EMPIRE PETROLEUM CORPORATION (NASDAQ:EMPR) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement
Subscription and Contribution Agreement
Empire Petroleum Corporation (the “Corporation”) entered into a
subscription and contribution agreement with Masterson West, LLC
(“Masterson West”) dated as of December 22, 2016 (the
“Contribution Agreement”) relating to the newly formed
Masterson West II, LLC, a Texas limited liability company
(“Masterson West II”). to the Contribution Agreement, among
other things, (a) in the initial closing, the Corporation
contributed 40,000,000 shares of its common stock, par value
$0.001 per share (the “Common Stock”), to Masterson West II,
and (b) at the final closing, Masterson West has an obligation to
contribute certain oil and gas properties (the “Contributed
Properties”) to Masterson West II in exchange for the
Corporation contributing cash of not less than $9,000,000 and up
to $18,000,000 to Masterson West II. There is no assurance that
the Corporation will be able to secure the funds necessary for
the final closing. The final closing is scheduled to occur no
later than April 1, 2017. If the final closing occurs, the
Corporation will own 50% of Masterson West II if it delivers
$18,000,000 of cash at the final closing and 25% of Masterson
West II if it delivers $9,000,000 of cash at the final closing.
subscription and contribution agreement with Masterson West, LLC
(“Masterson West”) dated as of December 22, 2016 (the
“Contribution Agreement”) relating to the newly formed
Masterson West II, LLC, a Texas limited liability company
(“Masterson West II”). to the Contribution Agreement, among
other things, (a) in the initial closing, the Corporation
contributed 40,000,000 shares of its common stock, par value
$0.001 per share (the “Common Stock”), to Masterson West II,
and (b) at the final closing, Masterson West has an obligation to
contribute certain oil and gas properties (the “Contributed
Properties”) to Masterson West II in exchange for the
Corporation contributing cash of not less than $9,000,000 and up
to $18,000,000 to Masterson West II. There is no assurance that
the Corporation will be able to secure the funds necessary for
the final closing. The final closing is scheduled to occur no
later than April 1, 2017. If the final closing occurs, the
Corporation will own 50% of Masterson West II if it delivers
$18,000,000 of cash at the final closing and 25% of Masterson
West II if it delivers $9,000,000 of cash at the final closing.
In connection with the contribution of the Contributed Properties
by Masterson West, at the final closing, Masterson West II will
assume a credit facility affiliated with the Contributed
Properties that has approximately $20,000,000 outstanding as of
the date hereof. Masterson West and the Corporation intend to use
the cash consideration paid by the Corporation at the final
closing to pay down such credit facility and/or as working
capital to continue to develop the Contributed Properties. If the
proceeds are used to pay down part or all of such credit
facility, the credit facility will be used to continue to develop
the Contributed Properties.
by Masterson West, at the final closing, Masterson West II will
assume a credit facility affiliated with the Contributed
Properties that has approximately $20,000,000 outstanding as of
the date hereof. Masterson West and the Corporation intend to use
the cash consideration paid by the Corporation at the final
closing to pay down such credit facility and/or as working
capital to continue to develop the Contributed Properties. If the
proceeds are used to pay down part or all of such credit
facility, the credit facility will be used to continue to develop
the Contributed Properties.
All of Contributed Properties are located in Moore and Potter
Counties in Texas and the wells to be included in such
Contributed Properties primarily target the red cave formation at
a depth of 2,100 to 2,300 feet. Masterson West and affiliate of
Masterson West, Adams Affiliates Inc., have owned and operated
the Contributed Properties for over 20 years. The Corporation has
targeted this transaction for a number of reasons. First, the
Contributed Properties are currently producing approximately
1,000 barrels of oil per day equivalent and include approximately
8,000 net acres of leasehold that are held by such production.
Second, the Corporation believes this transaction is a lower risk
oil-weighted infill drilling opportunity as Masterson West has
identified approximately 380 locations to develop on five to ten
acre spacing units, with approximately 200 proved undeveloped
drilling locations. The Corporation estimates the total cost to
complete each well will be approximately $250,000.
