Item 1.01 Entry into a Material Definitive Agreement
Sundance Transaction
On April 13, 2022, SilverBow Resources, Inc. (the “Company”) and its operating subsidiary, SilverBow Resources Operating, LLC (“SilverBow Operating”), entered into a purchase and sale agreement (the “Sundance Purchase Agreement”) with Sundance Energy, Inc. (“Sundance”), Armadillo E&P, Inc. (“Armadillo”) and SEA Eagle Ford, LLC (“SEA”) (collectively, the “Sundance Sellers”) pursuant to which the Company will acquire oil and gas assets in the Eagle Ford formation for consideration of approximately $354 million, subject to customary adjustments, approximately $225 million to be paid as cash and the rest to be paid with 4,148,472 shares of common stock (“Shares”) of the Company (which were valued based on the 30-day volume weighted average price as of April 8, 2022), subject to customary adjustments (the “Sundance Transaction”). The Sundance Sellers may also receive up to $15 million in contingent cash consideration based on crude price levels in 2022 and 2023. The Sundance Transaction is expected to close on or before July 19, 2022 (“Sundance Closing”), subject to shareholder approval and satisfaction or waiver of certain customary closing conditions, including the accuracy of the representations and warranties of each party and compliance by each party in all material respects with its covenants.
The Company, SilverBow Operating and the Sundance Sellers made customary representations and warranties in the Sundance Purchase Agreement. Subject to certain limitations on liability contained in the Sundance Purchase Agreement, the Company and SilverBow Operating have agreed to indemnify the Sundance Sellers for breaches of representations and warranties, covenants and certain liabilities. The Sundance Purchase Agreement contains certain termination rights for both the Company and SilverBow Operating and the Sundance Sellers, including, but not limited to, the right to terminate the Sundance Purchase Agreement in the event that the Transaction has not been approved by shareholders and consummated on or before September 2, 2022, or under certain conditions, if there has been a breach of certain representations and warranties or a failure by the other party to perform a covenant. In connection with the Sundance Purchase Agreement, on April 13, 2022, an entity indirectly managed by Strategic Value Partners LLC (“SVP”), as holder of 26.6% of the Company’s common stock, entered into an agreement with the Company to vote its shares of common stock in favor of the issuance of the Shares in the Sundance Transaction in any shareholder vote thereon (the “Voting Agreement”), subject to the specified conditions. Each of the Sundance Sellers is a third party beneficiary of the Voting Agreement with respect to SVP’s performance thereunder.
The foregoing description of each of the Sundance Purchase Agreement and the Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the full agreement, which is filed as Exhibit 10.1 and 10.2, respectively, to this Current Report on Form 8-K.