| Item 1.01. | Entry into a Material Definitive Agreement. |
Registration Rights Agreement Amendment
In connection with the closing of the Acquisitions (as defined below) on February 28, 2020 (the “Closing”), and pursuant to the Purchase Agreements, as amended (as defined below), Talos Energy Inc., a Delaware corporation (the “Company”) and ILX Holdings, LLC, a Delaware limited liability company (“ILX Holdings”), ILX Holdings II, LLC, a Delaware limited liability company (“ILX Holdings II”), ILX Holdings III LLC, a Delaware limited liability company (“ILX Holdings III”) and Riverstone V Castex 2014 Holdings, L.P., a Delaware limited partnership and designee of Castex Energy 2014, LLC, a Delaware limited liability company (“Castex 2014,” and together with ILX Holdings, ILX Holdings II and ILX Holdings III, the “Riverstone Sellers”), among others, entered into an amendment (the “Registration Rights Agreement Amendment”) to the Registration Rights Agreement, dated as of May 10, 2018 (the “Original Registration Rights Agreement,” and as amended from time to time, the “Registration Rights Agreement”), by and between the Company and certain holders of the Company’s common stock, par value $0.01 per share (“Common Stock”), party thereto. The Registration Rights Agreement Amendment adds each of the Riverstone Sellers (or one or more of its designated affiliates) as parties to the Registration Rights Agreement and provides such parties with customary registration rights with respect to the Company’s Preferred Shares (as defined below) issued to the Riverstone Sellers at the Closing.
The foregoing description of the Registration Rights Agreement Amendment is only a summary, does not purport to be complete and is qualified in its entirety by reference to the Registration Rights Agreement Amendment, a copy of which is filed as Exhibit 4.2 to this Current Report on Form8-K and is incorporated herein by reference.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
At the Closing, the Company consummated a previously announced acquisition of the outstanding limited liability company interests in certain wholly owned subsidiaries (the “Acquisitions”) of each of the Riverstone Sellers and Castex Energy 2016, L.P., a Delaware limited partnership (“Castex 2016,” and together with the Riverstone Sellers, the “Sellers”) pursuant to separate Purchase and Sale Agreements, dated as of December 10, 2019, between the Company, Talos Production Inc., a Delaware corporation (“Talos Production”) and each of the Sellers (as amended from time to time, the “Purchase Agreements”) for aggregate consideration consisting of the following, subject to certain negotiated adjustments: (i) an aggregate amount of cash from Talos Production equal to $385 million and (ii) an aggregate 110,000 shares (the “Preferred Shares”) of a series of the Company’s preferred stock, par value $0.01 per share, designated as “Series A Convertible Preferred Stock,” the terms of which are set forth in the Certificate of Designation of Preferences, Rights and Limitations related thereto (the “Certificate of Designation”). Each Preferred Share will automatically convert (the “Conversion”) into 100 shares of Common Stock (subject to adjustments) immediately following the expiration of the 20 calendar day period commencing on the stated date of distribution to the Company’s stockholders of a definitive Information Statement on Schedule 14C relating to such Conversion.
On December 10, 2019, Talos Production deposited in escrow an amount in cash equal to five percent of the Unadjusted Purchase Price (as defined in the applicable Purchase Agreement) under each Purchase Agreement that was applied at Closing towards the cash component of the purchase price under each Purchase Agreement. The Purchase Agreements have an effective time of 12:00 a.m., Central Time, on July 1, 2019.
Relationships
As of February 24, 2020, (i) certain entities controlled by or affiliated with Riverstone Energy Partners V, L.P. (collectively, the “Riverstone Funds”), an affiliate of Riverstone Holdings LLC, beneficially owned and possessed voting power over approximately 27.5% of the issued and outstanding Common Stock and (ii) certain funds and other alternative investment vehicles managed by Apollo Management VII, L.P. and Apollo Commodities Management, L.P., with respect to Series I (collectively, the “Apollo Funds”) beneficially owned and possessed voting power over approximately 35.4% of the issued and outstanding Common Stock. Pursuant to the Company’s Stockholders’ Agreement, dated as of May 10, 2018, as amended from time to time (the “Stockholders’ Agreement”), (i) the Riverstone Funds currently have the right to designate two persons for nomination by the board of directors of the Company (the “Board”) for
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