Counties in Texas and the wells to be included in such
Contributed Properties primarily target the red cave formation at
a depth of 2,100 to 2,300 feet. Masterson West and affiliate of
Masterson West, Adams Affiliates Inc., have owned and operated
the Contributed Properties for over 20 years. The Corporation has
targeted this transaction for a number of reasons. First, the
Contributed Properties are currently producing approximately
1,000 barrels of oil per day equivalent and include approximately
8,000 net acres of leasehold that are held by such production.
Second, the Corporation believes this transaction is a lower risk
oil-weighted infill drilling opportunity as Masterson West has
identified approximately 380 locations to develop on five to ten
acre spacing units, with approximately 200 proved undeveloped
drilling locations. The Corporation estimates the total cost to
complete each well will be approximately $250,000.
If the final closing does not occur, the Contributed Properties
will not be transferred to Masterson West II and 38,000,000
shares of the Common Stock shall be returned to the Corporation.
will not be transferred to Masterson West II and 38,000,000
shares of the Common Stock shall be returned to the Corporation.
The foregoing summary of the Contribution Agreement is qualified
in its entirety by reference to the full terms and conditions of
such agreement, a copy of which is included as an exhibit to this
Current Report on Form 8-K and is incorporated herein by
reference.
in its entirety by reference to the full terms and conditions of
such agreement, a copy of which is included as an exhibit to this
Current Report on Form 8-K and is incorporated herein by
reference.
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Limited Liability Company Agreement of Masterson West II,
LLC
LLC
In connection with the execution of the Contribution Agreement
described above, Masterson West and the Corporation executed that
certain Limited Liability Company Agreement of Masterson West II
dated as of December 22, 2016 (the “LLC Agreement”). to the LLC
Agreement, there are two classes of ownership interest, Class A
Units and Class B Units. In connection with Contribution
Agreement, at the initial closing, one Class A Units were issued
to Masterson West and one Class B Unit was issued to the
Corporation. Also, to the LLC Agreement, Masterson West is
immediately entitled to be distributed 2,000,000 shares of the
Common Stock.
described above, Masterson West and the Corporation executed that
certain Limited Liability Company Agreement of Masterson West II
dated as of December 22, 2016 (the “LLC Agreement”). to the LLC
Agreement, there are two classes of ownership interest, Class A
Units and Class B Units. In connection with Contribution
Agreement, at the initial closing, one Class A Units were issued
to Masterson West and one Class B Unit was issued to the
Corporation. Also, to the LLC Agreement, Masterson West is
immediately entitled to be distributed 2,000,000 shares of the
Common Stock.
An additional 49 to 99 Class B Units shall be issued to the
Corporation depending on the amount of cash contributed by the
Corporation to Masterson West II at the final closing. The Class
A Units and Class B Units are identical in all respects, except
with respect to how the Common Stock may be distributed to
Masterson West and the Corporation. In general, if the final
closing occurs and the Corporation contributes $18,000,000 to
Masterson West II, the Corporation shall be issued an additional
99 Class B Units and Masterson West shall be entitled to a
distribution of the remaining 38,000,000 shares of Common Stock.
If the Corporation contributes less than $18,000,000 to Masterson
West II at the final closing, the Corporation shall be issued a
lesser number of Class B Units and Masterson West shall be
entitled to a distribution of a lesser number of the 38,000,000
shares of Common Stock.
Corporation depending on the amount of cash contributed by the
Corporation to Masterson West II at the final closing. The Class
A Units and Class B Units are identical in all respects, except
with respect to how the Common Stock may be distributed to
Masterson West and the Corporation. In general, if the final
closing occurs and the Corporation contributes $18,000,000 to
Masterson West II, the Corporation shall be issued an additional
99 Class B Units and Masterson West shall be entitled to a
distribution of the remaining 38,000,000 shares of Common Stock.
If the Corporation contributes less than $18,000,000 to Masterson
West II at the final closing, the Corporation shall be issued a
lesser number of Class B Units and Masterson West shall be
entitled to a distribution of a lesser number of the 38,000,000
shares of Common Stock.
to the LLC Agreement, an affiliate of Masterson West shall be the
manager of Masterson West II and the Corporation has certain
customary approval rights before Masterson West can take certain
actions.
manager of Masterson West II and the Corporation has certain
customary approval rights before Masterson West can take certain
actions.
