TRANSACTION AGREEMENT dated as of March 5, 2019 by and among LILIS ENERGY, INC. THE VÄRDE FUND VI-A, L.P. VÄRDE INVESTMENT PARTNERS, L.P. THE VÄRDE FUND XI (MASTER), L.P. VÄRDE INVESTMENT PARTNERS (OFFSHORE) MASTER, L.P. THE VÄRDE SKYWAY FUND, L.P....
Execution Version
Exhibit 10.42
dated as of March 5, 2019
by and among
by and among
THE VÄRDE FUND VI-A, ▇.▇.
▇▇▇▇▇ INVESTMENT PARTNERS, L.P.
THE VÄRDE FUND XI (MASTER), ▇.▇.
▇▇▇▇▇ INVESTMENT PARTNERS (OFFSHORE) MASTER, L.P.
THE VÄRDE SKYWAY FUND, L.P.
THE VÄRDE SKYWAY MINI-MASTER FUND, L.P.
and
THE VÄRDE FUND XII (MASTER), L.P.
KE 59472957
TABLE OF CONTENTS
Page
1.1Definitions 1
2.1Issue of Exchanged Shares 11
2.2Deliveries 12
2.3Closing 13
2.4Closing Conditions. 14
3.1Representations and Warranties of the Company 15
3.2Representations and Warranties of the Värde Parties 25
4.1Ownership 27
4.2Consent 27
5.1Filings; Other Actions 27
5.2Transfer Restrictions 28
5.3Furnishing of Information 30
5.4Integration 30
5.5Securities Laws Disclosure; Publicity 30
5.6Stockholder Rights Plan 31
5.7Standstill 31
5.8Reservation and Listing of Securities 33
5.9Company Stockholder Approval 34
5.10Certain Transactions and Confidentiality 35
5.11Form D; Blue Sky Filings 36
5.12Tax Matters 36
5.13Board Representation Right 37
6.1Fees and Expenses 41
6.2Survival; Limitation on Liability 41
6.3Entire Agreement 41
6.4Notices 41
6.5Amendments; Waivers 42
6.6Headings 42
6.7Successors and Assigns 42
6.8No Third-Party Beneficiaries 42
6.9Governing Law 42
6.10Waiver of Jury Trial 43
6.11Execution 43
6.12Severability 43
6.13Replacement of Securities 43
6.14Remedies 44
6.15Non-Recourse 44
6.16Payment Set Aside 44
6.17Independent Nature of Värde Parties’ Obligations and Rights 45
6.18Liquidated Damages 45
6.19Saturdays, Sundays, Holidays, etc 45
6.20Construction and Interpretation 45
Schedule I: Värde Party Allocation
Schedule 3.1(a): Subsidiaries
Schedule 3.1(v): Registration Rights
Schedule 5.13 Director Designees/Appointees
Schedule 6.4: Address for Notice
Exhibit A: Form of A&R Series C Certificate of Designation
Exhibit B: Form of A&R Series D Certificate of Designation
Exhibit C: | Form of Payoff Letter |
Exhibit D: Form of Registration Rights Agreement
Exhibit E: Form of Series E Certificate of Designation
Exhibit F: Form of Series F Certificate of Designation
Exhibit G: Form of Legal Opinion of ▇▇▇▇▇▇▇▇▇ LLP
Exhibit H: Form of Nevada Opinion
This Transaction Agreement (this “Agreement”) is dated as of March 5, 2019, between Lilis Energy, Inc., a Nevada corporation (the “Company”), and The Värde Fund VI-A, L.P., Värde Investment Partners, L.P., The Värde Fund XI (Master), L.P., Värde Investment Partners (Offshore) Master, L.P., The Värde Skyway Fund, L.P., The Värde Skyway Mini-Master Fund, L.P. and The Värde Fund XII (Master), L.P. (each, a “Värde Party” and collectively, the “Värde Parties”).
WHEREAS, the Company, the guarantors from time to time party thereto, the lenders party thereto and Wilmington Trust, National Association, as administrative agent, are parties to the Second Lien Credit Agreement (as defined herein);
WHEREAS, pursuant to the Payoff Letter (as defined herein), the Company desires to issue to the Värde Parties, as consideration for the termination of the Second Lien Credit Agreement and the satisfaction in full of all indebtedness, liabilities and other Obligations (as defined therein) (the outstanding principal amount of the Loans thereunder, accrued and unpaid interest thereon and the Make-Whole Amount (as defined herein) totaling $133,596,279 (the “Term Loan Exchange Amount”)), (i) 9,891,638 shares of the Common Stock (as defined herein), (ii) 60,000 shares of the Series E Preferred Stock (as defined herein), having the terms set forth in the Series E Certificate of Designation (as defined herein), and (iii) 55,000 shares of the Series F Preferred Stock (as defined herein), having the terms set forth in the Series F Certificate of Designation (as defined herein);
WHEREAS, shares of the Series E Preferred Stock will be convertible into shares of the Common Stock in accordance with the terms of the Series E Certificate of Designation;
WHEREAS, the Company desires to issue to the Värde Parties, as consideration for the amendment and restatement of the Series C Certificate of Designation (as defined herein) and the Series D Certificate of Designation (as defined herein), 7,750,000 shares of the Common Stock; and
WHEREAS, at Closing (as defined herein), the Company and the Värde Parties will enter into the Registration Rights Agreement (as defined herein).
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Värde Party agree as follows:
Article I.
DEFINITIONS
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have the meanings set forth in this Section 1.1:
“2016 Plan” means the Lilis Energy, Inc. 2016 Omnibus Incentive Plan, as amended from time to time.
“A&R Series C Certificate of Designation” means the Second Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series C‑1 9.75% Participating Preferred Stock and Series C‑2 9.75% Participating Preferred Stock to be filed prior to the Closing by the Company with the Secretary of State of the State of Nevada, in the form of Exhibit A attached hereto.
“A&R Series D Certificate of Designation” means the Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series D 8.25% Participating Preferred Stock to be filed prior to the Closing by the Company with the Secretary of State of the State of Nevada, in the form of Exhibit B attached hereto.
“Action” has the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act; provided, that no portfolio company of a Värde Party or its Affiliates shall be considered or otherwise deemed an Affiliate thereof.
“Agreement” has the meaning ascribed to such term in the preamble.
“Articles of Incorporation” means the Amended and Restated Articles of Incorporation of the Company, dated as of October 10, 2011, as amended from time to time.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York or Texas are authorized or required by law or other governmental action to close.
“Capitalization Date” has the meaning ascribed to such term in Section 3.1(g).
“Certificates of Designation” means each of the A&R Series C Certificate of Designation, the A&R Series D Certificate of Designation, the Series E Certificate of Designation and the Series F Certificate of Designation.
“Closing” means the closing of the issuance of the Exchanged Shares pursuant to Section 2.1.
“Closing Date” means the date on which the Closing actually occurs.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Commission” means the United States Securities and Exchange Commission.
“Common Shares” means the Exchanged Common Shares and the Underlying Shares.
“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Company” has the meaning ascribed to such term in the preamble.
“Company Information” has the meaning ascribed to such term in Section 5.10(b).
“Company Stock Awards” has the meaning ascribed to such term in Section 3.1(g).
“Company Stockholders” means the holders of shares of the Common Stock.
“Effect” means any change, event, effect or circumstance.
“Environmental Laws” means any Law relating in any way to protection of the environment, preservation or reclamation of natural resources, pollution, occupational or public health or safety, or the management, release or threatened release of, or exposure to, any Hazardous Material.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Värde Party directly or indirectly resulting from or based upon (a) violation of or liability under any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal (or arrangement for the disposal) of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement, proceeding or other arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Company, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 or Title IV of ERISA and Section 412 or 430 of the Code, is treated as a single employer under Section 414 of the Code.
“ERISA Event” means: (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) the failure of any Plan to satisfy the minimum funding standard applicable to that Plan for a plan year under Section 412 or 430 of the Code or Section 302 of ERISA; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Company or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan or Multiemployer Plan; (e) the receipt by the Company or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Multiemployer Plan or to appoint a trustee to administer any Plan; (f) the incurrence by the Company or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Company or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent within the meaning of Title IV of ERISA.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exchanged Common Shares” has the meaning ascribed to such term in Section 2.1(b).
“Exchanged Preferred Shares” has the meaning ascribed to such term in Section 2.1(a).
“Exchanged Series E Shares” has the meaning ascribed to such term in Section 2.1(a).
“Exchanged Series F Shares” has the meaning ascribed to such term in Section 2.1(a).
“Exchanged Shares” has the meaning ascribed to such term in Section 2.1(b).
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“GAAP” has the meaning ascribed to such term in Section 3.1(h).
“Governmental Entity” means any court, administrative agency or commission or other governmental or arbitral body or authority or instrumentality, whether federal, state, local or foreign, and any applicable industry self-regulatory organization.
“Hazardous Materials” means all pollutants, contaminants, chemicals, materials, substances, wastes, mixtures, pesticides, and any other substance for which liability or standards of conduct may be imposed under any Environmental Law, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, noise, odor, mold, infectious or medical wastes and all other materials, substances or wastes of any nature regulated pursuant to any Environmental Law.
“Intellectual Property Rights” has the meaning ascribed to such term in Section 3.1(p).
“Investor Directors” has the meaning ascribed to such term in Section 5.13(b).
“Knowledge of the Company” means the actual knowledge of one or more executive officers of the Company.
“Law” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity.
“Legend Removal Date” has the meaning ascribed to such term in Section 5.2(d).
“Lien” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Loans” has the meaning ascribed to such term in the Second Lien Credit Agreement.
“Make-Whole Amount” has the meaning ascribed to such term in the Second Lien Credit Agreement.
“Material Adverse Effect” means, with respect to the Company, any Effect that, individually or taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Material Adverse Effect, is or is reasonably likely to be materially adverse to the business, assets, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole; provided, that in no event shall any of the following, alone or in combination, be deemed to constitute a Material Adverse Effect or be taken into account in determining whether a Material Adverse Effect has occurred: (i) any change in the Company’s stock price or trading volume, (ii) any failure by the Company to meet revenue, earnings production or other projections, (iii) any change in commodity prices or other Effect affecting the oil and gas industry generally, or the United States economy generally, or any Effect that results from changes affecting general worldwide economic or capital market conditions, in each case except to the extent such change of Effect disproportionately affects the Company and its Subsidiaries, taken as a whole, relative to other oil and gas exploration and production companies operating in the United States, (iv) any Effect caused by or resulting from the announcement or pendency of the transactions contemplated by the Transaction Documents or the RBL Amendment or the identity of a Värde Party or any of its Affiliates in connection with the transactions contemplated by this Agreement, (v) acts of war or terrorism or natural disasters, (vi) the performance of the obligations under the Transaction Documents and the consummation of the transactions contemplated hereby and thereby, including compliance with the covenants set forth herein and therein, or any action taken or omitted to be taken by the Company at the request or with the prior consent of the Värde Parties, (vii) in and of itself, the commencement of any suit, action or proceeding (provided, that such exclusion shall not apply to any underlying fact, event or circumstance that may have caused or contributed to such action, suit or proceeding), or any liability, sanction or penalty arising from any governmental proceeding or investigation that was commenced prior to the date of this Agreement and disclosed by the Company in this Agreement, in a correspondingly identified schedule attached hereto or in any SEC Report filed with or furnished to the Commission prior to the date of this Agreement, (viii) changes in GAAP or other accounting standards (or any interpretation thereof) or (ix) changes in any Laws or other binding directives issued by any Governmental Entity or interpretations or enforcement thereof; provided, that (A) the exceptions in clause (i) or (ii) shall not prevent or otherwise affect a determination that any Effect underlying such change or failure has resulted in, or contributed to, a Material Adverse Effect, (B) without limiting clause (iii), with respect to clauses (viii) and (ix), such Effects, alone or in combination, may be deemed to constitute, or be taken into account in determining whether a Material Adverse Effect has occurred, but only to the extent that such Effects disproportionately affect the Company and its Subsidiaries, taken as a whole, relative to other oil and gas exploration and production companies operating in the United States.
