Item 1.01. Entry into a Material Definitive Agreement.
Amendment to Purchase Agreement
On November 18, 2008, Superior Well Services, Inc. (the "Company") entered
into an amendment (the "Amendment") to the definitive Asset Purchase Agreement,
dated September 12, 2008 (the "Acquisition Agreement"), by and between the
Company and Diamondback Holdings, LLC and subsidiaries ("Diamondback"). The
Acquisition Agreement provides for the purchase by the Company of the assets
related to Diamondback's stimulation and pumping services segment, fluid
logistics and well-site services segment and completion and production services
segment. The Amendment reduces the purchase price for the assets from
$270 million to $225 million and provides for the purchase price to be paid
through the combination of a $70 million cash payment, the issuance to
Diamondback of $80 million aggregate principal amount of second lien notes (the
"Notes") and the issuance to Diamondback of $75 million of Series A Convertible
Preferred Stock. The $70 million cash payment portion of the aggregate purchase
price for the assets was funded by borrowings under the Company's syndicated
credit facility by and among the Company, Citizens Bank of Pennsylvania, and the
lenders party thereto.
As part of the acquisition, which closed November 18, 2008, the Company
acquired 128,000 horsepower, 105 transports and trucks, 400 frac tanks and six
water disposal wells. The assets that the Company purchased from Diamondback are
operating in the Anadarko, Arkoma, and Permian Basins, as well as the Barnett
Shale, Woodford Shale, West Texas, Southern Louisiana and Texas Gulf Coast.
In connection with the purchase of the assets from Diamondback, on
November 18, 2008 the Company filed a Certificate of Designations of Series A
Convertible Preferred Stock (the "Certificate of Designations") with the
Secretary of State of Delaware and issued 75,000 shares (the "Preferred Shares")
of Series A Convertible Preferred Stock to Diamondback as partial consideration
for the purchase of the assets. The Preferred Shares rank senior to all other
equity securities of the Company as to liquidation and dividends. The Preferred
Shares are entitled to cumulative cash dividends at an annual rate of $40.00 per
share, payable on March 1, June 1, September 1 and December 1 of each calendar
year. The Preferred Shares are entitled to a liquidation preference of $1,000
per share and each Preferred Share is convertible into 40 shares of common
stock, subject to adjustment (representing an initial conversion price of $25
per share based on the liquidation preference). If the closing price of the
Company's common stock exceeds 125% of the conversion price for least 10 trading
days within any period of 20 consecutive trading days, then the Company may,
after giving notice, force conversion of the Preferred Shares at the then
applicable conversion price. After giving notice, the Company may redeem the
Preferred Shares after 5 years for cash at the Company's option at 101% of par
value plus accrued but unpaid dividends. Upon a change of control, the Company
is required to repurchase the Preferred Shares at the liquidation value. The
Preferred Shares were issued in a private transaction exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act").
Indenture and Notes
On November 18, 2008, in connection with the issuance of the Notes, the
Company entered into an Indenture (the "Indenture"), among the Company, its
subsidiaries (the "Guarantors") and Wilmington Trust FSB, as trustee and
collateral agent (the "Trustee"). The Notes were issued pursuant to the
Indenture in a private transaction exempt from registration under Section 4(2)
of the Securities Act.
The Notes will mature on November 18, 2013, and interest is payable on the
Notes quarterly in arrears on January 1, April 1, July 1 and October 1 of each
year, commencing January 1, 2009. The interest rate on the Notes is initially
set at 7% and will escalate by 1% each year. The Notes are guaranteed on
unconditional basis by the Guarantors and are secured by a second priority lien
on substantially all of the assets of the Company.
The Notes are redeemable by the Company at any time or from time to time,
after giving notice, at a redemption price equal to 100% of the principal amount
of the Notes, plus accrued and unpaid interest to the applicable redemption
date.
The Indenture restricts the Company's ability and the ability of its
subsidiaries to: incur additional debt or sell assets; make certain investments,
loans and acquisitions; guarantee debt; grant liens; enter into transactions
with affiliates; engage in other lines of business; and pay dividends and
distributions. The Indenture contains certain affirmative covenants that require
the Company, among other things, to maintain its properties and maintain
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insurance coverage. The Company is also subject to financial covenants which
include a total debt to EBITDA ratio and a fixed charge coverage ratio. These
covenants are subject to a number of exceptions and qualifications set forth in
the Indenture.