The foregoing summary of the LLC Agreement is qualified in its
entirety by reference to the full terms and conditions of such
agreement, a copy of which is included as an exhibit to this
Current Report on Form 8-K and is incorporated herein by
reference.
entirety by reference to the full terms and conditions of such
agreement, a copy of which is included as an exhibit to this
Current Report on Form 8-K and is incorporated herein by
reference.
Item 2.03 Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant
Obligation under an Off-Balance Sheet Arrangement of a Registrant
The Corporation has recently entered into securities purchase
agreements (each, a “Securities Purchase Agreement” and,
collectively, the “Securities Purchase Agreements”) with five
accredited investors, to which it issued senior unsecured
convertible promissory notes due December 31, 2018 (each, a
“Convertible Note” and, collectively, the “Convertible
Notes”) in the aggregate amount of approximately $150,000. Each
Convertible Note accrues interest at 6%, is due December 31, 2018
and is convertible at the option of the holder at $0.15 per
share. Each investor was also issued a warrant certificate (each,
a “Warrant Certificate” and, collectively, the “Warrant
Certificates”), to which such investor could acquire one share
of Common Stock at $0.25 per share for each $0.25 invested in the
applicable Convertible Note until December 31, 2018. The full
amount interest under each Convertible Note is accrued and paid
upon the maturity date or earlier conversion.
agreements (each, a “Securities Purchase Agreement” and,
collectively, the “Securities Purchase Agreements”) with five
accredited investors, to which it issued senior unsecured
convertible promissory notes due December 31, 2018 (each, a
“Convertible Note” and, collectively, the “Convertible
Notes”) in the aggregate amount of approximately $150,000. Each
Convertible Note accrues interest at 6%, is due December 31, 2018
and is convertible at the option of the holder at $0.15 per
share. Each investor was also issued a warrant certificate (each,
a “Warrant Certificate” and, collectively, the “Warrant
Certificates”), to which such investor could acquire one share
of Common Stock at $0.25 per share for each $0.25 invested in the
applicable Convertible Note until December 31, 2018. The full
amount interest under each Convertible Note is accrued and paid
upon the maturity date or earlier conversion.
The foregoing summaries of the Convertible Note and the Warrant
Certificate are qualified in its entirety by reference to the
full terms and conditions of such agreements, copies of which are
included as exhibits to the form of Securities Purchase Agreement
filed as an exhibit to this Current Report on Form 8-K and are
incorporated herein by reference.
Certificate are qualified in its entirety by reference to the
full terms and conditions of such agreements, copies of which are
included as exhibits to the form of Securities Purchase Agreement
filed as an exhibit to this Current Report on Form 8-K and are
incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities
Issuance of 40,000,000 shares of Common Stock
As discussed above, in connection with the Contribution
Agreement, the Corporation issued 40,000,000 shares of Common
Stock to Masterson West II on December 22, 2016.
Agreement, the Corporation issued 40,000,000 shares of Common
Stock to Masterson West II on December 22, 2016.
Issuance of Convertible Notes and Warrant Certificates
See description of Convertible Notes and Warrant Certificates
set forth in Item 2.03 above.
set forth in Item 2.03 above.
The offers and sales related to the securities described above
were not registered under the Securities Act of 1933, as
amended, in reliance upon the exemption from the registration
requirements of that act provided by Section 4(2) thereof and
Regulation D promulgated by the Securities and Exchange
Commission thereunder. Each of the investors described above is
a sophisticated accredited investor with the experience and
expertise to evaluate the merits and risks of an investment in
the Corporation’s securities and the financial means to bear
the risks of such an investment. In addition, each investor was
provided access to all of the material information regarding
the company that such investor would have received if the offer
and sale of the securities had been registered.
were not registered under the Securities Act of 1933, as
amended, in reliance upon the exemption from the registration
requirements of that act provided by Section 4(2) thereof and
Regulation D promulgated by the Securities and Exchange
Commission thereunder. Each of the investors described above is
a sophisticated accredited investor with the experience and
expertise to evaluate the merits and risks of an investment in
the Corporation’s securities and the financial means to bear
the risks of such an investment. In addition, each investor was
provided access to all of the material information regarding
the company that such investor would have received if the offer
and sale of the securities had been registered.
