directors, officers, employees, investment bankers, attorneys, accountants and other advisors or representatives.
“Rights-of-Way” has the meaning set forth in Section 4.17.
“Schedule 13E-3” has the meaning set forth in Section 6.5(a).
“Sealy Ranch Lease” means that certain Oil and Gas Lease between Bank of America, N.A., Trustee, under Deed dated January 1, 1984, by George Sealy, et al. as lessor and Sundown Energy LP as lessee, and dated effective October 1, 2013, a memorandum of which is recorded in Volume 990 at Page 119 of the real property records of Ward County, Texas and under File # C12395 of the real property records of Winkler County, Texas, as amended by (a) that certain Amendment of Oil and Gas Lease dated September 1, 2015, by and between Sealy Land Company,
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LTD and Sundown Energy LP recorded in Volume 1054, at Page 386 of the real property records of Ward County, Texas, (b) that certain Lease Tolling Agreement, executed on October 16, 2020, by and between Sealy Land Company, LTD and the Company, and (c) that certain Letter Agreement dated May 26, 2023, by and between Sealy Land Company, LTD and the Company.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder.
“Series A Certificate of Designation” means the Certificate of Designations of Series A Redeemable Convertible Preferred Stock of the Company.
“Series A Preferred Stock” means the Preferred Stock designated as Series A Redeemable Convertible Preferred Stock pursuant to the Series A Certificate of Designation.
“Series A-1 Amendment” has the meaning set forth in Section 6.22.
“Series A-1 Certificate of Designation” means the Certificate of Designations of Series A-1 Redeemable Convertible Preferred Stock of the Company, as amended by the Series A-1 Amendment.
“Series A-1 Preferred Stock” means the Preferred Stock designated as Series A-1 Redeemable Convertible Preferred Stock pursuant to the Series A-1 Certificate of Designation.
“Software” means computer software programs in both source code and object code format, including databases, data files, application programming interfaces, user interfaces, and documentation relating thereto, as the context requires.
“Specified Acquisition” has the meaning set forth in Section 6.2(c).
“Specified Development Obligations” means the obligations set forth in Section 6.20 of the Company Disclosure Letter.
“Subsidiary” means, with respect to any Person, any other Person of which, (a) an amount of the voting securities or ownership interests sufficient to elect at least a majority of its board of directors or other governing Person or body is owned directly or indirectly by such first Person or (b) more than fifty percent (50%) of the equity interests is owned directly or indirectly by such first Person.
“Surviving Corporation” has the meaning set forth in the Recitals.
“Takeover Law” means any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover Laws of any jurisdiction or other applicable Laws that purport to limit or restrict business combinations or the ability to limit or restrict business combinations or the ability to acquire or to vote shares.
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“Tax” means all U.S. federal, state, local or foreign taxes, imposts, levies or other similar assessments, including any net income, capital gains, gross income, gross receipts, sales, use, transfer, ad valorem, franchise, profits, license, capital, withholding, payroll, estimated, employment, excise, goods and services, severance, stamp, occupation, premium, property, social security, environmental, alternative or add-on, value added, registration, occupancy, capital stock, unincorporated business, unemployment, disability, workers’ compensation, accumulated earnings, personal holding company, annual reports, windfall profits or other taxes or assessments, imposed by any Governmental Authority, together with all interest, penalties or additions to tax imposed with respect thereto.
“Tax Proceeding” means any audit, examination, investigation, claim, contest, dispute, Litigation or other similar proceeding with respect to Taxes by or against any Taxing Authority.
“Tax Returns” means any report, return (including any information return), declaration, claim for refund or other document filed or required to be filed with any Taxing Authority with respect to Taxes, including any attachment thereto and any amendment thereof.
“Taxing Authority” means any Governmental Authority responsible for the administration or the imposition of any Tax.
“Termination Date” has the meaning set forth in Section 8.1(b).
“Termination Expenses and Interest” has the meaning set forth in Section 8.3(e).
“Trade Secrets” has the meaning set forth in the definition of “Intellectual Property.”
“Transaction Approvals” has the meaning set forth in Section 4.3.
“Transactions” has the meaning set forth in the Recitals.
“Transfer Taxes” has the meaning set forth in Section 8.2(b).
“Treasury Regulations” means the regulations promulgated under the Code, as such regulations may be amended from time to time.
“Unaffiliated Company Stockholders” means the holders of Common Stock, excluding those shares of Common Stock held, directly or indirectly, by or on behalf of (a) the Insider Stockholders, and (b) any person that the Company has determined to be an “officer” of the Company within the meaning of Rule 16a-1(f) of the Exchange Act.
“Wells” means all oil or gas wells, whether producing, operating, shut-in or temporarily abandoned, located on an Oil and Gas Lease or any pooled, communitized or unitized acreage that includes all or a part of such Oil and Gas Lease or otherwise associated with an Oil and Gas Property of the applicable Person or any of its Subsidiaries, together with all oil, gas and mineral production from such well.
“Willful Breach” means, with respect to any breaches or failures to perform any of the covenants or other agreements contained in this Agreement, a material breach that is a consequence
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of a deliberate act or deliberate failure to act undertaken by the breaching party with actual knowledge that such party’s act or failure to act would, or would reasonably be expected to, constitute a breach of this Agreement.
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Except as disclosed in the Company SEC Documents filed with, or furnished to, the SEC and publicly available prior to the date hereof (excluding any disclosures set forth in any “risk factors,” “forward-looking statements” and similar disclosures to the extent cautionary, predictive or forward-looking in nature, but including any factual information contained within such statements), or in the disclosure schedule delivered by the Company to Parent concurrently with the execution of this Agreement (the “Company Disclosure Letter”) (each section of which qualifies the correspondingly numbered representation or warranty specified therein and any such other representations or warranties where its applicability to, relevance as an exception to, or disclosure for purposes of, such other representation or warranty is reasonably apparent), the Company represents and warrants to Parent and Merger Sub as follows:
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action by, any Governmental Authority; (iii) violate or conflict with any provision of the Certificate of Incorporation or Bylaws; or (iv) require any consent of, notice to or other action by any Person under, constitute a default or breach or an event that, with or without notice or lapse of time or both, would constitute a default or breach under, or cause or permit termination, cancelation, acceleration or other change of any right or obligation or the loss of any benefit under, any provision of any Company Material Contract, except in the case of clause (iv), as has not had, and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.
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Notwithstanding any other provision of this Agreement, it is agreed and understood that no representation or warranty is made by the Company in this Agreement with respect to Taxes, other than the representations in this Section 4.11 and, to the extent specifically relating to Taxes, Section 4.10.
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or any other Person resulting from the Company’s or their Representatives’ or Affiliates’ use of any information, documents, projections, forecasts or other material made available to the Company or their Representatives or Affiliates in connection with the Transactions.
Except as disclosed in the disclosure schedule delivered by Parent to the Company concurrently with the execution of this Agreement (the “Parent Disclosure Letter”) (each section of which qualifies the correspondingly numbered representation or warranty specified therein and any such other representations or warranties where its applicability to, relevance as an exception to, or disclosure for purposes of, such other representation or warranty is reasonably apparent), Parent and Merger Sub jointly and severally represent and warrant to the Company that:
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available to Parent, Merger Sub or their Representatives or Affiliates, including any information made available in the electronic data room maintained by or on behalf of the Company or its Representatives for purposes of the Transactions, teasers, marketing materials, consulting reports or materials, confidential information memoranda, management presentations, functional “break-out” discussions, responses to questions submitted on behalf of Parent, Merger Sub or their respective Representatives or in any other form in connection with the Transactions.
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Nothing contained in this Agreement shall give Parent, directly or indirectly, the right to control or direct the operations of the Company prior to the Closing, except as expressly set forth herein. Prior to the Closing, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over the operations of the Company and its Subsidiaries.
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promulgated under the Exchange Act, such steps to be taken in accordance with applicable SEC rules and regulations and interpretations of the SEC staff.
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Amendment, including the approval of the Special Committee and the Company Board and all required approvals from holders of Series A-1 Preferred Stock.
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For the avoidance of doubt, in the event of termination of this Agreement, the Financing Source Parties will have no liability to the Company, any of its Affiliates or any of its or their direct or indirect stockholders hereunder or under the Debt Financing Commitments or otherwise relating to or arising out of the transactions contemplated by such agreements (including for any willful and material breach), provided that the foregoing shall not preclude any liability of the Financing Sources to Parent or Merger Sub under the terms of the Debt Financing Commitments (and the related fee letters) or the Debt Financing.
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Battalion Oil Corporation
Two Memorial City Plaza
820 Gessner Road, Suite 1100
Houston, TX 77024
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Attention: | Walter R. Mayer, Senior Vice President, General Counsel and Corporate Secretary |
Email: wmayer@battalionoil.com
with a copy (which shall not constitute notice) to:
Mayer Brown LLP
700 Louisiana Street, Suite 3400
Houston, TX 77002
Attention: William T. Heller IV
Jeff M. Dobbs
Email: wheller@mayerbrown.com
jdobbs@mayerbrown.com
and
Mayer Brown LLP
71 S. Wacker Dr.
Chicago, IL 60606
Attention: Ryan H. Ferris
Email: rferris@mayerbrown.com
Fury Resources, Inc.
17503 La Cantera Pkwy, Suite 104-603
San Antonio, TX 78257
Attention: Ariella Fuchs, President and General Counsel
Email: afuchs@ruckusexp.com
with a copy (which shall not constitute notice) to:
K&L Gates LLP
1 Park Plaza, Twelfth Floor
Irvine, CA 92614
Attention: Michael A. Hedge; Jason C. Dreibelbis
Email: michael.hedge@klgates.com; jason.dreibelbis@klgates.com
or to such other individual or address as a party hereto may designate for itself by notice given as herein provided.
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applicable, the foregoing constitutes the election of the parties hereto to invoke any Law authorizing electronic signatures.
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interests or obligations hereunder shall be assigned (including by operation of law) by any of the parties without the prior written consent of the other parties. Any purported assignment in contravention of this Section 9.10 shall be null and void. The Company and the Company Board may not take or authorize any such actions contemplated by this Section 9.10 without the prior approval of the Company Special Committee.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written.
BATTALION OIL CORPORATION
By:/s/ Matthew Steele
Name: Matthew Steele
Title: Chief Executive Officer
[Signature page to Agreement and Plan of Merger]
FURY RESOURCES, INC.
By:/s/ Ariella Fuchs
Name: Ariella Fuchs
Title: President and General Counsel
SAN JACINTO MERGER SUB, INC.
By:/s/ Ariella Fuchs
Name: Ariella Fuchs
Title: President and General Counsel
[Signature page to Agreement and Plan of Merger]
EXHIBIT A
FORM OF Voting Agreement
(See attached.)
EXECUTION VERSION
VOTING AGREEMENT
VOTING AGREEMENT, dated as of December 14, 2023 (this “Agreement”), among Fury Resources, Inc., a Delaware corporation (“Parent”), and the stockholders of Battalion Oil Corporation, a Delaware corporation (the “Company”), listed on Schedule A hereto (each, a “Stockholder” and, collectively, the “Stockholders”).
RECITALS
WHEREAS, concurrently herewith, Parent, San Jacinto Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), and the Company are entering into an Agreement and Plan of Merger (attached hereto as Exhibit A, the “Merger Agreement”; capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Merger Agreement), pursuant to which (and subject to the terms and conditions set forth therein) Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation in the merger (the “Merger”);
WHEREAS, as of the date of this Agreement, each Stockholder is the record and “beneficial owner” (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of (a) certain shares of common stock, par value $0.0001 per share, of the Company (“Shares”) as set forth on Schedule A hereto under the heading “Covered Shares” (with respect to each Stockholder, the “Covered Shares”), (b) certain additional Shares as set forth on Schedule A hereto under the heading “Additional Shares” (with respect to each Stockholder, and together with any additional Shares or other securities of the Company of which such Stockholder acquires record or beneficial ownership after the date hereof, including, without limitation, by purchase, as a result of a stock dividend, stock split, recapitalization, combination, reclassification, exchange or change of any such securities, or upon exercise or conversion of any securities, such Stockholder’s “Additional Shares”), and (c) shares of Series A Redeemable Convertible Preferred Stock of the Company (“Series A Preferred Stock”) and Series A-1 Redeemable Convertible Preferred Stock of the Company (“Series A-1 Preferred Stock”), in each case, as set forth on Schedule A hereto under the heading “Owned Preferred Shares” (with respect to each Stockholder, the “Owned Preferred Shares” and, together with the Covered Shares and the Additional Shares, the “Subject Shares”);
WHEREAS, as a condition and inducement to Parent and Merger Sub’s willingness to enter into the Merger Agreement and to proceed with the transactions contemplated thereby, including the Merger, Parent and the Stockholders are entering into this Agreement; and
WHEREAS, the Stockholders acknowledge that Parent and Merger Sub are entering into the Merger Agreement in reliance on the representations, warranties, covenants and other agreements of the Stockholders set forth in this Agreement and would not enter into the Merger Agreement if any Stockholder did not enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent and the Stockholders hereby agree as follows:
1.Agreement to Vote. From and after the date hereof until the Termination Date (as defined herein), each Stockholder irrevocably and unconditionally agrees that it shall at any meeting of the stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting), however called, or in connection with any written consent of stockholders of the Company, except as otherwise approved in writing by Parent (a) when a meeting is held, appear at such meeting or otherwise cause the Covered Shares to be counted as present thereat for the purpose of establishing a quorum (including by proxy or other valid means), and respond to each request by the Company for written consent, if any and (b) vote (or consent), or cause to be voted at such meeting (or validly execute and return and cause such consent to be granted with respect to), all Covered Shares (i) in favor of the Merger, the adoption of the Merger Agreement and such other actions contemplated by the Merger Agreement (whether or not recommended by the Company Board) and (ii) against (A) any Company Takeover Proposal, (B) any action that that is intended to or would reasonably be expected to impede, interfere with, delay, postpone or adversely affect the consummation of the Merger or any of the transactions contemplated by the Merger Agreement or this Agreement (including any change to the capitalization or dividend policy of the Company or any amendment or other change to the Company’s certificate of incorporation or bylaws), and (C) any transaction that is intended to or would reasonably be expected to result in a breach in any material respect of any covenant, representation or warranty or other obligation or agreement of the Company or any of its Subsidiaries under the Merger Agreement.
2.Grant of Irrevocable Proxy; Appointment of Proxy.
(a)EACH STOCKHOLDER HEREBY GRANTS TO, AND APPOINTS, PARENT, THE EXECUTIVE OFFICERS OF PARENT, AND ANY OTHER PERSON DESIGNATED IN WRITING BY PARENT, EACH OF THEM INDIVIDUALLY, SUCH STOCKHOLDER’S IRREVOCABLE (UNTIL THE TERMINATION DATE) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE THE COVERED SHARES AS INDICATED IN AND EXPRESSLY LIMITED TO AS PROVIDED IN SECTION 1. EACH STOCKHOLDER INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION DATE) AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY SUCH STOCKHOLDER WITH RESPECT TO THE COVERED SHARES (THE STOCKHOLDER REPRESENTING TO THE COMPANY THAT ANY SUCH PROXY IS NOT IRREVOCABLE).
(b)The proxy granted in this Section 2 shall automatically expire, be revoked and of no further force or effect upon the Termination Date and Parent may further terminate this proxy at any time at its sole election by written notice provided to the applicable Stockholder.
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(c)Except as expressly set forth in Section 1, no Stockholder shall be restricted from voting in favor of, against or abstaining with respect to any matter presented to the stockholders of the Company. In addition, nothing in this Agreement shall give Parent the right to vote any Shares at any meeting of the stockholders of the Company other than as provided in this Section 1. Notwithstanding any of the foregoing in this Section 2, with respect to a given Stockholder, the proxy and power of attorney granted hereunder shall be effective if, and only if, such Stockholder has failed to perform its obligations under Section 1 as of the date that is three (3) Business Days prior to the date of the any applicable meeting of the stockholders of the Company.
3.No Inconsistent Agreements. Each Stockholder hereby represents, covenants and agrees that, except as contemplated by this Agreement, such Stockholder (a) has not entered into, and shall not enter into at any time prior to the Termination Date, any voting agreement or voting trust with respect to any Subject Shares and (b) has not granted, and shall not grant at any time prior to the Termination Date, a proxy or power of attorney with respect to any Subject Shares, in either case, which is inconsistent with such Stockholder’s obligations pursuant to this Agreement.
4.Termination. This Agreement shall terminate upon the earliest of (a) the Effective Time, (b) any termination of the Merger Agreement in accordance with its terms, (c) any amendment, modification or waiver of any provision of the Merger Agreement (including the Schedules and Exhibits thereto) that (i) reduces the amount of the Merger Consideration payable pursuant thereto or otherwise modifies the form of the consideration for the Merger, (ii) is adverse to any Stockholder relative to the other stockholders of the Company, or (iii) would reasonably be expected to materially delay or jeopardize the Closing of the Merger, in each case without the express written approval of the Stockholders, and (d) written notice of termination of this Agreement by Parent to the Stockholders or mutual written agreement of each of the parties hereto (such earliest date being referred to herein as the “Termination Date”); provided, that Sections 1 and 2 of this Agreement (but no other Section of this Agreement) shall terminate at the time that the that Company Stockholder Approval is obtained; provided further, that the provisions set forth in Sections 8 and 13 to 27 shall survive the termination of this Agreement; provided further, that any liability incurred by any party hereto as a result of a material breach of a term or condition of this Agreement prior to such termination shall survive the termination of this Agreement.
5.Representations and Warranties of Stockholders. Each Stockholder, as to itself (severally and not jointly), hereby represents and warrants to Parent as follows:
(a)As of the date hereof, such Stockholder is the record and beneficial owner of, and has good and valid title to, the Subject Shares, free and clear of Liens other than as created by this Agreement or pursuant to applicable Law. Such Stockholder has sole voting power and sole power to demand appraisal rights with respect to the Covered Shares, and sole power of disposition and sole power to agree to all of the matters set forth in this Agreement with respect to the Subject Shares, in each case with no limitations, qualifications or restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement. As of the date hereof, other than the Subject Shares, such Stockholder does not own beneficially or of record any (i) shares of capital stock or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (iii) options or other rights to acquire from the Company any capital stock, voting securities or
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securities convertible into or exchangeable for capital stock or voting securities of the Company. Except as contemplated by this Agreement, the Subject Shares are not subject to any voting trust agreement or other Contract to which such Stockholder is a party restricting or otherwise relating to the voting or Transfer (as defined below) of the Subject Shares. Such Stockholder has not appointed or granted any proxy or power of attorney that is still in effect with respect to any Subject Shares, except as contemplated by this Agreement.
(b)Each such Stockholder which is an entity is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by each such Stockholder which is an entity, the performance by such Stockholder of its obligations hereunder and the consummation by such Stockholder of the transactions contemplated hereby have been duly and validly authorized by such Stockholder and no other actions or proceedings on the part of such Stockholder are necessary to authorize the execution and delivery by such Stockholder of this Agreement, the performance by such Stockholder of its obligations hereunder or the consummation by such Stockholder of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by such Stockholder and, assuming due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).
(c)Except for the applicable requirements of the Exchange Act, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary on the part of such Stockholder for the execution, delivery and performance of this Agreement by such Stockholder or the consummation by such Stockholder of the transactions contemplated hereby, other than as contemplated by the Merger Agreement and (ii) neither the execution, delivery or performance of this Agreement by such Stockholder nor the consummation by such Stockholder of the transactions contemplated hereby nor compliance by such Stockholder with any of the provisions hereof shall (A) conflict with or violate, any provision of the organizational documents of any such Stockholder which is an entity, (B) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on such property or asset of such Stockholder pursuant to, any Contract to which such Stockholder is a party or by which such Stockholder or any property or asset of such Stockholder is bound or affected or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to such Stockholder or any of such Stockholder’s properties or assets, except, in the case of each of sub-clause (i) and (ii), as would not restrict, prohibit, materially delay or impair the performance by such Stockholder of its obligations under this Agreement.
(d)As of the date hereof, there is no action, suit, investigation, complaint or other proceeding pending against any such Stockholder or, to the knowledge of such Stockholder, threatened against any Stockholder that restricts or prohibits (or, if successful, would restrict or
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prohibit) the exercise by Parent of its rights under this Agreement or the performance by any party of its obligations under this Agreement.
(e)Except as provided in the Merger Agreement or the Company Disclosure Letter, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission payable by the Company or any of its Subsidiaries in connection with the transactions contemplated by the Merger Agreement or this Agreement based upon arrangements made by or at the direction of such Stockholder (acting in such capacity).
(f)Such Stockholder understands and acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance upon such Stockholder’s execution and delivery of this Agreement and the representations and warranties of such Stockholder contained herein.
6.Representations and Warranties of Parent. Parent hereby represents and warrants to each Stockholder as follows:
(a)Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by Parent, the performance by Parent of its obligations hereunder and the consummation by Parent of the transactions contemplated hereby have been duly and validly authorized by Parent and no other actions or proceedings on the part of Parent are necessary to authorize the execution and delivery by Parent of this Agreement, the performance by Parent of its obligations hereunder or the consummation by Parent of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and, assuming due authorization, execution and delivery by each Stockholder, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).
(b)Except for the applicable requirements of the Exchange Act, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary on the part of Parent for the execution, delivery and performance of this Agreement by Parent or the consummation by Parent of the transactions contemplated hereby, other than as contemplated by the Merger Agreement and (ii) neither the execution, delivery or performance of this Agreement by Parent nor the consummation by Parent of the transactions contemplated hereby nor compliance Parent with any of the provisions hereof shall (A) conflict with or violate, any provision of the organizational documents of Parent, (B) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on such property or asset of Parent pursuant to, any Contract to which Parent is a party or by which Parent or any property or asset of Parent is bound or affected or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or any of Parent’s properties or assets, except, in the case of each of sub-clause (i) and (ii), as would
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not restrict, prohibit, materially delay or impair the performance by Parent of its obligations under this Agreement.
(c)As of the date hereof, there is no action, suit, investigation, complaint or other proceeding pending against Parent or, to the knowledge of Parent, threatened against Parent that restricts or prohibits (or, if successful, would restrict or prohibit) the exercise by each Stockholder of its rights under this Agreement or the performance by any party of its obligations under this Agreement.