“Money Laundering Laws” has the meaning ascribed to such term in Section 3.1(ii).
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate contributes or has any obligations or liabilities (current or contingent).
“October Transaction Agreement” means that certain Transaction Agreement, dated as of October 10, 2018, among the Company and the Värde Parties.
“OFAC” has the meaning ascribed to such term in Section 3.1(gg).
“Payoff Letter” means that certain Payoff Letter, to be dated as of the date hereof, by Wilmington Trust, National Association, as administrative agent, and Värde Partners, Inc., as lead lender, acknowledged and agreed by the Company and the Värde Parties, in the form of Exhibit C attached hereto.
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 or 430 of the Code or Section 302 of ERISA, and in respect of which the Company or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as determined under ERISA.
“Preferred Stock” means each of the Series C-1 Preferred Stock, the Series C-2 Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock.
“Proxy Statement” has the meaning ascribed to such term in Section 5.9.
“RBL Amendment” has the meaning ascribed to such term in the definition of “RBL Credit Agreement” in this Section 1.1.
“RBL Credit Agreement” means that certain Second Amended and Restated Senior Secured Revolving Credit Agreement, dated as of October 10, 2018, by and among the Company, the guarantors from time to time party thereto, the lenders party thereto and BMO ▇▇▇▇▇▇ Bank, N.A., as administrative agent and collateral agent, as amended by the First Amendment and Waiver thereto, dated as of March 1, 2019 (the “RBL Amendment”), and as further amended from time to time (in accordance with the Certificates of Designation).
“Registration Rights Agreement” means that certain Amended and Restated Registration Rights Agreement, dated as of the Closing Date, by and among the Company and the Värde Parties, in the form of Exhibit D attached hereto.
“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Common Shares by each Värde Party as provided for in the Registration Rights Agreement.
“Representatives” means, with respect to a specified Person, the investors, officers, directors, managers, employees, agents, advisors, counsel, accountants, investment bankers and other representatives of such Person.
“Required Approvals” has the meaning ascribed to such term in Section 3.1(e).
“Required Minimum” means, as of any date, the maximum aggregate number of shares of the Common Stock then issuable upon conversion in full of all then outstanding Exchanged Series E Shares, ignoring any conversion limits set forth in the Series E Certificate of Designation.
“Requisite Stockholder Approval” has the meaning ascribed to such term in Section 5.9.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“SEC Reports” has the meaning ascribed to such term in Section 3.1(h).
“Second Lien Credit Agreement” means that certain Credit Agreement, dated as of April 26, 2017, by and among the Company, the guarantors party thereto, the lenders party thereto and Wilmington Trust, National Association, as administrative agent, as amended, supplemented or otherwise modified to the Closing Date, prior to giving effect to the Transaction Documents.
“Securities” means the Exchanged Shares and the Underlying Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
“Securities Purchase Agreement” means the Securities Purchase Agreement, dated January 30, 2018 among the Company and the original Holders (as defined therein), as amended, modified or supplemented from time to time in accordance with its terms.
“Series C and Series D Exchanged Common Shares” has the meaning ascribed to such term in Section 2.1(b).
“Series C Certificate of Designation” means the Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series C‑1 9.75% Convertible Participating Preferred Stock and Series C‑2 9.75% Convertible Participating Preferred Stock filed by the Company with the Secretary of State of the State of Nevada on October 10, 2018.
“Series C-1 Preferred Stock” means (a) prior to the filing of the A&R Series C Certificate of Designation with the Secretary of State of the State of Nevada, the Company’s Series C-1 9.75% Convertible Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences and privileges set forth in the Series C Certificate of Designation, and (b) from and after the filing of the A&R Series C Certificate of Designation with the Secretary of State of the State of Nevada, the Company’s Series C-1 9.75% Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences and privileges set forth in the A&R Series C Certificate of Designation.
“Series C-2 Preferred Stock” means (a) prior to the filing of the A&R Series C Certificate of Designation with the Secretary of State of the State of Nevada, the Company’s Series C-2 9.75% Convertible Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences and privileges set forth in the Series C Certificate of Designation, and (b) from and after the filing of the A&R Series C Certificate of Designation with the Secretary of State of the State of Nevada, the Company’s Series C-2 9.75% Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences and privileges set forth in the A&R Series C Certificate of Designation.
“Series D Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Series D 8.25% Convertible Participating Preferred Stock filed by the Company with the Secretary of State of the State of Nevada on October 10, 2018.
“Series D Preferred Stock” means (a) prior to the filing of the A&R Series D Certificate of Designation with the Secretary of State of the State of Nevada, the Company’s Series D 8.25% Convertible Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences and privileges set forth in the Series D Certificate of Designation, and (b) from and after the filing of the A&R Series D Certificate of Designation with the Secretary of State of the State of Nevada, the Company’s Series D 8.25% Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences and privileges set forth in the A&R Series D Certificate of Designation.
“Series E Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Series E 8.25% Convertible Participating Preferred Stock to be filed prior to the Closing by the Company with the Secretary of State of the State of Nevada, in the form of Exhibit E attached hereto.
“Series E Preferred Stock” means the Company’s Series E 8.25% Convertible Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences and privileges set forth in the Series E Certificate of Designation.
“Series F Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Series F 9.00% Participating Preferred Stock to be filed prior to the Closing by the Company with the Secretary of State of the State of Nevada, in the form of Exhibit F attached hereto.
“Series F Preferred Stock” means the Company’s Series F 9.00% Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences and privileges set forth in the Series F Certificate of Designation.
“Specified Party” has the meaning ascribed to such term in Section 5.13(j).
“Standstill Termination Date” means (a) with respect to Section 5.7(a), the date that is the earlier of (i) the date the Värde Parties and their Affiliates are no longer entitled to designate any Investor Directors pursuant to Section 5.13 or the Certificates of Designation and (ii) the date the Company fails to fully declare and pay all accrued dividends on the Preferred Stock in cash on a “Dividend Payment Date” (as defined in the Certificates of Designation) occurring after April 26, 2022 pursuant to the Certificates of Designation; (b) with respect to Section 5.7(b)-(h), the date that is the earlier of (i) the date the Värde Parties and their Affiliates are no longer entitled to designate any Investor Directors pursuant to Section 5.13 or the Certificates of Designation and (ii) the date the Company fails to fully declare and pay all accrued dividends on the Preferred Stock in cash on a “Dividend Payment Date” (as defined in the Certificates of Designation) occurring after April 26, 2021 pursuant to the Certificates of Designation; and (c) with respect to Section 5.7(i), the date the Värde Parties and their Affiliates are no longer entitled to designate any Investor Directors pursuant to Section 5.13 or the Certificates of Designation.
“Stated Value” has the meaning ascribed to such term in the Certificates of Designation, as applicable.
“Stockholder Meeting” has the meaning ascribed to such term in Section 5.9.
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and, where applicable, also includes any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Tax” means any federal, state, local, or non-U.S. income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated or other tax of any kind whatsoever, including any interest, penalty or addition thereto.
“Tax Return” means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Term Loan Exchange Amount” has the meaning ascribed to such term in the recitals.
“Term Loan Exchanged Common Shares” has the meaning ascribed to such term in Section 2.1(a).
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or NYSE National (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Certificates of Designation, the Registration Rights Agreement and the Payoff Letter, in each case including all exhibits and schedules thereto and hereto.
“Transfer Agent” means Corporate Stock Transfer, Inc., the current transfer agent and registrar for the Common Stock, and any successor transfer agent and registrar for the Common Stock.
“Underlying Shares” means the shares of Common Stock issuable upon conversion of the Exchanged Series E Shares.
“Värde Party” and “Värde Parties” have the meanings ascribed to such terms in the preamble.
“Värde Party Majority” has the meaning ascribed to such term in Section 5.13(b).
“Värde Parties’ Transaction Expense Amount” means all reasonable and documented out-of-pocket fees and expenses incurred by the Värde Parties in connection with the transactions contemplated by the Transaction Documents.
“VWAP” means, for any date, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)).
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
ARTICLE II.
ISSUE OF EXCHANGED SHARES; CLOSING
ISSUE OF EXCHANGED SHARES; CLOSING
2.1 Issue of Exchanged Shares.
(a) On the Closing Date, on the terms and subject to the conditions set forth herein and as consideration for the termination of the Second Lien Credit Agreement and the satisfaction in full, in lieu of the repayment in full in cash, of the Term Loan Exchange Amount pursuant to the Payoff Letter, the Company will issue to the Värde Parties (i) an aggregate of 9,891,638 shares of the Common Stock (the “Term Loan Exchanged Common Shares”), with each Värde Party receiving such number of the Term Loan Exchanged Common Shares as set forth opposite such Värde Party’s name on Schedule I hereto, (ii) an aggregate of 60,000 shares of the Series E Preferred Stock (the “Exchanged Series E Shares”), with an aggregate Stated Value of $60,000,000, with each Värde Party receiving such number of the Exchanged Series E Shares as set forth opposite such Värde Party’s name on Schedule I hereto, and (iii) an aggregate of 55,000 shares of the Series F Preferred Stock (the “Exchanged Series F Shares” and, together with the Exchanged Series E Shares, the “Exchanged Preferred Shares”), with an aggregate Stated Value of $55,000,000, with each Värde Party receiving such number of the Exchanged Series F Shares as set forth opposite such Värde Party’s name on Schedule I hereto. The Term Loan Exchanged Common Shares correspond to $18,596,279 of the Term Loan Exchange Amount, based on an agreed exchange price of $1.88 per share of Common Stock; and the Exchanged Preferred Shares correspond to $115,000,000 of the Term Loan Exchange Amount, based on an agreed exchange price of $1,000 per share of each of the Series E Preferred Stock and the Series F Preferred Stock.
(b) On the Closing Date, on the terms and subject to the conditions set forth herein and as consideration for the amendment and restatement of the Series C Certificate of Designation and the Series D Certificate of Designation as set forth in, respectively, the A&R Series C Certificate of Designation and the A&R Series D Certificate of Designation, the Company will issue to the Värde Parties 7,750,000 shares of the Common Stock (the “Series C and Series D Exchanged Common Shares” and, together with the Term Loan Exchanged Common Shares, the “Exchanged Common Shares”), with each Värde Party receiving such number of the Series C and Series D Exchanged Common Shares as set forth opposite such Värde Party’s name on Schedule I hereto. The Series C and Series D Exchanged Common Shares consist of (i) 6,250,000 shares of the Common Stock issued as consideration for the amendment and restatement of the Series C Certificate of Designation and (ii) 1,500,000 shares of the Common Stock issued as consideration for the amendment and restatement of the Series D Certificate of Designation. The Exchanged Common Shares and the Exchanged Preferred Shares shall collectively constitute the “Exchanged Shares.”
2.2 Deliveries.
(a) On the Closing Date, the Company shall deliver or cause to be delivered to each Värde Party the following:
(i) evidence of the number of shares of the Exchanged Shares issued to such Värde Party having been issued in book-entry form to such Värde Party;
(ii) evidence that the A&R Series C Certificate of Designation has been filed with, and accepted by, the Secretary of State of the State of Nevada;
(iii) evidence that the A&R Series D Certificate of Designation has been filed with, and accepted by, the Secretary of State of the State of Nevada;
(iv) evidence that the Series E Certificate of Designation has been filed with, and accepted by, the Secretary of State of the State of Nevada;
(v) evidence that the Series F Certificate of Designation has been filed with, and accepted by, the Secretary of State of the State of Nevada;
(vi) the Registration Rights Agreement duly executed by the Company;
(vii) the Payoff Letter duly executed by the Company and the other parties thereto (other than the Värde Parties);
(viii) evidence that a number of Underlying Shares at least equal to the Required Minimum has been reserved by the Company and approved, subject to official notice of issuance, for listing on the NYSE American;
(ix) evidence that the Exchanged Common Shares have been approved, subject to official notice of issuance, for listing on the NYSE American;
(x) to the extent not previously delivered to the Värde Parties, the RBL Amendment duly executed by the Company and the other parties thereto;
(xi) a certificate of the Company’s Secretary or another authorized officer of the Company, dated as of the Closing Date, certifying (A) the Articles of Incorporation and bylaws, as then in effect and attached thereto, (B) the resolutions adopted by the Board of Directors authorizing the transactions contemplated hereby and (C) as to the signatures and authority of the Persons signing the Transaction Documents and related documents on behalf of the Company;
(xii) a certificate of the Company signed on behalf of the Company by an executive officer and dated as of the Closing Date, certifying that the conditions in Section 2.4(b) (other than clause (iv) thereof) have been satisfied;
(xiii) an opinion from ▇▇▇▇▇▇▇▇▇ LLP, in substantially the form attached hereto as Exhibit G, which shall be addressed to the Värde Parties and dated as of the Closing Date;
(xiv) an opinion of Nevada counsel, in substantially the form attached hereto as Exhibit H, which shall be addressed to the Värde Parties and dated as of the Closing Date;
(xv) payment of the Värde Parties’ Transaction Expense Amount, payable by wire transfer of immediately available funds to the accounts designated by the Värde Parties prior to the Closing Date; and
(xvi) evidence that the Payoff Amount (as defined in the Payoff Letter) has been received by the applicable parties to which such amount is owed.
(b) On the Closing Date, each Värde Party shall deliver or cause to be delivered to the Company the following:
(i) the Registration Rights Agreement duly executed by such Värde Parties;
(ii) the Payoff Letter duly acknowledged by such Värde Parties and the other lenders party thereto;
(iii) a certificate of such Värde Party signed on behalf of such Värde Party by a duly authorized Person and dated as of the Closing Date, certifying that the conditions in Section 2.4(c) (other than clause (iii) thereof) have been satisfied; and
(iv) a cross-receipt, duly executed by such Värde Party, acknowledging such Värde Party’s receipt of the number of Exchanged Shares set forth opposite such Värde Party’s name on Schedule I hereto.
2.3 Closing. The Closing shall occur by the first Business Day that is on or following the satisfaction or waiver of the conditions set forth in Section 2.4 (other than those conditions that, by their terms, are to be satisfied or waived at the Closing, but subject to the satisfaction or waiver thereof) at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or such other location (or remotely by electronic exchange of documentation) as the parties may mutually agree.
2.4 Closing Conditions.
(a) Mutual Closing Conditions. The obligations of the Värde Parties, on the one hand, and the Company, on the other hand, to effect the Closing is subject to the satisfaction or, to the extent permitted by applicable Law, waiver by Värde Parties whose aggregate Exchanged Shares represent a majority of the aggregate Exchanged Shares of all Värde Parties and the Company, at the Closing of the following condition:
(i) no temporary restraining order, preliminary or permanent injunction or other judgment or order issued by any Governmental Entity and no Law shall be in effect restraining, enjoining, making illegal or otherwise prohibiting the consummation of the transactions contemplated by this Agreement.
(b) Värde Parties Closing Conditions. The obligations of the Värde Parties to effect the Closing are also subject to the satisfaction or, to the extent permitted by applicable Law, waiver by Värde Parties whose aggregate Exchanged Shares represent a majority of the aggregate Exchanged Shares of all Värde Parties at or prior to the Closing of the following conditions:
(i) (A) the representations and warranties of the Company set forth in Section 3.1 shall be true and correct in all material respects (other than Sections 3.1(b)(i), 3.1(c), 3.1(d), 3.1(f), 3.1(g), 3.1(u) or 3.1(w) or any other representations qualified by materiality which, in each case, shall be true and correct in all respects) as of the date of this Agreement and as of the Closing Date as though made on and as of such date (except to the extent that such representation or warranty speaks to an earlier date, in which case as of such earlier date);
(ii) there shall not be pending any suit, action or proceeding by any Governmental Entity or shareholder of the Company (other than a Värde Party or its Affiliates) seeking to restrain, enjoin or prohibit the consummation of the transactions contemplated by this Agreement;
(iii) the Company shall have performed and complied with, in all material respects, its obligations, covenants and agreements required to be performed by it pursuant to this Agreement at or prior to the Closing;
(iv) the Company shall have delivered to the Värde Parties all deliverables required to be delivered by the Company pursuant to Section 2.2(a); and
(v) no notice of delinquency or delisting from the NYSE American shall have been received by the Company with respect to the Common Stock.
(c) Company Closing Conditions. The obligation of the Company to effect the Closing is also subject to the satisfaction or, to the extent permitted by applicable Law, waiver by the Company at or prior to the Closing of the following conditions:
(i) (A) the representations and warranties of the Värde Parties set forth in Section 3.2 shall be true and correct in all material respects (other than Sections 3.2(a), 3.2(b) or 3.2(c), which shall be true and correct in all respects) as of the date of this Agreement and as of the Closing Date as though made on and as of such date (except to the extent that such representation or warranty speaks to an earlier date, in which case as of such earlier date);
(ii) each of the Värde Parties shall have performed and complied with, in all material respects, its obligations, covenants and agreements required to be performed by it pursuant to this Agreement at or prior to the Closing; and
(iii) each of the Värde Parties shall have delivered to the Company all deliverables required to be delivered by the Värde Parties pursuant to Section 2.2(b).
2.5 Termination. The Värde Parties shall be entitled to terminate this Agreement by written notice to the Company if the Closing has not occurred on or before March 8, 2019; provided, however, that the Värde Parties shall not have the right to terminate this Agreement under this Section 2.5 if the failure of the Closing to occur on or before such date is the result of the failure of any of the Värde Parties to fulfill any material covenant or agreement under this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to each Värde Party, as of the date hereof and as of the Closing Date, that, except as disclosed in the SEC Reports filed with or furnished to the Commission and publicly available prior to the date of this Agreement (excluding any risk factor disclosure and disclosure of risks included in any “forward-looking statements” disclaimer or other statements included in such SEC Reports to the extent that they are predictive, forward-looking or primarily cautionary in nature, in each case other than any specific factual information contained therein, and excluding any supplement, modification or amendment thereto made after the date hereof):
(a) Subsidiaries. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens (except for Liens created under or expressly permitted by the RBL Credit Agreement and the Second Lien Credit Agreement), and all of the issued and outstanding shares of capital stock or other equity interests of each Subsidiary have been validly issued, are fully paid and nonassessable (except in the case of any Subsidiary that is a limited liability company, as such nonassessability may be affected by the applicable limited liability company Law) and were not issued in violation of any preemptive or similar rights to subscribe for or purchase securities. None of the Company’s Subsidiaries is currently prohibited, directly or indirectly, from paying any dividends or distributions to the Company, from making any other distribution on such Subsidiary’s capital stock or other equity securities, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s property or assets to the Company or any other Subsidiary of the Company, except for (i) such prohibitions under applicable Law, applicable organizational or charter documents, the RBL Credit Agreement or the Second Lien Credit Agreement, (ii) restrictions on the subletting, assignment or transfer of any property, right or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any such lease, license or other similar contract and (iii) other restrictions incurred in the ordinary course of business under agreements or instruments not relating to indebtedness of the Company or any of its Subsidiaries.
(b) Organization and Qualification.
(i) The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite corporate or other applicable entity power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.
(ii) Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except to the extent that any failure to be so qualified or in good standing has not had, and would not reasonably be expected to have, a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. Except for obtaining the Requisite Stockholder Approval, the execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company and no further approval of the Board of Directors or the Company’s stockholders is required in connection herewith or therewith. The Transaction Documents to which the Company is a party have been (or upon delivery or filing thereof will have been) duly executed by the Company and, when delivered or filed with the Secretary of State of the State of Nevada, as applicable, in accordance with the terms hereof and thereof, will constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).
(d) No Conflicts. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) assuming the due execution and delivery of the Payoff Letter by the parties thereto, conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise and including, for the avoidance of doubt, the RBL Credit Agreement) to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or, (iii) subject to the Required Approvals, conflict with or result in a material violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound.
(e) Filings, Consents and Approvals. Assuming the due execution and delivery of the Payoff Letter by the parties thereto and giving effect to the RBL Amendment, the Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any Governmental Entity or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) as contemplated by Sections 5.5, 5.8, 5.9 and 5.11; (ii) as contemplated by the Registration Rights Agreement; (iii) as required in connection with the listing of the Common Shares on the NYSE American; (iv) the filing of the Certificates of Designation with the Secretary of State of the State of Nevada; and (v) as may be required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended in connection with the conversion of shares of the Preferred Stock (collectively, the “Required Approvals”).
(f) Issuance of the Securities. The Exchanged Shares have been duly authorized. When the Certificates of Designation have been filed with the Secretary of State of the State of Nevada and the Exchanged Shares have been issued, in accordance with the Transaction Documents, the Exchanged Shares will be duly and validly issued, fully paid and nonassessable and free and clear of all Liens imposed by, or arising through, the Company other than restrictions on transfer provided for in the Transaction Documents. Each of the Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable and free and clear of all Liens imposed by, or arising through, the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized Common Stock a number of shares of the Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum.
(g) Capitalization. The authorized shares of capital stock consist of (i) 150,000,000 shares of the Common Stock and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share. As of the close of business on March 1, 2019 (the “Capitalization Date”), (i) 73,682,816 shares of the Common Stock were issued and outstanding, (ii) 100,000 shares of Series C-1 Preferred Stock were issued and outstanding, (iii) 25,000 shares of Series C-2 Preferred Stock were issued and outstanding, (iv) 39,254 shares of Series D Preferred Stock were issued and outstanding, (v) 5,256,578 shares of the Common Stock were reserved for issuance upon the exercise of stock options outstanding on such date and zero shares of the Common Stock were reserved for issuance upon the exercise or payment of stock units (including deferred stock units, restricted stock and restricted stock units) or other equity-based incentive awards granted pursuant to any plans, agreements or arrangements of the Company and outstanding on such date (collectively, the “Company Stock Awards”), (vi) 4,422,329 shares of the Common Stock were reserved for issuance upon the exercise of outstanding warrants, (vii) 28,874,078 shares of the Common Stock were reserved for issuance upon the conversion of outstanding Series C-1 Preferred Stock, (viii) 6,776,237 shares of the Common Stock were reserved for issuance upon the conversion of the outstanding Series C-2 Preferred Stock, (ix) 10,353,632 shares of the Common Stock were reserved for issuance upon the conversion of outstanding Series D Preferred Stock, (x) 17,173,367 shares of the Common Stock were reserved for issuance upon conversion of the Loans under the Second Lien Credit Agreement, and (xi) 253,598 shares of the Common Stock were held by the Company in its treasury. Since the Capitalization Date, the Company has not sold or issued or repurchased, redeemed or otherwise acquired any shares of the Company’s capital stock or other equity securities other than shares of the Common Stock issued in respect of the exercise of Company Stock Awards in the ordinary course of business. Except as contemplated by the Transaction Documents and as set forth in this Section 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of the Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of the Common Stock or Common Stock Equivalents. None of (i) the issuance of the Exchanged Shares pursuant to this Agreement or (ii) the issuance of the Underlying Shares upon conversion of the Exchanged Series E Shares will obligate the Company to issue shares of the Common Stock or other securities to any Person (other than the Värde Parties) or result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with all federal and state securities Laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except as provided in the Transaction Documents, the Second Lien Credit Agreement, the Series C Certificate of Designation, the Series D Certificate of Designation, the October Transaction Agreement and the Securities Purchase Agreement, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the Knowledge of the Company, between or among any of the Company’s stockholders.
