Item 1.01 Entry into a Material Definitive Agreement.
On May 19, 2014, Lilis Energy, Inc. (the "Company") received an extension from
Hexagon, LLC ("Hexagon"), its largest creditor, of the maturity date under its
three loan agreements with Hexagon, entered into in January, March and April
2010 (the "Term Loans"). The maturity dates under the Term Loans have been
extended from May 16, 2014 to August 15, 2014. As of May 16, 2014, there was an
aggregate of $18.8 million outstanding under the Term Loans, which are
collateralized by mortgages against a portion of the Company's developed and
undeveloped leasehold acreage.
In connection with the extension, Hexagon and the Company agreed in principal to
the settlement of all amounts outstanding under the Term Loans, pursuant to
which (1) the Company will make a cash payment of $5.0 million no later than May
30, 2014 (the "First Cash Payment"), (2) the Company will make a cash payment of
$5.0 million no later than June 30, 2014 (the "Second Cash Payment" and together
with the First Cash Payment, the "Cash Payments"), (3) the Company will issue to
Hexagon a two-year $6 million unsecured note (the "Hexagon Replacement Note"),
bearing interest at an annual rate of 8%, requiring principal and interest
payments of $90,000 per month, and (4) the Company will issue to Hexagon 943,208
shares of unregistered common stock. The parties have also agreed that if either
of the Cash Payments is not made on time, an additional $1.0 million in
principal will be added to the Hexagon Replacement Note, and if the Hexagon
Replacement Note is not retired by December 31, 2014, the Company will issue an
additional 1.0 million shares of its common stock to Hexagon. Finally, Hexagon
will not, until the earlier of June 30, 2014 or the date the Company achieves
sustained average trading volume in excess of 100,000 shares per day for at
least ten consecutive trading days, sell or otherwise transfer for value any
shares of the Company's common stock or any securities convertible into the
Company's common stock, and that thereafter until December 31, 2014, Hexagon
will not sell or otherwise transfer for value more than 10,000 shares per week
of the Company's common stock or any securities convertible into the Company's
Also on May 19, 2014, the holders of the Company's 8% Senior Secured Convertible
Debentures (the "Debentures"), agreed to extend the maturity date under the
Debentures from May 16, 2014 to August 15, 2014.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
On May 16, 2014, A. Bradley Gabbard, the Company's Chief Financial Officer
announced his decision to resign from his positions as an officer and a director
of the Company effective immediately, in order to pursue other interests. Mr.
Gabbard's resignation was not due to any disagreement with the Company, the
Board of Directors or the Company's management.
Also on May 16, 2014, the Board of Directors of the Company appointed Eric
Ulwelling, who is currently the Company's Chief Accounting Officer and
Controller, to the position of Interim Chief Financial Officer, effective
immediately. Mr. Ulwelling, age 36, joined the Company in 2012 as Controller.
From 2009-2011, Mr. Ulwelling served as a controller with Applied Natural Gas
Fuels, Inc. From 2006 to 2009, he worked as an auditor with Singer Lewak,
servicing publicly traded companies, and prior to that worked as an auditor with
Pannell Kerr Forster. Mr. Ulwelling received a Bachelor of Science in Accounting
from California State University of Fullerton, in 2002.