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Item 5.01 Changes in Control of Registrant
Effective as of December 22, 2016, a change in control of the
Corporation occurred in connection with the issuance of the
40,000,000 shares of Common Stock to Masterson West II as
described in Item 1.01 above. Masterson West II has acquired
control of the Corporation by the issuance of such 40,000,000
shares of Common Stock, but 38,000,000 of such shares are subject
to a claw back by the Corporation depending on what happens at
the final closing or if the final closing occurs at all. If the
final closing does not occur, the 38,000,000 shares of Common
Stock will be returned to the Corporation and the change in
control will be reversed. The consideration for the issuance of
2,000,000 shares of Common Stock was the Masterson West’s
execution of the Contribution Agreement. The consideration for
the remaining 38,000,000 shall be the Contributed Properties if
they are contributed. Prior to the entry into the Contribution
Agreement, no single stockholder or, to the Corporation’s
knowledge, group of stockholders was in control of the
Corporation.
Corporation occurred in connection with the issuance of the
40,000,000 shares of Common Stock to Masterson West II as
described in Item 1.01 above. Masterson West II has acquired
control of the Corporation by the issuance of such 40,000,000
shares of Common Stock, but 38,000,000 of such shares are subject
to a claw back by the Corporation depending on what happens at
the final closing or if the final closing occurs at all. If the
final closing does not occur, the 38,000,000 shares of Common
Stock will be returned to the Corporation and the change in
control will be reversed. The consideration for the issuance of
2,000,000 shares of Common Stock was the Masterson West’s
execution of the Contribution Agreement. The consideration for
the remaining 38,000,000 shall be the Contributed Properties if
they are contributed. Prior to the entry into the Contribution
Agreement, no single stockholder or, to the Corporation’s
knowledge, group of stockholders was in control of the
Corporation.
Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
On December 22, 2016, J. C. Whorton, Jr. resigned as the Chairman
of the Board of Directors and Chief Executive Officer of the
Corporation. On December 23, 2016, the sole remaining member of
the Board of Directors, Michael R. Morrisett, appointed Anthony
N. Kamin to fill the vacancy on the Board of Directors created by
Mr. Whorton’s resignation. The resignation of J. C. Whorton, Jr.
was not the result of any disagreement with the Corporation.
of the Board of Directors and Chief Executive Officer of the
Corporation. On December 23, 2016, the sole remaining member of
the Board of Directors, Michael R. Morrisett, appointed Anthony
N. Kamin to fill the vacancy on the Board of Directors created by
Mr. Whorton’s resignation. The resignation of J. C. Whorton, Jr.
was not the result of any disagreement with the Corporation.
Item 7.01 Regulation FD Disclosure
On December 28, 2016, the Corporation issued a press release
announcing, among other things, that it had entered into the
Contribution Agreement and the LLC Agreement. A copy of the press
release is furnished as Exhibit 99.1 hereto.
announcing, among other things, that it had entered into the
Contribution Agreement and the LLC Agreement. A copy of the press
release is furnished as Exhibit 99.1 hereto.
Item 8.01 Other Events
Effective as of December 22, 2016, the Corporation changed its
address to 2651 E. 21st Street, Suite 310, Tulsa Oklahoma 74114,
and its telephone number to (539) 444-8002.
address to 2651 E. 21st Street, Suite 310, Tulsa Oklahoma 74114,
and its telephone number to (539) 444-8002.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
| 2.1 |
Subscription and Contribution Agreement dated as of December 22, 2016, by and between Masterson West, LLC and Empire Petroleum Corporation |
| 2.2 |
Limited Liability Company Agreement of Masterson West II, LLC dated as of December 22, 2016 |
| 4.1 |
Form of Securities Purchase Agreement entered into between Empire Petroleum Corporation and five accredited investors |
| 99.1 |
Press Release of Empire Petroleum Corporation dated December 28, 2016 |
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