7.Certain Covenants of Stockholder. Each Stockholder, for itself (severally and not jointly), hereby covenants and agrees as follows, in each case except as otherwise approved in writing by Parent:
(a)Prior to the Termination Date, such Stockholder shall not, and shall not authorize or permit any of its Subsidiaries or Representatives, directly or indirectly, to:
(i)solicit, initiate, endorse, encourage or facilitate the making by any Person (other than the other parties to the Merger Agreement) of any Company Takeover Proposal;
(ii)enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any Person any non-public information or data of or regarding the Company with respect to, or otherwise cooperate in any way with, any Company Takeover Proposal;
(iii)execute or enter into any Contract constituting or relating to any Company Takeover Proposal, or approve or recommend or propose to approve or recommend any Company Takeover Proposal or any Contract constituting or relating to any Company Takeover Proposal (or authorize or resolve to agree to do any of the foregoing actions); or
(iv)make, or in any manner participate in a “solicitation” (as such term is used in the rules of the Securities and Exchange Commission (the “SEC”)) of proxies or powers of attorney or similar rights to vote, or seek to advise or influence any Person with respect to the voting of the Common Stock intending to facilitate any Company Takeover Proposal or cause stockholders of the Company not to vote to approve the Merger or any other transaction contemplated by the Merger Agreement.
(b)Such Stockholder will immediately cease and cause to be terminated all existing discussions or negotiations with any Person conducted heretofore with respect to any of the matters described in Section 7(a) above.
(c)Parent acknowledges that this Agreement is being entered into by each Stockholder solely in its, his or her capacity as a record and/or beneficial owner of the Subject Shares and that (i) a representative of each Stockholder is a member of the Company Board, (ii) this Agreement is not intended to, and shall not, restrict or limit such representatives from acting in their capacities as members of the Company Board, including in the exercise of their fiduciary duties to the Company or its stockholders, and (iii) notwithstanding anything herein to the contrary, in no event shall Parent (directly or indirectly) bring any cause of action or make any claim against any Stockholder arising out of or relating to any action or inaction by such representatives in their
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capacities as members of the Company Board (including, without limitation, under Section 6.4 or Section 8.1 of the Merger Agreement).
(d)Prior to the Termination Date, and except as contemplated hereby, such Stockholder shall not (i) tender any Subject Shares into any tender or exchange offer, (ii) except for any Exempt Transfer, sell (constructively or otherwise), transfer, pledge, hypothecate, grant, encumber, assign, exchange, convert or otherwise dispose of (collectively “Transfer”), or enter into any Contract, option or other arrangement or understanding with respect to the Transfer of any of the Subject Shares or beneficial ownership or voting power thereof or therein (including by operation of law), (iii) grant any proxies or powers of attorney, deposit any Subject Shares into a voting trust or enter into a voting agreement with respect to any Subject Shares, or (iv) convert any Owned Preferred Shares, or any shares of preferred stock of the Company acquired by such Stockholder after the date of this Agreement, into Shares. Any Transfer in violation of this provision shall be void. If applicable, such Stockholder further authorizes and requests the Company to notify the Company’s transfer agent that there is a stop transfer order with respect to all of the Subject Shares and that this Agreement places limits on the voting of the Subject Shares. If so requested by Parent, such Stockholder agrees that the book-entry positions representing Covered Shares shall bear a legend stating that they are subject to this Agreement and to the irrevocable proxy granted in Section 2(a).
For purposes of this Agreement, an “Exempt Transfer” means any transfer of Shares: (x) if the Stockholder is a corporation, partnership, limited liability company, trust or other business entity, (a) to another corporation, partnership, limited liability company, trust or other business entity that is a controlled Affiliate of such Stockholder or (b) to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with such Stockholder or Affiliates of such Stockholder (including, for the avoidance of doubt, where such Stockholder is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), or (y) in a hedging or derivative transaction with respect to which such Stockholder conveys solely the economic consequences of ownership and retains, among other things, the sole right to vote, tender, dispose of and exercise dissenters’ rights with respect to such Subject Shares during the period in which this Section 7(d) remains in effect and such transaction does not prohibit or impede such Stockholder’s compliance with its obligations and covenants pursuant to the terms of this Agreement or the Contribution and Rollover Agreement entered into by such Stockholder as of the date hereof, or (z) that has received the prior written approval of Parent (which may be given or withheld in Parent’s sole discretion); provided, that in the case of an Exempt Transfer pursuant to clause (x)(a) or (x)(b), (A) prior to such Exempt Transfer becoming effective, such transferee will execute a joinder to this Agreement in form and substance reasonably satisfactory to Parent and which shall bind such transferee to all of the obligations of a Stockholder herein and (B) the transferor Stockholder shall remain liable for any failure of such transferee to comply with or perform its obligations under this Agreement.
8.Fiduciary Duties. This Agreement is being entered into by each Stockholder solely in its capacity as a stockholder of the Company. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement shall restrict, limit or prevent any director or officer of the Company from taking any action in his or her capacity as a director or officer of the Company or otherwise discharging his or her fiduciary duties solely in his or her capacity as a director or officer of the Company, and no action or omissions by any such director or officer in his or her capacity
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as a director or officer of the Company shall be deemed to constitute a breach of any provision of this Agreement.
9.Waiver of Appraisal Rights. Each Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that such Stockholder may have under applicable Law.
10.Disclosure. Each Stockholder hereby authorizes Parent and the Company to publish and disclose in any announcement or disclosure required by the SEC and in the Proxy Statement as Parent reasonably determines to be necessary in connection with the consummation of the Merger, such Stockholder’s identity and ownership of the Subject Shares and the nature of such Stockholder’s obligations under this Agreement.
11.Further Assurances. From time to time, at the reasonable request of Parent and without further consideration, each Stockholder shall take such further action as may reasonably be necessary to consummate and make effective the transactions contemplated by this Agreement.
12.Non-Survival of Representations and Warranties. The representations and warranties of the Stockholders contained herein shall not survive the closing of the Merger or the termination of the Merger Agreement in accordance with its terms, whichever occurs first.
13.Amendment and Modification. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each party and otherwise as expressly set forth herein.
14.Waiver. No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder. Any agreement on the part of a party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by such party.
15.Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by e-mail, upon written confirmation of receipt e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
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(i)If to a Stockholder:
To the address set forth on Schedule A
with a copy (which shall not constitute notice) to:
Dechert LLP
300 South Tryon Street, Suite 800
Charlotte, NC 28202
Attention: David Cosgrove
E-mail: David.cosgrove@dechert.com
(ii)If to Parent:
Fury Resources, Inc.
17503 La Cantera Parkway, Suite 104-603
San Antonio, TX 78257
Attention: Ariella Fuchs, President and General Counsel
E-mail: afuchs@ruckusexp.com
with a copy (which shall not constitute notice) to:
K&L Gates LLP
1 Park Plaza, Twelfth Floor
Irvine, California 92614
Attention: Michael A. Hedge, Jason C. Dreibelbis
E-mail: michael.hedge@klgates.com; jason.dreibelbis@klgates.com
16.Entire Agreement. This Agreement, the Merger Agreement (including the Exhibits and Schedules thereto) and the Confidentiality Agreement constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings between the parties with respect to the subject matter hereof and thereof.
17.No Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement.
18.Governing Law. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Delaware.
19.Submission to Jurisdiction. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any other party or its successors or assigns shall be brought and determined in the Delaware Court of Chancery and any
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state appellate court therefrom within the State of Delaware (unless the Delaware Court of Chancery shall decline to accept jurisdiction over a particular matter, in which case, in any Delaware state or federal court within the State of Delaware), and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
20.Assignment; Successors. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by either party without the prior written consent of the other party, and any such assignment without such prior written consent shall be null and void; provided, however, that Parent may assign all or any of its rights and obligations hereunder to any direct or indirect Subsidiary of Parent; provided further, that no assignment shall limit the assignor’s obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
21.Enforcement. The parties agree that irreparable damage may occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to seek specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (unless the Delaware Court of Chancery shall decline to accept jurisdiction over a particular matter, in which case, in any Delaware state or federal court within the State of Delaware), this being in addition to any other remedy to which such party is entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.
22.Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or
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unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
23.Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
24.Counterparts. This Agreement may be executed in two or more counterparts and such counterparts may be delivered in electronic format (including by .pdf and email), all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party; provided, however, that if any of the Stockholders fail for any reason to execute this Agreement, then this Agreement shall become effective as to the other Stockholders who execute this Agreement. To the extent applicable, the foregoing constitutes the election of the parties hereto to invoke any Law authorizing electronic signatures.
25.Non-Recourse. This Agreement may only be enforced against, and any claim or cause of action based upon, arising out of, or related to this Agreement may only be brought against, the entities that are expressly named as parties hereto and then only with respect to the specific obligations set forth herein with respect to such party. Except to the extent a named party to this Agreement (and then only to the extent of the specific obligations undertaken by such named party in this Agreement and not otherwise), no past, present or future director, manager, officer, employee, incorporator, member, partner, equityholder, Affiliate, agent, attorney, advisor, consultant or Representative or Affiliate of any of the foregoing shall have any liability (whether in Contract, tort, equity or otherwise) for any one or more of the representations, warranties, covenants, agreements or other obligations or liabilities of any one or more parties hereto under this Agreement (whether for indemnification or otherwise) or for any claim based on, arising out of, or related to this Agreement.
26. No Presumption Against Drafting Party. Each of the parties to this Agreement acknowledges that it has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.
27.No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in Parent or any other Person any direct or indirect ownership or incidence of ownership of, or with respect to, any Subject Shares. Subject to the restrictions and requirements set forth in this Agreement, all rights, ownership and economic benefits of and relating to each Stockholder’s Subject Shares shall remain vested in and belong to such Stockholder, and this Agreement shall not confer any right, power or authority upon Parent or any other Person to direct any Stockholder in the voting of any of its Subject Shares (except as otherwise specifically provided for herein).
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IN WITNESS WHEREOF, Parent and the Stockholders have caused to be executed or executed this Agreement as of the date first written above.
Signature Page to Voting Agreement
SCHEDULE A
Stockholder | Covered Shares | Additional Shares | Owned Preferred Shares |
Name: Luminus Energy Partners Master Fund, Ltd Address: c/o Luminus Management, LLC 1811 Bering Drive Suite 400 Houston, TX 77057 Attn: Jonathan Barrett E-mail: jbarrett@luminusmgmt.com | 3,794,569 | 2,356,879 | Series A Preferred Stock: 13,336 Series A-1 Preferred Stock: 20,269 |
Name: OCM HLCN HOLDINGS, L.P. Address: c/o Oaktree Capital Management, LLC | 2,460,083 | 1,528,005 | Series A Preferred Stock: 6,526 Series A-1 Preferred Stock: 9,921 |
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
EXHIBIT B
FORM OF Purchase Agreement
(See attached.)
EXECUTION VERSION
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”), is made as of December 14, 2023, by and among Fury Resources, Inc., a Delaware corporation (the “Company”) and the investors listed on Exhibit A attached to this Agreement (each a “Purchaser” and together the “Purchasers”).
The parties hereby agree as follows:
1.Purchase and Sale of Preferred Stock.
1.1Sale and Issuance of Preferred Stock.
(a)The Company shall adopt and file with the Secretary of State of the State of Delaware on or before the Closing (as defined below) the Amended and Restated Certificate of Incorporation in the form of Exhibit B attached to this Agreement (the “Restated Certificate”).
(b)Subject to the terms and conditions of this Agreement, each Purchaser agrees to purchase at the applicable Closing and the Company agrees to sell and issue to each Purchaser at the Closing that number of shares of Series A Preferred Stock, $0.0001 par value per share (the “Series A Preferred Stock”), as is determined pursuant to Exhibit A, at a purchase price of $1,000 per share of Series A Preferred Stock. The shares of Series A Preferred Stock issued to the Purchasers pursuant to this Agreement shall be referred to in this Agreement as the “Shares.”
(a)The purchase and sale of the Shares shall take place remotely via the exchange of documents and signatures promptly following satisfaction of the conditions set forth in Section 4 and Section 5, or at such other time and place as the Company and the Purchasers mutually agree upon, orally or in writing (which time and place are designated as the “Closing”).
(b)At the Closing, the Company shall deliver to each Purchaser a certificate (in electronic format) representing the Shares being purchased by such Purchaser at the Closing against payment of the purchase price therefor by check payable to the Company or by wire transfer to a bank account designated by the Company.
1.3Use of Proceeds. In accordance with the directions of the Company’s Board of Directors, as it shall be constituted in accordance with the Stockholders’ Agreement (as defined below) and the Restated Certificate, the Company will use the proceeds from the sale of the Shares to finance the Transactions (as defined below) and for the repayment of debt, working capital and other general corporate purposes.
1.4Defined Terms Used in this Agreement. In addition to the terms defined above, the following terms used in this Agreement shall be construed to have the meanings set forth or referenced below.
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(a)“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, managing member, officer, director or trustee of such Person, or any venture capital fund or registered investment company now or hereafter existing that is controlled by one or more general partners, managing members or investment advisers of, or shares the same management company or investment adviser with, such Person.
(b)“Board” or “Board of Directors” means the Board of Directors of the Company.
(c)“Code” means the Internal Revenue Code of 1986, as amended.
(d)“Common Equity Investments” means sales of Common Stock by the Company for total aggregate cash proceeds (paid to the Company prior to or concurrently with the Closing) of at least $200,000,000.
(e)“Contribution Agreement” means the Contribution, Rollover and Sale Agreement, dated as of the date hereof, by and among the Company and the parties thereto.
(f)“Contributions” means the transactions contemplated by the Contribution Agreement.
(g)“Equity Interests” means (i) any type of equity ownership interest or voting interest in any Person, including (x) in the case of a corporation, any and all shares (however designated) of capital stock, (y) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock and (z) in the case of a partnership or limited liability company, any and all partnership or membership interests (whether general or limited), (ii) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, any Person, or any subscriptions, calls, warrants or options of any kind entitling a Person to purchase or otherwise acquire shares, partnership, or membership interests or any other equity securities of any Person (including phantom share, share appreciation, profit participation or other similar rights) and (iii) in any case, any right to acquire, or any securities convertible into or exercisable or exchangeable for, any of the foregoing.
(h)“Indemnification Agreement” means the agreement between the Company and the directors designated by any Purchaser entitled to designate a member of the Board of Directors pursuant to the Stockholders’ Agreement, dated as of the date of the Closing, in the form of Exhibit D attached to this Agreement, which the Company shall execute upon request by any Purchaser on or after the Closing.
(i)“Knowledge” including the phrase “to the Company’s knowledge” shall mean the actual knowledge after reasonable investigation of the Chief Executive Officer of the Company.
(j)“Liability” means any obligation, liability, debt, loss, damage, adverse claim, fine, penalty, or deficiency of such Person of any kind, character or description,
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whether absolute or contingent, accrued or unaccrued, asserted or unasserted, known or unknown, liquidated or unliquidated, due or to become due, fixed or unfixed, disputed or undisputed, joint or several, vested or unvested, executory, determined, determinable or otherwise and regardless of when or by whom asserted, including those arising under any law or any contract, arrangement or undertaking, whether or not the same is required to be accrued on the financial statements of such Person.
(k)“Material Adverse Effect” means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property or results of operations of the Company.
(l)“Merger Agreement” means that certain Agreement and Plan of Merger by and among the Company, San Jacinto Merger Sub, Inc., a Delaware corporation (the “Merger Sub”) and Battalion Oil Corporation, a Delaware corporation, dated the date hereof.
(m)“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
(n)“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(o)“Stockholders’ Agreement” means the Stockholders’ Agreement among the Company, the Purchasers, and certain other stockholders of the Company, dated as of the date of the Closing, in the form of Exhibit E attached to this Agreement.
(p)“Transactions” means the transactions contemplated by the Merger Agreement.
(q)“Transaction Agreements” means this Agreement, the Contribution Agreement and the Stockholders’ Agreement.
2.Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser that, except as set forth on the Disclosure Schedule attached as Exhibit C to this Agreement, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date hereof, except as otherwise indicated. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Section 2, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this Section 2 only to the extent it is readily apparent from a reading of the disclosure on its face that such disclosure is applicable to such other sections and subsections.
For purposes of these representations and warranties (other than those in Subsections 2.2, 2.3, 2.4, 2.5, and 2.6), the term the “Company” shall include any subsidiaries of the Company, unless otherwise noted herein.
2.1Organization, Good Standing, Corporate Power and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business
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as now conducted and as presently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.
2.2Capitalization.(a)The authorized capital of the Company consists, immediately prior to the Closing, of:
(i)Not less than 100,000,000 shares of common stock, $0.0001 par value per share (the “Common Stock”). As of the Rollover and Sale Closing, all of the outstanding shares of Common Stock will have been duly authorized, will be fully paid and nonassessable and will have been issued in compliance with all applicable federal and state securities laws. Parent holds no Common Stock in its treasury.
(ii)Not more than 155,000 shares of Preferred Stock, $0.0001 par value per share (the “Preferred Stock”), all of which have been designated as “Series A Preferred Stock,” none of which are issued and outstanding immediately prior to the Closing. The rights, privileges and preferences of the Preferred Stock are as stated in the Restated Certificate and as provided by the Delaware General Corporation Law. The Company holds no Preferred Stock in its treasury.
(b)The issued and outstanding Equity Interests of the Company, the holder of such Equity Interests and the number and class of such interests as of the date of this Agreement are set forth on Subsection 2.2(b) of the Disclosure Schedule. Except for the conversion privileges of the shares of Series A Preferred Stock to be issued under this Agreement and the Contribution Agreement, and the Company’s obligation to consummate the Common Equity Investment, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company, or for the Company to issue, any shares of Common Stock or Preferred Stock, or any Equity Interests. There are no outstanding obligations of the Company (contingent or otherwise) to repurchase, redeem or otherwise acquire, directly or indirectly, any Equity Interests of the Company. The Company is not subject to, and no Person has any right to and, to the Company’s knowledge, there is no condition or circumstance that would reasonably be expected to give rise to or provide a basis for the assertion of a valid claim by any Person to the effect that such Person is entitled to acquire any Equity Interests of the Company. There are no outstanding stock-appreciation rights, stock-based performance units, “phantom” stock rights or other similar contracts or obligations of any character (contingent or otherwise) pursuant to which any Person is or may be entitled to receive any payment or other value based on the revenues, earnings or financial performance, equity value or other attribute of the Company. There are no bonds, debentures, notes or other indebtedness of the Company outstanding having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which any stockholders of the Company may vote. There are no declared or accrued but unpaid dividends or distributions with respect to any Equity Interests of the Company and there is no liability for distributions accrued and unpaid by the Company.
2.3Subsidiaries. Merger Sub is the only subsidiary of the Company. Except for Merger Sub, the Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or
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other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement. Merger Sub does not own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. Other than the Liabilities of Merger Sub pursuant to the Transaction Agreements and the Merger Agreement (and the other agreements referred to therein and entered into in connection therewith) and any fees, expenses and costs incurred or payable by Merger Sub in connection with the transactions contemplated in the Transaction Agreements and the Merger Agreement (and the other agreements referred to therein and entered into in connection therewith), Merger Sub does not have any Liabilities.
2.4Authorization. All corporate action required to be taken by the Company’s Board of Directors and stockholders in order to authorize the Company to enter into the Transaction Agreements, and to issue the Shares at the Closing and the Common Stock issuable upon conversion of the Shares, has been taken or will be taken prior to the Closing. All action on the part of the officers of the Company necessary for the execution and delivery of the Transaction Agreements, the performance of all obligations of the Company under the Transaction Agreements to be performed as of the Closing, and the issuance and delivery of the Shares has been taken or will be taken prior to the Closing. The Transaction Agreements, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally or (b) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
2.5Valid Issuance of Shares. The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free and clear of all restrictions, liens or other encumbrances (other than restrictions on transfer under the Stockholders’ Agreement, the Restated Certificate, applicable state and federal securities laws, or liens or encumbrances created by or imposed by a Purchaser). Assuming the accuracy of the representations of the Purchasers in Section 3 of this Agreement and subject to any filings required by applicable state and federal securities laws, the Shares will be issued in compliance with all applicable federal and state securities laws. The Common Stock issuable upon conversion of the Shares has been duly reserved for issuance, and upon issuance in accordance with the terms of the Restated Certificate, will be validly issued, fully paid and nonassessable and free of all restrictions, liens or other encumbrances (other than restrictions on transfer under the Stockholders’ Agreement, the Restated Certificate, applicable state and federal securities laws or liens or encumbrances created by or imposed by a Purchaser). Assuming the accuracy of the representations of the Purchasers in Section 3 of this Agreement, the Common Stock issuable upon conversion of the Shares will be issued in compliance with all applicable federal and state securities laws.
2.6Governmental Consents and Filings; Consent Generally. Assuming the accuracy of the representations made by the Purchasers in Section 3 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement, except for
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(a) the filing of the Restated Certificate, which will have been filed as of the Closing, and (b) filings pursuant to Regulation D of the Securities Act, and applicable state securities laws, which have been or will be made in a timely manner. The execution and delivery by the Company of this Agreement and the other Transaction Agreements, and the performance by the Company of its obligations hereunder and thereunder and the consummation of the transactions contemplated herein and therein by the Company do not and will not violate, conflict with or result in a breach of, or a default under, (i) any provision of the Company’s Restated Certificate or Bylaws (together, “Charter Documents”), (ii) any provision of any material agreement or instrument to which the Company is a party or by which it or its property are subject to or bound or affected or (iii) to the knowledge of the Company, any applicable law or regulation.
2.7Litigation. There is no claim, demand, action, suit, proceeding, arbitration, complaint, charge, inquiry, hearing, order, judgment, temporary or permanent injunction, or investigation pending, threatened in writing, or to the Company’s knowledge, threatened orally, in each case (a) against the Company or Merger Sub or their respective assets or properties, (b) against any officer or director or employee of the Company or Merger Sub arising out of their employment or board relationship with the Company or Merger Sub (as applicable), or (c) that questions the validity of the Transaction Agreements or the right of the Company to enter into them, or to consummate the transactions contemplated by the Transaction Agreements. Neither the Company, Merger Sub nor, to the Company’s knowledge, any of their respective officers or directors (in their role as such) is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers or directors, such as would affect the Company). There is no action, suit, proceeding or investigation by the Company or Merger Sub pending or which the Company or Merger Sub intends to initiate.
2.8Compliance with Other Instruments. Neither the Company nor Merger Sub is in violation or default (a) of any provisions of its Charter Documents or, with respect to Merger Sub, similar governing documents, (b) of any instrument, judgment, order, writ or decree, (c) under any note, indenture or mortgage, (d) under any material contract to which it is a party or by which it is bound, or (e) of any provision of federal or state statute, rule or regulation applicable to the Company or Merger Sub, in the case of sub-clauses (c) or (d), the violation of which would have a Material Adverse Effect. The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated by the Transaction Agreements will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, a default under any of the foregoing listed in clauses (a) through (e).
2.9Rights of Registration and Voting Rights. Except as contemplated in the Stockholders’ Agreement, the Company is not under any obligation to register under the Securities Act any of its currently outstanding Equity Interests or the Shares. Except as contemplated in the Stockholders’ Agreement, to the Company’s knowledge, no stockholder of the Company has entered into any agreements with respect to the voting or transfer of capital shares of the Company.
2.10Corporate Documents. The Charter Documents of the Company are in the form provided to the Purchasers.
