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): November 9, 2009 (November
8, 2009)
TETON
ENERGY CORPORATION
(Exact
name of registrant as specified in its charter)
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Delaware
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001-31679
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84-1482290
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(State
of incorporation)
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(Commission
File No.)
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(IRS
Employer
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Identification
No.)
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600
17th Street, Suite 1600 North
Denver,
CO
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80202
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (303) 565-4600
(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):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
INFORMATION ABOUT FORWARD-LOOKING
STATEMENTS
This
Current Report on Form 8-K of Teton Energy Corporation (“Teton,” the “Company,”
“we,” “us” or “our”), and the documents incorporated by reference, contain both
historical and “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. Forward-looking statements,
written, oral or otherwise made, represent the Company’s expectation or belief
concerning future events. All statements, other than statements of historical
fact, are or may be forward-looking statements. For example, statements
concerning projections, predictions, expectations, estimates or forecasts, and
statements that describe our objectives, future performance, plans or goals are,
or may be, forward-looking statements. These forward-looking statements reflect
management’s current expectations concerning future results and events and can
generally be identified by the use of words such as “may,” “will,” “should,”
“could,” “would,” “likely,” “predict,” “potential,” “continue,” “future,”
“estimate,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” and
other similar words or phrases, as well as statements in the future
tense.
Forward-looking
statements involve known and unknown risks, uncertainties, assumptions, and
other important factors that may cause our actual results, performance, or
achievements to be different from any future results, performance and
achievements expressed or implied by these statements. The following important
risks and uncertainties could affect our future results, causing those results
to differ materially from those expressed in our forward-looking
statements:
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our inability to continue
business operations during the Chapter 11
proceeding;
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our ability to obtain court
approval of our plan of reorganization and various other motions we expect
to file as part of the Chapter 11
proceeding;
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our ability to consummate our
plan of reorganization as currently
planned;
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risks associated with third
party motions in the Chapter 11 proceeding, which may interfere with our
reorganization as currently planned;
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our ability to seek, obtain
and approve a higher or better offer as the winning bid in the bankruptcy
court auction process;
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our ability to close the Plan
Sponsorship Agreement, whether with the Proposed Purchaser or an offer
from a higher and better bid.
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the potential adverse effects
of the Chapter 11 proceeding on our liquidity and results of
operations;
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our ability to retain and
motivate key executives and other necessary personnel while seeking to
implement our plan of reorganization;
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General economic and political
conditions, including governmental energy policies, tax rates or policies,
inflation rates and constrained credit markets;
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The market price of, and
supply/demand balance for, oil and natural gas;
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Our success in completing
development and exploration activities, when and if we are able to resume
those activities;
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Expansion and other
development trends of the oil and gas industry;
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Acquisitions and other
business opportunities that may be presented to and pursued by
us;
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Our ability to integrate our
acquisitions into our company structure; and
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Changes in laws and
regulations.
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These
factors are not necessarily all of the important factors that could cause actual
results to differ materially from those expressed in any of our forward-looking
statements. Other factors, including unknown or unpredictable ones could also
have material adverse effects on our future results.
The
forward-looking statements included in this Current Report are made only as of
the date set forth on the front of the document. We expressly disclaim any
intent or obligation to update any forward-looking statements to reflect new
information, subsequent events, changed circumstances, or
otherwise.
Item
1.01. Entry into a Material Definitive Agreement
Plan Sponsorship
Agreement
On
November 8, 2009, Teton Energy Corporation, a Delaware corporation (“TEC”) and
affiliated entities, Teton North America LLC, a Colorado limited liability
company (“TNA”), Teton Piceance LLC, a Colorado limited liability company
(“TP”), Teton DJ LLC, a Colorado limited liability company (“TDJ”), Teton
Williston LLC, a Colorado limited liability company (“TW”), Teton Big Horn LLC,
a Colorado limited liability company (“TBH”), Teton ORRI, LLC, a Colorado
limited liability company (“TORRI”), and Teton DJCO LLC, a Colorado limited
liability company (“Teton DJ” and collectively with TEC, TNA, TP, TDJ, TW, and
TORRI, the “Teton Entities” or “Teton” ), entered into a Plan Sponsorship
Agreement (the “Sponsorship Agreement”) with Rise Energy Partners II, LLC, a
Delaware limited liability company (“Rise” or the “Proposed Purchaser”), whereby
Rise has agreed to fund the Teton Entities’ emergence from reorganization
proceedings under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§
101 et. seq., as
amended (the “Bankruptcy Code”).
The
Sponsorship Agreement contains certain covenants by the Teton Entities,
including, among other things, the agreement by each of the Teton Entities to
commence its bankruptcy case by filing a voluntary Chapter 11 petition and the
proposed plan of reorganization (the “Plan”) in the United States Bankruptcy
Court for the District of Delaware (the “Bankruptcy Court”) on or before
November 9, 2009 (the “Chapter 11 Cases”).
