Item 1.01 Entry Into Material Definitive Agreement.
Restructuring Support Agreement
On June 28, 2020 (the "Petition Date"), Lilis Energy, Inc., a Nevada corporation
("Lilis" or the "Company"), and its wholly owned subsidiaries, Brushy Resources,
Inc., a Delaware corporation ("Brushy"), ImPetro Resources, LLC, a Delaware
limited liability company ("ImPetro Resources"), ImPetro Operating LLC, a
Delaware limited liability company ("ImPetro Operating"), Lilis Operating
Company, LLC, a Texas limited liability company ("Lilis Operating"), and
Hurricane Resources LLC, a Texas limited liability company ("Hurricane" and
together with the Company, Brushy, ImPetro Resources, ImPetro Operating and
Lilis Operating, the "Company RSA Parties"), entered into a Restructuring
Support Agreement ("RSA") with (i) the lenders under the Company's revolving
credit facility (other than Värde (as defined below)) (the "Consenting RBL
Lenders") and (ii) certain investment funds and entities affiliated with Värde
Partners, Inc. (collectively, "Värde"), which collectively own all of the
Company's outstanding preferred stock and a subordinated participation in a
portion of the indebtedness outstanding under that certain Second Amended and
Restated Senior Secured Revolving Credit Agreement dated as of October 10, 2018
(as amended, the "RBL Credit Agreement" and the loan facility, the "RBL Credit
Facility"), by and among the Company, as borrower, the other Company RSA
Parties, as guarantors, BMO Harris Bank, N.A., as administrative agent (the
"Administrative Agent"), and the lenders party thereto ("RBL Lenders").
Under the terms of the RSA, the Company RSA Parties, the Consenting RBL Lenders
and Värde have agreed to support a restructuring of the Company RSA Parties
under a Chapter 11 plan of reorganization ("Plan") to be proposed with terms set
forth in the RSA, which terms provide that, subject to the RSA:
• each lender under the RBL Credit Agreement that is unaffiliated with Värde
(each, a "Non-Affiliate RBL Lender") will receive its pro rata share of
(i) $9.2 million in cash plus all accrued and unpaid interest as of the
Petition Date (estimated to be $687,100), and (ii) participations in $55
million of new loans under the Exit RBL Facility described below;
• Värde, on account of claims held by its affiliates as lenders under the
RBL Credit Agreement and, if applicable, its claims under the Replacement
DIP Facility described below, will receive an aggregate of 100% of the new
common stock of the reorganized Lilis, and the treatment of the Company's
outstanding preferred stock, all of which is currently held by Värde,
remains undecided and will be agreed on by Värde, the Company and the
required Consenting RBL Lenders on or prior to the date the Replacement
DIP Facility closes;
• the treatment of allowed general unsecured claims will be determined no
later than August 17, 2020, which treatment must be acceptable to Värde in
consultation with the Administrative Agent, and as a condition to the
effectiveness of the Plan (subject to certain exceptions provided in the
RSA), the allowed general unsecured claims and allowed priority, other
secured, and priority tax claims, other than claims held by Värde and its
affiliates, must not exceed a total amount to be acceptable to Värde upon
receipt of reasonably acceptable diligence at the time of signing the
equity commitment letter providing for the Värde Equity Investment as
described below; and
• each outstanding share of the Company's common stock will be canceled for
no consideration.
The Company believes it is unlikely that the holders of shares of its common
stock will receive any consideration for their shares under any plan approved by
the Bankruptcy Court (as defined below), irrespective of whether such plan
contemplates terms consistent with or similar to those agreed upon in the RSA.
The Plan contemplated in the RSA is contingent upon, among other things, Värde's
election in its sole discretion, on or before August 17, 2020, to provide (i) an
agreed commitment (which, if elected, will be funded on the effective date of
the Plan) to buy the common stock of the reorganized Lilis for $55.0 million in
cash less any funding provided by Värde under the Replacement DIP Facility (but
excluding any amount of interest or fees paid-in-kind and capitalized
thereunder), and (ii) certain Värde funds to provide for a Replacement DIP
Facility.
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The Consenting RBL Lenders and Värde have the right to terminate the RSA, and
their support for the restructuring contemplated by the RSA (the
"Restructuring"), for customary reasons, including, among others, the failure to
timely achieve any of the milestones for the progress of the Chapter 11 Cases
(as defined below) that are in the RSA, which include the dates by which the
Company RSA Parties are required to, among other things, obtain certain court
orders and consummate the Restructuring.
There can be no assurance that the Company and the other Company RSA Parties
will confirm and consummate the Plan as contemplated by the RSA or complete an
alternative plan of reorganization.
Initial DIP Facility, Replacement DIP Facility and Exit Facility. The RSA
contemplates that, upon the interim approval of the Bankruptcy Court, the
Company RSA Parties, as borrower and guarantors, the Consenting RBL Lenders (in
that capacity, "Initial DIP Lenders") and the Administrative Agent will enter
into a Senior Secured Super-Priority Debtor-in-Possession Credit Agreement (the
"Initial DIP Credit Agreement"), under which the Initial DIP Lenders will
. . .
Item 1.03 Bankruptcy or Receivership.
On the Petition Date, the Company RSA Parties filed voluntary petitions
("Bankruptcy Petitions") for reorganization under Chapter 11 of Title 11 of the
United States Code ("Bankruptcy Code") in the United States Bankruptcy Court for
the Southern District of Texas, Houston Division ("Bankruptcy Court"). The
Company RSA Parties also filed motions with the Bankruptcy Court seeking joint
administration of the Chapter 11 Cases under the caption In re Lilis Energy,
Inc., et al., Case No. 20-33274 (the "Chapter 11 Cases"). The Company RSA
Parties will continue to operate their businesses as "debtors-in-possession"
under the jurisdiction of the Bankruptcy Court and under the provisions of the
Bankruptcy Code and orders of the Bankruptcy Court. The Company expects to
continue to operate in the ordinary course throughout the Chapter 11 process
without material disruption to vendors, suppliers and partners.
In addition, the Company RSA Parties filed a motion ("NOL Motion") seeking entry
of an interim and final order establishing certain procedures and restrictions
("Procedures") with respect to the direct or indirect purchase, disposition or
other transfer of the Company's (i) common stock ("Common Stock"), (ii) Series
C-1 9.75% Participating Preferred Stock ("Series C-1 Preferred Stock"), (iii)
Series C-2 9.75% Participating Preferred Stock ("Series C-2 Preferred Stock"),
(iv) Series D 8.25% Participating Preferred Stock ("Series D Preferred Stock"),
(v) Series E 8.25% Convertible Participating Preferred Stock ("Series E
Preferred Stock"), and (vi) Series F 9.00% Participating Preferred Stock
("Series F Preferred Stock"), and seeking related relief, in order to preserve
and protect the potential value of the Company RSA Parties' existing and future
net operating losses ("NOLs") and certain other tax attributes of the Company
RSA Parties (together with the NOLs, "Tax Attributes"). If approved, the
Procedures would, among other things, require notices of the holdings of, and
proposed transactions by, any person or entity that is or, as a result of the
transaction, would become, a Substantial Holder of Common Stock, Series C-1
Preferred Stock, Series C-2 Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, or Series F Preferred Stock.
