UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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): June 30, 2020

 

 

TRANSATLANTIC PETROLEUM LTD.

(Exact name of registrant as specified in its charter)

 

Bermuda

001-34574

None

(State or other jurisdiction of

(Commission File Number)

(IRS Employer

incorporation)

 

Identification No.)

 

16803 Dallas Parkway

Addison, Texas

 

 

 

75001

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (214) 220-4323

 

(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 pursuant to Section 12(b) of the Act:

 

Title of each class 

 

 

 

 

 

 

 

Ticker Symbol

 

 

 

 

 

 

 

Name of each exchange on which registered 

Common shares, par value $0.10

 

 

 

 

 

 

 

TAT

 

 

 

 

 

 

 

NYSE American

 

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 13(a) of the Exchange Act.  ☐


Item 1.01Entry into a Material Definitive Agreement.

On June 30, 2020, TransAtlantic Petroleum (USA) Corp. (“TransAtlantic USA”), a subsidiary of TransAtlantic Petroleum Ltd. (the “Company”), entered into a landlord consent (the “Consent”) with Longfellow Energy LP, a Texas limited partnership (the “Landlord”), pursuant to which the Landlord consented to the continuing of that certain Sublease Agreement, executed on August 7, 2018, by and between TransAtlantic USA and the Landlord (the “Sublease”), on a month-to-month basis with the rights of each of TransAtlantic USA and the Landlord to terminate the Sublease upon thirty days’ written notice.

The foregoing description of the Consent does not purport to be complete and is qualified in its entirety by reference to the full text of the Consent, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated in this Item 1.01 by reference.

Item 8.01Other Events.

On June 30, 2020, the Company entered into a non-binding letter of intent for a potential transaction (the “Acquisition Letter of Intent”) pursuant to which a subsidiary of a new entity (the “Buyer”) to be formed by a group of holders (the “Preferred Shareholder Group”) representing approximately 80% of the Company’s outstanding 12.0% Series A Convertible Redeemable Preferred Shares (the “Series A Preferred Shares”) would acquire 100% of the outstanding common shares of the Company (the “Acquisition”) on the terms set forth in the term sheet attached thereto (the “Acquisition Term Sheet”). Pursuant to the Acquisition Term Sheet, the Buyer would acquire 100% of the common shares of the Company not currently owned by members of the Preferred Shareholder Group at a fixed cash purchase price of $0.13 per common share.  

The members of the Preferred Shareholder Group are Longfellow Energy, LP (“Longfellow”), Dalea Partners, LP (“Dalea”), the Alexandria Nicole Mitchell Trust 2005, the Elizabeth Lee Mitchell Trust 2005, the Noah Malone Mitchell Trust 2005, and Stevenson Briggs Mitchell.  Longfellow and Dalea are affiliates of the Company’s Chairman of the Board of Directors and Chief Executive Officer, N. Malone Mitchell 3rd.

The closing of the Acquisition would occur no later than 180 days after the execution of the definitive transaction documents (the “Acquisition Documents”); provided, that the closing may be extended an additional 120 days if necessary to obtain regulatory approvals. Closing of the Acquisition would be subject to a number of conditions, including but not limited to, approval of the Acquisition by the shareholders of the Company, obtaining necessary third party approvals, no material adverse change in the Company, and receipt by the Company of a fairness opinion satisfactory to the Company’s Board of Directors.  

The Acquisition Letter of Intent will automatically terminate and be of no further force or effect upon the earlier of (i) 5:00 p.m. Central Standard Time on July 31, 2020, (ii) the execution of the Acquisition Documents, (iii) the mutual written agreement of the Preferred Shareholder Group and the Company and (iv) the decision by the Preferred Shareholder Group to terminate, at its sole discretion, the Acquisition Letter of Intent and the negotiations relating thereto.

The foregoing description of the Acquisition Letter of Intent and the Acquisition Term Sheet does not purport to be complete and is qualified in its entirety by reference to the full text of the Acquisition Letter of Intent and the Acquisition Term Sheet attached thereto, which is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated in this Item 8.01 by reference.

On June 30, 2020, the Company entered into a non-binding letter of intent with the Preferred Shareholder Group pursuant to which Dalea Investment Group, LLC (the “Lender”) would provide a working capital loan to the Company (the “Credit Facility Letter of Intent”) on the terms set forth in the term sheet attached thereto (the “Credit Facility Term Sheet”). Pursuant to the Credit Facility Term Sheet, the Lender would lend the Company up to $8 million under a secured credit facility (the “Credit Facility”), which amount would be made available to the Company in accordance with mutually agreed upon milestones. Upon termination of the Acquisition Documents, any remaining availability under the

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Credit Facility would terminate and any outstanding loans thereunder would mature and be payable. The Credit Facility would be guaranteed by TransAtlantic Worldwide, Ltd. and TransAtlantic USA and secured by a first priority perfected security interest (subject to customary exclusions and permitted liens) in the equity of TransAtlantic Worldwide, Ltd. and TransAtlantic USA and accounts and notes receivable and choses in action of the Company. The Credit Facility would bear interest at a fixed rate of 10% per annum, and such interest would be payable monthly.

The closing of the Credit Facility is subject to a number of conditions, including but not limited to, approval by the Company and the Lender of all documentation in connection with the Credit Facility (the “Loan Documents”), payment by the Company of up to $50,000 of fees and expenses of the Lender incurred in connection with the preparation of the Loan Documents, entry by the parties thereto into the Acquisition Documents, the creation and perfection of the requisite security interests, obtainment of necessary third party approvals and execution of all Loan Documents.

The Credit Facility Letter of Intent will automatically terminate and be of no further force or effect upon the earlier of (i) 5:00 p.m. Central Standard Time on July 31, 2020, (ii) the execution of the Loan Documents, (iii) the mutual written agreement of the Preferred Shareholder Group and the Company and (iv) the decision by the Preferred Shareholder Group to terminate, at its sole discretion, the Credit Facility Letter of Intent and the negotiations relating thereto.

The foregoing description of the Credit Facility Letter of Intent and the Credit Facility Term Sheet does not purport to be complete and is qualified in its entirety by reference to the full text of the Credit Facility Letter of Intent and the Credit Facility Term Sheet attached thereto, which is attached as Exhibit 99.2 to this Current Report on Form 8-K and incorporated in this Item 8.01 by reference.

The Preferred Shareholder Group has extended an invitation to the holders of the remaining approximately twenty percent (20%) of the Company’s outstanding Series A Preferred Shares (the “Non-Participant Preferred Shareholders”) to participate in either or both of the Acquisition and the Credit Facility in an amount equal to their pro rata percentage of the Company’s total outstanding Series A Preferred Shares. If a Non-Participant Preferred Shareholder elects to the participate in the Acquisition and/or the Credit Facility, such participation will be on the same terms as the Preferred Shareholder Group, and the Company will consent to such participation, subject to such Non-Participant Preferred Shareholder’s agreement to be bound by the binding provisions of the applicable letter of intent.

Each letter of intent described herein is only a mutual indication of interest in the applicable potential transaction by the parties thereto and does not represent any legally binding commitment or obligation on the part of any party thereto with respect to the applicable potential transaction. The terms of each applicable potential transaction are subject to a number of contingencies, including the performance of due diligence and the negotiation and execution of definitive agreements. No assurances are, or can be given, that the parties will enter into a definitive agreement for the applicable potential transaction, or that if such agreement is entered into, that the terms of the proposed applicable transaction will not change materially from the terms set forth in the applicable letter of intent or that the applicable potential transaction will be consummated. Certain conditions to the closing of each potential transaction are outside of the parties’ control and the Company cannot provide any assurance that the conditions will be satisfied.  

Forward-Looking Statements

This Current Report on Form 8-K contains statements concerning the timing of the closing of the Acquisition and Credit Facility, as well as other expectations, plans, goals, objectives, assumptions or information about future events, conditions, results of operations or performance that may constitute forward-looking statements or information under applicable securities legislation. Such forward-looking statements or information are based on a number of assumptions, which may prove to be incorrect. In addition to other assumptions identified in this Current Report on Form 8-K, assumptions have been made regarding, among other things, the completion of the Acquisition Documents and Loan Documents, the

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Buyer’s and Lender’s due diligence review and the receipt of applicable shareholder and third party approvals.

Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct.

Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements or information. These risks and uncertainties include the risks that the conditions to the Acquisition or Credit Facility will not be satisfied or the Acquisition or Credit Facility will not close on the terms expected.

The forward-looking statements or information contained in this Current Report on Form 8-K are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Item 9.01Financial Statements and Exhibits.

(d)Exhibits.

 


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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date:

July 2, 2020

 

 

 

 

 

 

 

 

TRANSATLANTIC PETROLEUM LTD.

 

 

 

 

 

 

By:

/s/ Tabitha Bailey

 

 

 

Tabitha Bailey

 

 

 

Vice President, General Counsel, and Corporate Secretary

 

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Exhibit 10.1

 

LANDLORD CONSENT

SUBLEASE AGREEMENT

16803 DALLAS PARKWAY

 

This Landlord Consent (“Consent”) executed the 30th day of June, 2020 and dated effective as of the 1st day of July, 2020 (the “Effective Date”) is entered into by and among Longfellow Energy LP, a Texas limited partnership (“Landlord”) and TransAtlantic Petroleum (USA) Corp., previously a Colorado company, now a Delaware company (“Tenant”).  For valuable consideration, the receipt and sufficiency of which is acknowledged, Landlord and Tenant agree to the following terms and conditions herein.

 

RECITALS

 

WHEREAS, Tenant is the tenant under that certain Sublease Agreement executed on August 7, 2018 with an Effective Date of June 14, 2018 (“Sublease”), under which Landlord leased to Tenant commercial office space (“Premises”) as set out in the Sublease;

 

WHEREAS, The Sublease is set to terminate on June 30, 2020;

 

WHEREAS, Tenant desires to continue subleasing the Premises under the same terms and conditions set out in the Sublease on a month-to-month tenancy; and

 

WHEREAS, Paragraph 19 of the Sublease requires Landlord’s consent for the Sublease to be a month-to-month tenancy.

 

AGREEMENT

 

For good and valuable consideration, the receipt and sufficiency of which are acknowledged, Landlord and Tenant agree as follows:

 

1.

General Terms.  All capitalized terms used in this Consent shall have the same meanings as set forth in the Sublease, unless otherwise provided below:

 

 

a.

“Effective Date” shall mean July 1, 2020.

 

 

b.

“Term” shall mean: The Sublease shall be month-to-month commencing on the Effective Date and shall be terminable by either party on 30 days’ written notice.

 

2.

Landlord’s Consent.  As of the Effective Date herein, Landlord consents to the Sublease continuing on a month-to-month basis with the rights of each Tenant and Landlord to terminate the Sublease upon 30 days’ written notice.

 

3.

Other Agreements.  Other than the Sublease, and this Consent, there are no other agreements or understandings, whether written or oral, between Tenant and Landlord.  This Consent shall not be amended orally, but only by an agreement in writing signed by all parties to this Consent.

 

4.

Binding Effect.  This Consent shall be binding on and inure to the benefit of the parties to this Consent and their successors and permitted assigns.


 

 

 

 

SIGNATURE PAGE

LANDLORD CONSENT  

SUBLEASE AGREEMENT

16803 DALLAS PARKWAY

 

 

LANDLORD:

 

Longfellow Energy, LP,

a Texas limited partnership

By Deut 8, LLC, its General Partner

 

 

 

 

By:

/s/ N. Malone Mitchell 3rd

 

 

N. Malone Mitchell 3rd, Manager

 

 

 

TENANT:

 

TransAtlantic Petroleum (USA) Corp.

a Delaware company

 

 

 

 

By:

/s/ Tabitha T. Bailey

 

 

Tabitha T. Bailey, Vice President, General Counsel, Corporate Secretary

 

 

 

 

Landlord Consent - Sublease (LFE-TAT) – Page 2 of 2

 

 

Exhibit 99.1

June 29, 2020

To:Special Committee

Kirk Krist, Chairman of the Special Committee

Greg Renwick

Charles Campise

 

cc:Tabitha Bailey, General Counsel

 

Gentlemen:

The undersigned (the “Preferred Shareholder Group”) collectively represent approximately eighty percent (80%) of the outstanding 12% Series A Convertible Redeemable Preferred Shares (“Series A Preferred Shares”) of TransAtlantic Petroleum Ltd. (the “Company”).  The Preferred Shareholder Group is pleased to submit this letter of intent (this “Letter of Intent”), for a proposed transaction whereby a subsidiary of a new entity to be formed by the Preferred Shareholder Group (“Buyer”), would acquire one hundred percent (100%) of the outstanding common shares of the Company.

The following are the terms of the proposed transaction:

1.General.  This Letter of Intent, including the attached term sheet (the “Term Sheet”), sets forth the general terms of the proposed acquisition (the “Acquisition”) by Buyer of all of the outstanding common equity securities of the Company. The definitive structure of the Acquisition would be determined by the parties after consultation with their respective tax, regulatory, legal and business advisors and the terms of the Transaction Documents (defined below) would be mutually acceptable to the Preferred Shareholder Group and the Company.  

2.Non-Binding.Neither this Letter of Intent nor the Term Sheet is intended to be binding on the Preferred Shareholder Group, Buyer or the Company, except for the respective obligations of the parties in paragraphs 3 through 13 of this Letter of Intent (the “Binding Provisions”), and will be superseded in their entirety upon the execution of mutually agreed upon definitive transaction documents (the “Transaction Documents”), which such Transaction Documents shall require mutual agreement on definitive documentation with respect to the working capital loan to be provided by the Preferred Shareholder Group.  Until the Transaction Documents are executed, no party hereto shall be under any legal obligation (except as expressly set forth in the Binding Provisions) with respect to the Acquisition, including that no party shall be under any obligation to continue discussions or negotiations about, to enter into any definitive written agreement for, or to consummate the Acquisition or any other transaction by virtue of this Letter of Intent, the Term Sheet or any other written or oral expression with respect thereto. All obligations or commitments to proceed with the Acquisition shall be contained only in the Transaction Documents.

 

3.Due Diligence.   Following execution of this Letter of Intent, until the earlier to occur of the Termination Date (defined below) and execution of the Transaction Documents, the Company will give Buyer and its representatives and advisors (including its investors and financing sources and their respective representatives and advisors) access during normal business hours, upon reasonable advance notice and in a manner to be reasonably agreed upon to: (i) the Company’s and its subsidiaries’ facilities; (ii) the key management personnel of Company; and (iii) all accounting, financial and other records applicable to the Company and its subsidiaries, and the Company will furnish Buyer all such information with respect to the business and affairs of the Company and its subsidiaries as Buyer may reasonably request; provided, that such access does not (x) unreasonably disrupt the normal business operations of the Company, or (y) result in any waiver of any attorney-client privilege in the Company’s sole discretion.  

4.Termination.  This Letter of Intent will automatically terminate and be of no further force or effect upon the earlier of (such date and time, the “Termination Date”): (i) 5:00 PM Central Standard Time on July 31, 2020, (ii) the execution of the Transaction Documents, (iii) the mutual written agreement of the Preferred Shareholder Group and the Company and (iv) the decision by the Preferred Shareholder Group to terminate, at its sole discretion, this Letter of Intent and the negotiations relating thereto.

 

5.Publicity.  Any and all announcements and publicity releases which relate to the acquisition contemplated hereby shall be subject to the parties’ mutual approval, unless otherwise required of the Company by law, rule or regulation (including pursuant to the federal and state securities laws and the marketplace rules of the Toronto Stock Exchange (the “TSX”) and NYSE American stock exchange (the “NYSE American”)), in which event the Company shall, to the extent permitted by applicable law, rules and regulations (including federal and state securities laws and the marketplace rules of the TSX and NYSE American), give the Preferred Shareholder Group reasonable prior notice and consider in good faith the comments of the Preferred Shareholder Group to such announcement or release.

6.Expenses. Other than as contemplated by paragraph 7 of this Letter of Intent and the provisions of the Term Sheet, each party shall bear its own expenses in connection with the negotiation of this Letter of Intent and the transactions contemplated hereby.  

7.Required Approvals.  If the Preferred Shareholder Group and the Company mutually agree to seek governmental or regulatory approval of the Acquisition prior to the execution of Transaction Documents, the parties agree to cooperate with each other and use commercially reasonable efforts to obtain such approvals.  Any filing fees required to be paid in connection with obtaining such governmental or regulatory approvals shall be paid 100% by the Preferred Shareholder Group, it being understood that costs associated with mailing, accountants, attorneys, and filing fees associated with any proxy statement, Form 10-K and Form 10-Q filings are not considered “filing fees required to be paid in connection with obtaining such governmental or regulatory approvals.”

8.Equitable Relief. It is understood and agreed that money damages may not be a sufficient remedy for any breach of the Binding Provisions by any party hereto and that the parties will be entitled to seek equitable relief, including injunction and specific performance, as a remedy for

 

any such breach. Such remedies will not be deemed to be the exclusive remedies for a breach by a party of the Binding Provisions, but will be in addition to all other remedies available at law or in equity to the non-breaching party.  

9.Modification and Amendment.  This Letter of Intent or any of the provisions herein may be modified or waived only by a separate writing signed, in the case of an amendment, by each of the parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. If any term, provision, covenant or restriction of this Letter of Intent is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Letter of Intent shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.

 

10.  Non-Participant Preferred Shareholders.  The Preferred Shareholder Group has extended an invitation to the holders of the remaining approximately twenty percent (20%) of the outstanding Series A Preferred Shares of the Company (the “Non-Participant Preferred Shareholders”) to participate in the Acquisition in an amount equal to their pro rata percentage of total outstanding Series A Preferred Shares of the Company, and is currently in discussions with the Non-Participant Preferred Shareholders regarding same.  If a Non-Participant Preferred Shareholder elects to the participate in the Acquisition, such participation will be on the same terms as the Preferred Shareholder Group, and Company will consent to such participation, subject to such Non-Participant Preferred Shareholder’s agreement to be bound by the Binding Provisions.  

 

11.Governing Law.   This Letter of Intent shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. All actions, disputes and litigation arising out of or related to this Letter of Intent, including matters connected with its performance, are subject to the exclusive jurisdiction of the federal and state courts of the State of Texas located in Dallas, Texas. Each party hereby irrevocably submits to the personal jurisdiction of such courts and irrevocably waives all objections to such venue, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, dispute or litigation brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS LETTER OF INTENT OR THE ACTIONS OF ANY PARTY TO THIS LETTER OF INTENT IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS LETTER OF INTENT.

 

12.Confidentiality.  Unless otherwise required of the Company by law, rule or regulation (including pursuant to the federal and state securities laws and the marketplace rules of the TSX and NYSE American), none of the Company, Buyer, any member of the Preferred Shareholder Group or any of their respective representatives shall disclose the contents of this Letter of Intent or the status of negotiations, except to their respective representatives, financing sources, consultants, attorneys, accountants, employees and agents, in each case, engaged by them in

 

connection with the Acquisition and subject to this or a similar confidentiality obligation, unless the other parties consent to such disclosure; provided, that any such consent required to be provided by the Company would only be provided by the Company’s Board of Directors, acting through the Special Committee.

 

13.Counterparts.   This Letter of Intent may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.

 

If the foregoing is acceptable to you, kindly acknowledge your agreement by executing this Letter of Intent.

[signature page follows]

 

 

Sincerely,

 

THE PREFERRED SHAREHOLDER GROUP

LONGFELLOW ENERGY, LP

 

By:

Deut 8, LLC,

 

its general partner

 

 

By:

/s/ N. Malone Mitchell, 3rd

Name:

N. Malone Mitchell, 3rd

Title:

Manager

 

 

 

 

DALEA PARTNERS, LP

 

 

By:

Dalea Management, LLC,

 

its general partner

 

 

By:

/s/ N. Malone Mitchell, 3rd

Name:

N. Malone Mitchell, 3rd

Title:

Manager

 

 

 

ALEXANDRIA NICOLE MITCHELL TRUST 2005

 

 

By:

/s/ Barbara A. Pope

Name:

Barbara A. Pope

Title:

Trustee

 

 

 

 

ELIZABETH LEE MITCHELL TRUST 2005

 

 

By:

/s/ Barbara A. Pope

Name:

Barbara A. Pope

Title:

Trustee

 


16803 DALLAS PARKWAY  |  ADDISON, TX 75001  |  P.O. BOX 1989  | 972.590.9900

 

 

 

NOAH MALONE MITCHELL TRUST 2005

 

By:

/s/ Barbara A. Pope

Name:

Barbara A. Pope

Title:

Trustee

 

 

 

 

STEVENSON BRIGGS MITCHELL

 

 

By:

/s/ Stevenson Briggs Mitchell

Name:

Stevenson Briggs Mitchell

 

 

 

 

 

ACCEPTED AND AGREED:

TRANSATLANTIC PETROLEUM LTD.

 

 

 

By:

/s/ K. Kirk Krist

 

Title:

Chairman of the Special Committee

 

 

16803 DALLAS PARKWAY  |  ADDISON, TX 75001  |  P.O. BOX 1989  | 972.590.9900

 

 

TERM SHEET

TERMS PROPOSED FOR THE ACQUISITION

OF

TRANSATLANTIC PETROLEUM LTD.

 

This Term Sheet summarizes the proposed principal terms of the contemplated Acquisition. Except as specifically set forth in the Letter of Intent to which this Term Sheet is attached, neither the Letter of Intent nor this Term Sheet will constitute a legally binding obligation, and no legally binding obligation will exist until the execution and delivery of definitive Transaction Documents, regardless of any draft agreement or oral understanding between the parties, and there will be no obligation whatsoever based upon principles of parole evidence, extended negotiations, “handshakes,” oral understandings, e-mail communications, or courses of conduct (including reliance and changes of position).  Capitalized terms used in this Term Sheet and not otherwise defined are defined as set forth in the Letter of Intent.

Company:

Transatlantic Petroleum Ltd., a Bermuda corporation

Buyer and Guarantee:

A wholly-owned subsidiary (“Buyer”) of an entity to be formed by the Preferred Shareholder Group.  A creditworthy counterparty reasonably acceptable to the Company shall guarantee the payment and performance obligations of Buyer.

Non-Participant Preferred Shareholders:

The Preferred Shareholder Group has extended an invitation to the Non-Participant Preferred Shareholders to participate in the Acquisition in an amount equal to their pro rata percentage of total outstanding Series A Preferred Shares of the Company and is currently in discussions with the Non-Participant Preferred Shareholders regarding same.  If a Non-Participant Preferred Shareholder elects to the participate in the Acquisition, such Non-Participant Preferred Shareholder shall become part of the Preferred Shareholder Group and shall participate in the Acquisition on the same terms as the Preferred Shareholder Group, and the Company will consent to such participation, subject to such Non-Participant Preferred Shareholder’s agreement to be bound by the Binding Provisions described in the Letter of Intent to which this Term Sheet is attached.  It will be a condition to the Company’s entry into the Transaction Documents that all Non-Participating Preferred Shareholders shall have irrevocably waived their rights to dissent under the Company’s Bye-Laws and applicable law.  

 

 

Purchase Price:

Buyer would purchase, at a fixed purchase price of $0.13 per common share (the “Purchase Price”), 100% of the Company’s outstanding common shares that are not owned by members of the Preferred Shareholder Group.    

Form of Consideration:

The Purchase Price would be paid in full, in cash at closing.  No portion of the Purchase Price would be subject to an earnout, holdback or escrow.    

Structure of Acquisition:

It is anticipated that a subsidiary of Buyer and the Company will enter into a merger agreement; provided, however, the definitive form of the Acquisition, including its structure as a merger, will be determined by mutual agreement of the parties in consultation with both parties’ tax, regulatory, legal and business advisors.


Representations and Warranties; No Indemnification:

The parties would agree to limited representations and warranties taking into account the knowledge and familiarity with the Company attributable to the officer and director roles and responsibilities of certain members of the Preferred Shareholder Group.  The representations and warranties and pre-closing covenants would not survive the closing, and the Transaction Documents would not contain any indemnification provisions.

Closing Date:

The closing of the Acquisition (the “Closing”) would occur no later than 180 days after execution of the Transaction Documents; provided, that either the Company or Buyer may extend the Closing for up to an additional 120 days if necessary for regulatory approval purposes.

Interim Operating Covenants:

During the period commencing on the date of execution of the Transaction Documents and ending on the earlier to occur of (x) termination of the Transaction Documents in accordance with their terms, and (y) the Closing:

(i)  the Company would continue to operate in its normal business course, consistent with past practices, until the Closing; and

(ii) the Company would provide Buyer with monthly financial statements through the Closing.

 

 

Conditions to Closing:

The Acquisition would be conditioned upon customary conditions precedent including, without limitation, the following:

Buyer and Company Conditions:

 

(i)receipt of any governmental and regulatory approvals necessary to consummate the transaction;

 

(ii)absence of any pending law, order or injunction prohibiting the consummation of the Acquisition; and

 

(iii)requisite approval of the Acquisition by the shareholders of the Company.

 

Buyer Conditions:

 

(i)no material adverse change (as customarily defined in the Transaction Documents) having occurred between execution of the Transaction Documents and the Closing; and

 

(ii)prior to the Closing, the Company shall have paid all expenses and fees to be borne by the Company pursuant to the Transaction Documents relating to the proposed transaction.

 

Company Condition:

 

(i)receipt by the Company’s Board of Directors of a fairness opinion from Seaport Gordian Energy LLC that the Acquisition is fair, from a financial point of view, to the Company and is not less favorable to the Company’s shareholders than could reasonably be expected to be obtained in an arm’s length transaction with an unaffiliated entity.

 

If all closing conditions listed above are satisfied and Buyer fails to close, the Company would be entitled to, at its option, (x) terminate and sue for damages or (y) seek specific performance.  

Fiduciary Out:

The consummation of the Acquisition would be subject to a fiduciary out, providing that the Company may abandon the Acquisition in the event that the Company’s Board of Directors reasonably determines that consummating the Acquisition would be a violation of its fiduciary duties.

 

 

 

D&O Insurance:

 

Buyer would, or would cause the surviving corporation of the merger to, provide the Company’s current directors and officers with the same rights of indemnification and advancement of expenses as they are currently entitled to under the Company’s organizational documents.

 

Buyer would, or would cause the surviving corporation of the merger to, purchase a “tail” policy for directors’ and officers’ insurance covering the six-year period following the Closing, or the best available coverage if the premium required is more than 300% per annum of the Company’s current directors’ and officers’ insurance policies, in each case, unless the Company purchases such a “tail” policy prior to the Closing in consultation with Buyer.

 

Specific Performance:

 

Each party would be entitled to specific performance to force a closing and to prevent breaches of the Transaction Documents.

 

Governing Law:

The Transaction Documents would be governed by Delaware law, except that any provisions of the Transaction Documents that relate to the exercise of a director’s or officer’s fiduciary duties, statutory duties, obligations, or statutory provisions, or which arise under or are required to be governed by the laws of Bermuda, would be governed by Bermuda law.

Exclusive Jurisdiction:

Each party would consent to the exclusive jurisdiction of the Court of Chancery of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware).

 

 

 

 

 

 

Exhibit 99.2

 

June 29, 2020

To:Special Committee

Kirk Krist, Chairman of the Special Committee

Greg Renwick

Charles Campise

 

cc:Tabitha Bailey, General Counsel

 

Gentlemen:

The undersigned (the “Preferred Shareholder Group”) collectively represent approximately eighty percent (80%) of the outstanding 12% Series A Convertible Redeemable Preferred Shares (“Series A Preferred Shares”) of TransAtlantic Petroleum Ltd. (the “Company”).  The Preferred Shareholder Group is pleased to submit this letter of intent (this “Letter of Intent”), for a proposed transaction whereby an entity designated by the Preferred Shareholder Group (“Lender”), would provide a working capital loan to the Company.

The following are the terms of the proposed transaction:

1.General.  This Letter of Intent, including the attached term sheet (the “Term Sheet”), sets forth the general terms of the proposed provision by Lender of a working capital loan (the “Loan”) to the Company. The definitive structure of the Loan would be determined by the parties after consultation with their respective tax, regulatory, legal and business advisors and the terms of the Transaction Documents (defined below) would be mutually acceptable to the Preferred Shareholder Group and the Company.  

2.Non-Binding.Neither this Letter of Intent nor the Term Sheet is intended to be binding on the Preferred Shareholder Group, Lender or the Company, except for the respective obligations of the parties in paragraphs 3 through 13 of this Letter of Intent (the “Binding Provisions”), and will be superseded in their entirety upon the execution of mutually agreed upon definitive transaction documents (the “Transaction Documents”), which such Transaction Documents shall require mutual agreement on definitive documentation with respect to the offer to acquire 100% of the Company’s outstanding common shares of the Company by the Preferred Shareholder Group.  Until the Transaction Documents are executed, no party hereto shall be under any legal obligation (except as expressly set forth in the Binding Provisions) with respect to the Loan, including that no party shall be under any obligation to continue discussions or negotiations about, to enter into any definitive written agreement for, or to consummate the Loan or any other transaction by virtue of this Letter of Intent, the Term Sheet or any other written or oral expression with respect thereto. All obligations or commitments to proceed with the Loan shall be contained only in the Transaction Documents.

 

 

3.Due Diligence.   Following execution of this Letter of Intent, until the earlier to occur of the Termination Date (defined below) and execution of the Transaction Documents, the Company will give Lender and its representatives and advisors (including its investors and financing sources and their respective representatives and advisors) access during normal business hours, upon reasonable advance notice and in a manner to be reasonably agreed upon to: (i) the Company’s and its subsidiaries’ facilities; (ii) the key management personnel of Company; and (iii) all accounting, financial and other records applicable to the Company and its subsidiaries, and the Company will furnish Lender all such information with respect to the business and affairs of the Company and its subsidiaries as Lender may reasonably request; provided, that such access does not (x) unreasonably disrupt the normal business operations of the Company, or (y) result in any waiver of any attorney-client privilege in the Company’s sole discretion.  

4.Termination.  This Letter of Intent will automatically terminate and be of no further force or effect upon the earlier of (such date and time, the “Termination Date”): (i) 5:00 PM Central Standard Time on July 31, 2020, (ii) the execution of the Transaction Documents, (iii) the mutual written agreement of the Preferred Shareholder Group and the Company and (iv) the decision by the Preferred Shareholder Group to terminate, at its sole discretion, this Letter of Intent and the negotiations relating thereto.

 

5.Publicity.  Any and all announcements and publicity releases which relate to the loan contemplated hereby shall be subject to the parties’ mutual approval, unless otherwise required of the Company by law, rule or regulation (including pursuant to the federal and state securities laws and the marketplace rules of the Toronto Stock Exchange (the “TSX”) and NYSE American stock exchange (the “NYSE American”)), in which event the Company shall, to the extent permitted by applicable law, rules and regulations (including federal and state securities laws and the marketplace rules of the TSX and NYSE American), give the Preferred Shareholder Group reasonable prior notice and consider in good faith the comments of the Preferred Shareholder Group to such announcement or release.

