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Item 9A. Controls and Procedures

2023-03-30 compared with 2022-03-07 · 42 added, 19 removed, 111 unchanged (35% of the section changed)

11 unchanged sentences

OTHER INFORMATION

Entry into a Material Definitive Agreement

On March 24, 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 25,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”).

The private placement of the Series A Preferred Shares pursuant to the Purchase Agreement was undertaken in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof.

A copy of the Purchase Agreement is filed as Exhibit 10.8 to this Annual Report on Form 10-K and is incorporated herein by reference.

A description of the material terms of the transaction is set forth below and is qualified in its entirety by reference to the documents filed herewith as Exhibits 3.1.1, 10.3.1, and 10.8 which are incorporated herein by reference.

The aggregate purchase price paid by the Buyers for the Series A Preferred Stock was approximately $24,375,000, 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 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 Preferred Stock

The powers, preferences, rights, qualifications, limitations and restrictions applicable to the Series A Preferred Stock to be issued in the transaction are set forth in the Series A Certificate of Designations of the Company (the “Certificate of Designations”), which form is filed as Exhibit 3.1.1 to this Annual Report on Form 10-K.

The Certificate of Designations is filed with the Delaware Secretary of State.

The holders of shares of the Series A Preferred Stock generally will have no voting rights, except as required by the General Corporation Law of the State of Delaware, other applicable law, the Certificate of Incorporation (as amended from time to time in accordance with its terms and the General Corporation Law, 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 Preferred Stock would be 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 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 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 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 series ranks on a parity with the Series A Preferred Stock with respect to dividend rights or rights upon a liquidation, winding-up or dissolution of the Company (such capital stock, together with any warrants, rights, calls or options exercisable for or convertible into such capital stock, the “Parity Stock”) other than (A) pro rata offers to purchase all, or a pro rata portion, of the Series A Preferred Stock and such Parity Stock (B) as a result of a reclassification of Parity Stock for or into other Parity Stock or Junior Stock, (C) the exchange or conversion of Parity Stock for or into other Parity Stock or Junior Stock or (D) the purchase of fractional interests in shares of Parity Stock pursuant to the conversion or exchange provisions of such Parity Stock or the security being converted or exchanged.

Holders of Series A Preferred Stock shall be entitled to receive dividends at the rate per share of Series A Preferred Stock equal to the Series A Dividend Rate (the “Series A Dividend”).

The “Series A Dividend Rate” shall mean fourteen and one-half percent (14.50%) per annum on the then-applicable liquidation preference.

If a Series A Dividend is not declared and paid in cash on a Dividend Payment Date, then in full discharge of such Series A Dividend for such Dividend Period, the Liquidation Preference of each outstanding share of Series A Preferred Stock, regardless of its date of issue, shall automatically increase on such Dividend Payment Date by an amount equal to sixteen percent (16.00%) per annum multiplied by the Liquidation Preference in effect immediately after the immediately prior Dividend Payment Date (or the Issuance Date in respect of the first Dividend Period) (such automatic increase, the “Unpaid Dividend

Accrual”), which, for the avoidance of doubt, will be pro-rated for the period of time elapsed during such Dividend Period.

The period from the closing date of the issuance of the shares of Series A Preferred Stock (the “Issuance Date”) to and including June 30, 2023, and each period from but excluding a Dividend Payment Date to and including the following Dividend Payment Date is herein referred to as a “Dividend Period.” “Dividend Payment Date” shall mean March 31, June 30, September 30 and December 31 of each year, commencing on June 30, 2023 and the “Liquidation Preference” shall equal one thousand dollars ($1,000) per share of Series A Preferred Stock, which amount shall be adjusted as the result of any Unpaid Dividend Accrual (or payment thereof), and as otherwise set forth in the Certificate of Designations.

Each Buyer shall have the option from time to time to convert all or a portion of such Buyer’s shares of Series A Preferred Stock into Common Stock at the Conversion Ratio.

The “Conversion Ratio” means, for each share of Series A Preferred Stock, the quotient of (i) the liquidation preference as of the date of the conversion and (ii) the then applicable Conversion Price.

The “Conversion Price” shall initially be $9.03, which may be adjusted from time to time as set forth herein.

First Amendment to Registration Rights Agreement

In connection with the Purchase Agreement, the Company also entered into the First Amendment to Registration Rights Agreement dated March 28, 2023 by and between the Company and the parties identified thereto (the “Amendment No.

1”) to the Registration Rights Agreement, dated as of October 8, 2019 (the “Registration Rights Agreement”).

Under Amendment No.

1, the Company granted the parties certain registration rights with respect to Common Stock issuable upon conversion of the Series A Preferred Stock.

The foregoing summaries of the material terms of the Purchase Agreement, the Certificate of Designations, and the Registration Rights Agreement are not complete and are qualified in their entirety by reference to the full text thereof, copies of which are filed herewith as Exhibit 3.1.1, Exhibit 10.3.1, and Exhibit 10.8, respectively, and incorporated by reference herein.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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(1) Consists of 889,394 unvested RSUs and outstanding 478,152 stock options.

(2) The formation of the plan was approved by the Bankruptcy Court upon confirmation of our Plan of Reorganization and further approved by our board with an effective date of January 1, 2020.

(2) The formation of the plan was approved by the Bankruptcy Court upon confirmation of our Plan of Reorganization in 2019 and further approved by our board with an effective date of January 1, 2020.

