Item 1.01 Entry into a Material Definitive Agreement.
Registration Rights Agreement
On August 31, 2022, in connection with the closing of the Purchase Agreement,
Ring and Stronghold entered into a registration rights agreement (the
"Registration Rights Agreement") relating to the Common Shares and shares of
Common Stock issued upon conversion of the Preferred Shares (collectively, the
"Shares"). The Registration Rights Agreement provides that, within 10 days after
receipt of all information needed by Ring to include in the selling stockholder
table, Ring will prepare and file a registration statement to permit the public
resale of the Shares. With respect to each individual Holder (as defined in the
Registration Rights Agreement), Ring shall cause the registration statement to
be continuously effective from and after the date it is first declared or
becomes effective until the earlier of (i) the first date after the one-year
anniversary of the Registration Rights Agreement on which a Holder, together
with its affiliates, owns less than one percent (1%) of the then-outstanding
Common Stock, including shares of Common Stock issuable upon conversion of the
Preferred Stock (whether or not convertible in accordance with the terms of the
Certificate of Designation at such time), and (ii) the date on which all Common
Stock (including Common Stock issuable on conversion of the Preferred Stock)
owned by such Holder may be sold without restriction pursuant to Rule 144 (or
any similar provision) under the Securities Act with no volume, manner of sale
or other restrictions or limitations.
The foregoing description of the Registration Rights Agreement is qualified in
its entirety by the terms of the Registration Rights Agreement, a copy of which
is attached to this Current Report on Form 8-K as Exhibit 10.1 and is
incorporated herein by reference.
Lock-Up Agreement
In connection with the closing of the Purchase Agreement, Ring entered into a
customary lock-up agreement (the "Lock-up Agreement") on August 31, 2022 with
Stronghold OpCo providing that such holder will not transfer any of the Common
Shares, the Preferred Shares or shares of Common Stock acquired from the
conversion of the Preferred Shares (the "Lock-up Shares") for 90 days after the
closing of the Stronghold Acquisition; provided, however, such period shall be
reduced to 60 days for any Lock-up Shares distributed by Stronghold OpCo to
non-affiliates of Warburg Pincus LLC ("Warburg") in accordance with the terms of
the Lock-up Agreement.
The foregoing description of the Lock-up Agreement is qualified in its entirety
by the terms of the Lock-up Agreement, a copy of which is attached to this
Current Report on Form 8-K as Exhibit 10.2 and is incorporated herein by
reference.
Director Nomination Agreement
In connection with the closing of the Purchase Agreement, on August 31, 2022,
Ring and Stronghold entered into a director nomination agreement (the
"Nomination Agreement") containing provisions by which Stronghold will have the
right to designate two directors to the Board of Directors (the "Board") of
Ring. Stronghold has the right to designate two directors to the Board so long
as it beneficially owns at least 15% of the outstanding Common Stock. Stronghold
has the right to appoint one director to the Board so long as it beneficially
owns between 10% to 15% of the outstanding Common Stock.
The foregoing description of the Nomination Agreement is qualified in its
entirety by the terms of the Nomination Agreement, a copy of which is attached
. . .
Item 2.01 Completion of Acquisition or Disposition of Assets.
On August 31, 2022, pursuant to the closing of the Purchase Agreement, among
other things, Ring completed the Stronghold Acquisition for cash consideration
of approximately $182.9 million (of which $15 million was deferred until six
months after the closing of the Purchase Agreement), net of preliminary and
customary purchase price adjustments and remains subject to final post-closing
settlement between Ring and Stronghold, 21,339,986 shares of Common Stock,
153,176 shares of Preferred Stock and assumed mark-to-market unrealized hedge
losses of $26.4 million as of August 31, 2022, as described above.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The description of the Credit Agreement in Item 1.01 above is incorporated in
this Item 2.03 by reference.
If the outstanding Preferred Stock has not been converted into Common Stock on
or before January 31, 2023, then the Preferred Stock will accrue dividends from
August 31, 2022, the date of initial issuance, at a rate of 8% per annum until
such time as it has converted. In addition, Ring will be required to redeem all
of the outstanding Preferred Stock if the Preferred Stock has not converted into
Common Stock on or before September 30, 2027. The price per share for redemption
would be the greater of the liquidation preference or the market price of Common
Stock that each holder would receive if such holder had fully converted its
shares of Preferred Stock into shares of Common Stock on the redemption date.
Item 3.02 Unregistered Sales of Equity Securities.
The description of the Stronghold Acquisition and the shares of Common Stock and
Preferred Stock in Item 2.01 above is incorporated in this Item 3.02 by
reference.