(h) SEC Reports; Financial Statements.
(i) The Company has filed with or furnished to the Commission all reports, schedules, forms, statements and other documents required to be filed with or furnished to the Commission by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, since December 31, 2015 (all such materials filed or furnished by the Company, whether or not required to be filed or furnished, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports complied in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(ii) The Company (i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are reasonably designed to ensure that material information relating to the Company, including its Subsidiaries, is made known to the individuals responsible for the preparation of the Company’s filings with the Commission and (ii) has disclosed, based on its most recent evaluation prior to the date of this Agreement, to the Company’s outside auditors and the Board of Directors’ audit committee (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that are reasonably likely to materially adversely affect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed or furnished prior to the date hereof: (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP and (C) liabilities under the Transaction Documents, the RBL Credit Agreement and the Second Lien Credit Agreement and (iii) the Company has not altered its methods of accounting.
(j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the Knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any Governmental Entity (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or (ii) if adversely determined, would reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof (in his or her capacity as a director or officer of the Company), is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the Knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or, to the Knowledge of the Company, former director or officer of the Company (in his or her capacity as a director or officer of the Company). The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act.
(k) Labor Relations. No strike, concerted refusal to work or other similar material labor dispute exists or, to the Knowledge of the Company, is imminent with respect to any of the employees of the Company. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement. To the Knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or noncompetition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in material compliance with all Laws relating to employment and employment practices, terms and conditions of employment and wages and hours. There are no material Actions against the Company pending, or to the Knowledge of the Company, threatened to be filed in connection with the employment of any employee of the Company or any of its Subsidiaries.
(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (except as provided in the RBL Amendment, whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any Governmental Entity or (iii) is or has been in violation of any Laws, except, in each case, as would not reasonably be expected to have a Material Adverse Effect.
(m) ▇▇▇▇▇▇▇▇-▇▇▇▇▇. The Company, the Subsidiaries and the Company’s officers and directors (in their capacity as such) are in material compliance with any and all applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof.
(n) Regulatory Permits. Except as would not reasonably be expected to have a Material Adverse Effect, (i) the Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate Governmental Entity necessary to conduct their respective businesses as described in the SEC Reports and have fulfilled and performed all of their respective obligations with respect to such certificates, authorizations and permits and (ii) no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or result in any other impairment of the rights of the holder of such certificates, authorizations and permits.
(o) Title to Assets. The Company and the Subsidiaries have generally satisfactory title to all of their interests in producing oil and gas properties and to all of their material interests in non-producing oil and gas properties, in each case free and clear of all Liens, except for Liens created under or expressly permitted by the RBL Credit Agreement and the Second Lien Credit Agreement.
(p) Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all trademarks, service marks, trade names, trade secrets, information, copyrights, and other intellectual property rights and similar rights material to its business as presently conducted (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim that the Intellectual Property Rights violate the intellectual property rights of any Person. To the Knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.
(q) Insurance. Each of the Company and its Subsidiaries carry, or are covered by, insurance from insurers of recognized financial responsibility in such amounts and covering such risks as is reasonably adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries. All material policies of insurance of the Company and its Subsidiaries are in full force and effect; the Company and its Subsidiaries are in compliance with the terms of such policies in all material respects; there are no material claims by the Company or any of its Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and none of the Company or any of its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(r) Related Party Transactions. Since December 31, 2015, neither the Company nor any of its Subsidiaries has entered into (i) any transaction required to be disclosed in SEC Reports prior to the date hereof pursuant to Item 404 of Regulation S-K promulgated by the Commission that has not been so disclosed or (ii) any related party transaction subject to the Company’s related party transactions policy that has not been approved in accordance with such policy.
(s) [Reserved].
(t) Private Placement. Assuming the accuracy of the Värde Parties’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the issue of the Exchanged Shares or the issue of the Underlying Shares by the Company to the Värde Parties as contemplated hereby. The issuance of the Exchanged Shares hereunder does not, and the issuance of the Underlying Shares will not, contravene the rules and regulations of the NYSE American.
(u) Investment Company. The Company is not, and immediately after the issuance of the Exchanged Shares will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
(v) Registration Rights. Except as set forth on Schedule 3.1(v), no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary. The Company has not granted registration rights to any Person other than the Värde Parties that would provide such Person priority over the Värde Parties’ rights with respect to any registration pursuant to the Registration Rights Agreement.
(w) Registration and Transfer Requirements. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is listed on NYSE American and the Company has not taken (and, to the Knowledge of the Company, no Person has taken) any action designed to, or which to the Knowledge of the Company, is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating (or seeking to terminate) such registration or listing. No notice of delinquency or delisting from the NYSE American has been received by the Company with respect to the Common Stock. The Exchanged Common Shares and a number of Underlying Shares at least equal to the Required Minimum have been approved, subject to official notice of issuance, for listing on the NYSE American.
(x) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation (or similar charter documents) or the laws of its state of incorporation (including the “acquisition of controlling interest” statutes codified in Nevada Revised Statutes 78.378 through 78.3793, inclusive, and the “combinations with interested stockholders” statutes codified in Nevada Revised Statutes 78.411 through 78.444, inclusive) that is or could become applicable to the Värde Parties as a result of the Värde Parties and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Securities and the Värde Parties’ ownership of the Securities.
(y) No Integrated Offering. Assuming the accuracy of the Värde Parties’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act or (ii) any applicable stockholder approval provisions of the NYSE American.
(z) Tax Status. The Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all other material Tax Returns, reports and declarations required by any jurisdiction to which it is subject and (ii) has paid all Taxes and other governmental assessments and charges that are material in amount or shown or determined to be due on such Tax Returns, reports and declarations, except those being contested in good faith by appropriate proceedings and for which the Company or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP.
(aa) ERISA. No ERISA Event has occurred or is reasonably expected to occur that could reasonably be expected to result in a Material Adverse Effect.
(bb) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising (as those terms are used in Regulation D promulgated under the Securities Act).
(cc) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the Knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any Person acting on its behalf of which the Company is aware) which is in violation of law; or (iv) violated in any material respect any provision of FCPA.
(dd) Acknowledgment Regarding Värde Parties’ Acquisition of Securities. The Company acknowledges and agrees that each of the Värde Parties is acting solely in the capacity of an arm’s length acquirer with respect to the Securities. The Company further acknowledges that no Värde Party is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by any Värde Party or any of their respective Representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the transactions contemplated hereby and thereby. The Company further represents to each Värde Party that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its Representatives. The Company acknowledges and agrees that no Värde Party makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
(ee) Regulation M Compliance. The Company has not, and to the Knowledge of the Company, no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, or (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of any of the Securities.
(ff) Stock Option Plans. To the Knowledge of the Company, each stock option granted by the Company under the 2016 Plan was granted (i) in accordance with the terms of the 2016 Plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. To the Knowledge of the Company, no stock option granted under the 2016 Plan has been backdated. To the Knowledge of the Company, the Company has not intentionally granted, and there is no and has been no Company policy or practice to intentionally grant, stock options under the 2016 Plan prior to, or otherwise intentionally coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.
(gg) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(hh) Environmental Matters.
(i) Except as would not reasonably be expected to have a Material Adverse Effect, the Company and its Subsidiaries (i) for the last 5 years have been and are in compliance with all Environmental Laws, which compliance includes and has included obtaining, maintaining and complying with any permit, license, authorization or other approval required under any Environmental Law, (ii) have not incurred, assumed, provided an indemnity with respect to, or otherwise become subject to any Environmental Liability of any other Person and (iii) have not received any notice, report, order, directive or other information regarding any actual or alleged violation of or liability under Environmental Laws, and are not subject to any pending or, to the Knowledge of the Company, threatened proceedings arising under Environmental Laws, in each case the subject matter of which is unresolved.
(ii) Except as would not reasonably be expected to have a Material Adverse Effect, neither the Company nor any Subsidiary has treated, stored, released, discharged, disposed of, arranged for or permitted the disposal of, transported, handled, manufactured, distributed, or exposed any Person to, or owned or operated any property or facility which is or has been contaminated by, any Hazardous Materials, in each case so as to give rise to any Environmental Liability of the Company or its Subsidiaries.
(ii) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the Knowledge of the Company or any Subsidiary, threatened.
Except for the representations and warranties made by the Company in this Section 3.1, neither the Company nor any other Person makes any express or implied representation or warranty with respect to the Company or any Subsidiaries or their respective businesses, operations, assets liabilities, condition or prospects, and the Company hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither the Company nor any other Person makes or has made any representation or warranty to the Värde Parties, or any of their respective Affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospect information relating to the Company or any of its Subsidiaries or their respective business, or (ii) except for the representations and warranties made by the Company in this Section 3.1 and the certificate delivered pursuant to Section 2.2(a)(xi), any oral or written information presented to the Värde Parties, or any of their respective Affiliates or representatives, in the course of their due diligence investigation of the Company, the negotiation of this Agreement or in the course of the transactions contemplated hereby. Notwithstanding anything to the contrary herein, nothing in this Agreement shall limit the right of the Värde Parties to rely on the representations, warranties, covenants and agreements made to the Värde Parties expressly set forth in the Transaction Documents or in any certificate delivered hereunder or thereunder.
3.2 Representations and Warranties of the Värde Parties. Each Värde Party, for itself and for no other Värde Party, hereby represents and warrants to the Company, as of the date hereof and as of the Closing Date, that:
(a) Organization; Authority. Such Värde Party is an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Värde Party of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Värde Party. The Transaction Documents to which such Värde Party is a party have been duly executed by such Värde Party and, when delivered by such Värde Party in accordance with the terms hereof, will constitute the valid and legally binding obligations of such Värde Party, enforceable against it in accordance with their terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).
(b) Own Account. Such Värde Party understands that the Securities are “restricted securities,” as defined in Section (a)(3) of Rule 144 of the Securities Act, and have not been registered under the Securities Act or any applicable state securities law and such Värde Party is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling the Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of the Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other Persons to distribute or regarding the distribution of the Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Värde Party’s right to sell the shares of the Preferred Stock pursuant to a Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Värde Party is acquiring the Securities hereunder in the ordinary course of its business.
(c) Värde Party Status. At the time such Värde Party was offered the Securities, it was, and as of the date hereof it is, an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act.
(d) Access to Information. Such Värde Party acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, Representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.
(e) Experience of Such Värde Party. Such Värde Party, either alone or together with its Representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Värde Party is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(f) General Solicitation. Such Värde Party is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.
ARTICLE IV.
CONSENT OF THE SERIES C-1, SERIES C-2 AND SERIES D HOLDERS
CONSENT OF THE SERIES C-1, SERIES C-2 AND SERIES D HOLDERS
4.1 Ownership. The Värde Parties hereby represent and warrant to the Company that, as of the date hereof, they currently own a majority of the outstanding shares of each of the Series C-1 Preferred Stock, the Series C-2 Preferred Stock and the Series D Preferred Stock.
4.2 Consent. The Värde Parties, in their capacity as holders of a majority of the outstanding shares of each of the Series C-1 Preferred Stock, the Series C-2 Preferred Stock and the Series D Preferred Stock, hereby consent to (i) the issuance by the Company of the Exchanged Preferred Shares, (ii) the amendment and restatement of the Series C Certificate of Designation as set forth in the A&R Series C Certificate of Designation and the filing of the A&R Series C Certificate of Designation with the Secretary of State of the State of Nevada, (iii) the amendment and restatement of the Series D Certificate of Designation as set forth in the A&R Series D Certificate of Designation and the filing of the A&R Series D Certificate of Designation with the Secretary of State of the State of Nevada, (iv) the filing of the Series E Certificate of Designation with the Secretary of State of the State of Nevada, (v) the filing of the Series F Certificate of Designation with the Secretary of State of the State of Nevada, and (vi) the increase in the number of directors constituting the entire Board of Directors contemplated by Section 5.13 of this Agreement.
