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LILIS ENERGY, INC. FILES (8-K) Disclosing Entry into a Material Definitive Agreement, Termination of a Material Definitive Agreement, Unregistered Sale of Equity Securities, Amendments to Articles of Inc. or Bylaws; Change in Fiscal Year

September 3, 2014



Item 1.01 Entry into a Material Definitive Agreement.

On September 2, 2014, Lilis Energy, Inc. (the "Company") entered into a Settlement Agreement (the "Settlement Agreement") with Hexagon, LLC ("Hexagon"), its senior lender, to settle all amounts payable by the Company pursuant to (i) a Credit Agreement, dated as of January 29, 2010, providing for a secured term loan in the original principal amount of $4.5 million (as amended, modified, supplemented, substituted or replaced, "Credit Agreement No. 1"); (ii) a Credit Agreement, dated as of March 25, 2010, providing for a secured term loan in the original principal amount of $6.0 million (as amended, modified, supplemented, substituted or replaced, "Credit Agreement No. 2"); and (iii) a Credit Agreement, dated as of April 14, 2010, providing for a term loan in the original principal amount of $15.0 million (as amended, modified, supplemented, substituted or replaced, "Credit Agreement No. 3" and, together with Credit Agreement No. 1 and Credit Agreement No. 2, the "Credit Agreements"), with Hexagon. As previously disclosed, the Credit Agreements were secured by mortgages against several of the Company's oil and gas properties (the "Hexagon Collateral").

Pursuant to the Settlement Agreement, in exchange for full extinguishment of all amounts payable (approximately $14.1 million in principal and interest) pursuant to the Credit Agreements and related promissory notes, the Company has agreed to assign to Hexagon all of the Hexagon Collateral, and to issue to Hexagon $2.0 million in a new series of 6% Redeemable Preferred Stock (the "Redeemable Preferred"). The Redeemable Preferred bears a 6% dividend per annum, payable quarterly, and is redeemable at face value (plus any accrued and unpaid dividends) at any time at the Company's option, or at Hexagon's option upon the Company's achievement of certain production and reserves thresholds. The Redeemable Preferred is not convertible into common stock or any other securities of the Company. Except as otherwise required by law, holders of the Redeemable Preferred shall not be entitled to voting rights.

The Settlement Agreement also prohibits Hexagon from selling or otherwise disposing of any shares of the Company's common stock held by Hexagon until February 29, 2016. In addition, pursuant to the Settlement Agreement, Hexagon and the Company each mutually released and discharged all known and unknown claims against the other and their respective representatives that they had or presently may have, including claims relating to the Credit Agreements.

Item 1.02 Termination of a Material Definitive Agreement

The disclosure set forth above under Item 1.01 is hereby incorporated by reference. The Settlement Agreement effectively terminates the Credit Agreements.

Item 3.02 Unregistered Sales of Equity Securities

The disclosure set forth above under Item 1.01 is hereby incorporated by reference. The Redeemable Preferred were issued pursuant to Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder. The investors represented their intentions to acquire the securities for investment only and not with a view toward distribution. The holders were given adequate information about the Company to make an informed investment decision. The Company did not engage in any general solicitation or advertising. The Company intends to issue the stock certificates with the appropriate restrictive legend affixed thereto.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

On August 29, 2014, the Company filed a Certificate of Designations of Preferences, Rights and Limitations (the "Certificate of Designations") with the Secretary of State of the State of Nevada, with respect to the Redeemable Preferred. See Item 1.01 above for a description of the terms of the Redeemable Preferred.


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Source: Edgar Glimpses


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