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2.11No Liabilities. Other than the Liabilities of the Company pursuant to the Transaction Agreements and the Merger Agreement (and the other agreements referred to therein and entered into in connection therewith) and any fees, expenses and costs incurred or payable by the Company in connection with the transactions contemplated in the Transaction Agreements and the Merger Agreement (and the other agreements referred to therein and entered into in connection therewith), the Company does not have any Liabilities.
2.12CFIUS. The Company does not engage in (i) the design, fabrication, development, testing, production, or manufacture of one or more “critical technologies,” as defined in Section 721 of the Defense Production Act of 1950, as amended, including all implementing regulations thereof (the “DPA”); (ii) the ownership, operation, maintenance, supply, manufacture, or servicing of “critical infrastructure,” as defined in the DPA; or (iii) the maintenance or collection, directly or indirectly, of “sensitive personal data,” as defined in the DPA.
3.Representations and Warranties of the Purchasers. Each Purchaser hereby represents and warrants to the Company, severally and not jointly, as to itself as of the date hereof, that:
3.1Authorization. The Purchaser has full power and authority to enter into the Transaction Agreements. The Transaction Agreements to which the Purchaser is a party, when executed and delivered by the Purchaser and assuming due and valid authorization, execution and delivery hereof by the Company and the other Purchasers, will constitute valid and legally binding obligations of such Purchaser, enforceable against such Purchaser in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
3.2Purchase Entirely for Own Account. This Agreement is made with such Purchaser in reliance upon such Purchaser’s representation to the Company, which by such Purchaser’s execution of this Agreement, such Purchaser hereby confirms, that the Shares to be acquired by such Purchaser will be acquired for investment for such Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, such Purchaser further represents that such Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Shares. Such Purchaser has not been formed for the specific purpose of acquiring the Shares.
3.3Disclosure of Information. Such Purchaser has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Shares with the Company’s management and has had an opportunity to review the Company’s facilities. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchasers to rely thereon.
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3.4Restricted Securities. Such Purchaser understands that the Shares have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Purchaser’s representations as expressed herein. Such Purchaser understands that the Shares are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, such Purchaser may need to hold the Shares indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. Except as set forth in the Stockholders’ Agreement, the Purchaser acknowledges that the Company has no obligation to register or qualify the Shares, or the Common Stock into which they may be converted, for resale. The Purchaser further acknowledges that, except as otherwise set forth in the Stockholders’ Agreement, if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Shares, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.
3.5No Public Market. Such Purchaser understands that no public market now exists for the Shares, and that the Company has made no assurances that a public market will ever exist for the Shares.
3.6Legends. Such Purchaser understands that the Shares and any securities issued in respect of or exchange for the Shares, may be notated with one or all of the following legends:(a)“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR HOLDER CAN DEMONSTRATE TO THE COMPANY’S REASONABLE SATISFACTION THAT SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE.”
(b)Any legend set forth in, or required by, the Stockholders’ Agreement.
(c)Any legend required by the securities laws of any state to the extent such laws are applicable to the Shares represented by the certificate, instrument or book entry so legended.
3.7Accredited Investor. Such Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
3.8Foreign Investors. If the Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Code), the Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Agreement, including (a) the legal requirements within its jurisdiction for the purchase of the Shares, (b) any foreign exchange restrictions applicable to such purchase, (c) any governmental or other consents that may need to be obtained, and (d) the income
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tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Shares. The Purchaser’s subscription and payment for and continued beneficial ownership of the Shares will not violate any applicable securities or other laws of the Purchaser’s jurisdiction.
3.9Restricted Persons. Such Purchaser is not, and is not owned or controlled by any person who is the target of any sanctions imposed by the United States, European Union, United Kingdom, or any other government (including, but not limited to, being identified on a sanctions list maintained by such governments or being located in, resident in, headquartered in, or organized under the laws of any territory that is targeted by comprehensive sanctions by any such government).
3.10No General Solicitation. Neither such Purchaser, nor any of its officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including, through a broker or finder (a) engaged in any general solicitation, or (b) published any advertisement in connection with the offer and sale of the Shares.
3.11Exculpation Among Purchasers. Such Purchaser acknowledges that it is not relying upon any Person, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Such Purchaser agrees that neither any Purchaser nor the respective controlling Persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable to any other Purchaser for any action heretofore taken or omitted to be taken by any of them in connection with the purchase of the Shares.
3.12Residence. If such Purchaser is an individual, then such Purchaser resides in the state or province identified in the address of such Purchaser set forth on Exhibit A; if such Purchaser is a partnership, corporation, limited liability company or other entity, then the office or offices of such Purchaser in which its principal place of business is identified in the address or addresses of such Purchaser set forth on Exhibit A.
4.Conditions to the Purchasers’ Obligations at Closing. The obligations of each Purchaser to purchase Shares at the Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived by the Purchaser:
4.1Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct in all respects as of the Closing.
4.2Performance. The Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company on or before the Closing.
4.3Compliance Certificate. The Chief Executive Officer of the Company shall deliver to the Purchasers at the Closing a certificate certifying that the conditions specified in Subsections 4.1 and 4.2 have been fulfilled.
4.4Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in
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connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of the Closing.
4.5Board of Directors. As of the Closing, the authorized size of the Board shall be five directors, and the Board shall be constituted as set forth in the Stockholders’ Agreement and the Restated Certificate.
4.6Merger Agreement. All conditions precedent to the closing of the Transactions (the “Transaction Closing”) set forth in the Merger Agreement shall have been satisfied or waived as determined by the parties to the Merger Agreement (other than those conditions which, by their nature, are to be satisfied at the Transaction Closing, but subject to satisfaction or waiver by such party of such conditions as of the Transaction Closing).
4.7Contribution Agreement. The Contributions shall have been consummated concurrently with or immediately prior to the Closing.
4.8Stockholders’ Agreement. The Company, each Purchaser (other than the Purchaser relying upon this condition to excuse such Purchaser’s performance hereunder), and the other stockholders of the Company named as parties thereto, shall have executed and delivered the Stockholders’ Agreement.
4.9Restated Certificate. The Company shall have filed the Restated Certificate with the Secretary of State of Delaware on or prior to the Closing.
4.10Secretary’s Certificate. The Secretary of the Company shall have delivered to the Purchasers at the Closing a certificate certifying (a) the Certificate of Incorporation and Bylaws of the Company as in effect at the Closing, (b) resolutions of the Board of Directors of the Company approving the Transaction Agreements and the transactions contemplated under the Transaction Agreements, and (c) resolutions of the stockholders of the Company approving the Restated Certificate.
4.11Contemporaneous Issuance. The Common Equity Investments shall have been consummated prior to or concurrently with the Closing.
5.Conditions of the Company’s Obligations at Closing. The obligations of the Company to sell Shares to the Purchasers at the Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived by the Company:
5.1Representations and Warranties. The representations and warranties of each Purchaser contained in Section 3 shall be true and correct in all respects as of the Closing other than de minimis changes.
5.2Performance. The Purchasers shall have, in all material respects, performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by them on or before the Closing.
5.3Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in
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connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of the Closing.
5.4Merger Agreement. All conditions precedent to the Transaction Closing shall have been satisfied or waived as determined by the parties to the Merger Agreement (other than those conditions which, by their nature, are to be satisfied at the Transaction Closing, but subject to satisfaction or waiver by such party of such conditions as of the Transaction Closing).
5.5Series A-1 Amendment. The Company shall have filed the Series A-1 Amendment (as defined in the Contribution Agreement) with the Secretary of State of Delaware on or prior to the Closing.
5.6Contribution Agreement. The Contributions shall have been consummated concurrently with or immediately prior to the Closing.
5.7Stockholders’ Agreement. Each Purchaser, and the other stockholders of the Company named as parties thereto shall have executed and delivered the Stockholders’ Agreement.
(a)If the Merger Agreement is validly terminated for any reason pursuant to its terms, this Agreement will automatically terminate in its entirety.
(b)Solely with respect to each Purchaser that is a party to the Contribution Agreement, in the event that such Purchaser’s aggregate Rollover Value (as defined in the Contribution Agreement) equals or exceeds such Purchaser’s Maximum Rollover Amount (as defined in the Contribution Agreement), then this Agreement will automatically terminate in its entirety with respect to such Purchaser and shall be of no further force or effect and such Purchaser shall have no further rights or obligations under this Agreement and shall no longer be deemed a Purchaser for purposes of this Agreement, in each case, other than with respect to Section 6.4 and Section 6.9.
6.2Survival of Warranties. Unless otherwise set forth in this Agreement, the representations and warranties of the Company and the Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of the Purchasers or the Company; provided that if this Agreement is terminated pursuant to Section 6.1, the representations and warranties of the Company and the Purchaser contained in or made pursuant to this Agreement shall terminate upon such date of termination.
6.3Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
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6.4Governing Law. This Agreement shall be governed by the internal law of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.
6.5Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
6.6Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
6.7Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt, or (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page or Exhibit A, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Subsection 6.7. If notice is given to the Company, a copy shall also be sent to K&L Gates LLP, 1 Park Plaza, Twelfth Floor, Irvine, CA 92614, Attention: Michael Hedge, Email: michael.hedge@klgates.com and if notice is given to the Purchasers, a copy shall also be given to Dechert LLP, 300 South Tryon Street, Suite 800, Charlotte, NC, 28202, Attention: David Cosgrove, Email: david.cosgrove@dechert.com.
6.8No Finder’s Fees. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. Each Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which each Purchaser or any of its officers, employees or representatives is responsible. The Company agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
6.9Expenses. At the Closing, the Company shall pay (or reimburse the Purchasers for) the reasonable fees and expenses of Dechert LLP, the counsel for the Purchasers, in respect of the negotiation and consummation of the Transaction Agreements and the transactions contemplated therein, in an amount not to exceed, in the aggregate, $100,000.
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6.10Amendments and Waivers. Any term of this Agreement may be amended, terminated or waived only with the written consent of the Company and the written consent of a majority of the Purchasers (such majority to be determined using the number of Shares purchased by each Purchaser pursuant to the terms of this Agreement and the number of Shares acquired pursuant to the Contribution Agreement); provided that any amendments, changes or modifications to the price per Share or number of Shares acquired hereunder shall require the written consent of each Purchaser. Any amendment or waiver effected in accordance with this Subsection 6.9 shall be binding upon the Purchasers and each transferee of Shares (or the Common Stock issuable upon conversion thereof), each future holder of all such securities, and the Company.
6.11Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.
6.12Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
6.13Entire Agreement. This Agreement (including the Exhibits hereto), the Restated Certificate and the other Transaction Agreements constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.
6.14Specific Performance. Each of the parties hereby agrees that there is no adequate remedy at law for the damage which any party might sustain if the other party fails to perform the specific terms and conditions of this Agreement or otherwise breach its terms. Accordingly, the parties agree that in the event of any breach or threatened breach by any party of any covenant, obligation or other provision set forth in this Agreement, any other party shall be entitled, at each such party’s option, to the remedies of specific performance and an injunction or injunctions, in each case, to prevent any breaches of this Agreement and to enforce specifically the terms and provisions hereof, without proof of actual damages or otherwise, in addition to all other remedies at law or in equity available to such party.
6.15Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of the State of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action
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or other proceeding arising out of or based upon this Agreement except in the state courts of the State of Delaware or the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION AGREEMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
Company:
FURY RESOURCES, INC.,
a Delaware corporation
By:
Name: Ariella Fuchs
Title: President and General Counsel
Address:
17503 La Cantera Parkway, Suite 104-603
San Antonio, TX 78257
Signature Page to Series A Preferred Stock Purchase Agreement
EXHIBITS
Exhibit A -SCHEDULE OF PURCHASERS
Exhibit B -FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
Exhibit C -DISCLOSURE SCHEDULE
Exhibit D -FORM OF INDEMNIFICATION AGREEMENT
Exhibit E -FORM OF STOCKHOLDERS’ AGREEMENT
Purchaser | Aggregate Purchase Price Amount |
Name: Luminus Energy Partners Master Fund, Ltd Address: c/o Luminus Management, LLC 1811 Bering Drive Suite 400 Houston, TX 77057 Attn: Jonathan Barrett E-mail: jbarrett@luminusmgmt.com | $42,519,622 less such Purchaser’s aggregate Rollover Value pursuant to the Contribution Agreement; provided, that if such Purchaser’s Aggregate Purchase Price Amount is equal to or less than $0, then Subsection 6.1(b) shall apply with respect to such Purchaser. |
Name: OCM HLCN HOLDINGS, L.P. Address: c/o Oaktree Capital Management, LLC | $27,556,191 less such Purchaser’s aggregate Rollover Value pursuant to the Contribution Agreement; provided, that if such Purchaser’s Aggregate Purchase Price Amount is equal to or less than $0, then Subsection 6.1(b) shall apply with respect to such Purchaser. |
Name: Lion Point Master, LP Address: 250 West 55th Street, 35th Floor New York, NY 10019 Attention: Didric Cederholm E-mail: dcederholm@lionpoint.com; ops@lionpoint.com | $9,320,478 |
EXHIBIT C
FORM OF Contribution Agreement
(See attached.)
EXECUTION VERSION
CONTRIBUTION, ROLLOVER AND SALE AGREEMENT
This Contribution, Rollover and Sale Agreement (this “Agreement”), dated as of December 14, 2023, is made by and among Fury Resources, Inc., a Delaware corporation (“Parent”), the Rollover Sellers listed on Schedule A attached to this Agreement (the “Rollover Sellers” or the “Sellers”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Series A Preferred Stock Purchase Agreement by and among Parent, the Rollover Sellers and the other parties thereto, dated as of the date hereof (the “Purchase Agreement”).
WHEREAS, concurrently with the execution and delivery of this Agreement, Parent, San Jacinto Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), and Battalion Oil Corporation, a Delaware corporation (the “Company”), have entered into that certain Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”);
WHEREAS, pursuant to the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger and as a wholly owned subsidiary of Parent;
WHEREAS, immediately prior to the closing of the Merger, but subject to the consummation thereof, each Rollover Seller desires to contribute to Parent all of the shares of (i) Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share (the “Series A Shares”), of the Company, (ii) Series A-1 Redeemable Convertible Preferred Stock, par value $0.0001 per share (the “Series A-1 Shares”), of the Company, and (iii) any new preferred stock, par value $0.0001 per share of the Company (“New Preferred Stock” and, together with the Series A Shares and Series A-1 Shares, the “Company Preferred Stock”), in each case, owned by such Rollover Seller on the date hereof as set forth on Schedule A attached hereto, or acquired by such Rollover Seller after the date hereof and prior to the Rollover and Sale Closing (as defined below), other than any Rollover Excess Shares (as defined below) (collectively, the “Rollover Shares”), in exchange for the number of shares of Series A Preferred Stock (as defined below) of Parent determined as set forth herein in each case, pursuant to and in accordance with the terms of this Agreement (the “Contribution and Rollover”);
WHEREAS, immediately prior to the closing of the Merger, but subject to the consummation thereof, in the event that the aggregate Rollover Value (as defined below) of any New Preferred Stock acquired by a Rollover Seller after the date hereof and prior to the Rollover and Sale Closing, when aggregated with the Rollover Value of such Rollover Seller’s Series A Shares and Series A-1 Shares, exceeds such Seller’s Maximum Rollover Amount (as defined below) as set forth on Schedule A hereto (such excess Rollover Value, the “Rollover Excess Amount”), then such Rollover Seller shall sell to Parent a number of shares of New Preferred Stock having an aggregate Rollover Value equal to such Seller’s Rollover Excess Amount (such shares of New Preferred Stock, “Rollover Excess Shares” and, together with the Rollover Shares, the “Transferred Shares”), in exchange for cash consideration equal to such Rollover Excess Amount, in each case, pursuant to and in accordance with the terms of this Agreement (the transactions described in the foregoing, collectively, the “Preferred Stock Sales”); and
WHEREAS, Parent and the Rollover Sellers intend that the Contribution and Rollover, together with the issuance of shares of Series A Preferred Stock of Parent pursuant to the Purchase Agreement, the Common Equity Investments, and the initial issuance of shares of Common Stock by Parent to Ruckus Energy Holdings, LLC, a Delaware limited liability company, be treated for United States federal income tax purposes as a transaction described in Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”) (such treatment, the “Intended Tax Treatment”).
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby mutually covenant and agree as follows:
CONTRIBUTION AND ROLLOVER
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REPRESENTATIONS AND WARRANTIES OF Parent
Parent hereby represents and warrants to each Rollover Seller that, except as set forth on the Disclosure Schedule attached as Schedule B to this Agreement, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date hereof, except as otherwise indicated. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Section 2, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this Section 2 only to the extent it is readily apparent from a reading of the disclosure on its face that such disclosure is applicable to such other sections and subsections.
For purposes of these representations and warranties (other than those in Sections 2.2, 2.3, 2.4, and 2.5), the term the “Parent” shall include any subsidiaries of Parent, unless otherwise noted herein.
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REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Rollover Seller hereby represents and warrants to Parent, severally and not jointly, as to itself as of the date hereof, that:
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MISCELLANEOUS
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[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Contribution, Rollover and Sale Agreement to be duly executed, as of the date first above written.
Parent:
FURY RESOURCES, INC.,
a Delaware corporation
By:
Name: Ariella Fuchs
Title: President and General Counsel
Address:
17503 La Cantera Parkway, Suite 104-603
San Antonio, TX 78257
[Signature Page to Contribution, Rollover and Sale Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Contribution, Rollover and Sale Agreement to be duly executed, as of the date first above written.
ROLLOVER SELLERS:
[signature blocks to be inserted]
[Signature Page to Contribution, Rollover and Sale Agreement]
Rollover Value and Rollover Sellers
Rollover Value per Rollover Share:
Rollover Share | Rollover Value |
Series A Share | $1,240.00; provided, that if the Rollover and Sale Closing does not take place on or prior to February 5, 2024, such amount shall increase at an annual rate of 16% from and after such date until the Rollover and Sale Closing occurs. |
Series A-1 Share | $1,086.00; provided, that if the Rollover and Sale Closing does not take place on or prior to February 5, 2024, such amount shall increase at an annual rate of 16% from and after such date until the Rollover and Sale Closing occurs. |
New Preferred Stock | The Redemption Price determined pursuant to Section 8(a) of the New Series Certificate of Designation as of the Rollover and Sale Closing Date (determined as if this Agreement, and the other ancillary agreements to which the Sellers are parties, had not been entered into). |
Rollover Sellers
Rollover Seller | Rollover Shares as of December 14, 2023 | Maximum Rollover Amount | |
| Series A Shares | Series A-1 Shares | |
Name: Luminus Energy Partners Master Fund, Ltd Address: c/o Luminus Management, LLC 1811 Bering Drive Suite 400 Houston, TX 77057 Attn: Jonathan Barrett E-mail: jbarrett@luminusmgmt.com | 13,336 | 20,269 | $42,519,622.00 |
OCM HLCN HOLDINGS, L.P. Address: c/o Oaktree Capital Management, LLC | 6,526 | 9,921 | $27,556,191.00 |
Schedule B
Disclosure Schedule
Exhibit A
Form of Certificate of Designations for New Preferred Stock
Exhibit B
Series A Preferred Stock Purchase Agreement
Exhibit C
Subscription Agreement
Exhibit D
Form of Certificate of Amendment to Certificate of Designations for Series A-1 Shares
Exhibit E
Form of Amended and Restated Bylaws
EXHIBIT D
form of Certificate of Designation
(See attached.)
EXECUTION VERSION
____________________
CERTIFICATE OF DESIGNATIONS
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
____________________
SERIES A-[●] REDEEMABLE CONVERTIBLE PREFERRED STOCK
(Par Value $0.0001 Per Share)
Battalion Oil Corporation (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), hereby certifies that, pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation (the “Board of Directors”) by the Amended and Restated Certificate of Incorporation of the Corporation (as amended from time to time in accordance with its terms and the General Corporation Law, the “Certificate of Incorporation”), which authorizes the Board of Directors to issue shares of the preferred stock of the Corporation (the “Preferred Stock”), in one or more series of Preferred Stock and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional, or other special rights and such qualifications, limitations or restrictions thereof, and in accordance with the provisions of Section 151 of the General Corporation Law, the Board of Directors duly adopted on [●], 202[●] the following resolution:
RESOLVED, that the rights, powers and preferences, and the qualifications, limitations and restrictions, of the Series A-[●] Preferred Stock as set forth in this Certificate of Designations are hereby approved and adopted by the Board of Directors and Series A-[●] Preferred Stock is hereby authorized out of the Corporation’s authorized preferred stock, par value $0.0001 per share; and the form, terms and provisions of this Certificate of Designations are hereby approved, adopted, ratified and confirmed in all respects as follows:
General. |
(a)The shares of such series shall be designated the Series A-[●] Redeemable Convertible Preferred Stock (hereinafter referred to as the “Series A-[●] Preferred Stock”).
(b)Each share of Series A-[●] Preferred Stock shall be identical in all respects with the other shares of Series A-[●] Preferred Stock.
(c)The authorized number of shares of Series A-[●] Preferred Stock shall initially be [●] ([●]), which number may from time to time be increased or decreased by resolution of the Board of Directors as permitted by the General Corporation Law.
(d)For purposes of this Certificate of Designations, “Capital Stock” of any Person means any and all shares, interests, participations or other equivalents however designated of corporate stock or other equity participations, including partnership interests, whether general or
limited, of such Person and any rights (other than debt securities convertible or exchangeable into an equity interest), warrants or options to acquire an equity interest in such Person. The Series A-[●] Preferred Stock shall, with respect to dividend rights and rights upon a liquidation, winding-up or dissolution of the Corporation, rank:
(i)senior to the Common Stock, par value $0.0001 per share, of the Corporation (“Common Stock”), and any other class or series of Capital Stock of the Corporation, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the Series A-[●] Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Corporation (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such Capital Stock, the “Junior Stock”);
(ii)on a parity with (A) the Series A Redeemable Convertible Preferred Stock of the Company, par value $0.0001 per share, (B) the Series A-1 Redeemable Convertible Preferred Stock of the Company, par value $0.0001 per share, and (C) any other class or series of Capital Stock of the Corporation, the terms of which provide that such class or series ranks on a parity with the Series A-[●] Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Corporation (such Capital Stock, together with any warrants, rights, calls or options exercisable for or convertible into such Capital Stock, the “Parity Stock”); and
(iii)junior to any class or series of Capital Stock of the Corporation (other than Common Stock), the terms of which expressly provide that such class or series ranks senior to the Series A-[●] Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Corporation (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such Capital Stock, the “Senior Stock”).