ARTICLE V.
OTHER AGREEMENTS OF THE PARTIES
OTHER AGREEMENTS OF THE PARTIES
5.1 Filings; Other Actions. Following the execution of this Agreement, the Värde Parties, on the one hand, and the Company, on the other hand, will cooperate and consult with the other and use commercially reasonable efforts to prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to obtain all necessary permits, consents, orders, approvals and authorizations of, or any exemption by, all third parties and Governmental Entities, and the expiration or termination of any applicable waiting period, necessary or advisable to consummate the transactions contemplated by this Agreement, and to perform the covenants contemplated by this Agreement. Each party shall execute and deliver such further certificates, agreements and other documents and take such other actions as the other parties may reasonably request to consummate or implement such transactions or to evidence such events or matters. Each party hereto agrees to keep the other party apprised of the status of matters referred to in this Section 5.1. The Värde Parties shall promptly furnish the Company, and the Company shall promptly furnish the Värde Parties, to the extent permitted by applicable Law, with copies of written communications received by it or its Subsidiaries from, or delivered by any of the foregoing to, any Governmental Entity in respect of the transactions contemplated by this Agreement.
5.2 Transfer Restrictions.
(a) Prior to September 5, 2019, without the consent of the Company, no Värde Party may transfer any of the Exchanged Common Shares other than to an affiliate of such Värde Party or in connection with a business combination transaction involving the Company. After September 5, 2019, the Exchanged Common Shares shall be unrestricted and freely transferable, subject to applicable securities laws binding on such Värde Party or transfer. No Värde Party may transfer any of the Exchanged Preferred Shares or the Underlying Shares except in accordance with the terms of the Certificates of Designation. Any purported transfer of any shares of the Securities in violation of this Section 5.2 or the Certificates of Designation shall be void ab initio, neither the Company nor such Värde Party shall recognize the same and the Company shall not record such purported transfer on its books or treat the purported transferee as the owner of any such Securities for any purpose.
(b) Subject to Section 5.2(d), certificates and book-entry notations representing shares of the Securities will bear a legend conspicuously thereon in accordance with Nevada Revised Statutes 78.242, as provided in the Certificates of Designation, or, with respect to the Common Shares, a substantially similar legend with appropriate modifications.
(c) The Company acknowledges and agrees that a Värde Party may from time to time pledge or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the Registration Rights Agreement and, if required under the terms of such arrangement, such Värde Party may transfer pledged or secured shares of the Securities to the pledgees or secured parties. Such a pledge or transfer will not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or ▇▇▇▇▇▇▇ shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Värde Party’s expense, the Company shall reasonably cooperate with the Värde Party in connection with such pledge or transfer and will execute and deliver such reasonable documentation as a pledgee secured party of the Securities may reasonably request in connection with a transfer of the Securities.
(d) Subject to the limitations set forth below, certificates evidencing the Common Shares shall not contain any legend (except in respect of the restrictions set forth in Section 5.2(a) or in Section 13(a) of the Series E Certificate of Designation, as relevant): (i) while a Registration Statement covering the resale of such Common Shares is effective under the Securities Act, (ii) following any sale of such Common Shares pursuant to Rule 144 or (iii) if such Common Shares are held by a Person who is not, and has not been for the preceding 90 days, an Affiliate of the Company and such Common Shares are eligible for sale under Rule 144 without restriction and, in the case of this clause (iii), the Company’s counsel (upon receipt of requested certifications from the holder of such Common Shares) has delivered an opinion of counsel in form and substance reasonably acceptable to the Transfer Agent if so requested by the Transfer Agent. The Company agrees that at such time as such legend is no longer required under clause (i), (ii) or (iii) of the first sentence of this Section 5.2(d), it will, no later than five Trading Days following the delivery by a Värde Party to the Company or the Transfer Agent of a certificate representing Common Shares, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Värde Party a certificate representing such shares that is free from all restrictive and other legends (except in respect of the restrictions set forth in Section 5.2(a) or in Section 13(a) of the Series E Certificate of Designation, as relevant).
(e) In connection with Section 5.2(d), each Värde Party, severally and not jointly with the other Värde Parties, understands and hereby acknowledges that in order for Rule 144 to be applicable to the sale of the Common Shares, the Company must be current with respect to its filing obligations under the Exchange Act at the time of such sale. Each Värde Party further understands and hereby acknowledges that any legal opinion given by the Company’s counsel in connection with Section 5.2(d) may be limited as to scope and in particular may expire or be withdrawn in the event that the requirements of Rule 144 are not satisfied, including if the Company is not in compliance with the current public information requirement of Rule 144. Finally, each Värde Party understands and hereby acknowledges that the Company and its legal counsel will rely on such Värde Party’s understanding and agreement in connection with the issuance of the legal opinion and removal of the legends from the Common Shares in accordance with Section 5.2(d), and that it is each Värde Party’s sole responsibility to confirm with the Company at the time of any sale of Common Shares that the current public information requirement set forth in Rule 144 has been met.
(f) In addition to such Värde Party’s other available remedies, the Company shall pay to a Värde Party, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Common Shares (based on the VWAP of the Common Stock on the date such Common Shares are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 5.2(d) and (e), $5 per Trading Day for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend (except in respect of the restrictions set forth in Section 5.2(a) or in Section 13(a) of the Series E Certificate of Designation, as applicable). Nothing herein shall limit such Värde Party’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Värde Party shall have the right to pursue all remedies available to it at law or in equity, including, without limitation, a decree of specific performance or injunctive relief.
(g) Each Värde Party, severally and not jointly with the other Värde Parties, agrees with the Company that such Värde Party shall sell any of the Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom and that, if any of the Securities are sold pursuant to a Registration Statement, such of the Securities shall be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing the Securities as set forth in this Section 5.2 is predicated, in part, upon the Company’s reliance upon this understanding.
5.3 Furnishing of Information. Without limitation of any information delivery requirements set forth in the Securities Purchase Agreement or the Certificates of Designation, as applicable, if, at any time while the Värde Parties and their Affiliates beneficially own at least 10% of the outstanding shares of the Common Stock, the Company is not required to file reports under Section 13(a) or 15(d) of the Exchange Act, the Company shall provide to each Värde Party who, together with its Affiliates, beneficially owns at least 10% of the outstanding shares of the Common Stock:
(a) quarterly unaudited financial statements prepared in accordance with GAAP within 45 days after the end of each fiscal quarter, in each case, in form and substance acceptable to the Värde Parties (by action of the Värde Parties who, together with their Affiliates, beneficially own a majority of the Underlying Shares held by the Värde Parties);
(b) audited annual financial statements prepared in accordance with GAAP within 90 days after the end of each fiscal year of the Company (certified by an independent accounting firm of national standing); and
(c) annually, within 90 days after the end of the fiscal year, a reserve report prepared or audited by a third party engineering firm of national standing in accordance with Commission guidelines with an “as of” date of December 31 of the preceding calendar year.
5.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Exchanged Shares in a manner that would require the registration under the Securities Act of the sale of the Exchanged Shares or that would be integrated with the offer or sale of the Exchanged Shares for purposes of the rules and regulations of any Trading Market such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.
5.5 Securities Laws Disclosure; Publicity. The Company shall (a) by 9:30 a.m. (New York City time) on the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act. The Company and each Värde Party shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Värde Party shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Värde Party, or without the prior consent of each Värde Party, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by Law; provided, that no party shall be required to seek the consent of any other party to this Agreement to disclose information with respect to the transactions contemplated hereby that has previously been publicly disclosed in accordance with this Section 5.5.
5.6 Stockholder Rights Plan. No claim shall be made or enforced by the Company or, with the consent of the Company, any other Person, that any Värde Party is an “acquiring person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Värde Party could be deemed to trigger the provisions of any such plan or arrangement, in each case, solely by virtue of receiving Securities under the Transaction Documents.
5.7 Standstill. Until the applicable Standstill Termination Date, each Värde Party agrees that such Värde Party and its Affiliates who hold any shares of Preferred Stock, any Common Shares or any shares of Common Stock issued pursuant to the October Transaction Agreement will not, except as expressly approved or invited in writing by the Board of Directors, directly or indirectly, through their subsidiaries, Affiliates or any other Persons, or in concert with any Person, or as part of a group that is deemed to be a “person” under Section 13(d)(3) of the Exchange Act:acquire or offer or agree to acquire, by purchase or otherwise, any ownership, including, but not limited to, beneficial ownership (as defined in Rule 13d-3 under the Exchange Act), of any shares of Common Stock or other voting securities of the Company, or any securities or other rights exercisable or exchangeable for or convertible into shares of Common Stock or other voting securities of the Company, other than (i) the acquisition of the Exchanged Shares pursuant to this Agreement, (ii) the acquisition of the Underlying Shares upon any conversion of the Exchanged Series E Shares or upon payment of any dividends thereon, any increase of the liquidation preference or convertible amount with respect to the Preferred Stock or any adjustments to the conversion price or conversion ratio or (iv) receiving any shares of securities generally distributed by the Company or an acquirer or target of the Company to holders of Common Stock or Preferred Stock;
(a) make or participate in any solicitation of proxies (as such term is defined in Rule 14a-1 under the Exchange Act) or consents, whether or not such solicitation is exempt under Rule 14a-2 under the Exchange Act, with respect to any matter from any holder of shares of Common Stock or other voting securities of the Company, or any securities exercisable or exchangeable for or convertible into shares of Common Stock or other voting securities of the Company, or make any communication exempted from the definition of solicitation by Rule 14a-1(1)(2)(iv) under the Exchange Act (other than communications in the ordinary course of business on a confidential basis among such Värde Party and its Affiliates);
(b) other than through the Company or Board of Directors, call or request any special meeting of holders of Common Stock or other voting securities of the Company or submit or propose the submission of any matter to a vote of the holders of Common Stock or other voting securities of the Company;
(c) other than through the Company or Board of Directors, effect or agree, offer, seek or propose to effect any business combination, merger, tender offer, sale or acquisition of substantially all of the assets, restructuring, recapitalization, liquidation, dissolution or other extraordinary transaction involving the Company or any of its Subsidiaries;
(d) otherwise seek or propose to influence, control or change the Board of Directors, management, policies, affairs, strategy or organizational documents of the Company or any of its Subsidiaries by way of any public communication or other broadly disseminated communication to holders of Common Stock or other voting securities of the Company;
(e) enter into any discussions, negotiations, agreements, arrangements or understandings with, or intentionally assist, advise or encourage, any other Person with respect to any matter described in the foregoing clauses (a) through (e) of this Section 5.7;
(f) intentionally take any action that would reasonably be expected to cause or require the Company or such Värde Party or any of its Affiliates to make any public announcement or other public disclosure with respect to any of the matters described in this Section 5.7;
(g) intentionally publicly disclose any intention, plan or arrangement inconsistent with any provision of this Section 5.7; or
(h) without limitation of Section 5.7(a), acquire or offer or agree to acquire, by purchase or otherwise, any ownership, including, but not limited to, beneficial ownership (as defined in Rule 13d-3 under the Exchange Act), of any shares of Common Stock or other voting securities of the Company, or any securities or other rights exercisable or exchangeable for or convertible into shares of Common Stock or other voting securities of the Company, in each case, that would result in the Värde Parties and their Affiliates collectively owning, beneficially or otherwise, greater than 50% of the outstanding shares of Common Stock, other than (i) the acquisition of the Exchanged Shares pursuant to this Agreement, (ii) the acquisition of the Underlying Shares upon any conversion of the Exchanged Series E Shares or upon payment of any dividends thereon, any increase of the liquidation preference or convertible amount with respect to the Preferred Stock or any adjustments to the conversion price or conversion ratio or (iv) receiving any shares of securities generally distributed by the Company or an acquirer or target of the Company to holders of Common Stock or Preferred Stock;
provided, however, that nothing in this Section 5.7 will limit (i) any Värde Party’s ability to vote or, subject to the other restrictions set forth herein and in the Certificates of Designation, the October Transaction Agreement and the Securities Purchase Agreement, transfer its Securities or any shares of Preferred Stock or Common Stock issued pursuant to the October Transaction Agreement or the Securities Purchase Agreement or otherwise exercise its rights under this Agreement, the Certificates of Designation, the October Transaction Agreement or the Securities Purchase Agreement, (ii) the ability of any director designated by the Värde Parties pursuant to this Agreement or the Certificates of Designation to vote, exercise his or her fiduciary duties as or otherwise fully participate as a member of the Board of Directors, (iii) the ability of the Värde Parties to assert or protect their rights as a stockholder of the Company in the event of the commencement of any bankruptcy or similar proceeding or assignment for the benefit of creditors involving the Company or (iv) the ability of the Värde Parties to exercise their rights to appoint, remove or cause the resignation of directors pursuant to this Agreement and the Certificates of Designation.