Pursuant
to the Sponsorship Agreement, on or before December 31, 2009 (the “Effective
Date”), or alternatively should circumstances beyond the control of the Teton
Entities make it impractical or impossible to consummate the Plan on or before
the Effective Date, before January 31, 2010 (the “Alternative Effective Date”),
all existing equity interests in TEC shall be cancelled, and TEC will convert
its organizational form from a Delaware corporation to a Delaware limited
liability company. Under the Sponsorship Agreement, Rise will
acquire one hundred percent (100%) of the membership interests of the
reorganized TEC (the “Membership Interests”) and will be its sole managing
member. TEC, as reorganized, will own 100% of the equity securities of TNA, TP,
TDJ, TW, TBH, TORRI, and Teton DJ.
In exchange for Rise acquiring all of the Membership Interests
and acting as the sole managing member of the reorganized TEC, Rise, on the
Effective Date or the Alternative Effective Date, will contribute to TEC the sum
of $11,700,000 in cash and will lend to or cause to be loaned to TEC the
additional sum of $7,000,000 (the “Rise Offer”). The proceeds from
the Rise Offer will be used to fund the Plan, which will eliminate Teton’s
indebtedness under Teton’s Third Amendment to the Second Amended and Restated
Credit Agreement and Forbearance Agreement (as amended, the “Credit Agreement”)
among Teton, the financial institutions party thereto as lenders (“Lenders”),
and JPMorgan Chase Bank, N.A., as Administrative Agent (“Administrative Agent”),
and provide a distribution to the holders of Teton’s 10.75% Secured Convertible
Debentures (the “Debentures”) and certain unsecured creditors. The
Lenders will then release their liens and claims against the Teton Entities, the
Teton Entities as reorganized, and their respective property.
The
Sponsorship Agreement also provides (i) for a break-up fee (the “Break-Up Fee”)
in an amount not to exceed $750,000 to Rise and the reimbursement of Rise’s
actual out-of pocket and reasonable third party expenses in an amount not to
exceed $200,000 if the transaction is not ultimately consummated with the
Proposed Purchaser (“Expense Reimbursement Fee”); (ii) that the Rise Offer to
sponsor the Teton Entities from reorganization proceedings shall be subject to
higher and better offers, which shall be submitted no later than December 14,
2009, and subject to an auction on December 15, 2009 if one or more Qualified
Bids (as defined in the Sponsorship Agreement ) are received.
Plan Support
Agreements
The Teton
Entities entered into two Plan Support Agreements, one of which is with the
Administrative Agent and the Lenders dated November 8, 2009 (the “Lender Support
Agreement”), and one of which is with the holders of more than 50% in number and
more than 2/3 in amount of the Debentures (the “Holders”) dated November 5, 2009
(the “Holder Support Agreement,” and collectively with the Lender Support
Agreement, the “Support Agreements”). Pursuant to the Support Agreements, the
Administrative Agent, Lenders and Holders respectively agreed, so long as no
Termination Event (as defined in the respective Support Agreements) has
occurred, to, among other things, (i) vote their claims in the Chapter 11 Cases
to accept the Plan upon the Bankruptcy Court’s approval, (ii) not to object or
otherwise commence any proceeding to oppose confirmation of the Plan; (iii) not
to support or vote to accept any other plan, (iv) to cooperate with the Teton
Entities in connection with the Plan, (v) not to seek any modification or
termination of the automatic stay, and (vi) to terminate all liens, security
interest and deeds of trust in their favor relating to the collateral upon
transfer of the assets and receipt of the distributions contemplated under the
Plan.
In
addition, the Lender Support Agreement provides that immediately prior to the
filing of the Chapter 11 Cases, the Teton Entities and the Lenders and
Administrative Agent will agree upon terms of a debtor-in-possession working
capital line of credit in the sum of $750,000 (the “DIP Loan”), which line of
credit will mature and become due and payable no later than January 31, 2010
(the “Termination Date”). The DIP Loan shall have usual and customary
terms, conditions, defaults, and remedies, and repayment of the DIP Loan shall
be secured by a first lien on the Teton Entities’ assets. The Teton
Entities have agreed to seek expeditious approval of the DIP Loan by the
Bankruptcy Court.
The
foregoing description of the Sponsorship Agreement and Support Agreements does
not purport to be complete and is qualified in its entirety by reference to the
Sponsorship Agreement and Support Agreements, copies of which are attached
hereto as Exhibits 2.1, 10.1 and 10.2, respectively, and are herein
incorporated by reference. The Sponsorship Agreement and Support
Agreements have been included to provide information regarding their
terms. They are not intended to provide any other factual information
about Teton. The representations, warranties and covenants contained in
the Sponsorship Agreement and Support Agreements were made only for purposes of
such agreement and as of specified dates set forth therein, were solely for the
benefit of the parties to the Sponsorship Agreement and Support Agreements,
respectively, and may be subject to limitations agreed upon by the contracting
parties. The representations and warranties have been made for the
purposes of allocating contractual risk between the parties to the Sponsorship
Agreement and Support Agreements instead of establishing these matters as facts,
and may be subject to standards of materiality applicable to the contracting
parties that differ from those applicable to Teton’s investors and security
holders.