(e)For purposes of this Certificate of Designations, the following terms have meanings set forth in the Section indicated:
Term | Section |
|---|---|
30 Day Date | Section 8(c) |
Board of Directors | Preamble |
Business Day | Section 4(b) |
Capital Stock | Section 1(d) |
Certificate of Incorporation | Preamble |
Change of Control | Section 8(b)(iv) |
CoC Conversion Consideration | Section 8(b)(ii) |
Common Stock | Section 1(d)(i) |
Conversion Notice | Section 7(a) |
Conversion Price | Section 7(a) |
Conversion Ratio | Section 7(a) |
Corporation | Preamble |
Corporation Event | Section 7(f) |
Debt | Section 7(b)(ii) |
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Term | Section |
|---|---|
Dividend Payment Date | Section 2(a) |
Dividend Period | Section 2(a) |
General Corporation Law | Preamble |
Holder | Section 3(a) |
Issuance Date | Section 2(a) |
Issuer Conversion Notice | Section 7(b) |
Junior Stock | Section 1(d)(i) |
Liquidation | Section 3(a) |
Liquidation Distribution | Section 3(a) |
Liquidation Preference | Section 3(a) |
Mandatory CoC Redemption Offer | Section 8(b)(ii) |
Mandatory Conversion Conditions | Section 7(b) |
Material Adverse Effect | Section 7(b) |
Maturity Date | Section 8(b)(vii) |
NYMEX Prices | Section 7(b)(v) |
NYSE American Issuance Limitation | Section 9(a) |
Optional CoC Conversion | Section 8(b)(iii) |
Optional CoC Redemption Offer | Section 8(b)(iii) |
Optional Holder Conversion | Section 7(a) |
Parity Stock | Section 1(d)(ii) |
PDP PV-20 | Section 7(b)(i) |
Permitted Holder | Section 8(b)(iv) |
Person | Section 8(b)(ix) |
Preferred Stock | Preamble |
Proved Developed Producing Reserves | Section 7(b)(iv) |
Purchase Agreement | Section 5(b) |
Redemption Notice | Section 8(a) |
Redemption Price | Section 8(a) |
Schedule 14C Action | Section 9(c) |
SEC | Section 9(c) |
Senior Stock | Section 1(d)(iii) |
Series A-[●] Dividend | Section 2(a) |
Series A-[●] Dividend Rate | Section 2(a) |
Series A-[●] Preferred Stock | Section 1(a) |
Stockholder Approval | Section 9(b) |
Subject Transaction | Section 9(d) |
Term Loan Credit Agreement | Section 8(b)(vi) |
Term Loan Restricted Period | Section 8(b)(v) |
Unpaid Dividend Accrual | Section 2(d) |
Working Capital Adjustments | Section 7(b)(iii) |
Dividends. |
(a)Holders of Series A-[●] Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, and the Corporation shall pay, out of funds lawfully available therefor, cumulative dividends at the rate per share of Series A-[●] Preferred Stock equal to the
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Series A-[●] Dividend Rate (the “Series A-[●] Dividend”). The “Series A-[●] Dividend Rate” shall mean fourteen and one-half percent (14.50%) per annum on the then-applicable Liquidation Preference (as defined herein). The period from the closing date of the issuance of the shares of Series A-[●] Preferred Stock (the “Issuance Date”) to and including December 31, 2023, and each period from but excluding a Dividend Payment Date to and including the following Dividend Payment Date is herein referred to as a “Dividend Period.” “Dividend Payment Date” shall mean March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2023.1
(b)Series A-[●] Dividends shall be payable quarterly in arrears at the Series A-[●] Dividend Rate and shall compound quarterly and accumulate, whether or not earned or declared, from the most recent date on which dividends have been paid, or, if no dividends have been paid, from the Issuance Date (subject, in each case, to the Unpaid Dividend Accrual).
(c)If a Series A-[●] Dividend is declared by the Board of Directors, then such Series A-[●] Dividend shall be paid in cash. The Board of Directors shall not be required to declare any Series A-[●] Dividends, and any declaration of a Series A-[●] Dividend shall be solely at the discretion of the Board of Directors of the Corporation.
(d)If a Series A-[●] Dividend is not declared and paid in cash on a Dividend Payment Date, then in full discharge of such Series A-[●] Dividend for such Dividend Period, the Liquidation Preference of each outstanding share of Series A-[●] Preferred Stock, regardless of its date of issue, shall automatically increase on such Dividend Payment Date by an amount equal to sixteen percent (16.00%) per annum multiplied by the Liquidation Preference in effect immediately after the immediately prior Dividend Payment Date (or the Issuance Date in respect of the first Dividend Period) (such automatic increase, the “Unpaid Dividend Accrual”), which, for the avoidance of doubt, will be pro-rated for the period of time elapsed during such Dividend Period. Notwithstanding anything to the contrary herein, any portion of the Unpaid Dividend Accrual that increased the Liquidation Preference during any historical Dividend Period can be paid by the Corporation in cash, out of funds lawfully available therefor, at any time as and if declared by the Board of Directors; provided that, after any such payment, the Liquidation Preference shall automatically decrease by the amount of such payment.
(e)All cash dividends paid or declared for payment on a Dividend Payment Date with respect to the Series A-[●] Preferred Stock and the Parity Stock shall be shared pro rata based on the then-current dividends due on shares of Series A-[●] Preferred Stock and (i) in the case of any series of non-cumulative Parity Stock, the aggregate of the current and unpaid dividends due on such series of Parity Stock, and (ii) in the case of any series of cumulative Parity Stock, the aggregate of the current and accumulated and unpaid dividends due on such series of Parity Stock.
(f)Holders of Series A-[●] Preferred Stock shall fully participate, on an as-converted basis, in any dividends declared and paid or distributions on Common Stock as if the Series A-[●] Preferred Stock were converted into shares of Common Stock as of the record date for such dividend or distribution, at the Conversion Ratio in effect on such record date.
1 Note to Company: Will need to be updated for any preferred issued in 2024.
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Liquidation. |
(a)Prior to conversion pursuant to Section 7, in the event of a liquidation (complete or partial), dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary (a “Liquidation”), after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of Series A-[●] Preferred Stock (each, a “Holder”) shall be entitled to receive, in respect of any shares of Series A-[●] Preferred Stock held by them, out of assets of the Corporation available for distribution to stockholders of the Corporation or their assignees, and subject to the rights of any outstanding shares of Senior Stock and before any amount shall be distributed to the holders of Junior Stock, a liquidating distribution (the “Liquidation Distribution”) in an amount equal to the greater of (i) the then-applicable Liquidation Preference, including, for the avoidance of doubt, any adjustment for any Unpaid Dividend Accrual (or payment thereof), and (ii) the amount such Holder would have been entitled to receive had such Holder converted its shares of Series A-[●] Preferred Stock into shares of Common Stock at the then-applicable Conversion Ratio immediately prior to such Liquidation. The “Liquidation Preference” shall equal $1,000 per share of Series A-[●] Preferred Stock, which amount shall be adjusted as the result of any Unpaid Dividend Accrual (or payment thereof), and as otherwise set forth herein. In addition, in connection with any conversion or redemption of the Series A-[●] Preferred Stock, the Liquidation Preference shall be adjusted to include all accrued and unpaid dividends (at the Series A-[●] Dividend Rate) between the immediately prior Dividend Payment Date (or the Issuance Date with respect to the first Dividend Period) and the date immediately prior to the effective date of such conversion or redemption. If, upon a Liquidation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the then outstanding shares of Series A-[●] Preferred Stock and the holders of any shares of Parity Stock ranking on a parity with the Series A-[●] Preferred Stock with respect to any distribution of assets upon Liquidation are insufficient to pay in full the amount of all such Liquidation Preference payable with respect to the Series A-[●] Preferred Stock and any such Parity Stock, then the holders of Series A-[●] Preferred Stock and such Parity Stock shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they are entitled.
(b)The Corporation shall provide the Holders appearing on the stock books of the Corporation as of the date of such notice at the address of said Holder shown therein with written notice of (i) any voluntary Liquidation promptly after such Liquidation has been approved by the Board of Directors and at least five (5) days prior to the effective date of such Liquidation and (ii) any involuntary Liquidation promptly upon the Corporation becoming aware of any instituted proceeding in respect thereof. Such notice shall state a distribution or payment date, the amount of the Liquidation Preference and the place where the Liquidation Preference shall be distributable or payable.
(c)After the payment in cash or proceeds to the Holders of the full amount of the Liquidation Distribution with respect to outstanding shares of Series A-[●] Preferred Stock, the Holders shall have no right or claim, based on their ownership of shares of Series A-[●] Preferred Stock, to the remaining assets of the Corporation, if any. Whenever any such distribution shall be paid in property other than cash, the value of such distribution shall be the fair market value of such property as determined in the good faith reasonable discretion of the Board of Directors or liquidating trustee, as the case may be.
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Voting. |
(a)General. Except as otherwise required by the General Corporation Law, other applicable law, the Certificate of Incorporation, or this Certificate of Designations, Holders shall not be entitled to any vote on matters submitted to the Corporation’s stockholders for approval. In any case in which the Holders shall be entitled to vote pursuant to the General Corporation Law, other applicable law, the Certificate of Incorporation, or this Certificate of Designations, each Holder entitled to vote with respect to such matter shall be entitled to one vote per share of Series A-[●] Preferred Stock.
(b)Protective Provisions. In addition to any vote required by the General Corporation Law, other applicable law, the Certificate of Incorporation, or this Certificate of Designations, for so long as any of the shares of Series A-[●] Preferred Stock shall remain outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, take any of the following actions, including whether by merger, consolidation or otherwise, without (in addition to any other vote required by the General Corporation Law, other applicable law, the Certificate of Incorporation, or this Certificate of Designations), the written consent or affirmative vote of the holders of at least two-thirds (66 ⅔%) of the then outstanding shares of Series A-[●] Preferred Stock voting as a separate class to:
(i)authorize, create, or increase the authorized amount of, or issue any class or series of Senior Stock, or reclassify or amend the provisions of any existing class of securities of the Corporation into shares of Senior Stock;
(ii)authorize, create or issue any stock or debt instrument or other obligation that is convertible or exchangeable into shares of its Senior Stock (or that is accompanied by options or warrants to purchase such Senior Stock);
(iii)amend, alter or repeal any provision of the Certificate of Incorporation or this Certificate of Designations, in either case, in a manner that materially adversely affects the special rights, preferences, privileges or voting powers of the Series A-[●] Preferred Stock;
(iv)declare or pay any dividends or other distributions in cash or property with respect to its Common Stock or other Junior Stock;
(v)redeem, repurchase or acquire shares of its Common Stock or other Junior Stock (other than with respect to customary repurchase rights or tax withholding arrangements with respect to equity awards or benefit plans); or
(vi)redeem, repurchase, recapitalize or acquire shares of its Parity Stock other than (A) pro rata offers to purchase all, or a pro rata portion, of the Series A-[●] Preferred Stock and such Parity Stock, (B) as a result of a reclassification of Parity Stock for or into other Parity Stock or Junior Stock, (C) the exchange or conversion of Parity Stock for or into other Parity Stock or Junior Stock or (D) the purchase of fractional interests in shares of Parity Stock pursuant to the conversion or exchange provisions of such Parity Stock or the security being converted or exchanged.
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If the Corporation shall propose to take any action enumerated above in clauses (i) through (vi) of this Section 4(b) then, and in each such case, the Corporation shall give notice of such proposed action to each Holder of record appearing on the stock books of the Corporation as of the date of such notice at the address of said Holder shown therein. Such notice shall specify, inter alia (x) the proposed effective date of such action; (y) the date on which a record is to be taken for the purposes of such action, if applicable; and (z) the other material terms of such action. Such notice shall be given at least two Business Days prior to the applicable date or effective date specified above. For the purposes of this Certificate of Designations, “Business Day” shall mean each day that is not a Saturday, Sunday or other day on which banking institutions in Houston, Texas or New York, New York are authorized or required by law to close. If at any time the Corporation shall cancel any of the proposed actions for which notice has been given under this Section 4(b) prior to the consummation thereof, the Corporation shall give prompt notice of such cancellation to each holder of record of the shares of Series A-[●] Preferred Stock appearing on the stock books of the Corporation as of the date of such notice at the address of said Holder shown therein. For the avoidance of doubt, if a holder of record of shares of Series A-[●] Preferred Stock does not respond to the aforementioned notice, such non-response shall in no way be deemed to constitute the written consent or affirmative vote of such Holder regarding any of the aforementioned actions in this Section 4(b) or described within such notice.
Reservation of Common Stock. |
(a)At any time that any Series A-[●] Preferred Stock is outstanding, the Corporation shall from time to time take all lawful action within its control to cause the authorized Capital Stock of the Corporation to include a number of authorized but unissued shares of Common Stock equal to the Conversion Ratio multiplied by the number of shares of outstanding Series A-[●] Preferred Stock.
(b)If (i) the Common Stock is listed on a national securities exchange and (ii) any shares of Common Stock to be reserved for the purpose of conversion of the Series A-[●] Preferred Stock require registration or listing with or approval of any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, then the Corporation shall, at its sole cost and expense, in good faith and as expeditiously as possible, subject to Section 5.02 (Information Statement) of the Purchase Agreement, dated on or about December [●], 2023, among the Corporation and the initial Holders (the “Purchase Agreement”), endeavor to secure such registration, listing or approval, as the case may be.
The shares of Series A-[●] Preferred Stock shall be in uncertificated, book-entry form as permitted by the Seventh Amended and Restated Bylaws of the Corporation (the “Bylaws”) and the General Corporation Law. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof any written notice as required by the General Corporation Law.
Conversion. |
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(a)Commencing on the date that is one hundred and twenty (120) days after the Issuance Date, each Holder shall have the option from time to time, exercisable by delivery of written notice to the Corporation substantially in the form attached hereto as Annex A-2 (the “Conversion Notice”), to the extent permitted by applicable law, to convert all or a portion of such Holder’s shares of Series A-[●] Preferred Stock into Common Stock at the Conversion Ratio (an “Optional Holder Conversion”); provided that the Corporation shall not be required to honor such request if such Holder has previously delivered a Conversion Notice, in respect of an Optional Holder Conversion, during the same fiscal quarter. The “Conversion Ratio” means, for each share of Series A-[●] Preferred Stock, the quotient of (i) the Liquidation Preference as of the date of the conversion and (ii) the then applicable Conversion Price. The “Conversion Price” shall initially be $[●], which may be adjusted from time to time as set forth herein.
(b)If based on the Corporation’s financial statements for any fiscal quarter and a reserve report as of the same date prepared by an independent reserve engineering firm as of the end of a fiscal quarter that, as of such date, (x) the PDP PV-20 value divided by (y) the number of outstanding shares of Common Stock, calculated on a fully-diluted basis (including the Series A-[●] Preferred Stock), is equal to or exceeds one hundred and thirty percent (130%) of the Conversion Price (the “Mandatory Conversion Conditions”, then the Corporation shall have the option from time to time until such time that the Mandatory Conversion Conditions are no longer satisfied (based on the Corporation’s financial statements for each subsequent fiscal quarter and the Corporation’s reserve report for each subsequent fiscal quarter (without the requirement that such reserve report is prepared by an independent reserve engineer)) or a Material Adverse Effect (as defined in the Purchase Agreement) has occurred since the date of the most recent financial statements that met the Mandatory Conversion Conditions, exercisable by delivery of written notice to the Holders at the address of such Holders shown on the stock books of the Corporation in the form attached hereto as Annex A-2 (the “Issuer Conversion Notice”), to convert some or all outstanding shares of Series A-[●] Preferred Stock into Common Stock using the then applicable Conversion Ratio (the “Issuer Forced Conversion”).
(i)“PDP PV-20” means, as of any date of determination, the sum of (A) the net present value of estimated future cashflows from the Proved Developed Producing Reserves, utilizing a twenty percent (20%) discount rate and using NYMEX Prices, plus or minus, (B) the mark-to-market value (whether positive or negative) of the Corporation’s hedge position, plus or minus, (C) Working Capital Adjustments (whether positive or negative), minus, (D) general and administrative expenses as reported in the Corporation’s financial statements for the trailing twelve (12) month period multiplied by four (4), and minus (E) existing Debt.
(ii)“Debt” means, without duplication, all of the principal of and accreted value and accrued and unpaid interest in respect of the Corporation’s (A) indebtedness for borrowed money, (B) other indebtedness that is evidenced by bonds, notes, letters of credit or similar instruments, (C) notes payable and (D) the then-applicable redemption price of any of the Corporation’s outstanding redeemable or purchasable capital stock that is not convertible into Common Stock taken into account in Section 7(b)(y).
(iii)“Working Capital Adjustments” means the Corporation’s current assets minus current liabilities.
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(iv)“Proved Developed Producing Reserves” means oil and gas properties designated as proved, developed and producing (in accordance with SEC rules and regulations) in the Corporation’s reserve report.
(v)“NYMEX Prices” means, as of any date of determination, the forward month prices for the most comparable hydrocarbon commodity applicable to such future production month for a sixty (60) month period (or such shorter period if forward month prices are not quoted for a reasonably comparable hydrocarbon commodity for the full sixty month period), with such prices held constant thereafter using at a price equal to the average of prices between the forty ninth (49th) month and sixtieth (60th) month, as such prices are (A) quoted on the NYMEX (or its successor) calculated as of a date not more than five (5) days prior to the date of determination and (B) adjusted for energy content, quality and basis differentials; provided that with respect to estimated future production for which prices are defined, within the meaning of SEC guidelines, by contractual arrangements excluding escalation based upon future conditions, then contract prices shall be applied to future production subject to such arrangements.
(vi)All of the financial metrics in subclauses (i)-(iii) above (other than (i)(A)) shall use the Corporation’s consolidated financial statements prepared in accordance with United States generally accepted accounting principles. All of the reserve information in subclause (i)(A) and (iv)-(v) above shall use the Corporation’s reserve report based as of the same date.
(c)In the event a Holder has elected an Optional Holder Conversion pursuant to Section 7(a) or in the event the Corporation has elected an Issuer Forced Conversion pursuant to Section 7(b) above, the Corporation shall deliver, no later than two Business Days following the conversion date, a number of shares of Common Stock equal to the Conversion Ratio.
(d)Any Common Stock delivered as a result of conversion pursuant to this Section 7 shall be validly issued, fully paid and non-assessable, free and clear of any preemptive right, liens, claims, rights or encumbrances other than those arising under the General Corporation Law, the Bylaws or transfer restrictions under the Securities Act and state securities laws. Immediately following the settlement of any conversion, if any, the rights of the holders of converted Series A-[●] Preferred Stock shall cease and the Persons entitled to receive shares of Common Stock upon the conversion of shares of Series A-[●] Preferred Stock shall be treated for all purposes as having become the owners of such shares of Common Stock. Concurrently with such conversion, the converted shares of Series A-[●] Preferred Stock shall cease to be outstanding, shall be canceled and the shares of Series A-[●] Preferred Stock formerly designated pursuant to this Certificate of Designations shall be restored to authorized but unissued shares of Preferred Stock.
(e)If, after the Issuance Date, the Corporation (i) makes a distribution on its Common Stock in securities (including Common Stock) or other property or assets, (ii) subdivides or splits its outstanding Common Stock into a greater number of shares of Common Stock, (iii) combines or reclassifies its Common Stock into a smaller number of shares of Common Stock or (iv) issues by reclassification of its Common Stock any securities (including any reclassification in connection with a merger, consolidation or business combination in which the Corporation is the surviving Person or another constituent corporation is issuing equity securities in exchange for
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Common Stock, including a transaction contemplated by the proviso in clause (1) of the definition of Change of Control), then the Conversion Price in effect at the time of the record date for such distribution or of the effective date of such subdivision, split, combination, or reclassification shall be proportionately adjusted so that the conversion of the Series A-[●] Preferred Stock after such time shall entitle the holder to receive the aggregate number of shares of Common Stock (or shares of any securities into which such shares of Common Stock would have been combined, consolidated, merged, reclassified or exchanged pursuant to clauses (ii) and (iii) above) that such holder would have been entitled to receive if the Series A-[●] Preferred Stock had been converted into Common Stock immediately prior to such record date or effective date, as the case may be, and in the case of a merger, consolidation or business combination in which the Corporation is the surviving Person or another constituent corporation is issuing equity securities in exchange for Common Stock, the Corporation shall provide effective provisions to ensure that the provisions in this Certificate of Designations relating to the Series A-[●] Preferred Stock shall not be abridged or amended and that the Series A-[●] Preferred Stock shall thereafter retain the same powers, preferences and relative participating, optional and other special rights, and the qualifications, limitations and restrictions thereon, that the Series A-[●] Preferred Stock had immediately prior to such transaction or event either in the Corporation if the surviving corporation or in the constituent corporation. An adjustment made pursuant to this Section 7(e) shall become effective immediately after the record date in the case of a distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification (including any reclassification in connection with a merger, consolidation or business combination in which the Corporation is the surviving Person or a constituent corporation) or split. Such adjustment shall be made successively whenever any event described above shall occur.
(f)At least fifteen (15) days prior to the consummation of any recapitalization, reorganization, consolidation, Change of Control, spin-off or other business combination (not otherwise addressed in Section 7(e) above) (a “Corporation Event”), the Corporation shall notify each Holder of such event (such notice to set forth in reasonable detail the material terms and conditions of such Corporation Event and the securities, cash or other assets, if any, which a holder of Series A-[●] Preferred Stock and Common Stock (each on a per share basis) would receive upon the consummation of such event, to the extent known by the Corporation at the time); provided that the Corporation shall not be obligated to provide any holder with information that is otherwise not publicly available.
(g)Upon any adjustment to the Conversion Price pursuant to this Section 7, the Corporation promptly shall deliver to each Holder a certificate signed by an appropriate officer of the Corporation, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Conversion Price then in effect following such adjustment.
(h)The Corporation shall pay any and all issue, documentary, stamp and other taxes, excluding any income, franchise, property or similar taxes, that may be payable in respect of any issue or delivery of Common Stock on conversion of Series A-[●] Preferred Stock pursuant hereto. However, the holder of any Series A-[●] Preferred Stock shall pay any tax that is due because Common Stock issuable upon conversion thereof are issued in a name other than such holder’s name.
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(i)No fractional shares of Common Stock shall be issued upon the conversion of any Series A-[●] Preferred Stock. All Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A-[●] Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional stock. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Corporation shall not issue a fractional share of Common Stock but shall round the fractional share of Common Stock to the nearest whole share of Common Stock (and a 0.5 of a share of Common Stock shall be rounded up to the next higher share of Common Stock).
(j)The Corporation agrees that it will act in good faith to make any adjustment(s) required by this Section 7 equitably and in such a manner as to afford the Holders the benefits of the provisions hereof, and will not intentionally take any action to deprive such Holders of the express benefit hereof.
(k)Any conversion made pursuant to this Section 7, including any Issuer Forced Conversion made pursuant to Section 7(b), is subject to compliance with all applicable laws, rules and regulations, including any relevant stock exchange rules.
