UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of Earliest Event Reported): August 14, 2019

 

CARBON ENERGY CORPORATION
(Exact name of registrant as specified in charter)

 

Delaware   000-02040   26-0818050

(State or Other Jurisdiction

of Incorporation)

 

(Commission File

Number)

 

(IRS Employer

Identification No.)

 

1700 Broadway, Suite 1170, Denver, Colorado   80290
(Address of principal executive offices)   (Zip code)

 

  (720) 407-7030  
  (Registrant's telephone number including area code)  

 

     
  (Former Name or former address, if changed since last report)  

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class Trading Symbol Name of each exchange on which registered
     

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13a of the Exchange Act.

 

 

 

 

 

 

Item 1.01 – Entry into a Material Definitive Agreement.

 

Amendment to Amended and Restated Credit Agreement .

 

On August 14, 2019, Carbon Appalachia Enterprises, LLC and Nytis Exploration (USA) Inc. (collectively, the “ Borrowers ”) (each of which is a subsidiary of Carbon Energy Corporation (“ Carbon ” or the “ Company ”), a Delaware corporation), entered into a Second Amendment (the “ Amendment ”) of the Amended and Restated Credit Agreement dated as of December 31, 2018, by and among the Borrowers, LegacyTexas Bank, as administrative agent (the “ Administrative Agent ”), and the lenders from time to time party thereto (as amended, the “ Credit Agreement ”). Pursuant to the Amendment, Borrowers, the Administrative Agent and such lenders agreed to (i) amend certain provisions of the Credit Agreement (described below) and (ii) the Administrative Agent and such lenders provided limited waivers of noncompliance with certain covenants under the Credit Agreement (also described below).

 

Pursuant to the Amendment, the parties agreed (i) that commencing October 1, 2019, the Borrowers and their subsidiaries will not have any accounts payable outstanding more than 90 days after the due date therefor, other than accounts payable that are being contested in good faith, (ii) that the Borrowers will maintain a minimum liquidity (unencumbered cash and cash equivalents plus credit available under the Credit Agreement facility) of $3 million and (iii) that the Borrowers will seek the sale of certain non-core assets and apply the proceeds thereof to payment of outstanding amounts under the Credit Agreement. In connection with the Amendment, the Administrative Agent and the lenders provided limited waivers of the Borrower’s failure (xi) to include accounts aging reports concurrently with delivery of quarterly financial statements and (xii) to satisfy the required Current Ratio for the quarter ended June 30, 2019.

 

The above description of the terms of the Amendment does not purport to be complete and is qualified in its entirety by the full text of the Amendment, which is attached as an exhibit hereto and incorporated herein by reference.

  

Item 9.01 Financial Statements and Exhibits.

(d)        Exhibits :

 

Exhibit No.   Description
     
10.1*   Second Amendment to the Amended and Restated Credit Agreement, dated August 14, 2019
     
         

* Filed herewith

 

 

2  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned, hereunto duly authorized.

 

  CARBON ENERGY CORPORATION  
August 15, 2019      
    /s/ Patrick R. McDonald  
   

Patrick R. McDonald,

Chief Executive Officer

 

 
       
       
       

 

3  

Exhibit 10.1

 

SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT

This SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this " Amendment "), dated as of August 14, 2019 (the " Second Amendment Effective Date "), is by and among CARBON APPALACHIA ENTERPRISES, LLC , a Delaware limited liability company (" CAE "), and NYTIS EXPLORATION (USA) INC. , a Delaware corporation (" Nytis USA ", and together with CAE, collectively, " Borrowers ", and each, individually, a " Borrower "), each of the Subsidiaries party hereto (collectively, the " Guarantors " and each a " Guarantor "), LEGACYTEXAS BANK , as the Administrative Agent (the " Administrative Agent "), and the Lenders party hereto.

WHEREAS, Borrowers, the financial institutions from time to time party thereto (the " Lenders "), and Administrative Agent are parties to that certain Amended and Restated Credit Agreement dated as of December 31, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the " Credit Agreement ");

WHEREAS, Borrowers have advised Administrative Agent and the Lenders that certain Events of Default have occurred under the Credit Agreement as the result of Borrowers' failure to comply with (i) the reporting requirement set forth in Section 7.1(p) of the Credit Agreement for the fiscal quarter ending March 31, 2019, and (ii) the Current Ratio financial covenant set forth in Section 9.2 of the Credit Agreement for the fiscal quarter ending June 30, 2019 (the foregoing Events of Default, collectively, the " Specified Defaults ");

WHEREAS, Borrowers have requested Administrative Agent and the Lenders to agree to amend the Credit Agreement and waive the Specified Defaults as hereinafter provided, and, subject to the terms and conditions set forth herein, Administrative Agent and the Lenders are willing to agree to such amendments and limited waiver, all as hereinafter provided; and

WHEREAS, Borrowers, the Guarantors, the Lenders and Administrative Agent acknowledge that the terms of this Amendment constitute an amendment and modification of, and not a novation of, the Credit Agreement and the other Loan Documents.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.         Definitions . Unless otherwise defined in this Amendment, capitalized terms used in this Amendment that are defined in the Credit Agreement shall have the meanings assigned to such terms in the Credit Agreement.