In the event that, prior to the Standstill Termination Date applicable to Section 5.7(i), any Värde Party or its Affiliate makes any acquisition of securities of the Company that is permitted under Section 5.7(i) (other an acquisition described in clauses (i)-(iv) of Section 5.7(i)), such Värde Party shall give (or shall cause its Affiliate to give) notice to the Company of such acquisition, including the number and type of securities acquired, no later than the first Business Day after the date of such acquisition.
Notwithstanding the foregoing, in the case of a Värde Party that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Värde Party’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Värde Party’s assets and barriers are in place to prevent such portfolio managers from obtaining such knowledge, the covenant set forth in Section 5.7(a) shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the securities covered by this Agreement, the October Transaction Agreement or the Securities Purchase Agreement; provided, that such assets managed by other managers not subject to such covenant does not exceed 1% of the Common Stock then issued and outstanding.
The parties agree that the covenants and other terms of Section 4.2 of the Securities Purchase Agreement are hereby superseded in their entirety from and after the Closing by the foregoing provisions this Section 5.7.
5.8 Reservation and Listing of Securities.
(a) At any time that shares of the Series E Preferred Stock are outstanding, the Company shall from time to time take all lawful action within its control to cause the authorized capital stock of the corporation to include a sufficient number of authorized but unissued shares of the Common Stock to satisfy the conversion requirements for all shares of the Series E Preferred Stock then outstanding, or issuable as a dividend, including by accretion to the Stated Value of, or accrued but unpaid dividends with respect to, such shares of Series E Preferred Stock (assuming for the purposes of this calculation that the Requisite Stockholder Approval has been obtained).
(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of the Common Stock is less than the Required Minimum on such date, the Company shall take all lawful action to amend the Articles of Incorporation to increase the number of authorized but unissued (and otherwise unreserved) shares of the Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 90th day after such date; provided, that the Company will not be required at any time to authorize a number of additional shares of the Common Stock greater than the maximum remaining number of shares of the Common Stock that could possibly be issued after such time pursuant to the Series E Certificate of Designation.
(c) The Company hereby agrees to use reasonable best efforts to maintain the listing of the Common Stock on the NYSE American or another Trading Market. The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market or as may be otherwise necessary to permit the conversion of all outstanding shares of the Series E Preferred Stock, prepare and file with such Trading Market an additional shares listing application covering a number of shares of the Common Stock at least equal to the Required Minimum on the date of each such application; (ii) take all steps necessary to cause such shares of the Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter; and (iii) provide to the Värde Parties evidence of such listing or quotation. The Company agrees to use reasonable best efforts to maintain the eligibility of the Common Stock for electronic transfer through The Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to The Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
(d) The Company agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application the applicable number of Underlying Shares specified in clause (i) of Section 5.8(c), and will take such other action as is necessary to cause such Underlying Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company will then use reasonable best efforts to continue the listing or quotation and trading of its Common Stock on a Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.
(e) The Company agrees that, if any shares of the Common Stock to be provided for the purpose of the conversion of the Series E Preferred Stock require registration with or approval of any Governmental Entity under any Law before such shares of the Common Stock may be validly issued upon conversion, the Company will use commercially reasonable efforts to secure such registration or approval, as the case may be.
5.9 Company Stockholder Approval. The Company agrees to use commercially reasonable efforts to obtain, at the next annual meeting of the Company Stockholders (at which a quorum is present) (the “Stockholder Meeting”), the approval by the Company Stockholders of the conversion of all Exchanged Series E Shares issued or issuable pursuant to this Agreement (assuming the maximum conversion rate as set forth in the Series E Certificate of Designation and that the Company elects to pay dividends in kind or otherwise accrues to Stated Value in accordance with the terms of the Series E Certificate of Designation, as applicable) (such approval, the “Requisite Stockholder Approval”) in accordance with the Articles of Incorporation and the bylaws of the Company. The Company will prepare and file with the SEC a proxy statement to be sent to the Company’s stockholders in connection with the Stockholder Meeting (the “Proxy Statement”). Subject to the directors’ fiduciary duties, the Proxy Statement shall include the Board of Directors’ recommendation that the holders of shares of the Common Stock vote in favor of the Requisite Stockholder Approval. Each Värde Party agrees to furnish to the Company information concerning such Värde Party and its Affiliates as the Company, on the advice of outside counsel, reasonably determines is necessary for the Proxy Statement, the Stockholder Meeting or any subsequent proxy solicitation; provided, that the Värde Party shall not be obligated to provide (i) any information subject to confidentiality, non-disclosure, or similar agreements or which cannot be disclosed under applicable Law, (ii) personally identifiable information, (iii) information regarding the limited partners of such Värde Party and (iv) financial information that the Värde Party reasonably deems to be material to its business, as determined in good faith in its sole discretion. The Company shall promptly notify the Värde Parties of (i) the receipt of the Requisite Stockholder Approval or (ii) any projected failure to obtain the Requisite Stockholder Approval.
5.10 Certain Transactions and Confidentiality.
(a) Each Värde Party, severally and not jointly with the other Värde Parties, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it, shall execute any purchases or sales, including short sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 5.5. Each Värde Party, severally and not jointly with the other Värde Parties, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 5.5, such Värde Party shall maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents and the schedules hereto. Notwithstanding the foregoing, in the case of a Värde Party that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Värde Party’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Värde Party’s assets and barriers are in place to prevent such portfolio managers from obtaining such knowledge, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to acquire the Securities covered by this Agreement.
(b) Each Värde Party shall, and shall cause its respective Affiliates and its and their Representatives to, (i) hold, in strict confidence, all non-public records, books, contracts, instruments, computer data and other data and information concerning the Company and its Subsidiaries furnished to it by the Company or its Representatives pursuant to, or in connection with the negotiation of, this Agreement (collectively, “Company Information”) (except to the extent that such Company Information was (A) previously known by such Värde Party from other sources; provided, that such source was not known by such Värde Party to be bound by a contractual, legal or fiduciary obligation of confidentiality to the Company or any of its Subsidiaries, (B) in the public domain through no violation of this Section 5.10(b) by such Värde Party or (C) later lawfully acquired from other sources by such Värde Party), and (ii) not release or disclose such Company Information to any other Person, except its Representatives and financing sources who need to know such Company Information, who are aware of the confidential nature of such Company Information and who have agreed to keep such Company Information strictly confidential. Notwithstanding the foregoing, each Värde Party may disclose Company Information to the extent that (i) disclosure to a regulatory authority is necessary or appropriate in connection with any necessary regulatory approval required to be obtained in connection with the Transaction Documents and the consummation of the transactions contemplated hereby and thereby or (ii) disclosure is required by judicial or administrative process or by other requirement of Law or the applicable requirements of any regulatory agency or relevant stock exchange.
5.11 Form D; Blue Sky Filings. The Company shall timely file a Form D with respect to the Securities if and as required under Regulation D. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Värde Parties under applicable securities or “Blue Sky” laws of the states of the United States.
5.12 Tax Matters.
(a) Absent a change in law or Internal Revenue Service practice, or a contrary determination (as defined in Section 1313(a) of the Code), the Värde Parties and the Company agree not to treat, for United States federal income Tax and withholding Tax purposes, the Preferred Stock (based on the terms of each series of Preferred Stock as set forth in the relevant Certificates of Designation) as “preferred stock” within the meaning of Section 305 of the Code and Treasury Regulation Section 1.305-5, and shall not take any position inconsistent with such treatment except pursuant to a determination within the meaning of Section 1313 of the Code; provided that, in the event Internal Revenue Service or other taxing authority successfully challenges such treatment, then the Värde Parties and the Company shall each be held harmless and shall not be required to indemnify any person for losses incurred due to the successful challenge by the taxing authority of such treatment.
(b) The Company shall pay any and all documentary, stamp or similar issue or transfer Tax due on (x) the issue of the Exchanged Preferred Shares and (y) the issue of the Underlying Shares. However, in the case of conversion of Preferred Stock, the Company shall not be required to pay any Tax or duty that may be payable in respect of any transfer involved in the issue and delivery of the Underlying Shares or shares of the Preferred Stock in a name other than that of the holder of the shares to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such Tax or duty, or has established to the satisfaction of the Company that such Tax or duty has been paid.
(c) For U.S. federal and applicable state income tax purposes, (i) the issuance to the Värde Parties on the terms and subject to the conditions set forth herein and pursuant to the Payoff Letter of (A) 9,891,638 shares of the Common Stock, (B) 60,000 shares of the Series E Preferred Stock and (C) 55,000 shares of the Series F Preferred Stock and (ii) the amendment to the Series C Certificate of Designation, the amendment to the Series D Certificate of Designation and the receipt of the Series C and Series D Exchanged Common Shares, shall be treated by the parties as a “recapitalization” of the Company pursuant to Section 368(a)(1)(E) of the Code except pursuant to a determination within the meaning of Section 1313 of the Code; provided that, in the event that the transactions do not so qualify as a recapitalization, as the result of a successful challenge by the Internal Revenue Service or other taxing authority, then the Company shall be held harmless and shall not be required to indemnify any person for losses incurred due to the failure of the transaction to so qualify or the successful challenge, including the Värde Parties.
5.13 Board Representation Right.
(a) On or prior to the Closing Date, the Board of Directors shall have taken or shall take all actions necessary to increase the number of directors constituting the entire Board of Directors by two directors (to total eleven). The Company shall cause the vacancies created by such increase to be filled by (and shall only be filled by) (i) the person designated by the holders of the Series E Preferred Stock to be the initial Investor Director (as defined in the Series E Certificate of Designation) and (ii) the person designated by the holders of the Series F Preferred Stock to be the initial Investor Director (as defined in the Series F Certificate of Designation), in each case, as and when required under the Series E Certificate of Designation or the Series F Certificate of Designation, as applicable. The parties agree that the rights granted to the Purchasers (as defined in the Securities Purchase Agreement) under Section 4.15 of the Securities Purchase Agreement, and the rights granted to the Värde Parties under Section 5.13 of the October Transaction Agreement are hereby superseded in their entirety by this Section 5.13.