6.Expenses. Other than as contemplated by paragraph 7 of this Letter of Intent and the provisions of the Term Sheet, each party shall bear its own expenses in connection with the negotiation of this Letter of Intent and the transactions contemplated hereby.  

7.Required Approvals.  If the Preferred Shareholder Group and the Company mutually agree to seek governmental or regulatory approval of the Loan prior to the execution of Transaction Documents, the parties agree to cooperate with each other and use commercially reasonable efforts to obtain such approvals.  Any filing fees required to be paid in connection with obtaining such governmental or regulatory approvals shall be paid 100% by the Preferred Shareholder Group, it being understood that costs associated with mailing, accountants, attorneys, and filing fees associated with any proxy statement, Form 10-K and Form 10-Q filings are not considered “filing fees required to be paid in connection with obtaining such governmental or regulatory approvals.”

8.Equitable Relief. It is understood and agreed that money damages may not be a sufficient remedy for any breach of the Binding Provisions by any party hereto and that the parties will be entitled to seek equitable relief, including injunction and specific performance, as a remedy for

16803 DALLAS PARKWAY  |  ADDISON, TX 75001  |  P.O. BOX 1989  | 972.590.9900

 

 

any such breach. Such remedies will not be deemed to be the exclusive remedies for a breach by a party of the Binding Provisions, but will be in addition to all other remedies available at law or in equity to the non-breaching party.  

9.Modification and Amendment.  This Letter of Intent or any of the provisions herein may be modified or waived only by a separate writing signed, in the case of an amendment, by each of the parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. If any term, provision, covenant or restriction of this Letter of Intent is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Letter of Intent shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.

 

10.  Non-Participant Preferred Shareholders.  The Preferred Shareholder Group has extended an invitation to the holders of the remaining approximately twenty percent (20%) of the outstanding Series A Preferred Shares of the Company (the “Non-Participant Preferred Shareholders”) to participate in the Loan in an amount equal to their pro rata percentage of total outstanding Series A Preferred Shares of the Company, and is currently in discussions with the Non-Participant Preferred Shareholders regarding same.  If a Non-Participant Preferred Shareholder elects to the participate in the Loan, such participation will be on the same terms as the Preferred Shareholder Group, and Company will consent to such participation, subject to such Non-Participant Preferred Shareholder’s agreement to be bound by the Binding Provisions.  

 

11.Governing Law.   This Letter of Intent shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. All actions, disputes and litigation arising out of or related to this Letter of Intent, including matters connected with its performance, are subject to the exclusive jurisdiction of the federal and state courts of the State of Texas located in Dallas, Texas. Each party hereby irrevocably submits to the personal jurisdiction of such courts and irrevocably waives all objections to such venue, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, dispute or litigation brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS LETTER OF INTENT OR THE ACTIONS OF ANY PARTY TO THIS LETTER OF INTENT IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS LETTER OF INTENT.

 

12.Confidentiality.  Unless otherwise required of the Company by law, rule or regulation (including pursuant to the federal and state securities laws and the marketplace rules of the TSX and NYSE American), none of the Company, Lender, any member of the Preferred Shareholder Group or any of their respective representatives shall disclose the contents of this Letter of Intent or the status of negotiations, except to their respective representatives, financing sources, consultants, attorneys, accountants, employees and agents, in each case, engaged by them in connection with the Loan and subject to this or a similar confidentiality obligation, unless the

16803 DALLAS PARKWAY  |  ADDISON, TX 75001  |  P.O. BOX 1989  | 972.590.9900

 

 

other parties consent to such disclosure; provided, that any such consent required to be provided by the Company would only be provided by the Company’s Board of Directors, acting through the Special Committee.

 

13.Counterparts.   This Letter of Intent may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.

 

If the foregoing is acceptable to you, kindly acknowledge your agreement by executing this Letter of Intent.

 

Sincerely,

 

THE PREFERRED SHAREHOLDER GROUP

/s/ N. Malone Mitchell, 3rd

N. Malone Mitchell, 3rd

On behalf of the Preferred Shareholder Group

 

 

 

ACCEPTED AND AGREED:

TRANSATLANTIC PETROLEUM LTD.

 

 

 

By:

/s/ K. Kirk Krist

 

Title:

Chairman of the Special Committee

 

 

16803 DALLAS PARKWAY  |  ADDISON, TX 75001  |  P.O. BOX 1989  | 972.590.9900

 

 

SENIOR SECURED CREDIT FACILITY

Term Sheet

June 29, 2020

 

I.Parties

Borrower:

 

Transatlantic Petroleum Ltd. (the “Borrower”)

Lender:

 

Dalea Investment Group, LLC (“Lender”).

II.Facility

 

 

Up to $8 million (the “Commitment”) credit facility (the “Facility”).

Availability:

 

Availability under the Facility shall be made available to Borrower in accordance with mutually agreed milestones; provided that availability shall terminate upon termination of the Merger Agreement.

Use of Proceeds:

 

The proceeds of the Facility shall be used (i) to finance the working capital needs of the Borrower and its subsidiaries in the ordinary course of business and (ii) in accordance with a budget mutually agreed by Borrower and Lender (the “Approved Budget”).

III.Certain Provisions

Interest Rates:

 

10% annual, payable monthly.  Upon the occurrence of an Event of Default, Borrower shall pay interest on the facility at a rate per annum equal to the interest rate specified above plus 2%.

