Item 1.01. Entry into a Material Definitive Agreement.
On
November 27, 2019, Yuma Energy, Inc. (the “Company”) and certain of its
subsidiaries (collectively, the “Borrowers”) entered into an
amended and restated credit agreement (the “Credit Agreement”) with YE
Investment LLC, a Delaware limited liability company
(“YE”) and an
affiliate of Red Mountain Capital Partners LLC, a Delaware limited
liability company (“Red
Mountain”). Among other things, the Credit Agreement
amends and restates the credit agreement dated as of October 26,
2016 (as amended, modified or restated from time to time) (the
“Original Credit
Agreement”) by and among, the Borrowers and YE, as
administrative agent and lender.
The
Credit Agreement provides for a delayed draw term loan in an amount
of up to $2.0 million (the “Draw Term Loan”) in addition to
the current outstanding loan of $1.7 million (the
“Purchased
Loan”). The amounts borrowed under the Credit
Agreement bear annual interest at a rate of 10% per annum, payable
quarterly until December 31, 2019 and monthly thereafter. Principal
amounts outstanding under the Purchased Loan are due and payable in
full at maturity on December 31, 2022 and the principal amounts
outstanding under the Draw Term Loan are due and payable in full at
maturity on September 30, 2022. The Draw Term Loan has a prepayment
penalty of 10% of the principal amount repaid. All of the
obligations under the Credit Agreement, and the guarantees of those
obligations, are secured by substantially all of the
Company’s assets.
The
Purchased Loan may be exchanged (the “Note Exchange”) for a convertible
note (the “Convertible
Note”) at the option of YE. Provided, however, the
Note Exchange will be subject to approval of the stockholders of
the Company as required by the NYSE American, LLC for issuances of
common stock, $0.001 par value per share of the Company (the
“Common Stock”).
Upon the Note Exchange, the Convertible Note will be convertible
into Common Stock at a rate of $0.1288668927422 per share with an
interest rate of 5% per annum.
The
Credit Agreement contains a number of covenants that, among other
things, restrict, subject to certain exceptions, the
Borrowers’ ability to create liens on assets, make
fundamental business changes, make investments, pay dividends and
distributions or repurchase its equity interests, engage in mergers
or consolidations, sell certain assets and engage in certain
transactions with affiliates.
The
Credit Agreement contains customary affirmative covenants and
defines events of default to include failure to pay principal or
interest, breach of covenants, breach of representations and
warranties, insolvency, judgment default and a change in control.
Additionally, an event of default will occur if the Restructuring
Transactions (as such term is defined in the Restructuring and
Exchange Agreement dated as of September 30, 2019 (the
“Restructuring
Agreement”), by and among the Borrowers, Red Mountain,
RMCP PIV DPC, LP, RMCP PIV DPC II, LP, and YE) have not been
consummated and made effective on or before September 30, 2020. The
Restructuring Transactions include the Note Exchange and the filing
of an amended and restated certificate of designation of the Series
D Preferred Stock of the Company with the Delaware Secretary of
State to reduce the conversion price of the Company’s Series
D Preferred Stock. Upon the occurrence and continuance of an event
of default, the Lender has the right to accelerate repayment of the
loans and exercise its remedies with respect to the
collateral.
The
Credit Agreement is included as Exhibit 10.1 to this Current Report
on Form 8-K, and the foregoing summary description of the Credit
Agreement is qualified in its entirety by reference to such
exhibit, which is incorporated herein by reference.