The Indenture specifies a number of events of default (many of which are
subject to applicable cure periods), including, among others, the failure to
make payments when due, defaults under other agreements or instruments of
indebtedness, uninsured losses to the collateral in excess of $5 million, the
seizure or attachment of the collateral, noncompliance with covenants, and the
occurrence of certain bankruptcy proceedings. In the case of an event of default
arising from certain events of bankruptcy, all outstanding Notes will become due
and payable immediately without further action or notice. If any other event of
default occurs and is continuing, the Trustee or the holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately.
Registration Rights Agreement
On November 18, 2008, in connection with the issuance of the Notes and the
Preferred Shares, the Company entered into a Registration Rights Agreement among
the Company and Diamondback. As soon as reasonably practicable after
November 18, 2008, the Company is required to file a shelf registration
statement with the SEC, with respect to the resale, from time to time, of the
Notes, the Preferred Shares, and common stock issuable upon conversion of the
Preferred Shares (such Notes, Preferred Shares and common stock, the
"Registrable Securities"), and for such registration statement to be declared
effective by SEC by March 18, 2009. The Company must use its reasonable best
efforts to keep the shelf registration statement continuously effective until
all Registrable Securities have been sold, the SEC requires that the shelf
registration be taken down or until there are no longer any Registrable
Securities. The Registrable Securities will cease to be Registrable Securities
when (i) such Registrable Securities have been sold pursuant to an effective
registration statement, (ii) they have been distributed to the public pursuant
to Rule 144, (iii) they have been sold to a person to whom rights were not
assigned under the agreement, or (iv) they are freely tradeable under Rule 144
with no volume restrictions and the Company has delivered certificates for such
Registrable Securities to their holders with no restrictive legends.
In addition, Diamondback has certain demand registration rights with respect
to the common stock issuable upon conversion of the Preferred Shares, and
Diamondback also has certain piggy-back registration rights with respect to
certain offerings of common stock, series A preferred stock or second lien notes
by the Company for its own account. The Company is required to pay additional
interest and dividends if they fail to comply with their obligations to register
the Registrable Securities within the specified time periods.
The descriptions set forth above in Item 1.01 do not purport to be complete
descriptions and are qualified in their entirety by the Certificate of
Designations, the Indenture, the Amendment and the Registration Rights
Agreement, which are filed herewith as Exhibits 3.1, 4.1, 10.1, and 10.2 and are
incorporated herein by reference.
Item 2.01. Completion of Acquisition or Disposition of Assets.
The information included in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 2.01 of this Current Report on Form
8-K.
Item 2.03. Creation of Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information included in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 2.03 of this Current Report on Form
8-K.
Item 3.02. Unregistered Sales of Equity Securities.
The information included in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 3.02 of this Current Report on Form
8-K.
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Item 3.03. Material Modifications to Rights of Security Holders.
The information included in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 3.03 of this Current Report on Form
8-K.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
The information included in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 5.03 of this Current Report on Form
8-K.
Item 7.01. Regulation FD Disclosure.
On November 19, 2008, the Company issued a press release announcing the
closing of the acquisition of assets from Diamondback. A copy of the press
release is furnished herewith as Exhibit 99.1 and is incorporated herein by
reference.
In accordance with General Instruction B.2 of Form 8-K, the press release
shall not be deemed "filed" for the purposes of Section 18 of the Exchange Act
of 1934, as amended, or otherwise subject to the liabilities of that section,
nor shall such information and Exhibit be deemed incorporated by reference into
any filing under the Securities Act or the Exchange Act of 1934, as amended,
except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Other Exhibits
(a) Financial statements of businesses acquired.
In accordance with Item 9.01(a)(4) of Form 8-K, the required financial
information with respect to the acquisition of assets from Diamondback will be
provided within 71 calendar days of November 24, 2008.
(b) Pro forma financial information.
In accordance with Item 9.01(b)(2) of Form 8-K, the required pro forma
financial information with respect to the acquisition of assets from Diamondback
will be provided within 71 calendar days of November 24, 2008.
(d) Exhibits.
Exhibit No. Description
3.1 Certificate of Designations of Series A Convertible Preferred Stock
4.1 Indenture, dated November 18, 2008, by and among the Company, its
subsidiaries, and Wilmington Trust FSB, as Trustee and Collateral Agent
10.1 First Amendment to Asset Purchase Agreement, dated November 18, 2008, by
and among the Company and Diamondback
10.2 Registration Rights Agreement, dated November 18, 2008, by and among the
Company and Diamondback
99.1 Press release, issued November 19, 2008
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