Maturity:

 

The earlier of (A) one year after the Closing Date, (B) termination of the Merger Agreement by the Borrower, and (C) closing of the transaction contemplated by the Merger Agreement.

Prepayments:

 

Voluntary prepayments shall be permitted in whole or in part prior to the Maturity Date, without prior approval of the Lender. No mandatory prepayments shall be required.

 

 

IV.Collateral and Other Credit Support

Collateral:

 

The Facility will be secured by a first priority perfected security interest (subject to customary exclusions and permitted liens) in the equity of TransAtlantic Worldwide, Ltd. and TransAtlantic Petroleum (USA) Corp. and accounts and notes receivable and choses in action of the Borrower (collectively, the “Collateral”).

Guaranties:

 

TransAtlantic Worldwide, Ltd. and TransAtlantic Petroleum (USA) Corp. each shall unconditionally guarantee all of the indebtedness, obligations and liabilities of the Borrower arising under or in connection with the Loan Documents.

V.Certain Conditions

Conditions Precedent to Closing Date:

 

The availability of the Facility shall be conditioned upon satisfaction or waiver of, among other things, the following conditions precedent (the date upon which all such conditions precedent shall be satisfied or waived, the “Closing Date”):

 

 

(a)The Borrower shall have executed and delivered satisfactory definitive financing documentation with respect to the Facility, including a credit agreement (the “Credit Agreement”), security documents and other legal documentation (collectively, together with the Credit Agreement, the “Loan Documents”) mutually satisfactory to the Borrower and the Lender.

 

 

(b)Borrower shall pay Lender for all reasonable and documented, out-of-pocket legal fees and expenses incurred in connection with the preparation of the Loan Documents (limited to one firm of counsel) up to a maximum of $50,000.00.

 

 

(c)Borrower shall have entered into a merger agreement with the Lender and/or its affiliates on terms mutually agreed by Borrower and Lender and/or its affiliates.

 

 

 

 

(d)Liens creating a first priority security interest in the Collateral shall have been perfected (subject to customary exclusions and permitted liens).

(e) All necessary governmental and third-party

consents and approvals necessary in connection with the Facility and the transactions contemplated thereby shall have been obtained on or prior to the Closing Date.

(f)    The Approved Budget and Loan Documents shall have been approved by a majority of the Company’s Board of Directors and all holders of Series A Preferred Shares.

On-Going Conditions

 

The making of each extension of credit shall be conditioned upon (a) there being no default or event of default in existence at the time of, or after giving effect to the making of, such extension of credit, (b) after giving effect to the extensions of credit request, the total extensions of credit under the Facility shall not exceed the Commitment, and (c) use of the credit for purposes pursuant to the Approved Budget.

VI.Certain Documentation Matters

 

 

The Loan Documents shall contain limited representations and warranties taking into account the knowledge and familiarity with the Borrower attributable to the officer and director roles and responsibilities of N. Malone Mitchell 3rd.

The Loan Documents shall contain only the following covenants and events of default:

Affirmative Covenants:

 

•reporting obligations; and

•use of proceeds of the Facility in accordance with the Approved Budget.

 

 

 

Negative Covenants:

 

Limitations on:

•indebtedness (including third party guarantee obligations);

•liens;

•mergers, consolidations, liquidations and dissolutions;

•sales of assets (other than inventory in the ordinary course of business);

•payment of restricted payments (including dividends and other payments in respect of equity interests);

•investments (including acquisitions), loans and

advances (but permitting investments in affiliates);

•sale and leaseback transactions;

•swap agreements;

•optional payments and modifications of subordinated and other debt instruments;

•other than for cause, no (a) removal of N. Malone Mitchell 3rd as an officer, or (b) material reduction in N. Malone Mitchell 3rd’s authority as an officer.

 

Events of Default:

 

Subject to customary limitations, qualifications, notice and cure provisions: failure to pay principal or interest on the outstanding amount of the Facility; breach of any covenants; bankruptcy events; any of the Loan Documents shall cease to be in full force and effect (only if such failure results in the security interest purported to be created by the security documents ceasing to be enforceable against a material portion of the collateral); termination of the Merger Agreement by the Borrower. A breach of a covenant and event of default can only be triggered by actions explicitly approved by a majority of the directors and opposed by N. Malone Mitchell 3rd.

Expenses:

 

The Borrower shall pay (a) all reasonable and documented out-of-pocket expenses of the Lender in connection with the preparation, execution, delivery, and administration of the Loan Documents and any amendment or waiver with respect thereto (including the reasonable and documented fees, disbursements and other charges of one firm of outside counsel) up to a maximum of $50,000.00, and (b) all documented out-of-pocket expenses of the Lender (including the fees, disbursements and other charges of outside counsel) in connection with the enforcement of the Loan Documents.

 

 

Indemnification:

 

The Lender (and its affiliates and officers, directors, employees, advisors and agents) will have no liability for, and will be indemnified and held harmless against, any loss, liability, cost or expense incurred in respect of the financing contemplated hereby or the use or the proposed use of proceeds thereof (except to the extent found in a final judgment by a court of competent jurisdiction to have resulted from the gross negligence

or willful of misconduct the indemnified party).

Governing Law:

 

The Loan Documents will be governed by the internal laws of the State of Texas.

Counsel:

 

Foley & Lardner, LLP