Annual report pursuant to Section 13 and 15(d)

Related Party Transactions

v3.19.1
Related Party Transactions
12 Months Ended
Dec. 31, 2018
Related Party Transactions [Abstract]  
Related Party Transactions

13. Related Party Transactions

 

Transactions with Fir Tree

 

On March 3, 2017, the Company entered into a transaction with Fir Tree pursuant to which Fir Tree purchased from ACM Emerging Markets Master Fund I, L.P. $22 million aggregate principal amount of the Company’s outstanding convertible notes which were due in 2018. This transaction was part of a comprehensive recapitalization designed to create a path to a potential equalization of substantially all of the Company’s debt, subject to stockholder approval. As part of the transaction, the Company issued to Fir Tree an additional $19.4 million aggregate principal amount of convertible notes. After giving effect to these transactions, the Company had approximately $41.4 million of outstanding convertible notes. Fir Tree agreed to convert all of the outstanding convertible notes into common stock at a conversion price of $1.40 per share, subject to receipt of stockholder approval and satisfaction of certain other conditions.

 

On June 20, 2017, the Company converted such notes into Common Stock at a price of $1.40 per share and issued 29,538,786 shares of Common Stock to Fir Tree (the “Conversion”), upon the Company receiving stockholder approval at the Annual Meeting of Stockholders of the Company on June 15, 2017. As such, all obligations under the notes have been deemed paid in full and the notes have been terminated. No termination penalty or fee was incurred in connection with the termination of the notes. The Conversion reduced the Company’s debt by approximately $41.4 million.

 

On March 29, 2018, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Fir Tree, pursuant to which Fir Tree agreed to purchase 10,000 shares of our newly-designated Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred”), at a price of $1,000 per share. The transaction closed on April 2, 2018 providing for our sale and issuance of 10,000 shares of Series A Preferred, providing $10.0 million of gross proceeds and $9.7 million of net proceeds after expenses to us. Holders of Series A Preferred are entitled to cumulative dividends payable semi-annually in arrears at a rate of (i) 10% per year if we elect to pay the dividend in cash, or (ii) 12% per year if we elect to pay the dividend through the issuance of additional shares of Series A Preferred. On October 1, 2018, we paid the initial dividend on the outstanding shares of Series A Preferred through the issuance of an aggregate of 600 additional shares of Series A Preferred to the holders of outstanding shares of Series A Preferred.

 

On June 8, 2018, we executed a negotiable demand promissory note (the “Demand Note”) in the principal amount of up to $15.0 million in favor of Eco-Lender, LLC (the “Lender”), a Delaware limited liability company and an affiliate of Fir Tree. Pursuant to the Demand Note, on June 8, 2018, the Lender advanced approximately $5.5 million of gross proceeds and $5.1 million of net proceeds after expenses and on August 16, 2018 the Lender advanced an additional $3.0 million of gross proceeds and $2.97 million of net proceeds to us under the Demand Note. We do not have any right to re-borrow any amounts that have been advanced and repaid under the Demand Note. In addition, the Lender is not obligated to make any additional advances under the Note.

 

Interest on the unpaid principal balance of the Demand Note accrues at an annual rate of 10%, subject to a default interest rate of 14.00% or 24.00% depending on the payment date following the occurrence of a default. All payments of principal, interest and other amounts under the Demand Note are payable immediately upon written demand by the Lender to us; provided, however, the Lender cannot make any demand for payment under the Demand Note until the earlier of (A) 45 days after the date of the Demand Note, (B) the occurrence of a material adverse change as defined in the Demand Note and determined by the Lender in its sole and absolute discretion, (C) the occurrence of any default or event of default under any material agreement of ours or any of our subsidiaries, and (D) the date upon which we or any of our subsidiaries ceases operating for any reason.

 

We may prepay, in whole or in part, at any time, the principal, interest and other amounts owing under the Demand Note subject to a prepayment premium of 4.00% of the aggregate amount of such prepayment (inclusive of interest and other amounts due and owing under the Demand Note), provided that the minimum amount of any such prepayment is equal to the lesser of $1 million and the then outstanding balance of the Demand Note.

  

All of our obligations under the Note are guaranteed by our wholly owned subsidiary, EcoStim, Inc. (“EcoStim”), and secured by a security interest (subject to permitted liens) in substantially all of our personal property, including 100% of the outstanding equity of the our U.S. subsidiaries (including EcoStim, Inc.) and 65% of the outstanding equity of our non-U.S. subsidiaries; provided, however, that the Lender had a subordinate lien on those of our assets that were subject to the lien of Porter Capital pursuant to the Receivables Agreement prior to the termination of such agreement.

