UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 1, 2014
Commission File Number 333-146627
BARON ENERGY, INC.
(Exact name of registrant as specified in its charter)
NEVADA 26-0582528
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
300 S.C.M. Allen Parkway
Suite 400
San Marcos, TX 78666
(Address of principal executive offices) (Zip Code)
(512) 392-5775
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
following provisions.
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On July 28, 2014, simultaneously with the consummation of the Asset
Acquisition described in Item 2.01 below, we entered into a Credit Agreement
with Petro Capital Energy Credit, LLC ("Petro") to secure funding by means of a
credit facility arrangement wherein Petro would act as the administrative agent
for various lenders (the "Lenders") who will provide term loans to the Company's
wholly-owned subsidiary, Baron Production LLC ("Baron Production"), in the
maximum aggregate amount of $5,150,000, such loans to be secured by oil and gas
properties including interests in 1.) various oil and gas leases in Taylor
County, Texas known as the Shaffer Leases transferred concurrently to Baron
Production by us; 2.) various oil and gas leases in Frio County and LaSalle
County, Texas acquired pursuant to the contemporaneous Purchase and Sale
Agreement described in Item 2.01 below between Ricochet Energy, Inc., a Texas
corporation, for itself and as limited agent for the other sellers specified
therein, and us (the "Ricochet Properties"), which Purchase and Sale Agreement
was concurrently assigned to and assumed by Baron Production; and 3.) other
assets owned by us and Baron Production. We, as parent of Baron Production,
executed guarantees for the loans and a granted to Petro a security interest in
our 100% ownership interest in Baron Production.
As further inducement to Petro to enter into the Credit Agreement, Baron
Production assigned a thirty-six month, limited-term 2% overriding royalty
interest in the Shaffer Leases and the Ricochet Properties; we also issued
Warrants to Petro for the benefit of the Lenders to purchase shares of our
Common Stock for $0.0175 per share equal to 5% of our outstanding Common Stock
on a fully diluted basis.
Concurrent with the consummation of the Credit Agreement, on July 28, 2014,
Baron Production entered into certain volume production agreements including a
Purchase and Sale Agreement, Production and Marketing Agreement, and Conveyance
of Term Overriding Royalty Interest with PCEC Sub 1, LLC ("PCEC"), an affiliate
of Petro, wherein PCEC acquired term overriding royalty interests in and
production from the Shaffer Leases and Ricochet Properties in consideration for
payment to Baron Production of $6,100,000 (the "VPP"). The VPP is limited to oil
production from well bores existing as of July 28, 2014. We, as parent of Baron
Production, executed guarantees to PCEC to guarantee Baron Production's
performance of its obligations under the Purchase and Sale Agreement, Production
and Marketing Agreement and the Conveyance of Term Overriding Royalty Interest.
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
Effective May 29, 2014, we entered into a Purchase and Sale Agreement with
Ricochet Energy, Inc., a Texas corporation, and other third-party sellers
specified therein (collectively, "Ricochet') to acquire all of Ricochet's right,
title and interest in certain oil and gas leasehold interests, record title
interests, operating rights interests, fee interests, mineral interests and
overriding royalty and other related oil and gas interests in Frio and LaSalle
County, Texas (the "Ricochet Agreement"). On July 28, 2014 we assigned all of
our rights, title, and interest in the Ricochet Agreement to Baron Production.
Baron Production consummated the Ricochet Agreement concurrently with the
financing and other transactions described in Item 1.01 above, whereby it
acquired working interests ranging from 89.10% to 100% in 8,060 gross acres, 14
producing wells, and 1 salt-water disposal well, with current gross production
of 204 barrels of oil and 180 million cubic feet of gas per day, for the
purchase price of $7,720,743, subject to certain adjustments.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT
On July 28, 2014, our wholly-owned subsidiary, Baron Production LLC ("Baron
Production"), entered into a credit facility agreement described in Item 1.01
above, which description is incorporated by reference into this Item 2.03. The
obligations of Baron Production are secured by certain oil and gas interests and
other assets owned by us and Baron Production and subject to guarantees by us as
described in Item 1.01 above.