Redemption |
(a)The Corporation has the option in its sole discretion, from time to time other than in connection with a Liquidation and to the extent permitted by applicable law, to redeem all or a portion of the then outstanding shares of Series A-[●] Preferred Stock, for an amount per share of Series A-[●] Preferred Stock equal to the Redemption Price, subject to a holder’s right to elect conversion set forth below. The “Redemption Price” means (a) for the period commencing on the Issuance Date and ending on the date that is one hundred and nineteen (119) days after the Issuance Date, one hundred percent (100%) of the Liquidation Preference at such time; (b) for the period commencing on the day that is one hundred and twenty (120) days after the Issuance Date and ending on the date that is one hundred and seventy-nine (179) days after the Issuance Date, one hundred and two percent (102%) of the Liquidation Preference at such time; (c) for the period commencing on the day that is one hundred and eighty (180) days after the Issuance Date and ending on the first (1st) anniversary of the Issuance Date, one hundred and five percent (105%) of the Liquidation Preference at such time; (d) for the period commencing on the day immediately after the first (1st) anniversary of the Issuance Date and ending on the second (2nd) anniversary of the Issuance Date, one hundred and eight percent (108%) of the Liquidation Preference at such time; and (e) any time after the second (2nd) anniversary of the Issuance Date, one hundred and twenty percent (120%) of the Liquidation Preference at such time. The Corporation may exercise its redemption option under this Section 8(a) by delivery of written notice to the Holders in the form attached as Annex B (the “Redemption Notice”), provided, however, that, to the extent permitted pursuant to Section 7(a), the Holders shall have five (5) Business Days from the date of receipt of any such Redemption Notice to, in lieu of being paid the cash Redemption Price, elect to convert the shares of Series A-[●] Preferred Stock subject to such Redemption Notice in accordance with Section 7(a). Such redemption shall be completed on a date specified in the Redemption Notice, which shall be not less than ten (10) and not more than twenty (20) Business Days following the date of the Redemption Notice. If the Corporation redeems only a portion of the then outstanding shares of Series A-[●] Preferred Stock, the shares of Series A-[●] Preferred
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Stock subject to such redemption shall be allocated pro rata among the outstanding shares of Series A-[●] Preferred Stock.
(i)At any time on or prior to the one hundred fiftieth (150th) day following the Issuance Date, upon the occurrence of a Change of Control, at the option of the Corporation, either (A) each Holder shall have all of their shares of Series A-[●] Preferred Stock redeemed in exchange for, exchanged for, or converted into the right to receive, a cash payment per share of Series A-[●] Preferred Stock equal to the Redemption Price as of such date or (B) each Holder shall be entitled to receive the same form and amount of consideration such Holder would have received pursuant to the applicable acquisition agreement if, immediately prior to the record date for payments relating to such Change of Control, such share of Series A-[●] Preferred Stock had been converted into a number of shares of Common Stock equal to the quotient of (1) the Liquidation Preference as of such date multiplied by one hundred and seven point five percent (107.5%) and (2) the VWAP over fifteen (15) consecutive trading days ending on the third (3rd) trading day prior to the closing of the Change of Control transaction.
(ii)At any time after both the one hundred fiftieth (150th) day following the Issuance Date and the end of the Term Loan Restricted Period, upon the occurrence of a Change of Control, the Corporation shall offer each Holder a cash payment per share of Series A-[●] Preferred Stock equal to the Redemption Price (the “Mandatory CoC Redemption Offer”); provided, however, that, notice of such Mandatory CoC Redemption Offer shall be provided to each Holder at least ten (10) Business Days prior to the consummation of such Change of Control and the Holders shall have five (5) Business Days from the date of receipt of any such notice to, in lieu of being paid the cash Redemption Price, elect to receive from the acquirer in the Change of Control transaction the same form and amount of consideration such Holder would have received pursuant to the applicable acquisition agreement if, immediately prior to the record date for payments relating to such Change of Control, such share of Series A-[●] Preferred Stock had been converted into a number of shares of Common Stock at the Conversion Ratio (“CoC Conversion Consideration”).
(iii)At any time after the one hundred fiftieth (150th) day following the Issuance Date and prior to the end of the Term Loan Restricted Period, upon the occurrence of a Change of Control that occurs, the Corporation shall have the option to offer each Holder a cash payment per share of Series A-[●] Preferred Stock it holds equal to the Redemption Price (the “Optional CoC Redemption Offer”). The Corporation shall notify each Holder at least ten (10) Business Days prior to the consummation of such Change of Control if it is electing to exercise the Optional CoC Redemption Offer, and the Holders shall have five (5) Business Days from the date of receipt of any such notice to, in lieu of being paid the cash Redemption Price, elect to receive the CoC Conversion Consideration from the acquirer in the Change of Control transaction in connection with the consummation of such Change of Control. If the Corporation does not elect to offer the Optional CoC Redemption Offer, the Holder shall be entitled to receive the CoC Conversion Consideration from the
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acquirer in the Change of Control transaction in connection with the consummation of such Change of Control.
(iv)(A) a “Change of Control” means (1) the consummation of any transaction by the Corporation the result of which is that any Person or “group” (as defined in the Securities Exchange Act of 1934, as amended), other than any Permitted Holder, becomes the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the voting stock of the Corporation, measured by voting power rather than number of shares, units or the like; provided that a transaction in which the Corporation becomes a subsidiary of another Person shall not constitute a Change of Control if, immediately following such transaction, the Persons who were beneficial owners of the voting stock of the Corporation immediately prior to such transaction beneficially own, directly or indirectly, fifty percent (50%) or more of the total voting power of the voting stock of such other Person of whom the Corporation has become a subsidiary or (2) the sale of all or substantially all of the Corporation’s assets; and (B) the “Permitted Holder” means any holder of shares of Series A-[●] Preferred Stock as of the Issuance Date and its affiliates.
(v)“Term Loan Restricted Period” means the period from the Issuance Date until the earliest of (a) the termination of the Term Loan Credit Agreement, (b) the first Business Day immediately following the first anniversary of the Maturity Date of the Term Loan Credit Agreement (as in effect on the date hereof), and (c) such time, if any, as the Term Loan Credit Agreement may be amended in a manner that would not cause the Series A-[●] Preferred Stock to be “Disqualified Capital Stock” under the Term Loan Credit Agreement as a result of the Corporation being obligated to effect the Mandatory CoC Redemption Offer pursuant to clause (ii) above.
(vi)“Term Loan Credit Agreement” means the Amended and Restated Senior Secured Credit Agreement, dated as of November 24, 2021, by and among the Corporation, Halcón Holdings, LLC, Macquarie Bank Limited and the lenders from time to time party thereto, as amended, restated or otherwise modified from time to time.
(vii)“Maturity Date” means November 24, 2025.
(viii)“VWAP” means the dollar volume-weighted average price for the Common Stock on its trading market during the period beginning at 9:30:01 a.m., New York time (or such other time as the trading market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the trading market publicly announces is the official close of trading), as reported by Bloomberg, L.P. through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or such other time as the trading market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City Time (or such other time as the trading market publicly announces is the official close of trading), as reported by Bloomberg, L.P., or, if no dollar volume-weighted average price is reported for such security by Bloomberg, L.P. for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink
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Sheets LLC (formerly the National Quotation Bureau, Inc.). If the VWAP cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the VWAP of the Common Stock shall be the fair market value of the Common Stock as determined by an independent nationally recognized investment banking firm mutually agreed to by the Corporation and holders of at least two-thirds (66 ⅔%) of the Series A-[●] Preferred Stock then outstanding.
(ix)“Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof or any other form of entity.
(c)The Holders and the Corporation agree that each will cooperate in good faith to determine the U.S. federal income tax treatment of any redemption by the Corporation of the Series A-[●] Preferred Stock and will (and will cause its affiliates to), in connection with any such redemption, reasonably cooperate (i) to structure such redemption in a manner that permits each Holder to report the redemption payment as received in part or full payment in exchange for its Series A-[●] Preferred Stock for U.S. federal income tax purposes if such structure can be achieved without any unreimbursed cost or expense to the Corporation (provided that, for the avoidance of doubt, the Holders and the Corporation acknowledge (A) that it may not be possible to structure any such redemption in a manner that permits a Holder to report a redemption payment as received in part or full payment in exchange for its Series A-[●] Preferred Stock for U.S. federal income tax purposes, in which case the Corporation shall still be entitled to make any such redemption pursuant to this Section 8 as it determines is appropriate (and in the amounts it determines is appropriate) and (B) that different Holders may be subject to different treatment for U.S. federal income tax purposes), (ii) to allow each Holder a reasonable opportunity to transfer its Series A-[●] Preferred Stock to an affiliate or third party prior to such redemption; provided that the Corporation shall not be required to assist in such transfer (other than in respect of registering such transfer on the books and records of the Corporation) and, for the avoidance of doubt, such transfer shall be subject to the other terms, conditions and restrictions applicable to the Series A-[●] Preferred Stock, and (iii) if such redemption is funded by, or occurs in connection with, an issuance of equity by the Corporation, to cause the Person or Persons acquiring such equity to purchase the Series A-[●] Preferred Stock from the Holders directly and to make any necessary amendments to this Certificate of Designations following such purchase as agreed between such purchaser(s) and the Corporation. If, as a result of the previous sentence, any such redemption of shares of Series A-[●] Preferred Stock is delayed for more than thirty (30) days from the date on which the Corporation otherwise planned to make such redemption (the “30 Day Date”) and the redemption occurs, the Series A-[●] Dividend shall stop accumulating (including with respect to any Unpaid Dividend Accrual) on the shares of Series A-[●] Preferred Stock that are to be redeemed from the 30 Day Date until the date of such redemption and the Redemption Price for such redemption shall be that applicable at the 30 Day Date. The Corporation further agrees that, for every taxable year in which the Series A-[●] Preferred Stock remains outstanding (other than tax year 2023), it shall use reasonable best efforts to conduct and/or update its current “earnings and profits study” (or similar analysis) to determine its then-current and accumulated earnings and profits.
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NYSE American Issuance Limitation. |
(a)No Holder will be entitled to receive converted shares of Common Stock or other shares of Common Stock issuable upon redemption, dividend payments, or as otherwise provided in this Certificate of Designations to the extent such issuance would result in a violation of the NYSE American Company Guide or rules of the national securities exchange upon which the Common Stock is then listed(the “NYSE American Issuance Limitation”), unless either (i) the Corporation obtains the Stockholder Approval and the Schedule 14C Action has been completed, or (ii) the Corporation determines upon advice of counsel that Stockholder Approval and the Schedule 14C Action are not required to effect the conversion, in each such case, the NYSE American Issuance Limitation will no longer apply.
(b)“Stockholder Approval” means stockholder approval of the proposal to issue Common Stock upon conversion of the Series A-[●] Preferred Stock for purposes of Rule 713 of the New York Stock Exchange American Listed Company Manual, or to comply with the applicable rules of the national securities exchange upon which the Common Stock is then listed.
(c)“Schedule 14C Action” means, collectively, (i) the filing of an Information Statement on Schedule 14C relating to the issuance of converted shares of Common Stock or other shares of Common Stock issuable upon redemption, dividend payments, or as otherwise provided in this Certificate of Designations with the United States Securities and Exchange Commission (the “SEC”) and the receipt from the SEC of notice that it has no comments thereon, (ii) the mailing of such Information Statement to the Corporation’s shareholders and (iii) the expiration of the 20 calendar day waiting period under Rule 14c-2(b).
(d)Notwithstanding anything herein to the contrary, if the Holders (together with their respective affiliates) collectively beneficially own fifty percent (50%) or more of the outstanding Common Stock at the time a transaction is contemplated pursuant to which the NYSE American Issuance Limitation would reduce the consideration being issued to the Holders in connection with such transaction (“Subject Transaction”), the Corporation shall notify the Holders of such Subject Transaction and the related NYSE American Issuance Limitation at least ten (10) Business Days prior to the consummation of such Subject Transaction and give the Holders five (5) Business Days from the date of receipt of any such notice to provide a Stockholder Approval, and if such Stockholder Approval is timely received, the Corporation shall not consummate such Subject Transaction until the Schedule 14C Action removing the NYSE American Issuance Limitation has been completed.
10. |
(a)In connection with any conversion pursuant to Section 7 or redemption in accordance with Section 8, the Holder must deliver transfer instruments reasonably satisfactory to the Corporation, at the principal office of the Corporation (or such other place mutually acceptable to the Holder and the Corporation) together with written notice that such Holder elects to convert all or such lesser number of shares as specified therein.
(b)Transfers of Series A-[●] Preferred Stock held in uncertificated, book-entry form shall be made only upon the transfer books of the Corporation kept at an office of the Corporation
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upon receipt of proper transfer instructions from the registered owner of such uncertificated shares, or from a duly authorized attorney or from an individual presenting proper evidence of succession, assignment or authority to transfer the stock. The Corporation may refuse any requested transfer until furnished evidence reasonably satisfactory to it that such transfer is made in accordance with the terms of this Certificate of Designations.
No Other Rights. |
The shares of Series A-[●] Preferred Stock shall not have any powers, designations, preferences or relative, participating, optional, or other special rights, nor shall there be any qualifications, limitations or restrictions or any powers, designations, preferences or rights of such shares, other than as set forth herein or in the Certificate of Incorporation, or as may be provided by law.
Other Provisions. |
(a)The shares of Series A-[●] Preferred Stock shall not be subject to the operation of any retirement or sinking fund.
(b)In case any one or more of the provisions contained in this Certificate of Designations shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. Furthermore, in lieu of any such invalid, illegal or unenforceable provision, the Corporation shall use its reasonable best efforts to add as a part of this Certificate of Designations a provision as similar in terms to such invalid, illegal or unenforceable provision as may be possible and be legal, valid and enforceable, unless the requisite parties separately agree to a replacement provision that is valid, legal and enforceable.
(c)Any payments, issuances or distributions required to be made hereunder on any day that is not a Business Day shall be made on the next succeeding Business Day without interest or additional payment for such delay. All payments required hereunder shall be made by wire transfer of immediately available funds in United States Dollars to the Holders in accordance with the payment instructions as such Holders may deliver by written notice to the Corporation from time to time.
(d)Unless otherwise agreed to by the Corporation and the applicable Holder, any certificate representing the Series A-[●] Preferred Stock (and the Common Stock issuable upon conversion thereof) will bear a restrictive legend substantially in the form set forth below, which is hereby incorporated in and expressly made a part of this Certificate of Designations, and will be subject to the restrictions set forth therein. In addition, any such certificate may have notations, additional legends or endorsements required by law, stock exchange rules, and agreements to which the Corporation and all of the Holders of Series A-[●] Preferred Stock in their capacity as Holders are subject, if any.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT
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RELATING THERETO IS IN EFFECT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERS SET FORTH IN THE CERTIFICATE OF DESIGNATIONS FILED WITH THE SECRETARY OF STATE FOR THE STATE OF DELAWARE PURSUANT TO SECTION 202 OF THE DELAWARE GENERAL CORPORATION LAW (THE “CERTIFICATE OF DESIGNATIONS”). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE CERTIFICATE OF DESIGNATIONS. A COPY OF THE CERTIFICATE OF DESIGNATIONS WILL BE FURNISHED WITHOUT CHARGE BY THE CORPORATION TO THE HOLDER UPON REQUEST.
Effective Date. |
This Certificate of Designations shall become effective on [●], 202[●].
[The Remainder of this Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Battalion Oil Corporation has caused this Certificate of Designations to be duly executed this [●] day of [●], 202[●].
BATTALION OIL CORPORATION
By: _____________________________
Name: [●]
Title: [●]
[Signature Page to Certificate of Designations]
Annex A-1
Conversion Notice
The undersigned holder of Series A-[●] Preferred Stock hereby irrevocably elects to convert the number of shares of Series A-[●] Preferred Stock indicated below pursuant to Section 7(a) of the Certificate of Designations into shares of Common Stock at the Conversion Ratio. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designations of Series A-[●] Redeemable Convertible Preferred Stock, filed by Battalion Oil Corporation on [●], 202[●] (the “Certificate of Designations”).
Conversion Calculations:
Number of shares of Series A-[●] Preferred Stock owned prior to conversion: [_____]
Number of shares of Series A-[●] Preferred Stock to be converted: [_____]
Number of shares of Common Stock to be issued: [_____]
[HOLDER]
Annex A-2
Issuer Conversion Notice
Battalion Oil Corporation, a Delaware corporation, hereby irrevocably elects to convert the number of shares of Series A-[●] Preferred Stock held by you indicated below into shares of Common Stock at the Conversion Ratio on the date set forth below pursuant to Section 7(b) of the Certificate of Designations. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designations of Series A-[●] Redeemable Convertible Preferred Stock, filed by Battalion Oil Corporation on [●], 202[●] (the “Certificate of Designations”).
Holder: [_____]
Conversion Calculations:
Number of Shares of Series A-[●] Preferred Stock owned by you prior to conversion: [_____]
Number of Shares of Series A-[●] Preferred Stock owned by you to be converted: [_____]
Number of shares of Common Stock to be issued: [_____]
BATTALION OIL CORPORATION
EXECUTION VERSION
Annex B
Redemption Notice
Battalion Oil Corporation, a Delaware corporation, hereby irrevocably elects to redeem the number of shares of Series A-[●] Preferred Stock held by you indicated below on the date set forth below. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designations of Series A-[●] Redeemable Convertible Preferred Stock, filed by Battalion Oil Corporation on [●], 202[●].
Holder: [_____]
Date of redemption: [_____]
Redemption Calculations:
Number of Shares of Series A-[●] Preferred Stock owned by you prior to redemption: [_____]
Number of Shares of Series A-[●] Preferred Stock owned by you to be redeemed: [_____]
Redemption Price: [___]
Elect a Single Form of Payment of Redemption Price:
___ Cash (Cash payment to be made to you: [_____])
BATTALION OIL CORPORATION
EXHIBIT E
FORM OF Series A-1 Amendment
(See attached.)
EXECUTION VERSION
BATTALION OIL CORPORATION
____________________
Certificate of Amendment
to
Certificate of Designations
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
____________________
SERIES A-1 REDEEMABLE CONVERTIBLE PREFERRED STOCK
(Par Value $0.0001 Per Share)
Battalion Oil Corporation (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies that:
Whereas, pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation (the “Board”) by the Amended and Restated Certificate of Incorporation of the Corporation (as amended from time to time in accordance with its terms and the DGCL, the “Certificate of Incorporation”), the Board has previously authorized the creation and issuance of a series of preferred stock, with a par value of $0.0001 per share, of the Corporation designated as the “Series A-1 Redeemable Convertible Preferred Stock” (the “Series A-1 Preferred Stock”), with terms set forth in that certain Certificate of Designation filed with the Secretary of State of the State of Delaware on September 6, 2023 (the “Certificate of Designations”);
Whereas, the Board, by unanimous written consent, approved and adopted resolution for purposes of amending certain provisions of the Certificate of Designations (this “Amendment”); and
Whereas, pursuant to Section 4(b) of the Certificate of Designation, the holders of at least two-thirds (66 ⅔%) of the then outstanding shares of Series A-1 Preferred Stock (the “Requisite Series A-1 Holders”), by written consent, approved this Amendment on the terms set forth herein.
NOW, THEREFORE, BE IT RESOLVED, that, pursuant to the authority expressly vested in the Board and in accordance with the provisions of the Certificate of Incorporation and the DGCL, the Certificate of Designations be, and hereby is amended as follows:
1.Section 7(a) of the Certificate of Designations is amended and restated to read as follows:
(a)Each Holder shall have the option from time to time, commencing on the date that is two hundred and forty (240) days after the Issuance Date, exercisable by delivery of written notice to the Corporation substantially in the form attached hereto as Annex A-1 (the “Conversion Notice”), to the extent permitted by applicable law, to convert all or a portion of such Holder’s shares of Series A-1 Preferred Stock into Common Stock at the Conversion Ratio (an “Optional Holder Conversion”); provided that the Corporation shall not be required to honor such request if such Holder has previously delivered a Conversion Notice, in respect of an Optional Holder Conversion, during the same fiscal quarter.
The “Conversion Ratio” means, for each share of Series A-1 Preferred Stock, the quotient of (i) the Liquidation Preference as of the date of the conversion and (ii) the then applicable Conversion Price. The “Conversion Price” shall initially be $7.63, which may be adjusted from time to time as set forth herein.
2.Section 8(a) of the Certificate of Designations is amended and restated to read as follows:
(a)The Corporation has the option in its sole discretion, from time to time other than in connection with a Liquidation and to the extent permitted by applicable law, to redeem all or a portion of the then outstanding shares of Series A-1 Preferred Stock, for an amount per share of Series A-1 Preferred Stock equal to the Redemption Price, subject to a holder’s right to elect conversion set forth below. The “Redemption Price” means (a) for the period commencing on the Issuance Date and ending on the date that is one hundred and nineteen (119) days after the Issuance Date, one hundred percent (100%) of the Liquidation Preference at such time; (b) for the period commencing on the day that is one hundred and twenty (120) days after the Issuance Date and ending on the date that is two hundred and thirty-nine (239) days after the Issuance Date, one hundred and two percent (102%) of the Liquidation Preference at such time; (c) for the period commencing on the day that is two hundred and forty (240) days after the Issuance Date and ending on the first (1st) anniversary of the Issuance Date, one hundred and five percent (105%) of the Liquidation Preference at such time; (d) for the period commencing on the day immediately after the first (1st) anniversary of the Issuance Date and ending on the second (2nd) anniversary of the Issuance Date, one hundred and eight percent (108%) of the Liquidation Preference at such time; and (e) any time after the second (2nd) anniversary of the Issuance Date, one hundred and twenty percent (120%) of the Liquidation Preference at such time.
The Corporation may exercise its redemption option under this Section 8(a) by delivery of written notice to the Holders in the form attached as Annex B (the “Redemption Notice”), provided, however, that, to the extent permitted pursuant to Section 7(a), the Holders shall have five (5) Business Days from the date of receipt of any such Redemption Notice to, in lieu of being paid the cash Redemption Price, elect to convert the shares of Series A-1 Preferred Stock subject to such Redemption Notice and in accordance with Section 7(a). Such redemption shall be completed on a date specified in the Redemption Notice, which shall be not less than ten (10) and not more than twenty (20) Business Days following the date of the Redemption Notice. If the Corporation redeems only a portion of the then outstanding shares of Series A-1 Preferred Stock, the shares of Series A-1 Preferred Stock subject to such redemption shall be allocated pro rata among the outstanding shares of Series A-1 Preferred Stock.
3.Clauses (i) through (iii) of Section 8(b) of the Certificate of Designations are amended and restated to read as follows:
(i)At any time on or prior to the two hundred fortieth (240th) day following the Issuance Date, upon the occurrence of a Change of Control, at the option of the Corporation, either (A) each Holder shall have all of their shares of Series A-1 Preferred Stock redeemed in exchange for, exchanged for or converted into the right to receive a cash payment per share of Series A-1 Preferred Stock equal to the Redemption Price as of such date or (B) each Holder shall be entitled to receive the same form and amount of consideration such Holder would have received pursuant to the applicable acquisition agreement if, immediately prior to the record date for payments relating to such Change of Control, such share of Series A-1 Preferred Stock had been converted into a number of shares of Common Stock equal to the quotient of (1) the Liquidation Preference as of such date multiplied by one hundred and seven point five percent (107.5%) and (2) the VWAP over fifteen (15) consecutive trading days ending on the third (3rd) trading day prior to the closing of the Change of Control transaction.