 

July 2017 and August 2017 Private Placements

 

On July 6, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with each of the purchasers identified on the signature pages thereto, including funds affiliated with Fir Tree and Bienville (collectively, the “July Purchasers”) pursuant to which the July Purchasers agreed to purchase 10,000,000 shares of the Company’s common stock, par value $0.001 per share, at a price of $1.50 per share (the “July Private Placement”). The issuance of the Shares pursuant to the Purchase Agreement was made in reliance upon an exemption from registration provided under Section 4(a)(2) of the Securities Act. The July Private Placement closed on July 6, 2017 and resulted in approximately $15.0 million of gross proceeds and approximately $14.8 million of net proceeds (after deducting the Company’s estimated expenses).

 

In connection with the closing of the July Private Placement, the Company and the July Purchasers entered into that certain Amended& Restated Registration Rights Agreement, dated July 6, 2017 (the “Registration Rights Agreement”). Under the Registration Rights Agreement, the Company agreed to (i) use its reasonable best efforts to file a Registration Statement (as defined in the Registration Rights Agreement) on Form S-1 or any successor form thereto (each a “Long-Form Registration” as defined in the Registration Rights Agreement) with the Securities and Exchange Commission (the “Commission”) upon the initial request of registration from the Demand Holders (as defined in the Registration Rights Agreement) within ninety (90) days after the date on which the initial request is given; and (ii) use its reasonable best efforts to file a Registration Statement on Form S-3 or any successor form thereto, if the Company is qualified for the use of Form S-3, (each a “Short-Form Registration” as defined in the Registration Rights Agreement) with the Commission upon the initial request of registration from the Demand Holders within sixty (60) days after the date on which the initial request is given. In addition, the Registration Rights Agreement provides holders of Registrable Securities (as defined in the Registration Rights Agreement) piggyback registration rights, subject to certain underwriter cutbacks and issuer blackout periods. The Company also agreed to pay all fees and expenses relating to the registration and disposition of the Registrable Securities in compliance with the Company’s obligations under the Registration Rights Agreement.

 

In addition, in connection with the closing of the July Private Placement, the Company’s Amended and Restated Stockholders Agreement dated as of March 3, 2017 (the “Rights Agreement”) was amended to clarify certain procedures set forth in the Rights Agreement with respect to matters subject to approval by directors nominated by FT SOF VII Holdings, LLC, an affiliate of Fir Tree Partners.

 

On August 2, 2017, the Company entered into a Common Stock Subscription Agreement (the “Subscription Agreement”) with (i) affiliates of Fir Tree, pursuant to which such Fir Tree affiliates agreed to purchase 9,456,056 shares (pre-split) of the Company’s common stock, (ii) Bienville Argentina Fund, pursuant to which Bienville agreed to purchase 1,923,077 shares (pre-split) of the Company’s common stock and (iii) certain other purchasers identified on the signature pages thereto (the “August Purchasers”) pursuant to which such other August Purchasers agreed to purchase an aggregate of 10,124,364 shares of the Company’s common stock, in each cases of clauses (i), (ii) and (iii), at a price of $1.43 per share, which was the closing market price for the Company’s Common Stock on August 1, 2017 (collectively, the “August Private Placement”). The issuance of such shares of Common Stock pursuant to the Subscription Agreement was made in reliance upon an exemption from registration provided under Section 4(a)(2) of the Securities Act. The August Private Placement closed on August 8, 2017 and resulted in approximately $28.0 million of gross proceeds and approximately $26.7 million of net proceeds (after deducting the Company’s estimated expenses).

 

In connection with the August Private Placement, the Company, Fir Tree, Bienville Argentina Fund, and the August Purchasers entered into a new Registration Rights Agreement as of August 2, 2017 that became effective upon the closing of the August Private Placement (the “PIPE Registration Rights Agreement”). Under the PIPE Registration Rights Agreement, the Company agreed to (i) use its reasonable best efforts to file a Registration Statement (“Shelf Registration Statement” as defined in the PIPE Registration Rights Agreement) with the Commission no later than sixty (60) days following the closing date of the August Private Placement, to be effective no later than one hundred twenty (120) days following such closing date. In addition, the PIPE Registration Rights Agreement provides holders of Registrable Securities (as defined in the PIPE Registration Rights Agreement) piggyback registration rights, subject to certain underwriter cutbacks and issuer blackout periods. The Company agreed to pay all fees and expenses relating to the registration and disposition of the Registrable Securities in compliance with the Company’s obligations under the PIPE Registration Rights Agreement.

  

In connection with the August Private Placement, the prior Restated Registration Rights Agreement, dated as of March 3, 2017 (the “Existing Registration Rights Agreement”), among the Company, Fir Tree, Bienville and the other parties thereto, was amended so as to include definitions related to the August Private Placement, to clarify certain clauses set forth in the Existing Registration Rights Agreement with respect to the Shelf Registration Statement as defined in the PIPE Registration Rights Agreement, and to clarify certain aspects of the relationship between the Company’s obligations under the Existing Registration Rights Agreement and the Company’s obligations under the PIPE Registration Rights Agreement.

 

The Registration Rights Agreement and the PIPE Registration Rights Agreement were terminated on February 21, 2019 in contemplation of the deregistration of the Company’s common stock with the SEC.