2
Concurrent with the consummation of the Credit Agreement, on July 28, 2014,
Baron Production entered into certain volume production agreements including a
Purchase and Sale Agreement, Production and Marketing Agreement, and Conveyance
of Term Overriding Royalty Interest with PCEC Sub 1, LLC ("PCEC"), an affiliate
of Petro, wherein PCEC acquired term overriding royalty interests in and
production from the Shaffer Leases and Ricochet Properties in consideration for
payment to Baron Production of $6,100,000 (the "VPP"). The VPP is limited to oil
production from well bores existing as of July 28, 2014. We, as parent of Baron
Production, executed guarantees to PCEC to guarantee Baron Production's
performance of its obligations under the Purchase and Sale Agreement, Production
and Marketing Agreement and the Conveyance of Term Overriding Royalty Interest.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
As further inducement to Petro to enter into the Credit Agreement described
in Item 1.01 above, on July 28, 2014 we issued Warrants to Petro for the benefit
of the Lenders to purchase shares of our Common Stock for $0.0175 per share
equal to 5% of our outstanding Common Stock on a fully-diluted basis. Said
Warrants expire five years from issuance. We have also granted "piggyback"
registration rights on the shares issuable under the Warrants, such shares to be
included in any registration statement filed by the Company with the Securities
and Exchange Commission to register shares of its securities. The Warrants were
issued pursuant to the exemption provided by Section 4(2) of the Securities Act
for transactions by an issuer not involving a public offering. The recipients of
our securities are "accredited investors" and acquired the securities for
investment purposes only without a view to distribution. Furthermore, the
investors had access to information concerning us and our business prospects;
there was no general solicitation or advertising for such acquisition of our
securities; and the securities are restricted pursuant to Rule 144.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR
By authority granted to the Board of Directors of the Registrant by its
Articles of Incorporation, the Registrant filed a Certificate of Designation
effective July 24, 2014, with the Nevada Secretary of State, establishing a
series of Preferred Stock designated as "Series A Convertible Preferred Stock"
consisting of 7,000,000 shares and having a stated value of $1.00 per share with
the relative rights and preferences as set forth in such Certificate of
Designation.
Shareholder approval was not required to establish or file the Certificate
of Designation to designate the Series A Convertible Preferred Stock under the
Articles of Incorporation and Nevada statutory law.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
Exhibit No. Description
----------- -----------
3.3 Certificate of Designation of Series A Convertible Preferred
Shares filed with the Nevada Secretary of State on July 24, 2014
4.1 Warrant Agreement dated July 28, 2014 by and between Petro
Capital Energy Credit, LLC and Baron Energy, Inc.
4.2 Registration Rights Agreement dated July 28, 2014 by and between
Baron Energy, Inc. and Petro Capital Energy Credit, LLC
10.75 Credit Agreement dated July 28, 2014 by and between Baron Energy,
Inc., Baron Production LLC, and Petro Capital Energy Credit, LLC
10.76 Note dated July 28, 2014 from Baron Production LLC to Petro
Capital Energy Credit, LLC
10.77 Deed of Trust, Assignment of As-Extracted Collateral, Security
Agreement, Fixture Filing and Financing Statement dated July 28,
2014 granted by Baron Production LLC in favor of PCEC-B, LLC
10.78 Second Lien Deed of Trust, Assignment of As-Extracted Collateral,
Security Agreement, Fixture Filing and Financing Statement dated
July 28, 2014 granted by Baron Production LLC to PCEC-B, LLC
10.79 Purchase and Sale Agreement dated May 29, 2014 by and between
Baron Energy, Inc. and Ricochet Energy, Inc., et al
10.80 Purchase and Sale Agreement dated July 28, 2014 by and between
Baron Production LLC and PCEC Sub 1 LLC
10.81 Production and Marketing Agreement dated July 28, 2014 by and
between Baron Production LLC and PCEC Sub 1, LLC
10.82 Conveyance of Term Overriding Royalty Interest dated July 28,
2014 from Baron Production LLC to PCEC Sub 1, LLC
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
BARON ENERGY, INC.
Date: August 1, 2014 By: /s/ Ronnie L. Steinocher
-----------------------------------------
Name: Ronnie L. Steinocher
Title: President and Chief Executive Officer
4