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(ii)At any time after both the two hundred fortieth (240th) day following the Issuance Date and the end of the Term Loan Restricted Period, upon the occurrence of a Change of Control, the Corporation shall offer each Holder a cash payment per share of Series A-1 Preferred Stock equal to the Redemption Price (the “Mandatory CoC Redemption Offer”); provided, however, that, notice of such Mandatory CoC Redemption Offer shall be provided to each Holder at least ten (10) Business Days prior to the consummation of such Change of Control and the Holders shall have five (5) Business Days from the date of receipt of any such notice to, in lieu of being paid the cash Redemption Price, elect to receive from the acquirer in the Change of Control transaction the same form and amount of consideration such Holder would have received pursuant to the applicable acquisition agreement if, immediately prior to the record date for payments relating to such Change of Control, such share of Series A-1 Preferred Stock had been converted into a number of shares of Common Stock at the Conversion Ratio (“CoC Conversion Consideration”).
(iii)At any time after the two hundred fortieth (240th) day following the Issuance Date and prior to the end of the Term Loan Restricted Period, upon the occurrence of a Change of Control that occurs, the Corporation shall have the option to offer each Holder a cash payment per share of Series A-1 Preferred Stock it holds equal to the Redemption Price (the “Optional CoC Redemption Offer”). The Corporation shall notify each Holder at least ten (10) Business Days prior to the consummation of such Change of Control if it is electing to exercise the Optional CoC Redemption Offer, and the Holders shall have five (5) Business Days from the date of receipt of any such notice to, in lieu of being paid the cash Redemption Price, elect to receive the CoC Conversion Consideration from the acquirer in the Change of Control transaction in connection with the consummation of such Change of Control. If the Corporation does not elect to offer the Optional CoC Redemption Offer, the Holder shall be entitled to receive the CoC Conversion Consideration from the acquirer in the Change of Control transaction in connection with the consummation of such Change of Control.
4.All other provisions of the Certificate of Designation shall remain in full force and effect.
[The Remainder of this Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Battalion Oil Corporation has caused this Certificate of Amendment to Certificate of Designations to be duly executed this [●] day of December, 2023.
BATTALION OIL CORPORATION
Name:Matthew B. Steele
Title:Chief Executive Officer
[Signature Page to Certificate of Amendment to Certificate of Designations]
EXHIBIT F
FORM OF escrow agreement
(See attached.)
EXECUTION VERSION
ESCROW AGREEMENT
This ESCROW AGREEMENT dated this 14th day of December, 2023 (this “Escrow Agreement”), is entered into by and among Fury Resources, Inc., a Delaware corporation (“Parent”), Battalion Oil Corporation, a Delaware corporation (“Company” and together with Parent, the “Parties,” and individually, a “Party”), and WILMINGTON TRUST, NATIONAL ASSOCIATION, a national association, as escrow agent (the “Escrow Agent”).
RECITALS
WHEREAS, concurrently with the execution and delivery of this Escrow Agreement, Parent and Company are entering into that certain Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”), by and among Parent, Company and San Jacinto Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Company will merge with and into Merger Sub (the “Merger”), with Company surviving the Merger as a wholly owned subsidiary of Parent;
WHEREAS, on September 29, 2023, Parent and the Escrow Agent entered into that certain Escrow Agreement, pursuant to which the Escrow Agent established an escrow account (the “Subscription Escrow Account”) into which certain Persons have deposited amounts to fund Parent’s acquisition of Company pursuant to and in accordance with the Merger Agreement;
WHEREAS, pursuant to the Merger Agreement, Parent may be required to pay a termination fee to Company of up to $20,000,000 (the “Termination Fee”) if the Merger Agreement is terminated under certain circumstances as set forth in the Merger Agreement;
WHEREAS, the Parties desire for the Escrow Agent to open an account (the “Termination Fee Escrow Account”) into which the Escrow Agent will transfer funds from the Subscription Escrow Account in an amount equal to the Termination Fee, to be held and disbursed by the Escrow Agent in accordance with the Escrow Agreement and the Merger Agreement, and the Escrow Agent agrees to hold and distribute such funds in accordance with the terms of this Escrow Agreement and the Merger Agreement; and
WHEREAS, Schedule I to this Escrow Agreement sets forth the wire transfer instructions for each of Company and Parent.
NOW THEREFORE, in consideration of the promises herein, the parties hereto agree as follows:
ARTICLE 1
ESCROW DEPOSIT, DISTRIBUTION, AND INVESTMENT
Section 1.1.Deposit of Escrow Funds. Parent and Company hereby appoint the Escrow Agent as their escrow agent for the purposes set forth herein, and the Escrow Agent hereby accepts such appointment and its duties as provided herein. Upon the execution and delivery of this Escrow Agreement, the Escrow Agent will transfer (or cause to be transferred), funds in the amount equal to $10,000,000 (the “Initial Escrow Property”) from the Subscription Escrow Account to the Termination Fee Escrow Account, by wire transfer of immediately available funds. Within 40 days following the execution and delivery of this Agreement, Parent and Company shall deliver joint written instructions to the Escrow Agent to transfer (or cause to be transferred), additional funds in the amount of $10,000,000 (the “Additional Escrow Property” and, together with the Initial Escrow Property, the “Escrow Property”) from the Subscription Escrow Account to the Termination Fee Escrow Account, by wire transfer of immediately available funds. The Escrow Property
shall be held, disbursed and invested as provided in this Escrow Agreement. Prior to the earlier of the consummation of the Merger or the termination of the Merger Agreement, the Parties shall provide the Escrow Agent with certified tax identification numbers by furnishing appropriate forms W-9 or W-8, as applicable, and such other forms and documents that the Escrow Agent may request. The Escrow Property shall be left un-invested.
Section 1.2.Disbursements. Upon receipt of joint written instructions (“Joint Instructions”), signed by an authorized representative (“Authorized Representative”) of each of Parent and Company (as set forth on Exhibit A-1 and A-2), the Escrow Agent shall promptly, but in any event within one (1) Business Day after receipt of Joint Instructions, disburse the Escrow Property (or a portion thereof) as provided in such Joint Instructions by wire transfer of immediately available funds to the account(s) designated in such instructions, but only to the extent that funds have been delivered to the Escrow Agent in accordance with Section 1.1 and that any callback required by the Escrow Agent pursuant to Section 1.3 has been completed. In addition to the foregoing, the Escrow Agent shall also comply with any final, non-appealable judgment or order issued or entered by a court of competent jurisdiction with respect to the Escrow Property (a “Judgment”). If the Escrow Agent complies with any such Judgment, then it shall not be liable to any Party or any other person by reason of such compliance. In the absence of written instruction to the contrary, if any residual interest posts to the Termination Fee Escrow Account after the final distribution of the Escrow Property the Escrow Agent shall (i) deem any residual interest of less than $50 as an additional fee payable to the Escrow Agent, or (ii) deem any residual interest greater than $50 as payable to Parent using the payment instructions set forth on Schedule I. The Escrow Agent will furnish monthly statements to the Parties via the addresses set forth on Exhibit C hereto.
Section 1.3.Security Procedure for Funds Transfer. Concurrently with the execution of this Escrow Agreement, the Parties shall deliver to the Escrow Agent exhibits in the form of Exhibit A-1 and Exhibit A-2 to this Escrow Agreement listing individuals of such Party who are authorized to provide the Escrow Agent with a written instruction to distribute funds from the account and any other written instruction permitted pursuant to the terms of this Escrow Agreement (each an “Authorized Representative”). Each Party understands and agrees that the Escrow Agent shall have no obligation or duty to act upon a written instruction for the disbursement of Escrow Property under this Escrow Agreement if such written instruction is not signed by an Authorized Representative of such Party and such written instruction is not delivered to, and able to be authenticated by, the Escrow Agent in accordance with this Escrow Agreement. The Escrow Agent shall follow internal policies and procedures for when confirming the validity or authenticity of funds transfer instructions received in the name of the Parties, which may include a callback to one or more of the Authorized Representatives in Exhibit A-1 and Exhibit A-2, in particular if the wire instructions included on Schedule I hereto have changed. Once delivered to the Escrow Agent, Exhibit A-1 or Exhibit A-2 may be revised or rescinded only in writing signed by an Authorized Representative of the applicable Party. Such revisions or rescissions shall be effective only after actual receipt and following such period of time as may be necessary to afford the Escrow Agent a reasonable opportunity to act on it. If a revised Exhibit A-1 or Exhibit A-2 or a rescission of an existing Exhibit A-1 or Exhibit A-2 is delivered to the Escrow Agent by an entity that is a successor-in-interest to either Party, such document shall be accompanied by additional documentation satisfactory to the Escrow Agent showing that such entity has succeeded to the rights and responsibilities of the Party in question. The Parties understand that the Escrow Agent’s inability to receive or confirm funds transfer instructions may result in a delay in accomplishing such funds transfer, and agree that the Escrow Agent shall not be liable for any loss caused by any such delay.
Section 1.4.Tax Reporting. With respect to any payments or distributions made pursuant to this Escrow Agreement by the Escrow Agent, the Escrow Agent shall not be deemed the “Payor”, as defined under the Internal Revenue Code of 1986, as amended, and shall have no responsibility for preparing or conducting any tax reporting. The Escrow Agent’s engagement is purely ministerial in nature and conducted upon
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receipt of written direction from the Parties, and the Escrow Agent shall be entitled to rely conclusively and without further inquiry on such written direction.
ARTICLE 2
DUTIES OF THE ESCROW AGENT
Section 2.1.Scope of Responsibility. Notwithstanding any provision to the contrary, the Escrow Agent is obligated only to perform the duties specifically set forth in this Escrow Agreement, which shall be deemed purely ministerial in nature. Under no circumstances will the Escrow Agent be deemed to be a fiduciary to any Party or any other person under this Escrow Agreement. The Escrow Agent shall not be responsible or liable for the failure of any Party to perform in accordance with this Escrow Agreement. The Escrow Agent shall neither be responsible for, nor chargeable with, knowledge of any default under this Escrow Agreement, the terms and conditions of any other agreement, including but not limited to the Merger Agreement, instrument, or document other than this Escrow Agreement, whether or not a copy of such agreement has been provided to the Escrow Agent; and the Escrow Agent shall have no duty to know or inquire as to the performance or nonperformance of any provision of any such agreement, instrument, or document. References in this Escrow Agreement to any other agreement, instrument, or document are for the convenience of the Parties, and the Escrow Agent has no duties or obligations with respect thereto. This Escrow Agreement sets forth all matters pertinent to the escrow contemplated hereunder, and no additional covenants or obligations of the Escrow Agent shall be inferred or implied from the terms of this Escrow Agreement or any other agreement.
Section 2.2.Attorneys and Agents. The Escrow Agent shall be entitled to rely on and shall not be liable for any action taken or omitted to be taken by the Escrow Agent in accordance with the advice of counsel or other professionals retained or consulted by the Escrow Agent. The Escrow Agent shall be reimbursed as set forth in Section 3.1 for any and all compensation (fees, expenses and other costs) paid and/or reimbursed to such counsel and/or professionals. The Escrow Agent may perform any and all of its duties through its agents, representatives, attorneys, custodians, and/or nominees and shall not be responsible for the acts or omissions of such agents, representatives, attorneys, custodians and/or nominees appointed with due care.
Section 2.3.Reliance. The Escrow Agent shall be entitled to request and receive written instructions from the Parties and shall not be liable for any losses or damages of any nature that may arise from any action taken or not taken by it in accordance with the written direction or consent of the Parties or their respective agents, representatives, successors, or assigns. The Escrow Agent shall not be liable for acting or refraining from acting upon any notice, request, consent, direction, requisition, certificate, order, affidavit, letter, or other paper or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons, without further inquiry into the person’s or persons’ authority.
Section 2.4.Right Not Duty Undertaken. The permissive rights of the Escrow Agent to do things enumerated in this Escrow Agreement shall not be construed as duties and, with respect to such permissive rights, the Escrow Agent shall not be answerable for other than its gross negligence or willful misconduct.
ARTICLE 3
PROVISIONS CONCERNING THE ESCROW AGENT
Section 3.1.Indemnification. The Parties hereby agree, jointly and severally, to defend, release and indemnify the Escrow Agent, its directors, officers, employees and agents (collectively, the “Indemnified Parties” and individually, an “Indemnified Party”), and hold the Indemnified Parties harmless from any and against all liabilities, losses, actions, suits or proceedings at law or in equity, and any other expenses, fees
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or charges of any character or nature (whether brought by any Party or third party) (including, without limitation, attorney's fees and expenses and the costs of enforcement of this Escrow Agreement, the indemnifications provided herein, or any provision thereof) which an Indemnified Party may incur or with which it may be threatened by reason of acting as or on behalf of the Escrow Agent under this Escrow Agreement or arising out of the existence of the Termination Fee Escrow Account, except to the extent the same shall have been finally adjudicated by a court of competent jurisdiction to have been directly caused by the Indemnified Parties’ gross negligence or willful misconduct. The Escrow Agent shall have a first lien against the Termination Fee Escrow Account to secure the obligations of the Parties. Notwithstanding anything to the contrary herein, the Parties agree, solely as between themselves, that any obligation for indemnification under this Section 3.1 (or for reasonable fees and expenses of the Escrow Agent described in Section 3.1) shall be borne by the Party or Parties determined by a court of competent jurisdiction to be responsible for causing the loss, damage, liability, cost or expense against which the Escrow Agent is entitled to indemnification or, if no such determination is made, then one half by Parent and one half by Company.
Section 3.2.Limitation of Liability. the escrow agent SHALL NOT be liable, directly or indirectly, for any (i) damages, Losses or expenses arising out of the services provided hereunder, other than damages, losses or expenses which have been finally adjudicated BY A COURT OF COMPETENT JURISDICTION to have DIRECTLY resulted from the escrow agent’s gross negligence or willful misconduct, or (ii) special, Indirect, INCIDENTAL, PUNITIVE or consequential damages or LOSSES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT LIMITATION LOST PROFITS), even if the escrow agent AND THE PARTIES has been advised of the possibility of such LOSSES OR damages AND REGARDLESS OF THE FORM OF ACTION.
Section 3.3.Termination, Resignation or Removal. Upon the disbursement of the entire Escrow Property, this Escrow Agreement shall terminate and be of no further force and effect (other than the provisions of Section 3.1 and Section 3.4, which shall survive such termination). The Escrow Agent may resign by furnishing written notice of its resignation to the Parties, specifying the date upon which such resignation shall take effect, and the Parties may remove the Escrow Agent by furnishing to the Escrow Agent a joint written notice of its removal, specifying the date upon which such removal shall take effect, along with payment of all fees and expenses to which it is entitled through the effective date of such resignation or removal. Such resignation or removal, as the case may be, shall be effective thirty (30) calendar days after the delivery of such notice or upon the earlier appointment of a successor, and the Escrow Agent’s sole responsibility thereafter shall be to safely keep the Escrow Property and to deliver the same to a successor escrow agent as shall be appointed by the Parties, as evidenced by a joint written notice filed with the Escrow Agent or in accordance with a court order. If the Parties have failed to appoint a successor escrow agent prior to the expiration of thirty (30) calendar days following the delivery of such notice of resignation or removal, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief, and any such resulting appointment shall be binding upon the Parties.
Section 3.4.Compensation. The Escrow Agent shall be entitled to compensation for its services as stated in the fee schedule attached hereto as Exhibit B, which compensation shall be paid by Parent upon the deposit of funds into the Termination Fee Escrow Account. The Escrow Agent shall have, and is hereby granted, a prior lien upon the Escrow Property with respect to its unpaid fees, non-reimbursed expenses and unsatisfied indemnification rights, superior to the interests of any other persons or entities and is hereby granted the right to set off and deduct any unpaid fees, non-reimbursed expenses and unsatisfied indemnification rights from the Escrow Property. The terms of this paragraph shall survive termination of this Escrow Agreement and/or the earlier resignation or removal of the Escrow Agent.
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Section 3.5.Disagreements. If any conflict, disagreement or dispute arises between, among, or involving any of the parties hereto concerning the meaning or validity of any provision hereunder or concerning any other matter relating to this Escrow Agreement, or the Escrow Agent is in doubt as to the action to be taken hereunder, the Escrow Agent shall be fully protected and may, at its option, retain the Escrow Property until the Escrow Agent (i) receives a Judgment directing delivery of the Escrow Property, (ii) receives Joint Instructions directing delivery of the Escrow Property, in which event the Escrow Agent shall be authorized to disburse the Escrow Property in accordance with such Judgment or Joint Instructions, or (iii) files an interpleader action in any court of competent jurisdiction, and upon the filing thereof, the Escrow Agent shall be relieved of all liability as to the Escrow Property and shall be entitled to recover attorneys’ fees, expenses and other costs incurred in commencing and maintaining any such interpleader action. The Parties hereto further agree to pursue any redress or recourse in connection with such dispute without making the Escrow Agent a party to the same. The Escrow Agent shall be entitled to act on any such agreement or court order without further question, inquiry, or consent.
Section 3.6.Merger or Consolidation. Any corporation or association into which the Escrow Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer all or substantially all of its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which the Escrow Agent is a party, shall be and become the successor escrow agent under this Escrow Agreement and shall have and succeed to the rights, powers, duties, immunities and privileges as its predecessor, without the execution or filing of any instrument or paper or the performance of any further act.
Section 3.7.Attachment of Escrow Property; Compliance with Legal Orders. In the event that any Escrow Property shall be attached, garnished or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the Escrow Property, the Escrow Agent is hereby expressly authorized, in its sole discretion, to respond as it deems appropriate or to comply with all writs, orders or decrees so entered or issued, or which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction. In the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the Parties or to any other person, firm or corporation, should, by reason of such compliance notwithstanding, such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated. Escrow Agent shall receive and may conclusively rely upon an opinion of counsel.
Section 3.8Force Majeure. The Escrow Agent shall not be responsible or liable for any failure or delay in the performance of its obligation under this Escrow Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; wars; acts of terrorism; civil or military disturbances; sabotage, epidemic, pandemic, riots; interruptions, loss or malfunctions of utilities, computer (hardware or software) or communications services; accidents; work stoppages, labor disputes; acts of civil or military authority or governmental action; it being understood that the Escrow Agent shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstances.
Section 3.9 No Financial Obligation. Escrow Agent shall not be required to use or risk its own funds or otherwise incur any financial liability in the performance of any of its obligations or duties or the exercise of any of its rights or powers, and shall not be required to take any action which, in the Escrow Agent’s sole and absolute judgment, could involve it in expense or liability unless furnished with security and indemnity which it deems, in its sole and absolute discretion, to be satisfactory.
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ARTICLE 4
MISCELLANEOUS
Section 4.1.Successors and Assigns. This Escrow Agreement shall be binding on and inure to the benefit of the Parties and the Escrow Agent and their respective successors and permitted assigns. No other persons shall have any rights under this Escrow Agreement. No assignment of the interest of any of the Parties shall be binding unless and until written notice of such assignment shall be delivered to the other Party and the Escrow Agent and shall require the prior written consent of the other Party and the Escrow Agent (such consent not to be unreasonably withheld). Notwithstanding anything in the agreement to the contrary, no assignment shall be deemed final until the successor or assignee has completed the requisite Know Your Customer (KYC) information as may be required by the Escrow Agent.
Section 4.2.Definition of Business Day. “Business Day” means any day other than a Saturday, a Sunday or any day that is a federal legal holiday or banking institutions are required by law to close.
Section 4.3.Escheat. The Parties are aware that under applicable state law, property which is presumed abandoned may under certain circumstances escheat to the applicable state. The Escrow Agent shall have no liability to the Parties, their respective heirs, legal representatives, successors and assigns, or any other party, should any or all of the Escrow Property escheat by operation of law.
Section 4.4.Notices. All notices, requests, demands, and other communications required or permitted under this Escrow Agreement shall be in writing, in English, and shall be deemed to have been duly given if delivered (i) by email with a pdf attachment, (ii) by overnight delivery with a reputable national overnight delivery service, or (iii) by mail or by certified mail, return receipt requested, and postage prepaid. If any notice is mailed, it shall be deemed given five Business Days after the date such notice is deposited in the United States mail. If notice is given to a party, it shall be given at the address for such party set forth below. It shall be the responsibility of the Parties to notify the Escrow Agent and the other Party in writing of any name or address changes. In the case of communications delivered to the Escrow Agent, such communications shall be deemed to have been given on the date received by the Escrow Agent.
Fury Resources, Inc.
17503 La Cantera Parkway, Suite 104-603
San Antonio, TX 78257
Attention: Ariella Fuchs
Email address: afuchs@ruckusexp.com
with a copy (which shall not constitute notice) to:
K&L Gates LLP
1 Park Plaza, Twelfth Floor
Irvine, CA 92614
Attention: Michael A. Hedge; Jason C. Dreibelbis
Email: michael.hedge@klgates.com; jason.dreibelbis@klgates.com
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If to Company:
Battalion Oil Corporation
820 Gessner Road, Suite 1100
Houston, TX 77024
Attention:Walter Mayer, General Counsel
Email:wmayer@battalionoil.com
with a copy (which shall not constitute notice) to:
Mayer Brown LLP
700 Louisiana Street Suite 3400
Houston, TX 77002
Attention:William T. Heller IV
Jeff M. Dobbs
Email: wheller@mayerbrown.com
jdobbs@mayerbrown.com
and
Mayer Brown LLP
71 S. Wacker Dr.
Chicago, IL 60606
Attention: Ryan H. Ferris
Email: rferris@mayerbrown.com
If to the Escrow Agent:
Wilmington Trust, National Association
50 South 6th Street, Suite 1290
Minneapolis, MN 55402
Attn: Lance Schonert
Telephone: 612-217-5681
Email: LSchonert@wilmingtontrust.com
Section 4.5.Governing Law. The rights and obligations of the parties shall be governed by, and this Escrow Agreement shall be interpreted, construed and enforced in accordance with, the laws of the State of Delaware excluding its conflict of laws rules to the extent such rules would apply the law of another jurisdiction. The parties hereby (i) irrevocably submit to the exclusive jurisdiction of any federal or state court sitting in the County of New Castle, Wilmington, DE, (ii) waive any objection to the laying of venue in any suit, action or proceeding arising out of this Escrow Agreement in such courts, and (iii) waive any objection that such courts are an inconvenient forum or do not have jurisdiction over any party.
Section 4.6.Entire Agreement. This Escrow Agreement sets forth the entire agreement and understanding of the parties related to the Escrow Property and supersedes all prior agreements and understandings, oral or written. In the event of any direct conflict of the terms of this Escrow Agreement with the terms of the Merger Agreement, as with respect to the rights of Parent and Company, the terms of the Merger Agreement shall control and prevail provided, in no event shall the Escrow Agent be bound by the terms of the Merger Agreement. This Escrow Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies.