SECTION 2.         Amendments to Credit Agreement . Subject to satisfaction of the conditions to effectiveness set forth in Section 3 of this Amendment, the parties hereto agree as follows:

(a)               Amendment to Section 8.19 of the Credit Agreement . Section 8.19 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

Section 8.19 Certain Accounts Payable .

 

(a)       On or before September 30, 2019, for each well whose reserves or projected cash flow are from time to time included in any Reserve Report, there shall be no accounts payable outstanding more than 90 days after the due date under or in connection with an authorization for expenditure that are associated with such well, other than those that are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been established.

 

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Page 1

 

 

(b)       Commencing as of October 1, 2019 and thereafter, there shall be no accounts payable outstanding more than 90 days after the due date, other than accounts payable that are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been established.

 

(b)              New Section 9.3 of the Credit Agreement . A new Section 9.3 is hereby added to the end of Article 9 of the Credit Agreement to read in its entirety as follows:

Section 9.3 Minimum Liquidity . Borrowers shall not permit the Liquidity to be less than $3,000,000 at any time.

SECTION 3.         Conditions of Effectiveness . The amendments set forth in Section 2 of this Amendment, the agreements and covenants set forth in Section 4 of this Amendment, the limited waiver set forth in Section 5 of this Amendment, as well as any other terms and conditions set forth herein, shall be effective as of Second Amendment Effective Date, provided that Administrative Agent shall have received each of the following:

(a)               a counterpart of this Amendment executed by Borrowers, the Guarantors and the Lenders; and

(b)              such other certificates, documents, consents or instruments as Administrative Agent may reasonably require.

SECTION 4.         Agreement Regarding Asset Sale; Sale Milestones . The Borrowers hereby covenant and agree that:

(a)               The Borrowers shall solicit offers from third-parties to purchase certain Property of the Borrowers and their respective Subsidiaries in one or a series of transactions (collectively, the “ Sale” ) and comply with all other covenants, agreements, and deliverable and timing requirements set forth in clauses (b) and (c) below.

(b)              On or before December 31, 2019 (or such later date as agreed to in writing by Administrative Agent in its sole discretion) (such date, the " LOI Date "), the Borrowers shall deliver to Administrative Agent evidence reasonably satisfactory to Administrative Agent that Borrowers have received one or more executed letters of intent from a reputable purchaser (each such letter, an " LOI ") or other offer in connection with the Sale.

(c)               As soon as possible, but in any event within sixty (60) days after the LOI Date (or such later date as agreed to in writing by Administrative Agent in its sole discretion), the Borrowers shall (i) have consummated the Sale and the related transactions in connection with the LOIs, (ii) generate or receive proceeds in connection with the Sale in an amount equal to or greater than $2,000,000, and (iii) upon consummation of the Sale, immediately prepay the principal of the Loans with proceeds from the Sale in an amount equal to or greater than $2,000,000 on such date.

SECTION 5.         Specified Defaults; Limited Waiver .

(a)               Specified Defaults . Borrowers have requested that Administrative Agent and the Lenders waive the Specified Defaults. Subject to the terms and conditions of this Amendment, Administrative Agent and the Lenders hereby waive the Specified Defaults.

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Page 2

 

 

(b)              Limited Waiver . Except for the limited waiver set forth in Section 5(a) and except as otherwise provided herein, no provision hereof shall constitute a waiver of any of the terms or conditions of the Credit Agreement or any other Loan Document other than those terms or conditions expressly addressed herein (and even in such instance, only to the extent explicitly addressed herein). Other than as expressly set forth in this Amendment, nothing contained in this Amendment shall be construed as a waiver of any Default or Event of Default or a consent to any action or inaction by any Borrower, any Guarantor or any other Obligated Party, nor shall it be construed as a course of dealing or conduct on the part of any Lender. All rights and remedies now or hereafter available to Administrative Agent or any Lender are hereby reserved. The limited waiver set forth herein shall be effective only in this specific instance and for the specific purpose for which it is given, and this limited waiver shall not entitle any Borrower to any other or further waiver or consent in any similar or other circumstance.

SECTION 6.         Acknowledgment and Ratification . As a material inducement to Administrative Agent and the Lenders to execute and deliver this Amendment, each of Borrowers and each of the Guarantors acknowledges and agrees that (a) the execution, delivery, and performance of this Amendment shall, except as expressly provided herein, in no way release, diminish, impair, reduce, or otherwise affect the obligations of such Person under the Loan Documents to which such Person is a party, (b) acknowledges and agrees that each Loan Document to which such Person is a party shall remain in full force and effect and shall each continue to be the legal, valid and binding obligations of such Person enforceable against such Person in accordance with its terms, and (c) acknowledges and agrees that it has no claims or offsets against, or defenses or counterclaims to, any of the Loan Documents.