Item
1.03 Bankruptcy or Receivership
On
November 8, 2009 (the “Petition Date”), the Teton Entities filed the Chapter 11
Cases in the Bankruptcy Court. Teton will seek to have the Chapter 11
Cases jointly administered under the caption Teton Energy Corporation, Case No.
09-13946.
The Teton
Entities remain in possession of their assets, and will continue to manage and
operate their businesses and properties as debtors-in-possession under the
jurisdiction of the Bankruptcy Court and in accordance with Bankruptcy Code
sections 1107 and 1108 and other applicable provisions of the Bankruptcy Code,
which require, among other things, Bankruptcy Court approval of certain matters
outside the ordinary course of business. During the bankruptcy
process, Teton intends to use cash flow from operations and the DIP Loan to
allow business operations to continue as normal.
On the
Petition Date, Teton filed the Plan. The Plan provides for (i) the
emergence of Teton from bankruptcy as the reorganized Teton and the re-vesting
of Teton’s assets in the reorganized Teton free and clear of any liens,
encumbrances or other interests; (ii) the funding of Teton’s obligations under
the Plan through a transfer of its assets pursuant to a Court approved auction
process; and (iii) the resolution of all outstanding Claims against and
Interests in Teton.
Teton
would like to inform investors that it believes it is likely that there will be
no value for its common stockholders in the bankruptcy process. Teton does not
contemplate its stockholders receiving any recovery absent it receiving a
substantially higher and better offer for the membership interests in the
reorganized company. Stockholders of a company in chapter 11 generally receive
value only if all claims of the company’s secured and unsecured creditors are
fully satisfied. In this case, the expected proceeds from the sale are
substantially less than the amount Teton’s secured and unsecured creditors are
owed. Therefore, Teton’s management strongly believes all such claims
will not be fully satisfied, leading to its belief that its common stock will
have no value.
Item
2.04. Triggering
Events That Accelerate or Increase a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement.
The
filing of the Chapter 11 Cases described in Item 1.03 above constitutes an event
of default under the Credit Agreement and the Debentures. The aggregate
amount of principal, fees and interest outstanding under the Credit Agreement
and Debentures was approximately $43 million as of the Petition Date. On the
Petition Date, all obligations under the Credit Agreement and Debentures became
automatically and immediately due and payable. However, the ability of the
secured creditors to seek remedies to enforce their rights under the Credit
Agreement and Debentures is automatically stayed as a result of the filing of
the Chapter 11 Cases. The automatic stay invoked by the filing of the
Chapter 11 Cases effectively precludes any actions by Teton’s secured creditors
to collect, assert, or recover a claim against Teton, subject to the applicable
provisions of the Bankruptcy Code and orders granted by the Bankruptcy
Court.
Item
7.01 Regulation FD Disclosure.
Additional
information regarding the Chapter 11 Cases will be available on the internet at
www.teton-energy.com.
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On
November 9, 2009, Teton issued a press release relating to the filing of the
Chapter 11 Cases, a copy of which is filed herewith as Exhibit 99.1 and
incorporated herein by reference.
Item
9.01. Financial
Statements and Exhibits.
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Exhibit No.
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Description
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2.1
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Plan
Sponsorship Agreement, dated November 8, 2009 between the Teton Entities
and Rise Energy Partners II, LLC (without exhibits).
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10.1
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Plan
Support Agreement dated November 8, 2009 among the Teton Entities,
JPMorgan Chase Bank, N.A., as Administrative Agent and the Lenders under
the Credit Agreement (without exhibits).
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10.2
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Plan
Support Agreement dated November 5, 2009 among the Teton Entities and the
Holders of the Debentures (without exhibits).
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99.1
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Press
release dated November 9, 2009.
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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.
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TETON
ENERGY CORPORATION
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By:
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/s/ Jonathan
Bloomfield
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Jonathan
Bloomfield
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Chief
Financial Officer
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INDEX
TO EXHIBITS
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Exhibit No.
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Description
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2.1
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Plan
Sponsorship Agreement, dated November 8, 2009 between the Teton Entities
and Rise Energy Partners II, LLC (without exhibits).
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10.1
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Plan
Support Agreement dated November 8, 2009 among the Teton Entities,
JPMorgan Chase Bank, N.A., as Administrative Agent and the Lenders under
the Credit Agreement (without exhibits).
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10.2
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Plan
Support Agreement dated November 5, 2009 among the Teton Entities and the
Holders of the Debentures (without exhibits).
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99.1
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Press
release dated November 9, 2009.
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