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Section 4.7.Amendment. This Escrow Agreement may be amended, modified, superseded, rescinded, or canceled only by a written instrument executed by the Parties and the Escrow Agent. All fees, costs and expenses (including reasonable attorneys’ fees, costs and expenses) incurred by the Escrow Agent in connection with any amendment, modification or supplement shall be payable, jointly and severally, by the Parties.
Section 4.8.Waivers. The failure of any party to this Escrow Agreement at any time or times to require performance of any provision under this Escrow Agreement shall in no manner affect the right at a later time to enforce the same performance. A waiver by any party to this Escrow Agreement of any such condition or breach of any term, covenant, representation, or warranty contained in this Escrow Agreement, in any one or more instances, shall neither be construed as a further or continuing waiver of any such condition or breach nor a waiver of any other condition or breach of any other term, covenant, representation, or warranty contained in this Escrow Agreement.
Section 4.9.Severability. If a court of competent jurisdiction declares any provision hereof invalid, it will be ineffective only to the extent of such invalidity, so that the remainder of the provision and this Escrow Agreement will continue in full force and effect.
Section 4.10.Electronic Signatures, Counterparts. This Escrow Agreement and related notices, demands and other communications related thereto may be executed by the parties hereto individually or in any number of combinations, in one or more counterparts (including by means of electronically signed, telecopied or PDF signature pages), each of which shall be an original and all of which shall together constitute one and the same agreement.
Section 4.11.Waiver of Jury Trial. EACH OF THE PARTIES EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LITIGATION RELATING TO OR ARISING OUT OF THIS ESCROW AGREEMENT.
[The remainder of this page left intentionally blank.]
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IN WITNESS WHEREOF, this Escrow Agreement has been duly executed as of the date first written above.
FURY RESOURCES, INC.
Name:
Title:
S-1
BATTALION OIL CORPORATION
By:
Name:Matthew B. Steele
Title:Chief Executive Officer
S-2
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Escrow Agent
By:
Name:
Title:
S-3
Schedule I
Wire Transfer Instructions
Fury Resources, Inc.
Bank Name:[****]
ABA Number: [****]
Account Name:[****]
Account Number:[****]
Battalion Oil Corporation
Bank Name:[****]
ABA Number: [****]
Account Name:[****]
Account Number:[****]
EXHIBIT A-1
CERTIFICATE AS TO AUTHORIZED REPRESENTATIVES
OF PARENT
Fury Resources, Inc. (the “Parent”) hereby designates each of the following persons as its Authorized Representatives for purposes of this Agreement, and confirms that the title, contact information and specimen signature of each such person as set forth below is true and correct. Each such Authorized Representative is authorized to initiate and approve transactions of all types for the Escrow Account[s] established under the Agreement to which this Exhibit A-1 is attached, on behalf of the Parent.
Name (print): | Abraham Mirman |
Specimen Signature: | |
Title: | Chief Executive Officer, Ruckus Energy Holdings, LLC |
Telephone Number (required): If more than one, list all applicable telephone numbers. | Office: [****] Cell: |
E-mail (required): If more than one, list all applicable email addresses. | Email 1: [****] Email 2: |
Name (print): | Ariella Fuchs |
Specimen Signature: | |
Title: | President, General Counsel and Secretary, Ruckus Energy Holdings, LLC |
Telephone Number (required): If more than one, list all applicable telephone numbers. | Office: [****] Cell: |
E-mail (required): If more than one, list all applicable email addresses. | Email 1: [****] Email 2: |
Name (print): | |
Specimen Signature: | |
Title: | |
Telephone Number (required): If more than one, list all applicable telephone numbers. | Office: Cell: |
E-mail (required): If more than one, list all applicable email addresses. | Email 1: Email 2: |
COMPLETE BELOW TO UPDATE EXHIBIT A-1
If Parent wishes to update this Exhibit A-1, Parent must complete, sign and send to Escrow Agent an updated copy of this Exhibit A-1 with such changes. Any updated Exhibit A-1 shall be effective once signed by Parent and Escrow Agent and shall entirely supersede and replace any prior Exhibit A-1 to this Agreement.
[____________________________________]
By:_________________________
Name:
Title:
Date:
WILMINGTON TRUST, NATIONAL ASSOCIATION (as Escrow Agent)
By:_________________________
Name:
Title:
Date:
EXHIBIT A-2
CERTIFICATE AS TO AUTHORIZED REPRESENTATIVES
OF COMPANY
Battalion Oil Corporation (the “Company”) designates each of the following persons as its Authorized Representatives for purposes of this Agreement, and confirms that the title, contact information and specimen signature of each such person as set forth below is true and correct. Each such Authorized Representative is authorized to initiate and approve transactions of all types for the Escrow Account[s] established under the Agreement to which this Exhibit A-2 is attached, on behalf of the Company.
Name (print): | Matthew Steele |
Specimen Signature: | |
Title: | Chief Executive Officer |
Telephone Number (required): If more than one, list all applicable telephone numbers. | Office:[****] |
E-mail (required): If more than one, list all applicable email addresses. | Email:[****] |
| |
Name (print): | Walter Mayer |
Specimen Signature: | |
Title: | Senior Vice President and General Counsel |
Telephone Number (required): If more than one, list all applicable telephone numbers. | Office:[****] |
E-mail (required): If more than one, list all applicable email addresses. | Email:[****] |
COMPLETE BELOW TO UPDATE EXHIBIT A-2
If the Company wishes to update this Exhibit A-2, Company must complete, sign and send to Escrow Agent an updated copy of this Exhibit A-2 with such changes. Any updated Exhibit A-2 shall be effective once signed by Company and Escrow Agent and shall entirely supersede and replace any prior Exhibit A-2 to this Agreement.
[____________________________________]
By:_________________________
Name:
Title:
Date:
WILMINGTON TRUST, NATIONAL ASSOCIATION (as Escrow Agent)
By:_________________________
Name:
Title:
Date:
| |
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EXHIBIT B
Fees of Escrow Agent
Acceptance Fee: | WAIVED |
Initial Fees as they relate to Wilmington Trust acting in the capacity of Escrow Agent – includes review of the Escrow Agreement; acceptance of the Escrow appointment; setting up of Escrow Account(s) and accounting records; and coordination of receipt of funds for deposit to the Escrow Account(s). Acceptance Fee payable at time of Escrow Agreement execution
Escrow Agent Administration Fee (one-time): | $3,500 |
For ordinary administrative services by Escrow Agent – includes daily routine account management; investment transactions; cash transaction processing (including wire and check processing); monitoring claim notices pursuant to the agreement; disbursement of funds in accordance with the agreement; and mailing of trust account statements to all applicable parties. Tax reporting is included. The fee agreed upon for the services rendered hereunder is intended as compensation for the Escrow If the Escrow Agent is directed to render any service not contemplated in this Escrow Agreement, the Escrow Agent shall be compensated for such extraordinary services.
Wilmington Trust’s fee is based on the following assumptions:
● Number of Escrow Accounts to be established: 1
● Number of Deposits to Escrow Account(s): Not more than 5
● Number of Withdrawals from Escrow Fund(s): Not more than 5 to the parties to the agreement
● Funds held Un-invested
Out-of-Pocket Expenses: | Billed At Cost |
EXHIBIT C
Statement Recipient Address
Please provide the contact and address for the individuals who should receive Escrow Statements.
PARENT STATEMENT RECIPIENT:
Fury Resources, Inc.
17503 La Cantera Parkway
San Antonio, TX 78257
Attention: Ariella Fuchs
Telephone: [****]
Email address: afuchs@ruckusexp.com
with a copy (which shall not constitute notice) to:
K&L Gates LLP
1 Park Plaza, Twelfth Floor
Irvine, CA 92614
Attention: Michael A. Hedge; Jason C. Dreibelbis
Email: michael.hedge@klgates.com; jason.dreibelbis@klgates.com
COMPANY STATEMENT RECIPIENT:
Battalion Oil Corporation
820 Gessner Road, Suite 1100
Houston, TX 77024
Attention:Walter Mayer, General Counsel
Email:wmayer@battalionoil.com
with a copy (which shall not constitute notice) to:
Mayer Brown LLP
700 Louisiana Street Suite 3400
Houston, TX 77002
Attention: William T. Heller IV
Jeff M. Dobbs
Email: wheller@mayerbrown.com
jdobbs@mayerbrown.com
and
Mayer Brown LLP
71 S. Wacker Dr.
Chicago, IL 60606
Attention: Ryan H. Ferris
Email: rferris@mayerbrown.com
Exhibit 3.1
____________________
Certificate of Amendment
to
Certificate of Designations
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
____________________
SERIES A-1 REDEEMABLE CONVERTIBLE PREFERRED STOCK
(Par Value $0.0001 Per Share)
Battalion Oil Corporation (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies that:
Whereas, pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation (the “Board”) by the Amended and Restated Certificate of Incorporation of the Corporation (as amended from time to time in accordance with its terms and the DGCL, the “Certificate of Incorporation”), the Board has previously authorized the creation and issuance of a series of preferred stock, with a par value of $0.0001 per share, of the Corporation designated as the “Series A-1 Redeemable Convertible Preferred Stock” (the “Series A-1 Preferred Stock”), with terms set forth in that certain Certificate of Designation filed with the Secretary of State of the State of Delaware on September 6, 2023 (the “Certificate of Designations”);
Whereas, on December 14, 2023, the Board duly approved and adopted resolution for purposes of amending certain provisions of the Certificate of Designations (this “Amendment”); and
Whereas, pursuant to Section 4(b) of the Certificate of Designation, the holders of at least two-thirds (66 ⅔%) of the then outstanding shares of Series A-1 Preferred Stock (the “Requisite Series A-1 Holders”), by written consent, approved this Amendment on the terms set forth herein.
NOW, THEREFORE, BE IT RESOLVED, that, pursuant to the authority expressly vested in the Board and in accordance with the provisions of the Certificate of Incorporation and the DGCL, the Certificate of Designations be, and hereby is amended as follows:
The “Conversion Ratio” means, for each share of Series A-1 Preferred Stock, the quotient of (i) the Liquidation Preference as of the date of the conversion and (ii) the then applicable Conversion Price. The “Conversion Price” shall initially be $7.63, which may be adjusted from time to time as set forth herein.
The Corporation may exercise its redemption option under this Section 8(a) by delivery of written notice to the Holders in the form attached as Annex B (the “Redemption Notice”), provided, however, that, to the extent permitted pursuant to Section 7(a), the Holders shall have five (5) Business Days from the date of receipt of any such Redemption Notice to, in lieu of being paid the cash Redemption Price, elect to convert the shares of Series A-1 Preferred Stock subject to such Redemption Notice and in accordance with Section 7(a). Such redemption shall be completed on a date specified in the Redemption Notice, which shall be not less than ten (10) and not more than twenty (20) Business Days following the date of the Redemption Notice. If the Corporation redeems only a portion of the then outstanding shares of Series A-1 Preferred Stock, the shares of Series A-1 Preferred Stock subject to such redemption shall be allocated pro rata among the outstanding shares of Series A-1 Preferred Stock.
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| 4. | All other provisions of the Certificate of Designation shall remain in full force and effect. |
[The Remainder of this Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Battalion Oil Corporation has caused this Certificate of Amendment to Certificate of Designations to be duly executed this 15th day of December, 2023.
| BATTALION OIL CORPORATION | |
|
| |
|
|
|
By: | /s/ Matthew B. Steele | |
| Name: | Matthew B. Steele |
| Title: | Chief Executive Officer |
[Signature Page to Certificate of Amendment to Certificate of Designations]
Exhibit 3.2
____________________
CERTIFICATE OF DESIGNATIONS
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
____________________
SERIES A-2 REDEEMABLE CONVERTIBLE PREFERRED STOCK
(Par Value $0.0001 Per Share)
Battalion Oil Corporation (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), hereby certifies that, pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation (the “Board of Directors”) by the Amended and Restated Certificate of Incorporation of the Corporation (as amended from time to time in accordance with its terms and the General Corporation Law, the “Certificate of Incorporation”), which authorizes the Board of Directors to issue shares of the preferred stock of the Corporation (the “Preferred Stock”), in one or more series of Preferred Stock and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional, or other special rights and such qualifications, limitations or restrictions thereof, and in accordance with the provisions of Section 151 of the General Corporation Law, the Board of Directors duly adopted on December 15, 2023 the following resolution:
RESOLVED, that the rights, powers and preferences, and the qualifications, limitations and restrictions, of the Series A-2 Preferred Stock as set forth in this Certificate of Designations are hereby approved and adopted by the Board of Directors and Series A-2 Preferred Stock is hereby authorized out of the Corporation’s authorized preferred stock, par value $0.0001 per share; and the form, terms and provisions of this Certificate of Designations are hereby approved, adopted, ratified and confirmed in all respects as follows:
| 1. | General. |
Term | Section |
|---|---|
30 Day Date | Section 8(c) |
Board of Directors | Preamble |
Business Day | Section 4(b) |
Capital Stock | Section 1(d) |
Certificate of Incorporation | Preamble |
Change of Control | Section 8(b)(iv) |
CoC Conversion Consideration | Section 8(b)(ii) |
Common Stock | Section 1(d)(i) |
Conversion Notice | Section 7(a) |
Conversion Price | Section 7(a) |
Conversion Ratio | Section 7(a) |
Corporation | Preamble |
Corporation Event | Section 7(f) |
Debt | Section 7(b)(ii) |
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Term | Section |
|---|---|
Dividend Payment Date | Section 2(a) |
Dividend Period | Section 2(a) |
General Corporation Law | Preamble |
Holder | Section 3(a) |
Issuance Date | Section 2(a) |
Issuer Conversion Notice | Section 7(b) |
Junior Stock | Section 1(d)(i) |
Liquidation | Section 3(a) |
Liquidation Distribution | Section 3(a) |
Liquidation Preference | Section 3(a) |
Mandatory CoC Redemption Offer | Section 8(b)(ii) |
Mandatory Conversion Conditions | Section 7(b) |
Material Adverse Effect | Section 7(b) |
Maturity Date | Section 8(b)(vii) |
NYMEX Prices | Section 7(b)(v) |
NYSE American Issuance Limitation | Section 9(a) |
Optional CoC Conversion | Section 8(b)(iii) |
Optional CoC Redemption Offer | Section 8(b)(iii) |
Optional Holder Conversion | Section 7(a) |
Parity Stock | Section 1(d)(ii) |
PDP PV-20 | Section 7(b)(i) |
Permitted Holder | Section 8(b)(iv) |
Person | Section 8(b)(ix) |
Preferred Stock | Preamble |
Proved Developed Producing Reserves | Section 7(b)(iv) |
Purchase Agreement | Section 5(b) |
Redemption Notice | Section 8(a) |
Redemption Price | Section 8(a) |
Schedule 14C Action | Section 9(c) |
SEC | Section 9(c) |
Senior Stock | Section 1(d)(iii) |
Series A-2 Dividend | Section 2(a) |
Series A-2 Dividend Rate | Section 2(a) |
Series A-2 Preferred Stock | Section 1(a) |
Stockholder Approval | Section 9(b) |
Subject Transaction | Section 9(d) |
Term Loan Credit Agreement | Section 8(b)(vi) |
Term Loan Restricted Period | Section 8(b)(v) |
Unpaid Dividend Accrual | Section 2(d) |
Working Capital Adjustments | Section 7(b)(iii) |
| 2. | Dividends. |
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| 3. | Liquidation. |
4
| 4. | Voting. |
5
If the Corporation shall propose to take any action enumerated above in clauses (i) through (vi) of this Section 4(b) then, and in each such case, the Corporation shall give notice of such proposed
6
action to each Holder of record appearing on the stock books of the Corporation as of the date of such notice at the address of said Holder shown therein. Such notice shall specify, inter alia (x) the proposed effective date of such action; (y) the date on which a record is to be taken for the purposes of such action, if applicable; and (z) the other material terms of such action. Such notice shall be given at least two Business Days prior to the applicable date or effective date specified above. For the purposes of this Certificate of Designations, “Business Day” shall mean each day that is not a Saturday, Sunday or other day on which banking institutions in Houston, Texas or New York, New York are authorized or required by law to close. If at any time the Corporation shall cancel any of the proposed actions for which notice has been given under this Section 4(b) prior to the consummation thereof, the Corporation shall give prompt notice of such cancellation to each holder of record of the shares of Series A-2 Preferred Stock appearing on the stock books of the Corporation as of the date of such notice at the address of said Holder shown therein. For the avoidance of doubt, if a holder of record of shares of Series A-2 Preferred Stock does not respond to the aforementioned notice, such non-response shall in no way be deemed to constitute the written consent or affirmative vote of such Holder regarding any of the aforementioned actions in this Section 4(b) or described within such notice.
| 5. | Reservation of Common Stock. |
| 6. | Uncertificated Shares |
The shares of Series A-2 Preferred Stock shall be in uncertificated, book-entry form as permitted by the Seventh Amended and Restated Bylaws of the Corporation (the “Bylaws”) and the General Corporation Law. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof any written notice as required by the General Corporation Law.
| 7. | Conversion. |
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9
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| 8. | Redemption |
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| 9. | NYSE American Issuance Limitation. |
| 10. | Additional Procedures. |
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| 11. | No Other Rights. |
The shares of Series A-2 Preferred Stock shall not have any powers, designations, preferences or relative, participating, optional, or other special rights, nor shall there be any qualifications, limitations or restrictions or any powers, designations, preferences or rights of such shares, other than as set forth herein or in the Certificate of Incorporation, or as may be provided by law.
| 12. | Other Provisions. |
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT
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RELATING THERETO IS IN EFFECT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERS SET FORTH IN THE CERTIFICATE OF DESIGNATIONS FILED WITH THE SECRETARY OF STATE FOR THE STATE OF DELAWARE PURSUANT TO SECTION 202 OF THE DELAWARE GENERAL CORPORATION LAW (THE “CERTIFICATE OF DESIGNATIONS”). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE CERTIFICATE OF DESIGNATIONS. A COPY OF THE CERTIFICATE OF DESIGNATIONS WILL BE FURNISHED WITHOUT CHARGE BY THE CORPORATION TO THE HOLDER UPON REQUEST.
| 13. | Effective Date. |
This Certificate of Designations shall become effective on December 15, 2023.
[The Remainder of this Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Battalion Oil Corporation has caused this Certificate of Designations to be duly executed this 15th day of December, 2023.
| BATTALION OIL CORPORATION | |
|
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By: | /s/ Matthew B. Steele | |
| Name: | Matthew B. Steele |
| Title: | Chief Executive Officer |
[Signature Page to Certificate of Designations]
Annex A-2
Conversion Notice
The undersigned holder of Series A-2 Preferred Stock hereby irrevocably elects to convert the number of shares of Series A-2 Preferred Stock indicated below pursuant to Section 7(a) of the Certificate of Designations into shares of Common Stock at the Conversion Ratio. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designations of Series A-2 Redeemable Convertible Preferred Stock, filed by Battalion Oil Corporation on December 15, 2023 (the “Certificate of Designations”).
Conversion Calculations:
Number of shares of Series A-2 Preferred Stock owned prior to conversion: [_____]
Number of shares of Series A-2 Preferred Stock to be converted: [_____]
Number of shares of Common Stock to be issued: [_____]
[HOLDER]
Annex A-2
Issuer Conversion Notice
Battalion Oil Corporation, a Delaware corporation, hereby irrevocably elects to convert the number of shares of Series A-2 Preferred Stock held by you indicated below into shares of Common Stock at the Conversion Ratio on the date set forth below pursuant to Section 7(b) of the Certificate of Designations. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designations of Series A-2 Redeemable Convertible Preferred Stock, filed by Battalion Oil Corporation on December 15, 2023 (the “Certificate of Designations”).
Holder: [_____]
Conversion Calculations:
Number of Shares of Series A-2 Preferred Stock owned by you prior to conversion: [_____]
Number of Shares of Series A-2 Preferred Stock owned by you to be converted: [_____]
Number of shares of Common Stock to be issued: [_____]
BATTALION OIL CORPORATION
Annex B
Redemption Notice
Battalion Oil Corporation, a Delaware corporation, hereby irrevocably elects to redeem the number of shares of Series A-2 Preferred Stock held by you indicated below on the date set forth below. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designations of Series A-2 Redeemable Convertible Preferred Stock, filed by Battalion Oil Corporation on December 15, 2023.
Holder: [_____]
Date of redemption: [_____]
Redemption Calculations:
Number of Shares of Series A-2 Preferred Stock owned by you prior to redemption: [_____]
Number of Shares of Series A-2 Preferred Stock owned by you to be redeemed: [_____]
Redemption Price: [___]
Elect a Single Form of Payment of Redemption Price:
___ Cash (Cash payment to be made to you: [_____])
BATTALION OIL CORPORATION
Exhibit 10.1
EXECUTION VERSION
TABLE OF CONTENTS
Page
Schedule A – Schedule of Purchasers
Exhibit A – Form of Certificate of Designations for the Series A-2 Preferred Stock
Exhibit B – Form of Third Amendment to Registration Rights Agreement
ii
PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of December 15, 2023 (this “Agreement”), is entered into by and among Battalion Oil Corporation, a Delaware corporation (“BATL”), and each of the purchasers set forth on Schedule A hereto (the “Purchasers”).
RECITALS:
WHEREAS, BATL desires to sell the Purchased Securities (as defined below) and the Purchasers desire to purchase from BATL the Purchased Securities, in accordance with the provisions of this Agreement; and
WHEREAS, BATL has agreed to provide the Purchasers with certain registration rights with respect to the shares of Common Stock, par value $0.0001 per share, of BATL (the “Common Stock”) underlying the Purchased Securities acquired pursuant hereto.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, BATL and each of the Purchasers, severally and not jointly, hereby agree as follows:
“Affiliate” means, with respect to a specified Person, any other Person, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided however, that BATL and the Purchasers shall not be considered Affiliates for purposes of this Agreement.
“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.
“Allocated Purchase Price” means with respect to each Purchaser, the dollar amount set forth opposite such Purchaser’s name under the heading “Allocated Purchase Price” on Schedule A hereto.
“Basic Documents” means, collectively, this Agreement, the Certificate of Designations and the Third Amendment to Registration Rights Agreement.
“BATL” has the meaning set forth in the introductory paragraph of this Agreement.
“BATL Bylaws” shall have the meaning specified in Section 2.05(d).
“BATL Charter” shall have the meaning specified in Section 2.04(b)(iii).
“BATL Financial Statements” shall have the meaning specified in Section 3.03(a).
“BATL Related Parties” shall have the meaning specified in Section 6.02.
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“BATL SEC Documents” shall have the meaning specified in Section 3.03(a).
“Board” means the board of directors of BATL.
