Item 1.01 | Entry into a Material Definitive Agreement. |
On September 6, 2023, Battalion Oil Corporation (the “Company”) entered into a purchase agreement (the “Purchase Agreement”) with each of the purchasers set forth on Schedule A thereto (the “Buyers”), pursuant to which the Company agreed to sell to the Buyers, in a private placement, an aggregate of 38,000 shares (the “Series A-1 Preferred Shares”) of Series A-1 Redeemable Convertible Preferred Stock, par value $0.0001 per share (the “Series A-1 Preferred Stock”). A description of the material terms of the transaction is set forth below and is qualified in its entirety by reference to the documents attached hereto as Exhibit 3.1, Exhibit 10.1 and Exhibit 10.2, which are incorporated herein by reference.
The Buyers of the Series A-1 Preferred Shares included certain funds managed by Luminus Management, LLC, Oaktree Capital Management, LP, and LSP Investment Advisors, LLC, our largest three (3) existing shareholders whose appointed representatives make up fifty percent (50%) of our board of directors. The issuance of Series A-1 Preferred Shares was approved by our board of directors upon recommendation by a special committee of disinterested directors that was established to evaluate the proposed terms of the transaction. The aggregate purchase price paid by the Buyers for the Series A-1 Preferred Shares was approximately $37,050,000, with related expenses and fees to be paid out of the proceeds. The Company intends to use the proceeds for general corporate and working capital purposes including scheduled debt principal and interest payments.
Purchase Agreement
The Purchase Agreement entered into by the Company and the Buyers contains representations, warranties, and covenants of the Company and each of the Buyers, as well as indemnification rights and other obligations of the parties. The closing of the transaction, including the issuance of the Series A-1 Preferred Shares, occurred on September 6, 2023 (the “Closing Date”), and was conditioned on customary closing conditions, including the accuracy of the representations and warranties in the Purchase Agreement, the compliance by the parties with the covenants in the Purchase Agreement, and no material adverse effect occurred with respect to the Company.
Description of Series A-1 Preferred Stock
The powers, preferences, rights, qualifications, limitations and restrictions applicable to the Series A-1 Preferred Stock issued in the transaction are set forth in the Series A-1 Certificate of Designations of the Company (the “Certificate of Designations”), which form is attached as Exhibit 3.1 to this Current Report on Form 8-K. The Certificate of Designations is filed with the Delaware Secretary of State.
The holders of shares of the Series A-1 Preferred Stock generally have no voting rights, except as required by the General Corporation Law of the State of Delaware (the “DGCL”), other applicable law, the Certificate of Incorporation (as amended from time to time in accordance with its terms and the DGCL, the “Certificate of Incorporation”), or as otherwise described in the Certificate of Designations, and except that the consent of the holders of at least two-thirds of the outstanding Series A-1 Preferred Stock is required to: (i) authorize, create, or increase the authorized amount of, or issue any class or series of class or series that ranks senior to the Series A-1 Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Company (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such capital stock, the “Senior Stock”), or reclassify or amend the provisions of any existing class of securities of the Company into shares of Senior Stock; (ii) authorize, create or issue any stock or debt instrument or other obligation that is convertible or exchangeable into shares of its Senior Stock (or that is accompanied by options or warrants to purchase such Senior Stock); (iii) amend, alter or repeal any provision of the Certificate of Incorporation or the Certificate of Designations, in either case, in a manner that materially adversely affects the special rights, preferences, privileges or voting powers of the Series A-1 Preferred Stock; (iv) declare or pay any dividends or other distributions in cash or property with respect to its common stock, par value $0.0001 per share, of the Company (the “Common Stock”) or other class or series of capital stock of the Company, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the Series A-1 Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Company (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such capital stock, the “Junior Stock”); (v) redeem, repurchase or acquire shares of its Common Stock or other Junior Stock (other than with respect to customary repurchase rights or tax withholding arrangements with respect to equity awards or benefit plans); or (vi) redeem, repurchase, recapitalize or acquire shares of its stock on a parity with any class or series of capital stock of the Company, the terms of which provide that such class or