SECTION 7.         Representations and Warranties . Before and after giving effect to this Amendment, the Borrowers hereby confirm that (a) the representations and warranties of each Borrower and each other Obligated Party contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects (except to the extent such representations and warranties are qualified by materiality, in which case they shall be true and correct in all respects) on and as of the Second Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (except to the extent such representations and warranties are qualified by materiality, in which case they shall be true and correct in all respects) as of such earlier date, and (b) no Default or Event of Default shall have occurred and be continuing (other than the Specified Defaults).

SECTION 8.         Administrative Agent and the Lenders Make No Representations or Warranties . By execution of this Amendment, neither Administrative Agent nor any Lender (a) makes any representation or warranty or assumes any responsibility with respect to any statements, warranties, or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency, or value of this Amendment, the Credit Agreement, the Loan Documents or any other instrument or document furnished pursuant hereto or thereto, or (b) makes any representation or warranty or assumes any responsibility with respect to the financial condition of any Borrower, any Guarantor or any other Person or the performance or observance by such Persons of any of their obligations under the Loan Documents or any other instrument or document furnished pursuant thereto.

SECTION 9.         Effect of Amendment . This Amendment (a) except as expressly provided herein, shall not be deemed to be a consent to the modification or waiver of any other term or condition of the Credit Agreement, the other Loan Documents or any of the instruments or agreements referred to therein, (b) except as expressly provided herein, shall not prejudice any right or rights which Administrative Agent or the Lenders may now or hereafter have under or in connection with the Credit Agreement or any other Loan Document, including, without limitation, the right to accelerate the Obligations, institute foreclosure proceedings, exercise their respective rights under the UCC or other applicable Law, and/or institute collection proceedings against any Borrower, any Guarantor, or any other Obligated Party, to the extent provided therein or by Law, and (c) except as expressly provided herein, shall not be deemed to be a waiver of any existing or future Default or Event of Default under the Credit Agreement or any other Loan Document.

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Page 3

 

 

SECTION 10.      Miscellaneous . This Amendment shall be governed by, and construed in accordance with, the Laws of the State of Texas. The captions in this Amendment are for convenience of reference only and shall not define or limit the provisions hereof. This Amendment may be executed in separate counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Amendment, it shall not be necessary to produce or account for more than one such counterpart. This Amendment, and any documents required or requested to be delivered pursuant to Section 3 hereof, may be delivered by telecopy or pdf transmission of the relevant signature pages hereof and thereof, as applicable.

SECTION 11.      NOTICE OF FINAL AGREEMENT . THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[Remainder of page intentionally left blank. Signature pages follow.]

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Page 4

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the date and year first above written.

  BORROWERS :  
     
  CARBON APPALACHIA ENTERPRISES, LLC  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  
       
  NYTIS EXPLORATION (USA) INC.  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Signature Page

 

  GUARANTORS :  
       
  APPALACHIA GAS SERVICES, LLC  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  
       
       
  CARBON APPALACHIA GROUP, LLC  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  
       
       
  CARBON APPALACHIAN COMPANY, LLC  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  
       
       
  CARBON TENNESSEE MINING COMPANY, LLC  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  
       
       
  CARBON WEST VIRGINIA COMPANY LLC  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  

 

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Signature Page

 

 

  GUARANTORS :  
       
  COALFIELD PIPELINE COMPANY  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President & CEO  
       
  CRANBERRY PIPELINE CORPORATION  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  
       
  KNOX ENERGY, LLC  
       
  By: Carbon Appalachia Enterprises, LLC,  
    its sole Member  
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  
       
  NYTIS EXPLORATION COMPANY LLC  
       
  By: Nytis Exploration (USA) Inc.,  
    its sole Manager  
       
       
  By: /s/ Patrick R. McDonald  
    Patrick R. McDonald  
    President  

 

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Signature Page

 

  ADMINISTRATIVE AGENT:  
       
  LEGACYTEXAS BANK  
       
  By: /s/ Michael Dombroski  
    Michael Dombroski  
    Managing Director  
       
  LENDER :  
       
  LEGACYTEXAS BANK  
       
  By: /s/ Michael Dombroski  
    Michael Dombroski  
    Managing Director  

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Signature Page

 

 

  LENDERS :  
       
  EAST WEST BANK  
       
  By: /s/ Mary Lou Allen  
  Name: Mary Lou Allen  
  Title: Portfolio Manager  
       
       

 

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Signature Page

 

 

  LENDERS :  
       
  SIMMONS BANK, an Arkansas Chartered Bank  
       
  By: /s/ Zachary Holly  
  Name: Zachary Holly  
  Title: Vice President  
       

 

 

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Signature Page

 

  LENDERS :  
       
  CIT BANK, N.A.  
       
  By: /s/ Stewart McLeod  
  Name: Stewart McLeod  
  Title: Director  

 

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT – Signature Page