(b) Subject to Section 5.13(c), without limiting the other rights the Värde Parties and their Affiliates may have, from and after the Closing Date and for so long as the Värde Parties and their Affiliates continue to beneficially own (as defined in Rule 13d-3 under the Exchange Act) shares of Common Stock (including the Common Shares) (for purposes of calculating beneficial ownership in this Section 5.13, without regard to limitations based on stockholder approval and giving effect to conversion of the Exchanged Series E Shares, whether or not then convertible) representing at least the applicable percentage of the outstanding shares of Common Stock specified in clauses (i) through (v) below, the Värde Parties (by action of the Värde Parties who, together with their Affiliates, beneficially own a majority of the total number of shares of Common Stock beneficially owned by all of the Värde Parties and their Affiliates, calculated on the basis set forth above (such Värde Parties, the “Värde Party Majority”)) shall have the right (but not the obligation) to designate to the Board of Directors the following number of directors (the “Investor Directors”):
(i) five Investor Directors, for as long as the Värde Parties and their Affiliates beneficially own shares of Common Stock representing at least 40.0% of the outstanding shares of Common Stock;
(ii) four Investor Directors, for as long as the Värde Parties and their Affiliates beneficially own shares of Common Stock representing at least 33.3% of the outstanding shares of Common Stock;
(iii) three Investor Directors, for as long as the Värde Parties and their Affiliates beneficially own shares of Common Stock representing at least 25.0% of the outstanding shares of Common Stock;
(iv) two Investor Directors, for as long as the Värde Parties and their Affiliates beneficially own shares of Common Stock representing at least 10.0% of the outstanding shares of Common Stock; and
(v) one Investor Director, for as long as the Värde Parties and their Affiliates beneficially own shares of Common Stock representing at least 5.0% of the outstanding shares of Common Stock.
(c) Notwithstanding anything herein to the contrary:
(i) during the time that the holders of Preferred Stock of any series are entitled to appoint one or more directors to the Board of Directors pursuant to one or more of the Certificates of Designation, the number of Investor Directors the Värde Parties shall be entitled to designate pursuant to Section 5.13(b) shall be reduced by the total number of directors the holders of the Preferred Stock of all series are then entitled to appoint pursuant to the Certificates of Designation; and
(ii) the number of Investor Directors the Värde Parties shall be entitled to designate pursuant to Section 5.13(b) shall be reduced if, and only to the extent necessary in order to comply with applicable law or Trading Market rules (as directed in writing by the Commission or the Trading Market on which the Common Stock is then listed), so that the percentage of the number of directors constituting the entire Board of Directors represented by the number of Investor Directors does not exceed the percentage of the outstanding shares of Common Stock beneficially owned by the Värde Parties and their Affiliates, calculated as set forth in Section 5.13(b) (rounded up to the nearest whole number of Investor Directors).
(d) Notwithstanding anything herein to the contrary, as long as the Värde Parties and their Affiliates meet the conditions set forth in Sections 5.13(b)(i), 5.13(b)(ii), 5.13(b)(iii), 5.13(b)(iv) or 5.13(b)(v), as applicable, without the prior affirmative vote or prior written consent of a Värde Party Majority, the Company shall not, directly or indirectly (whether by way of amendment to the charter documents of the Company, merger, recapitalization or otherwise), subject to right of the holders of Common Stock to amend the provisions of the bylaws of the Company relating to the number of directors constituting the entire Board of Directors or the manner in which such number of directors is determined (but, for the sake of clarity, without limiting the Värde Parties’ other rights pursuant to this Section 5.13), modify the number of directors constituting the entire the Board of Directors at any time (except as required by Section 5.13(a)); provided, that the Company may increase the number of directors constituting the entire Board of Directors without the consent of a Värde Party Majority if the Värde Parties and their Affiliates are given the right to designate one or more additional Investor Directors as necessary to cause (i) the number of Investor Director(s) the Värde Parties and their Affiliates have the right to designate (subject to Section 5.13(c)) relative to the number of directors constituting the entire Board of Directors to be in the same proportion as (ii) the number of shares of Common Stock beneficially owned by the Värde Parties and their Affiliates relative to the total number of outstanding shares of Common Stock, rounded up or down to the nearest whole number of directors.
(e) The Company shall take all actions within its power to cause all designees designated pursuant to Section 5.13(b) to be appointed or elected to the Board of Directors, including (i) causing such designees to be included in the slate of nominees recommended by the Board of Directors to the holders of Common Stock for election as directors at each meeting of the Company Stockholders called for the purpose of electing directors (and/or in connection with any election by written consent), (ii) soliciting proxies in favor of the election of such nominees, (ii) seeking the adoption of stockholders’ resolutions and amendments to the organizational documents of the Company, (iii) executing required agreements and instruments, (iv) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result and (v) for so long as the Värde Parties retain the rights described under Section 5.13(b), not nominating or recommending the election of any other candidates against or in replacement of such designated Investor Directors.
(f) Each Investor Director designated pursuant to Section 5.13(b) shall serve until his or her successor is designated or his or her earlier death, disability, resignation or removal. Any vacancy or newly created directorship in the position of an Investor Director while the Värde Parties have the right to appoint such Investor Director pursuant to Section 5.13(b) may be filled by the Board of Directors only with an individual designated by the Värde Party Majority, subject to the fulfillment of the requirements set forth in Section 5.13(h). While the Värde Parties have the right to appoint any Investor Director pursuant to Section 5.13(b), the Värde Parties, by and only by a Värde Party Majority, shall have the right to, at any time, with or without cause (i) cause such Investor Director to resign from his or her directorship, and (ii) appoint a replacement Investor Director to fill the vacancy resulting from such resignation, subject to the fulfillment of the requirements set forth in Section 5.13(h). Any Investor Director appointed pursuant to Section 5.13(b) shall be deemed to have agreed to resign from his or her directorship (and the Company shall recognize such resignation) upon exercise of the Värde Parties’ rights set forth in the immediately preceding sentence if such Investor Director shall have previously delivered to the Company a written letter of resignation stating that such Investor Director resigns his or her directorship effective upon any exercise of the Värde Parties’ rights set forth in the immediately preceding sentence.
(g) At all times while an Investor Director is serving as a member or observer of the Board of Directors, and following any such Investor Director’s death, disability, resignation or removal, such Investor Director shall be entitled to all rights to indemnification and exculpation as are then made available to any other member or observer of the Board of Directors.
(h) Notwithstanding anything to the contrary, any Investor Director shall be reasonably acceptable to the Board of Directors and the Nominating and Corporate Governance Committee thereof acting in good faith (provided, that, for the avoidance of doubt, any investment professional of Värde Partners, Inc. or its Affiliates shall be deemed reasonably acceptable) and satisfy all applicable Commission and stock exchange requirements regarding service as a regular director of the Company and shall comply in all material respects with the Company’s corporate governance guidelines as in effect from time to time.
(i) Without limiting the Certificates of Designation, the right to designate an Investor Director pursuant to Section 5.13(b) shall automatically terminate at such time as the Värde Parties and their Affiliates no longer meet the conditions set forth in Sections 5.13(b)(i), 5.13(b)(ii), 5.13(b)(iii), 5.13(b)(iv) or 5.13(b)(v), as applicable, and at such time, if requested in writing by the Company, any Investor Directors then serving on the Board of Directors in excess of the entitled amount (if less than all then Investor Directors, then as selected by the Värde Party Majority) shall promptly resign from the Board of Directors. For the avoidance of doubt, any such Investor Director shall not be required to resign from the Board of Directors pursuant to this Section 5.13(i) if such individual has then currently been appointed or designated as a director of the Company pursuant to a right to appoint or designate a director that is then in effect under another agreement with the Company or the Certificates of Designation, but such individual will no longer be an Investor Director under this Agreement.
(j) To the fullest extent permitted by applicable law, the Company, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Company and its subsidiaries in, or in being offered an opportunity to participate in, any business opportunities that are from time to time presented to the Värde Parties or any of their respective affiliates or any of their respective agents, shareholders, members, partners, directors, officers, employees, investment managers, investment advisors, affiliates or subsidiaries (other than the Company and its subsidiaries), including any director or officer of the Company who is also an agent, shareholder, member, partner, director, officer, employee, investment managers, investment advisors, affiliate or subsidiary of any Värde Party (each, a “Specified Party”), even if the business opportunity is one that the Company or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and no Specified Party shall have any duty to communicate or offer any such business opportunity to the Company or be liable to the Company or any of its subsidiaries or any stockholder, including for breach of any fiduciary or other duty, as a director or officer or controlling stockholder or otherwise, and the Company shall indemnify each Specified Party against any claim that such person is liable to the Company or its stockholders for breach of any fiduciary duty, by reason of the fact that such person (i) participates in, pursues or acquires any such business opportunity, (ii) directs any such business opportunity to another person or (iii) fails to present any such business opportunity, or information regarding any such business opportunity, to the Company or its subsidiaries, unless, in the case of a Person who is a director or officer of the Company, such business opportunity is expressly offered to such director or officer in writing solely in his or her capacity as a director or officer of the Company.
(k) The parties agree that, as of the Closing Date, (i) the members of the Board of Directors designated or appointed pursuant to this Section 5.13 and the Certificates of Designation shall be the individuals listed on Schedule 5.13, and (ii) each such individual shall be deemed to have been designated or appointed to the Board of Directors pursuant to this Section 5.13 or the applicable Certificate of Designation as specified for such individual on Schedule 5.13.
ARTICLE VI.
MISCELLANEOUS
MISCELLANEOUS
6.1 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary (including with respect to the Värde Parties’ Transaction Expense Amount), each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all fees of the Transfer Agent (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any conversion or exercise notice delivered by a Värde Party) levied in connection with the delivery of any Securities to the Värde Parties. Further, for the avoidance of doubt, the Company shall be responsible for the fees, commissions and expenses of brokers, financial advisors, finders, placement agents, investment banks or similar Persons engaged (or purportedly engaged) by the Company or its Subsidiaries with respect to the offer and sale or issue of any of the Securities.
6.2 Survival; Limitation on Liability. The representations and warranties of the parties contained in this Agreement shall survive until the first anniversary of the date hereof, except for (i) the representations and warranties of the Company contained in Sections 3.1(b)(i), 3.1(c), 3.1(d), 3.1(f), 3.1(g), 3.1(u) and 3.1(w) and (ii) the representations and warranties of the Värde Parties contained in Sections 3.2(a), 3.2(b) and 3.2(c), which will survive indefinitely and (iii) the representations and warranties of the Company contained in Section 3.1(z), which will survive until 30 days after the expiration of the applicable statute of limitations. All of the covenants or other agreements of the parties contained in this Agreement shall survive until fully performed or fulfilled, unless and to the extent that non-compliance with such covenants or agreements is waived in writing by the party entitled to such performance. The Company shall not be liable hereunder to the Värde Party or any other Person for any punitive, exemplary, treble, special, indirect, incidental or consequential damages (including any loss of earnings or profits), except for any such damages that are direct damages in the form of diminution of value or payable to a third-party.
6.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
6.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission (if there is no receipt of notice of a failed delivery to the notice party), if such notice or communication is delivered e-mail attachment as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (Houston, Texas time) on a Business Day, (b) the next Business Day after the date of transmission (if there is no receipt of notice of a failed delivery to the notice party), if such notice or communication is delivered via e-mail attachment as set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (Houston, Texas time) on any Business Day, (c) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The initial address for such notices and communications shall be as set forth on Schedule 6.4 attached hereto; provided, that a party may update its address by notice duly given to the other parties.
6.5 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Värde Parties holding at least a majority in interest of the Securities held by such Värde Parties then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner be deemed to impair the exercise of any such right.
6.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
6.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company shall not assign this Agreement or any rights or obligations hereunder (other than by merger) without the prior written consent of each Värde Party. No Värde Party may assign this Agreement or any rights or obligations hereunder to any Person without the prior written consent of the Company, except that a Värde Party may assign any or all of its rights hereunder to (i) an Affiliate of such Värde Party or (ii) following April 26, 2021, to any Person, in each case, to which such Värde Party transfers any Securities in accordance with the Transaction Documents; provided, that (x) such transferee or Affiliate agrees with the Company in writing to be bound by the provisions of the Transaction Documents that apply to the Värde Parties, (y) no such assignment by a Värde Party shall relieve such Värde Party of its obligations hereunder without the prior written consent of the Company and (z) the Värde Parties’ rights under Section 5.13 may not be assigned pursuant to clause (ii) above unless such assignment has been approved by a majority of the members of the Board of Directors.
6.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 6.15.