“Business Day” means any day other than a Saturday, Sunday, any federal legal holiday or day on which banking institutions in the State of New York or State of Texas are authorized or required by Law or other governmental action to close.
“Certificate of Designations” shall have the meaning specified in Section 2.04(b)(iii).
“Change of Control” shall have the meaning specified in the Certificate of Designations.
“Closing” shall have the meaning specified in Section 2.03(a).
“Closing Date” shall have the meaning specified in Section 2.03(b).
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Stock” shall have the meaning set forth in the recitals.
“Conversion Shares” means the Common Stock issuable upon conversion of the Series A-2 Preferred Stock.
“Delaware Corporations Act” means the General Corporation Law of the State of Delaware.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.
“GAAP” means generally accepted accounting principles in the United States of America.
“Governmental Authority” means, with respect to a particular Person, any country, state, county, city and political subdivision in which such Person or such Person’s Property is located or which exercises valid jurisdiction over any such Person or such Person’s Property, and any court, agency, department, commission, board, bureau or instrumentality of any of them and any monetary authority which exercises valid jurisdiction over any such Person or such Person’s Property. Unless otherwise specified, all references to Governmental Authority herein with respect to BATL means a Governmental Authority having jurisdiction over BATL, its Subsidiaries or any of their respective Properties.
“Indemnified Party” shall have the meaning specified in Section 6.03.
“Indemnifying Party” shall have the meaning specified in Section 6.03.
“Law” means any federal, state, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law (including common law), rule or regulation.
“Lien” means any mortgage, claim, encumbrance, pledge, lien (statutory or otherwise), security agreement, conditional sale or trust receipt or a lease, consignment or bailment, preference or priority, assessment, deed of trust, charge, easement, servitude or other encumbrance upon or with respect to any property of any kind.
“Material Adverse Effect” means any event, change, circumstance or development that has a material adverse effect on the assets, business, results of operations or financial condition of BATL and its
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Subsidiaries, taken as a whole; provided, however, that in no event would any of the following (or the effect of any of the following), alone or in combination, be deemed to constitute, or be taken into account in determining whether there has been or will be, a “Material Adverse Effect”, unless solely with respect to subclauses (iii) and (iv) below, such event has a disproportionate and adverse effect on BATL or its business compared to similarly situated participants operating in the upstream oil and gas industry in the geographies in which they operate (in which case, such adverse effects shall be taken into account in determining whether a “Material Adverse Effect” has occurred solely to the extent they are disproportionate): (i) any change or development (including any downturn) in interest rates or general economic, political (including relating to any federal, state or local election), business, financial, commodity, currency or market conditions generally, including changes in the credit, debt, securities, financial, capital or reinsurance markets (including changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets); (ii) any change generally affecting any of the industries or markets in which BATL or its Subsidiaries operate or the economy as a whole; (iii) any earthquake, hurricane, tsunami, tornado, flood, mudslide, wild fire or other natural or man-made disaster, pandemic, epidemic or disease outbreak (including COVID-19), act of God or other force majeure event; (iv) any regional, state, local, national or international political or social conditions (or changes thereof) in countries in which BATL operates, including civil or social unrest, terrorism, acts of war, or sabotage or the engagement by the United States or such other countries in hostilities or the escalation thereof, whether or not pursuant to the declaration of a national emergency or war, or the occurrence or the escalation of any military or terrorist attack (including any internet or “cyber” attack or hacking) upon the United States or such other country, or any territories, possessions, or diplomatic or consular offices of the United States or such other countries or upon any United States or such other country military installation, equipment or personnel; and (v) any failure of BATL and its Subsidiaries, taken as a whole, to meet any projections, forecasts, guidance, estimates, milestones, budgets or financial or operating predictions of revenue earnings, cash flow or cash position (it being understood that the facts giving rise to such failure may be taken into account in determining whether there has been a Material Adverse Effect).
“Non-Recourse Party” shall have the meaning specified in Section 7.15.
“NYSE” means the NYSE American.
“Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof or any other form of entity.
“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.
“Purchased Securities” means, with respect to each Purchaser, the number of shares of Series A-2 Preferred Stock as set forth opposite such Purchaser’s name on Schedule A hereto.
“Purchaser Related Parties” shall have the meaning specified in Section 6.01.
“Purchasers” has the meaning set forth in the introductory paragraph of this Agreement.
“Redemption Price” shall have the meaning specified in the Certificate of Designations.
“Registration Rights Agreement” means that certain Registration Rights Agreement, dated as of October 8, 2019, by and among BATL and the investors party thereto, as amended from time to time.
“Representatives” means, with respect to a specified Person, the officers, directors, managers, employees, agents, counsel, accountants, investment bankers and other representatives of such Person.
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“Schedule 14C Action” means, collectively, (i) the filing of an Information Statement on Schedule 14C relating to the transaction contemplated hereby with the SEC and the receipt from the SEC of notice that it has no comments thereon, (ii) the mailing of such Information Statement to BATL’s stockholders and (iii) the expiration of the twenty (20) calendar day waiting period under Rule 14c-2(b).
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.
“Series A Preferred Stock” means the Series A Redeemable Convertible Preferred Stock of BATL, having the terms set forth in the Certificate of Designations of the Series A Redeemable Convertible Preferred Stock of BATL filed with the Secretary of State of the State of Delaware on March 24, 2023, as amended from time to time.
“Series A-1 Preferred Stock” means the Series A-1 Redeemable Convertible Preferred Stock of BATL, having the terms set forth in the Certificate of Designations of the Series A-1 Redeemable Convertible Preferred Stock of BATL filed with the Secretary of State of the State of Delaware on September 6, 2023, as amended from time to time.
“Series A-2 Preferred Stock” means the Series A-2 Redeemable Convertible Preferred Stock having the terms set forth in the Certificate of Designations.
“Stockholder Consent” means an executed consent delivered by holders of a majority of the shares of Common Stock in lieu of a stockholder meeting and in compliance with the Delaware Corporations Act, for the purpose of providing all necessary approvals under the Delaware Corporations Act and the applicable rules and listing standards of the stock exchange upon which the Common Stock is then listed, if any, to consummate the issuance of more than twenty percent (20%) of the outstanding shares of Common Stock in connection with any conversion of the Series A-2 Preferred Stock.
“Subsidiary” means, as to any Person, any corporation or other entity of which: (i) such Person or a Subsidiary of such Person is a general partner or manager; (ii) at least a majority of the outstanding equity interest having by the terms thereof ordinary voting power to elect a majority of the board of directors or similar governing body of such corporation or other entity (irrespective of whether or not at the time any equity interest of any other class or classes of such corporation or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries; or (iii) any corporation or other entity as to which such Person consolidates for accounting purposes.
“Third Amendment to Registration Rights Agreement” means the Third Amendment to Registration Rights Agreement, to be entered into on the date hereof, between BATL and the Purchasers in substantially the form attached hereto as Exhibit B.
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(a)Each of the Purchasers shall pay to BATL (or a designated Subsidiary of BATL) its Allocated Purchase Price as of the Closing Date, such payments to be made by wire transfers of immediately available funds on the Closing Date to an account designated by BATL at least two (2) Business Days (or such shorter period of time as shall be agreeable by all parties hereto) prior to the Closing Date and deliver or cause to be delivered the Third Amendment to Registration Rights Agreement in substantially the form attached hereto as Exhibit B, which shall have been duly executed by the Required Holders (as defined in the Registration Rights Agreement).
(b)Each Purchaser (except Luminus Energy Partners Master Fund, LTD) shall deliver or cause to be delivered to BATL a properly executed IRS Form W-9 (or any applicable successor form).
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Except as set forth in any BATL SEC Documents filed or furnished by BATL (excluding any disclosures in such BATL SEC Documents under the headings “Risk Factors,” “Forward-Looking Statements” or “Qualitative Disclosures About Market Risk” and other disclosures that are predictive, cautionary or forward looking in nature and any exhibits or other documents appended thereto), BATL represents and warrants to each Purchaser as follows:
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Each Purchaser, severally and not jointly, hereby represents and warrants to BATL as follows:
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At such address indicated on Schedule A attached hereto.
Battalion Oil Corporation
3505 West Sam Houston Parkway North, Suite 300
Houston, Texas 77043
Attention: Walter R. Mayer
E-mail: wmayer@battalionoil.com
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges LLP
201 Redwood Shores Parkway, Suite 400
Redwood City, CA 94065
Attn: Kyle C. Krpata / Nicholas Doloresco
Email: kyle.krpata@weil.com / nicholas.doloresco@weil.com
or to such other address as BATL or such Purchaser may designate in writing. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified or registered mail, return receipt requested, or regular mail, if mailed; upon actual receipt if sent by overnight courier copy; when receipt is acknowledged, if sent via e-mail; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.
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[Remainder of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.
| BATTALION OIL CORPORATION | |
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By: | /s/ Matthew B. Steele | |
| Name: | Matthew B. Steele |
| Title: | Chief Executive Officer |
LUMINUS ENERGY PARTNERS MASTER FUND, LTD. | ||
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By: | /s/ Jonathan Barrett | |
| Name: | Jonathan Barrett |
| Title: | President |
| OCM HLCN Holdings, L.P. By: Oaktree Fund GP, LLC, its General Partner By: Oaktree Fund GP I, L.P., its Managing Member | |
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By: | /s/ Jordan Mikes | |
| Name: | Jordan Mikes |
| Title: | Authorized Signatory |
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By: | /s/ Allen Li | |
| Name: | Allen Li |
| Title: | Authorized Signatory |
| GEN IV INVESTMENT OPPORTUNITIES, LLC | |
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By: | /s/ Jeff Wade | |
| Name: | Jeff Wade |
| Title: | Chief Compliance Officer |
Purchaser | Series A-2 | Allocated |
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LUMINUS ENERGY PARTNERS MASTER FUND, LTD c/o Luminus Management, LLC 1811 Bering Drive Suite 400 Houston, TX 77057 Attention: Jonathan Barrett; Carlos Treistman; Philip Cibulsky E-mail: jbarrett@luminusmgmt.com; ctreistman@luminusmgmt.com; pcibulsky@luminusmgmt.com | 17,211 | $16,780,725 |
OCM HLCN HOLDINGS, L.P. c/o Oaktree Capital Management, LLC | 11,159 | $10,880,025 |
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Dechert LLP Charlotte, NC, 28202 Attention: David B. Cosgrove | | |
GEN IV INVESTMENT OPPORTUNITIES, LLC 1700 Broadway, 35th floor New York, NY 10019 Attention: David Chang E-mail: dchang@LSpower.com | 6,630 | $6,464,250 |
Total | ___________ 35,000 | ______________ $34,125,000 |
Schedule A
Exhibit 10.2
EXECUTION VERSION
THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
This THIRD Amendment to registration rights agreement (this “Amendment”) is made as of December 15, 2023, between Battalion Oil Corporation (formerly known as Halcón Resources Corporation), a Delaware corporation (the “Company”), and each of the parties identified on the signatures pages hereto.
RECITALS
WHEREAS, the Company and the Investors previously entered into that certain Registration Rights Agreement, dated as of October 8, 2019, as amended by (a) that certain First Amendment to the Registration Rights Agreement, dated as of March 28, 2023, and (b) that certain Second Amendment to the Registration Rights Agreement, dated as of September 6, 2023, each by and between the parties hereto (as may be further amended from time to time, the “Agreement”);
WHEREAS, the Parties to the Agreement desire to further amend the Agreement as set forth in this Amendment;
WHEREAS, pursuant to Section 10 of the Agreement, any provision of the Agreement may be amended only by a written instrument signed by the Company and the Required Holders;
WHEREAS, the parties identified on the signature pages hereto represent the Required Holders; and
WHEREAS, capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings given to such terms in the Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
| 1. | The definition of “Registrable Securities” in Section 1 of the Agreement is hereby amended and restated in its entirety to read as follows: |
“Registrable Securities” means (i) any shares of Common Stock, whether now owned or hereafter acquired by the Investors (including shares of Common Stock issued pursuant to the Plan), (ii) the shares of Common Stock issued or issuable upon conversion or redemption of the Series A Preferred Stock now owned or hereafter acquired by the Investors in accordance with the terms of the Certificate of Designations, (iii) the shares of Common Stock issued or issuable upon conversion or redemption of the Series A-1 Preferred Stock now owned or hereafter acquired by the Investors in accordance with the terms of the Series A-1 Certificate of Designations, (iv) the shares of Common Stock issued or issuable upon conversion or redemption of the Series A-2 Preferred Stock now owned or hereafter acquired by the Investors in accordance with the terms of the Series A-2 Certificate of Designations, and (v) any shares of capital stock of the Company issued or issuable with respect to the Common Stock described in clause (i)-(iv), as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise;
provided, that any Registrable Securities beneficially owned by an Investor shall cease to be Registrable Securities to the extent such securities may be sold pursuant to Rule 144 (or any similar provisions in force) without volume or manner of sale limitations.
| 2. | Section 1 of the Agreement is hereby amended to add the following definitions: |
“Series A-2 Certificate of Designations” means the certificate of designations setting forth the terms of the Series A-2 Preferred Stock.
“Series A-2 Preferred Stock” means the Series A-2 Redeemable Convertible Preferred Stock of the Company, par value $0.0001 per share, and having the rights and obligations specified in the Certificate of Designations, effective as of December 15, 2023.
| 3. | Except as expressly amended hereby, the Agreement shall remain in full force and effect in accordance with the provisions thereof. |
| 4. | After giving effect to this Amendment, each reference in the Agreement to “this Agreement,” “the Agreement,” “hereof,” “hereunder,” “herein,” “hereby” or words of like import referring to the Agreement shall refer to the Agreement, as amended by this Amendment. |
| 5. | Section 11 of the Agreement shall apply to this Amendment, mutatis mutandis. |
| 6. | This Amendment may be executed in counterparts (including by facsimile or other electronic transmission), each of which shall be deemed an original and each of which shall constitute one and the same instrument. |
[Signature pages follow]
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IN WITNESS WHEREOF, the parties to this Amendment have executed this Amendment as of the date first written above.
| COMPANY: | |
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| BATTALION OIL CORPORATION | |
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By: | /s/ Matthew B. Steele | |
| Name: | Matthew B. Steele |
| Title: | Chief Executive Officer |
| INVESTORS: | ||
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| LUMINUS ENERGY PARTNERS MASTER FUND, LTD. | ||
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By: | /s/ Jonathan Barrett | ||
| Name: | Jonathan Barrett | |
| Title: | President | |
| OAKTREE OPPORTUNITIES FUND X HOLDINGS (DELAWARE), L.P. By: Oaktree Fund GP, LLC, its General Partner By: Oaktree Fund GP I, L.P., its Managing Member | |
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By: | /s/ Allen Li | |
| Name: | Allen Li |
| Title: | Authorized Signatory |
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By: | /s/ Jordan Mikes | |
| Name: | Jordan Mikes |
| Title: | Authorized Signatory |
| OAKTREE OPPS XB Holdco LTD. By: Oaktree Capital Management, L.P., its Director | |
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By: | /s/ Allen Li | |
| Name: | Allen Li |
| Title: | Managing Director |
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By: | /s/ Jordan Mikes | |
| Name: | Jordan Mikes |
| Title: | Managing Director |
Signature Page to
Third Amendment to Registration Rights Agreement
| OAKTREE OPPORTUNITIES FUND XB HOLDINGS (DELAWARE), L.P. By: Oaktree Fund GP, LLC, its General Partner By: Oaktree Fund GP I, L.P., its Managing Member | |
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By: | /s/ Allen Li | |
| Name: | Allen Li |
| Title: | Authorized Signatory |
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By: | /s/ Jordan Mikes | |
| Name: | Jordan Mikes |
| Title: | Authorized Signatory |
| OAKTREE VALUE OPPORTUNITIES FUND HOLDINGS, L.P. By: Oaktree Value Opportunities Fund GP, L.P., its General Partner By: Oaktree Value Opportunities Fund GP, Ltd., its General Partner By: Oaktree Capital Management, L.P., its Director | |
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By: | /s/ Allen Li | |
| Name: | Allen Li |
| Title: | Authorized Signatory |
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By: | /s/ Jordan Mikes | |
| Name: | Jordan Mikes |
| Title: | Authorized Signatory |
| GEN IV INVESTMENT OPPORTUNITIES, LLC | |
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By: | /s/ Jeff Wade | |
| Name: | Jeff Wade |
| Title: | Chief Compliance Officer |
Signature Page to
Third Amendment to Registration Rights Agreement
Exhibit 99.1
Battalion Oil Corporation Announces
Acquisition By Fury Resources, Inc.
December 15, 2023 08:55 ET | Source: Battalion Oil Corporation
Houston, Texas, Dec. 15, 2023 (GLOBE NEWSWIRE) –
Battalion Oil Corporation (NYSE American: BATL) (“Battalion” or the “Company”) announced today that it had entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Fury Resources, Inc. (“Buyer” or “Parent”), pursuant to which Parent will acquire all of the outstanding shares of Common Stock of the Company (the “Common Stock”), for $9.80 per share in cash (the “Merger Consideration”), which represents a total transaction value of approximately $450 million. The Preferred Stock of the Company held by Luminus Management LLC and funds and accounts managed by Oaktree Capital Management, L.P., or their respective affiliates (collectively, the “Rollover Stockholders”), will be contributed to Buyer in exchange for new preferred shares of Buyer, or sold to Buyer for cash, in each case at a valuation based on the conversion or redemption value of such Preferred Stock.
The transaction is expected to close in the first quarter of 2024, subject to various closing conditions. Such conditions include customary closing conditions, such as the approval of Battalion’s stockholders.
Parent has received debt commitments from Fortress Credit Corp. and AI Partners Asset Management Co., Ltd to finance a portion of the Merger Consideration under the Merger Agreement.
In connection with the transaction, the Rollover Stockholders, who collectively own 61.61% of the Common Stock of the Company, entered into a Voting Agreement with Buyer pursuant to which they have agreed, among other things, to vote 6,254,652 of their shares of Common Stock, which in the aggregate represents 38% of the total voting power of the shares of capital stock of the Company, in favor of adopting the Merger Agreement.
For Battalion, Houlihan Lokey Capital, Inc. acted as financial advisor and Mayer Brown LLP is acting as legal counsel. Jefferies LLC acted as financial advisor and K&L Gates LLP is acting as legal counsel to the Buyer.
Avi Mirman, Executive Chairman of the Board of Parent commented, “We are excited to announce this transaction with Battalion and believe we are well positioned to drive value growth for our investors as we return the asset to active development. It has been a pleasure working with the Battalion team on this transaction, and we look forward to continuing that work as we move toward a successful close.
The acquisition of Battalion represents a return to the Delaware Basin for our team, which now includes Battalion’s former CEO Richard Little. Our team has a strong understanding of the subsurface as well as the capital constraints that have previously hampered the Company’s ability to exploit this asset. With the benefit of a newly revived balance sheet, we believe we
can leverage our deep knowledge of the basin and combined operational excellence to fully unlock the asset’s potential. Additionally, we are excited to explore the opportunities provided to the Company through its joint venture with Caracara. By offering the ability to drill locations with higher H2S volumes, this joint venture will allow the company to exploit additional drilling and acquisition opportunities which may not be available to others in the region.
As part of this transaction, several of Battalion’s major shareholders have agreed to reinvest proceeds from this sale into the ongoing business. We view this as a vote of confidence in our ability to develop this asset and drive profitable growth. This acquisition represents a compelling value proposition for our investors and we are eager to get to work.”
Matt Steele, Battalion CEO, commented, “It has been a pleasure working with Avi Mirman and his team to get the transaction to this point. Avi has a plan to become a premier player in the Delaware Basin. With the additional investment capital provided by the transaction, the company will finally be in a position to fully develop the Battalion asset base and position the company, its investors, and its employees for success.”
About Battalion
Battalion Oil Corporation is an independent energy company engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the United States.
About Fury
Fury Resources, Inc. (“Fury Resources”) is a privately held exploration and production company focused on value creation through the acquisition and exploitation of assets in the Permian Basin. The team is comprised of core individuals who are long-term oil and gas veterans, and have in the past successfully grown Lilis Energy, Inc., a struggling $3MM market cap exploration and production company, to well over $550MM, by the acquisition, organic growth, and development of Permian Basin properties. With expertise and talent in the team, Fury Resources is positioned and capitalized to grow in the area organically and through future acquisitions. To learn more, visit Fury Resource’s website at www.furyresources.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes “forward-looking statements”. All statements included in this press release other than statements of historical fact, including, but not limited to, forecasts or expectations regarding the transaction are forward-looking statements. Forward-looking statements are based on current expectations and assumptions about future events and currently available information as to the outcome and timing of future events. Such statements are inherently subject to numerous business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond Battalion’s control. No assurance can be given that such expectations will be correct or achieved or that the assumptions are accurate or that any transaction will ultimately be consummated. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which such statement is made. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, Battalion’s actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. Except as otherwise required
by applicable law, Battalion undertakes no obligation to publicly correct or update any forward-looking statement whether as a result of new information, future events or circumstances after the date of this report, or otherwise.
Additional Information About the Transaction
Battalion will furnish to the U.S. Securities and Exchange Commission (the “SEC”) a current report on Form 8-K regarding the transaction, which will include the Merger Agreement as an exhibit thereto. All parties desiring details regarding the Merger are urged to review these documents, which will be available at the SEC’s website (http://www.sec.gov).
In connection with the transaction, Battalion will prepare and mail to its stockholders a proxy statement that will include a copy of the Merger Agreement. In addition, in connection with the transaction, Battalion and certain other participants in the transaction will prepare and disseminate to the Battalion’s stockholders a Schedule 13E-3 Transaction Statement that will include Battalion’s proxy statement (the “Schedule 13E-3”). The Schedule 13E-3 will be filed with the SEC. INVESTORS AND STOCKHOLDERS ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY THE SCHEDULE 13E-3 AND OTHER MATERIALS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT BATTALION, THE TRANSACTION, AND RELATED MATTERS. Stockholders will also be able to obtain these documents, as well as other filings containing information about Battalion, the transaction and related matters, without charge from the SEC’s website (http://www.sec.gov).
Battalion and Fury Resources, their respective directors and certain of their respective executive officers and other employees may be deemed to be participants in the solicitation of proxies from Battalion’s stockholders with respect to the proposed transaction. Information regarding the persons who may be considered “participants” in the solicitation of proxies will be set forth in the Schedule 13E-3 and proxy statement when filed with the SEC.
This announcement is neither a solicitation of proxy, an offer to purchase nor a solicitation of an offer to sell any securities, and it is not a substitute for any proxy statement or other materials that may be filed with or furnished to the SEC should the proposed merger proceed.
Contact
BATTALION OIL CORPORATION
Matthew B. Steele
Chief Executive Officer
832-538-0300
www.battalionoil.com
FURY RESOURCES, INC.
Avi Mirman
Executive Chairman of the Board
631-704-7744
info@furyresources.com