The shares of Common Stock and Preferred Stock issued pursuant to the Purchase
Agreement were issued in reliance on an exemption from the registration
requirements of the Securities Act by virtue of Section 4(a)(2) and/or other
exemptions thereunder, as promulgated by the SEC under the Securities Act. Ring
relied upon representations, warranties, certifications and agreements of
Stronghold in support of the satisfaction of the conditions contained in
Section 4(a)(2) of the Securities Act or Regulation D under the Securities Act.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangement of Certain Officers.
On August 31, 2022, in connection with the closing of the Purchase Agreement,
Ring entered into the Nomination Agreement, whereby Stronghold has the right to
designate two directors to the Board. Stronghold designated Roy I. Ben-Dor and
David S. Habachy to the Board. On September 1, 2022, the Board increased the
size of the Board from seven members to nine members and appointed
Messrs. Ben-Dor and Habachy as directors to hold office until Ring's annual
meeting of stockholders in 2023 and the election of their successors.
The Board approved an annual cash retainer of $75,000 for each of
Messrs. Ben-Dor and Habachy. The Board also approved an equity award of 37,797
restricted stock units ("RSUs") pursuant to the Ring Energy, Inc. 2021 Omnibus
Incentive Plan and a restricted stock unit agreement for Mr. Habachy. Each RSU
represents the contingent right to receive one share of Common Stock.
Roy I. Ben-Dor, age 39, joined Warburg in 2011. He has been a Managing Director
at Warburg since January 2020. He was a Principal at Warburg from 2016 through
2019. Previously, he worked at McKinsey & Company in New York. He is a Director
of Artis Exploration, Citizen Energy, Eco Material Technologies, Stronghold
OpCo, ViridiEnergy and Zenith Energy. He also works with ClimeCo, Gradiant
Corporation, Montana Renewables, and Terra Energy Partners. Mr. Ben-Dor received
a BA cum laude in Psychology and Economics with Distinction from Duke
University, a JD magna cum laude from Harvard Law School and an MBA with High
Distinction ("Baker Scholar") from Harvard Business School.
David S. Habachy, age 46, served as a Managing Director on the Energy team of
Warburg from 2017 until July 2022. Previously, Mr. Habachy served as Managing
Director and member of the Investment Committee of the Kayne Anderson Energy
Funds. Additionally, while at Kayne Anderson, Mr. Habachy served on numerous
boards of oil and gas upstream E&P and midstream companies in the U.S. and
Canada from 2008 to 2017. Prior to entering into private equity in 2008,
Mr. Habachy spent 10 years in asset management, operations and consulting in the
upstream E&P business. He started his petroleum engineering career at
Arco/Vastar in 1998. Mr. Habachy serves on the board of directors of Earthstone
Energy, Inc., a company with a class of equity securities registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Additionally,
Mr. Habachy currently serves on the Investment Committee Board for Memorial
Hermann Health System and is a board member of the Houston Producers' Forum.
Mr. Habachy holds a B.S. in Chemical Engineering and an MBA degree with George
Kozmetsky highest honors distinction from The University of Texas at Austin.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On August 30, 2022, Ring filed with the Secretary of State of the State of
Nevada a Certificate of Designation of the Series A Convertible Preferred Stock
(the "Certificate of Designation"), which created the Preferred Stock issued by
Ring at the closing of the Purchase Agreement on August 31, 2022.
Each share of Preferred Stock will be convertible into 277.7778 shares of Common
Stock, subject to adjustment as set forth in the Certificate of Designation. No
dividend will be paid on the Preferred Stock if it converts into Common Stock on
or before January 31, 2023. Accordingly, until such date each share of Preferred
Stock will automatically convert into 277.7778 shares of Common Stock at an
initial conversion price of $3.60 per share of Common Stock immediately
following the receipt of Ring stockholder approval of the conversion feature of
the Preferred Stock and the issuance of Common Stock upon conversion of the
Preferred Stock. The initial conversion rate is subject to adjustment in certain
circumstances, including stock splits, stock dividends, rights offerings, or
combinations of Common Stock.
If the Preferred Stock has not automatically converted into Common Stock on or
before January 31, 2023, then each holder of Preferred Stock will be entitled to
receive dividends at an annual rate of 8% of the initial liquidation preference
per share from the date of issuance. If a cash dividend is not declared and paid
on any dividend payment date, then the liquidation preference per share of
Preferred Stock will be increased by the amount of the unpaid dividend.
Ring will be required to redeem all of the outstanding shares of Preferred Stock
at a price equal to the greater of the liquidation preference or the market
price of Common Stock that each holder would receive if such holder had fully
converted its shares of Preferred Stock into shares of Common Stock on the
redemption date if the Preferred Stock has not been converted into Common Stock
on or before September 30, 2027.
Except as expressly required by law, the holders of Preferred Stock have no
voting rights, including the right to elect directors, and their consent is not
required for taking corporate action; provided, however, we have agreed not to
take any of the following actions without the affirmative vote or consent of the
holders of a majority of the outstanding shares of Preferred Stock voting
separately as a single class: (a) create, authorize (including by way of
reclassification, merger, consolidation, subdivision or other similar
reorganization) or issue any of our equity securities except with respect to
certain employee plans, including additional shares of Preferred Stock;
(b) redeem, acquire, engage in a tender offer (other than responding to a
third-party tender offer as required by applicable law) or otherwise purchase
any of our equity securities except with respect to certain employee plans;
(c) declare or pay, set apart for payment in respect of or make any direct or
indirect distribution or distribution (whether in cash, securities or other
property) in respect of any equity securities, other than with respect to the
Preferred Stock; (d) amend, repeal, modify or alter our Articles of
Incorporation or Bylaws so as to affect adversely the rights, preferences,
privileges or voting or consent rights of the Preferred Stock or the holders of
the Preferred Stock; (e) announce, authorize or enter into any agreement related
to or consummate a material transaction, including (but not limited to) any
change of control as such terms are defined in the Certificate of Designation;
or (f) increase or decrease the size of the Board other than as set forth in the
Purchase Agreement or any ancillary documents thereto.
The foregoing description of the amendment to Ring's articles of incorporation
is qualified in its entirety by reference to the full text of the Certificate of
Designation, which is attached as Exhibit 3.1 to this Current Report on Form 8-K
and incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
On September 1, 2022, Ring issued a press release announcing the consummation of
the transactions contemplated in the Purchase Agreement. A copy of the press
release is furnished as Exhibit 99.1 hereto.
The information in this Current Report on Form 8-K furnished pursuant to Item
7.01, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes
of Section 18 of the Exchange Act, or otherwise subject to liability under that
section, and they shall not be deemed incorporated by reference in any filing
under the Securities Act or the Exchange Act, except as shall be expressly set
forth by specific reference in such filing. By filing this Current Report on
Form 8-K and furnishing this information pursuant to Item 7.01, Ring makes no
admission as to the materiality of any information in this Current Report on
Form 8-K, including Exhibit 99.1, that is required to be disclosed solely by
Regulation FD.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The financial statements required by this Item 9.01 and Regulation S-X will be
filed by an amendment to this Form 8-K. The amendment will be filed with the SEC
no later than 71 calendar days after the date this Form 8-K is required to be
filed with the SEC.
(b) Pro forma financial information.
The pro forma financial information required by this Item 9.01 and Regulation
S-X will be furnished by an amendment to this Form 8-K. The amendment will be
filed with the SEC no later than 71 calendar days after the date this Form 8-K
is required to be filed with the SEC.
(d) Exhibits.
The following exhibits are included with this Current Report on Form 8-K:
Exhibit No. Description
2.1* Purchase and Sale Agreement dated July 1, 2022, by and among Ring
Energy, Inc., Stronghold Energy II Operating, LLC, and Stronghold
Energy II Royalties, LP (incorporated by reference to Exhibit 2.1 to
the Current Report on Form 8-K filed by the Registrant with the SEC on
July 8, 2022).
2.1(a)* First Amendment to Purchase and Sale Agreement by and among
Stronghold Energy II Operating, LLC, Stronghold Energy II Royalties,
LP, and Ring Energy, Inc., dated August 4, 2022 (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed by
the Registrant with the SEC on August 9, 2022).
3.1 Certificate of Designation of the Series A Convertible Preferred
Stock dated August 30, 2022.
10.1 Registration Rights Agreement dated August 31, 2022, by and among
Ring Energy, Inc., Stronghold Energy II Operating, LLC, and Stronghold
Energy II Royalties, LP.
10.2 Lock-up Agreement dated August 31, 2022, by and between Ring
Energy, Inc. and Stronghold Energy II Operating, LLC.
10.3 Director Nomination Agreement dated August 31, 2022, by and among
Ring Energy, Inc., Stronghold Energy II Operating, LLC, and Stronghold
Energy II Royalties, LP.
10.4 Second Amended and Restated Credit Agreement dated August 31, 2022,
by and among Ring Energy, Inc., Truist Bank, and the Lenders from time
to time party thereto.
99.1 Press Release dated September 1, 2022.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
* Certain schedules, annexes or exhibits have been omitted pursuant to Item
601(a)(5) of Regulation S-K, but will be furnished supplementally to the SEC
upon request.
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