6.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by the Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts in the state and federal courts, sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service will constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party commences an action, suit or proceeding to enforce any provisions of the Transaction Documents, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
6.10 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
6.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf signature page were an original thereof.
6.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
6.13 Replacement of Securities. If any certificate or instrument evidencing any of the Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such new certificate or instrument.
6.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Värde Parties and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
6.15 Non-Recourse. Notwithstanding anything that may be expressed or implied in this Agreement or any document, agreement, or instrument delivered contemporaneously herewith, and notwithstanding the fact that any party may be a partnership or limited liability company, each party hereto, by its acceptance of the benefits of the Transaction Documents, covenants, agrees and acknowledges that no Persons other than the parties shall have any obligation hereunder and that it has no rights of recovery hereunder against, and no recourse hereunder or under any documents, agreements, or instruments delivered contemporaneously herewith or in respect of any oral representations made or alleged to be made in connection herewith or therewith shall be had against, any former, current or future director, officer, agent, Affiliate, manager, investment manager, investment advisor, assignee, incorporator, controlling Person, fiduciary, representative or employee of any party (or any of their successors or permitted assignees), against any former, current, or future general or limited partner, manager, stockholder or member of any party (or any of their successors or permitted assignees) or any Affiliate thereof or against any former, current or future director, officer, agent, employee, Affiliate, manager, investment manager, investment advisor, assignee, incorporator, controlling Person, fiduciary, representative, general or limited partner, stockholder, manager or member of any of the foregoing, but in each case not including the parties, whether by or through attempted piercing of the corporate veil, by or through a claim (whether in tort, contract or otherwise) by or on behalf of such party against such Persons and entities, by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, or otherwise; it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on, or otherwise be incurred by any such Persons, as such, for any obligations of the applicable party under this Agreement or the transactions contemplated hereby, under any documents or instruments delivered contemporaneously herewith, in respect of any oral representations made or alleged to be made in connection herewith or therewith, or for any claim (whether in tort, contract or otherwise) based on, in respect of, or by reason of, such obligations or their creation. Notwithstanding anything in the Transaction Documents to the contrary, the liability of the Värde Parties shall be several, not joint.
6.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Värde Party pursuant to any of the Transaction Documents or a Värde Party enforces or exercises its rights hereunder or thereunder and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
6.17 Independent Nature of Värde Parties’ Obligations and Rights. The obligations of each Värde Party under any of the Transaction Documents are several and not joint with the obligations of any other Värde Party hereunder or thereunder and no Värde Party will be responsible in any way for the performance or non-performance of the obligations of any other Värde Party under any of the Transaction Documents. Nothing contained in the Transaction Documents, and no action taken by any Värde Party pursuant hereto or thereto, shall be deemed to constitute the Värde Parties as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Värde Parties are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Värde Party shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of the Transaction Documents, and it shall not be necessary for any other Värde Party to be joined as an additional party in any proceeding for such purpose.
6.18 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid, notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
6.19 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein is not a Business Day, such action may be taken or such right may be exercised on the next succeeding Business Day.
6.20 Construction and Interpretation.
(a) The term “or” when used in the Agreement is not exclusive, unless the context required otherwise. The parties agree that each of them and their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of the Common Stock in any of the Transaction Documents shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.
(b) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and subsection references are to this Agreement unless otherwise specified. The headings in this Agreement are included for convenience of reference only and will not limit or otherwise affect the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The phrases “the date of this Agreement,” “the date hereof” and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date set forth in the first paragraph of this Agreement. The meanings given to terms defined herein will be equally applicable to both the singular and plural forms of such terms. Except as otherwise specified herein, references to agreements, policies, standards, guidelines or instruments, or to statutes or regulations, are to such agreements, policies, standards, guidelines or instruments, or statutes or regulations, as amended or supplemented from time to time (or to successors thereto).
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President, Chief Financial Officer and Treasurer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGES FOR VÄRDE PARTIES FOLLOW]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
SEVERALLY AND NOT JOINTLY FOR EACH ENTITY LISTED BELOW:
By: /s/ Markus Specks
Name: Markus Specks
Title: Managing Director
THE VÄRDE FUND VI-A, L.P.,
By: Värde Investment Partners G.P., LLC, its General Partner
By: Värde Partners, L.P., its Managing Member
By: Värde Partners, Inc., its General Partner
VÄRDE INVESTMENT PARTNERS, L.P.,
By: Värde Investment Partners G.P., LLC, its General Partner
By: Värde Partners, L.P., its Managing Member
By: Värde Partners, Inc., its General Partner
THE VÄRDE FUND XI (MASTER), L.P.,
By: Värde Fund XI G.P., LLC, its General Partner
By: Värde Partners, L.P., its Managing Member
By: Värde Partners, Inc., its General Partner
VÄRDE INVESTMENT PARTNERS (OFFSHORE) MASTER, L.P.,
By: Värde Investment Partners G.P., LLC, its General Partner
By: Värde Partners, L.P., its Managing Member
By: Värde Partners, Inc., its General Partner
THE VÄRDE SKYWAY FUND, L.P.,
By: The Värde Skyway Fund G.P., LLC, its General Partner
By: Värde Partners, L.P., its Managing Member
By: Värde Partners, Inc., its General Partner
THE VÄRDE SKYWAY MINI-MASTER FUND, L.P.,
By: The Värde Skyway Fund G.P., LLC, its General Partner
By: Värde Partners, L.P., its Managing Member
By: Värde Partners, Inc., its General Partner
THE VÄRDE FUND XII (MASTER), L.P.,
By: The Värde Fund XII G.P., LLC, its General Partner
By: The Värde Fund XII UGP, LLC, its General Partner
By: Värde Partners, L.P., its Managing Member
By: Värde Partners, Inc., its General Partner
Schedule I
Värde Party Allocation
Värde Party | Term Loan Exchanged Common Shares | Exchanged Series E Shares | Exchanged Series F Shares | Term Loan Exchange Amount (pursuant to Payoff Letter) | Series C and Series D Exchanged Common Shares | ||
THE VÄRDE FUND VI-A, L.P. | 296,749 | 1,800 | 1,650 | $4,007,888 | 232,500 | ||
VÄRDE INVESTMENT PARTNERS, L.P. | 672,631 | 4,080 | 3,740 | $9,084,547 | 527,000 | ||
THE VÄRDE FUND XI (MASTER), L.P. | 4,114,922 | 24,960 | 22,880 | $55,576,052 | 3,224,000 | ||
VÄRDE INVESTMENT PARTNERS (OFFSHORE) MASTER, L.P. | 593,498 | 3,600 | 3,300 | $8,015,777 | 465,000 | ||
THE VÄRDE SKYWAY FUND, L.P. | 242,490 | 1,471 | 1,348 | $3,275,061 | 189,988 | ||
THE VÄRDE SKYWAY MINI-MASTER FUND, L.P. | 1,043,423 | 6,329 | 5,802 | $14,092,455 | 817,512 | ||
THE VÄRDE FUND XII (MASTER), L.P. | 2,927,925 | 17,760 | 16,280 | $39,544,499 | 2,294,000 | ||
Total: | 9,891,638 | 60,000 | 55,000 | $133,596,279 | 7,750,000 | ||
Schedule 3.1(a)
Subsidiaries
Brushy Resources, Inc.
ImPetro Resources, LLC
ImPetro Operating, LLC
Lilis Operating Company, LLC
Hurricane Resources, LLC
Schedule 3.1(v)
Registration Rights
Registration Rights Agreement, dated as of February 28, 2017, by and among the Company and the Purchasers party thereto.
Registration Rights Agreement, dated as of April 26, 2017, by and among the Company and the Lenders party thereto.
Registration Rights Agreement, dated as of January 31, 2018, by and among the Company and the Purchasers party thereto.
Registration Rights Agreement, dated as of October 10, 2018, by and among the Company and the Värde Parties party thereto.
The Registration Rights Agreement (as defined herein).
Schedule 5.13
Director Designees/Appointees
Name: | Designated or Appointed Pursuant to: |
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ | Series D Certificate of Designation |
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | Series C Certificate of Designation |
Markus Specks | Series C Certificate of Designation |
Schedule 6.4
Address for Notice
If to the Company:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
with a copy to (which will not constitute notice):
▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. Still, Jr.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
If to the Värde Parties:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Markus Specks
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department
Email: ▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
with a copy to (which will not constitute notice):
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.C.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
Exhibit A
Form of A&R Series C Certificate of Designation
[See Attached.]
Exhibit B
Form of A&R Series D Certificate of Designation
[See Attached.]
Exhibit C
Form of Payoff Letter
[See Attached.]
Exhibit D
Form of Registration Rights Agreement
[See Attached.]
Exhibit E
Form of Series E Certificate of Designation
[See Attached.]
Exhibit F
Form of Series F Certificate of Designation
[See Attached.]
Exhibit G
Form of Legal Opinion of ▇▇▇▇▇▇▇▇▇ LLP
[See Attached.]
Exhibit H
Form of Nevada Opinion
1. The Company is a corporation duly incorporated under the laws of the State and in good standing in the State of Nevada, with the corporate power and authority to conduct its business and own its properties as presently conducted.
2. The execution and delivery to the Värde Parties by the Company of the Transaction Agreement, the Payoff Letter, the Certificates of Designation and the Registration Rights Agreement (collectively, the “Opinion Documents”), the performance by the Company of its obligations thereunder, and the consummation of the transactions contemplated thereby, have been duly authorized by all necessary corporate action by the Company and the Opinion Documents have been duly executed and delivered by the Company.
3. The execution and delivery to the Värde Parties by the Company of the Opinion Documents, the performance by the Company of its obligations thereunder, and the consummation of the transactions contemplated thereby, do not violate any provision of the articles of incorporation or bylaws (together, the “Organizational Documents”) of the Company.
4. The execution and delivery to the Värde Parties by the Company of the Opinion Documents, the performance by the Company of its obligations under each Opinion Document, and the consummation of the transactions contemplated thereby, do not require under Nevada law any filing or registration by the Company with, or approval or consent to the Company of, any governmental agency or authority of the State of Nevada, that has not been made or obtained except that we express no opinion with respect to any securities laws.
5. Issuance of the Exchanged Shares has been duly authorized by all necessary corporate action on the part of the Company.
6. Upon issuance of the Exchanged Shares, in accordance with the terms of the Transaction Agreement, the Exchanged Shares will be duly issued, fully paid and non-assessable and, to the best of our knowledge, free and clear of all liens, and will not be issued in violation of preemptive or other similar rights pursuant to (A) any statute, rule or regulation of the State of Nevada (B) the Company’s Organizational Documents as in effect on the date hereof or (C) to the best of our knowledge, any agreement to which the Company or any of its subsidiaries is a party or bound.
7. Issuance of (i) the Preferred Stock in accordance with the terms of the Transaction Agreement and (ii) Common Stock issuable upon conversion of the Preferred Stock, as applicable, has been duly authorized by all necessary corporate action on the part of the Company.
8. Upon issuance of the Preferred Stock in accordance with the terms of the Transaction Agreement, the Preferred Stock will be duly issued, fully paid and non-assessable and, to the best of our knowledge, free and clear of all liens, and will not be issued in violation of preemptive or other similar rights pursuant to (A) any statute, rule or regulation of the State of Nevada (B) the Company’s Organizational Documents in effect on the date hereof or (C) to the best of our knowledge, any agreement to which the Company was a party or bound.
9. The shares of Common Stock issuable upon conversion of the Preferred Stock, as applicable, when issued in accordance with the terms of the Certificates of Designations, will be duly issued, fully paid and non-assessable and, to the best of our knowledge, free and clear of all liens, and will not be issued in violation of preemptive or other similar rights pursuant to (A) any statute, rule or regulation of the State of Nevada (B) the Company’s Organizational Documents as in effect on the date hereof or (C) to the best of our knowledge, any agreement to which the Company or any of its subsidiaries is a party or bound.
ii
KE 57151467.9