For purposes of the Procedures, a "Substantial Holder" is any person, entity or,
in certain cases, group of persons or entities, with beneficial ownership (as
determined under applicable rules under the Internal Revenue Code of 1986, as
amended) of, (i) 4,280,509 shares of Common Stock, which represents
approximately 4.50% of the issued and outstanding Common Stock as of the
Petition Date, (ii) 4,500 shares of Series C-1 Preferred Stock, which represents
approximately 4.50% of the issued and outstanding Series C-1 Preferred Stock as
of the Petition Date, (iii) 1,125 shares of Series C-2 Preferred Stock, which
represents approximately 4.50% of the issued and outstanding Series C-2
Preferred Stock as of the Petition Date, (iv) 1,766 shares of Series D Preferred
Stock, which represents approximately 4.50% of the issued and outstanding Series
D Preferred Stock as of the Petition Date, (v) 2,700 shares of Series E
Preferred Stock, which represents approximately 4.50% of the issued and
outstanding Series E Preferred Stock as of the Petition Date, or (vi) 2,475
shares of Series F Preferred Stock, which represents approximately 4.50% of the
issued and outstanding Series F Preferred Stock as of the Petition Date.
If the Procedures are approved, any prohibited transfer of Common Stock, Series
C-1 Preferred Stock, Series C-2 Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock would be null and void ab
initio and will cause reversal of the noncompliant transaction and such other
(or additional) measures as the Bankruptcy Court may deem appropriate.
The NOL Motion and Procedures are available on the docket of the Chapter 11
Cases, which can be accessed via PACER at https://www.pacer.gov. The Company RSA
Parties also requested authority to employ Stretto as its claims and notice
agent. If approved, the NOL Motion and Procedures and additional information
about the Chapter 11 Cases would also be available for free on the website
maintained by Stretto, located at https://cases.stretto.com/LilisEnergy or by
calling (855) 364-4639 (Toll-Free) or (949) 266-6357 (Local).
Item 2.04 Triggering Events that Accelerate or Increase a Direct Financial
Obligation or an Obligation Under an Off-Balance Sheet Arrangement.
Filing the Bankruptcy Petitions constituted an event of default that accelerated
the Company's obligations under the RBL Credit Agreement. The RBL Credit
Agreement provides that, as a result of that default, the principal and interest
due thereunder is immediately due and payable. Any efforts to enforce such
payment obligations under the
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RBL Credit Agreement are automatically stayed because of the Chapter 11 Cases,
and the RBL Lenders' rights of enforcement regarding the RBL Credit Agreement
are subject to the provisions of the Bankruptcy Code.
The information under Item 1.03 is incorporated herein by reference.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On June 27, 2020, Markus Specks, a former Värde designee under Värde's board
designation right as holder of the Company's outstanding preferred stock,
resigned as a director of the Company. Mr. Specks was replaced by Mr. Nicholas
Winter, a Managing Director of Värde Partners, Inc., who was designated as a
Company director by Värde.
For a description of the material transactions between the Company and Värde
since the beginning of 2019, please see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations-Related Party
Transactions" in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2019, filed with the Securities and Exchange Commission on
April 30, 2020. Such description is incorporated herein by reference. In
addition, Värde is a party to the RSA, as described above under Item 1.01. The
information under Item 1.01 is also incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
On June 29, 2020, the Company issued a press release announcing the commencement
of the Chapter 11 Cases, its entry into the RSA and the resignation of Mr.
Specks and his replacement by Mr. Winter, a copy of which is attached as Exhibit
99.1 to this Current Report on Form 8-K and incorporated herein by reference.
The information furnished under Item 7.01 of this Current Report on Form 8-K,
including the accompanying Exhibit 99.1, shall not be deemed to be "filed" for
the purposes of Section 18 of the Securities Exchange Act of 1923, as amended
(the "Exchange Act"), or otherwise subject to the liability of such section, nor
shall such information be deemed to be incorporated by reference in any filing
by the Company under the Securities Act of 1933, as amended, or the Exchange
Act, regardless of the general incorporation language of such filing, except as
specifically stated in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number Description
10.1 Restructuring Support Agreement, dated as of June 28, 2020, by and
among Lilis Energy, Inc., certain of its subsidiaries, the lenders
party thereto, and certain investment funds and entities affiliated
with Värde Partners, Inc.
99.1 Press release, dated June 29, 2020© Edgar Online, source Glimpses
LILIS ENERGY, INC. 