Pursuant to General Instruction 6 to Form 10-K, we incorporate by reference into this Item the information to be disclosed in our definitive proxy statement for our 2023 Annual Meeting of Stockholders.

11 unchanged sentences

Amended and Restated Certificate of Incorporation of Battalion Oil Corporation ( formerly Halcón Resources Corporation) dated October 8, 2019, as amended by the Certificate of Amendment, dated January 21, 2020 (Incorporated by reference to Exhibit 3.1 of our Annual Report on Form 10-K filed March 25, 2020).

Certificate of Designations of Series A Redeemable Convertible Preferred Stock dated effective March 24, 2023

Seventh Amended and Restated Bylaws of Battalion Oil Corporation (Incorporated by reference to Exhibit 3.2 of our Current Report on Form 8-K filed January 27, 2020).

1 unchanged sentence

(Incorporated by reference to Exhibit 4.1 of our Annual Report on Form 10-K filed March 25, 2020).

Senior Secured Revolving Credit Agreement, dated as of October 8, 2019, by and among Battalion Oil Corporation ( formerly Halcón Resources Corporation), as borrower, Bank of Montreal, as administrative agent, and certain other financial institutions party thereto, as lenders (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed October 8, 2019).

First Amendment to the Senior Secured Revolving Credit Agreement, dated as of November 21, 2019, by and among Battalion Oil Corporation ( formerly Halcón Resources Corporation), as borrower, Bank of Montreal, as administrative agent, and the lenders party thereto.

(Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed November 27, 2019).

Second Amendment to the Senior Secured Revolving Credit Agreement and Limited Consent, dated as of April 30, 2020, by and among Battalion Oil Corporation, as borrower, Bank of Montreal, as administrative agent, and the lenders party thereto.

(Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed May 6, 2020).

Third Amendment to the Senior Secured Revolving Credit Agreement and Limited Waiver, dated as of October 29, 2020, by and among Battalion Oil Corporation, as borrower, Bank of Montreal, as administrative agent, and the lenders party thereto.

(Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed November 2, 2020).

Fourth Amendment to the Senior Secured Revolving Credit Agreement dated as of May 10, 2021, by and among Battalion Oil Corporation, as borrower, Bank of Montreal, as administrative agent, and the lenders party thereto (Incorporated by reference to Exhibit 10.1.4 of our Quarterly Report on Form 10-Q filed May 17, 2021).

Fifth Amendment to the Senior Secured Revolving Credit Agreement dated as of September 24, 2021, by and among Battalion Oil Corporation, as borrower, Bank of Montreal, as administrative agent, and the lenders party thereto (Incorporated by reference to Exhibit 10.1.5 of our Current Report on Form 8-K filed September 30, 2021).

Amended and Restated Senior Secured Credit Agreement dated as of November 24, 2021, by and among Battalion Oil Corporation, as holdings, Halcón Holdings LLC, as borrower, the subsidiary guarantors party thereto, Macquarie Bank Limited, as administrative agent, and the lenders party thereto (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed November 29, 2021).

Second Amendment to Amended and Restated Senior Secured Credit Agreement dated as of November 14, 2022, by and among Halcón Holdings, LLC, as borrower, Macquarie Bank Limited, as administrative agent and the lenders party hereto, the guarantors party hereto and Battalion Oil Corporation, as holdings (Incorporated by reference to Exhibit 10.1.1 of our Quarterly Report on Form 10-Q filed November 14, 2022).

Warrant Agreement, dated as of October 8, 2019, by and between Halcón Resources Corporation and Broadridge Corporate Issuer Solutions, Inc., as warrant agent (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed October 8, 2019).

Registration Rights Agreement, dated as of October 8, 2019, by and among Halcón Resources Corporation and each of the parties thereto, as investors (Incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K filed October 8, 2019).

First Amendment to Registration Rights Agreement dated March 28, 2023, by and among Battalion Oil Corporation and each of the parties thereto, as investors.

Battalion Oil Corporation 2020 Long-Term Incentive Plan, effective as of January 1, 2020 (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed January 31, 2020).

3 unchanged sentences

Rohling and Battalion Oil Corporation effective as of January 28, 2020 (Incorporated by reference to Exhibit 10.7 of our Annual Report on Form 10-K filed March 25, 2020).

Employment Agreement between R.

Kevin Andrews and Battalion Oil Corporation effective as of August 17, 2020 (Incorporated by reference to Exhibit 10.12 of our Quarterly Report on Form 10-Q filed November 9, 2020).

First Amendment to Employment Agreement between R.

Kevin Andrews and Battalion Oil Corporation effective as of August 7, 2021.

(Incorporated by reference to Exhibit 10.8.1 of our Quarterly Report on Form 10-Q filed August 9, 2021).

Offer Letter with Kristen McWatters dated January 20, 2023

Purchase Agreement, dated March 28, 2023, by and among Battalion Oil Corporation and each of the purchasers set forth on Schedule A thereto.

Form of Nonqualified Stock Option Award Agreement (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed January 31, 2020).

3 unchanged sentences

List of Subsidiaries of Battalion Oil Corporation

Consent of Deloitte & Touche LLP

Consent of Netherland, Sewell & Associates, Inc.

Sarbanes-Oxley Section 302 certification of Principal Executive Officer

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March 30, 2023

KEVIN ANDREWS

Kevin Andrews

/s/ KRISTEN MCWATTERS

Kristen McWatters

Executive Vice President, Chief Financial Officer and Treasurer

14 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures