Item 1.01 Entry into a Material Definitive Agreement.
As previously reported, on May 18, 2017, Keane Group, Inc. (the “Company”) entered into a Purchase Agreement (the “Purchase Agreement”) with RockPile Energy Holdings, LLC, a Delaware limited liability company (the “Principal Seller”), RockPile Management NewCo, LLC, a Delaware limited liability company (together with the Principal Seller, the “Seller Parties”), and RockPile Energy Services, LLC, a Colorado limited liability company, on behalf of itself and its subsidiaries (“RockPile”), providing for the purchase of 100% of the outstanding equity interests of RockPile from the Seller Parties (the “Purchase”).
On July 3, 2017 (the “Closing Date”), the Company completed its acquisition of RockPile for (i) approximately $115,194,000 in cash, including approximately $4,355,000 in respect of deposits previously paid by Seller Parties for 30,000 previously ordered hydraulic fracturing horsepower, and (ii) 8,684,210 shares of the Company’s common stock (the “Acquisition Shares”). The cash portion of the purchase price was determined based on a $135 million base cash purchase price, which is subject to closing and post-closing adjustments as provided in the Purchase Agreement (including (i) reductions for the payment of RockPile’s indebtedness and transaction expenses at closing, (ii) increases for certain capital expenditures by RockPile made prior to the Closing Date and (iii) customary adjustment for the amount of working capital of RockPile delivered at closing against a normalized working capital target). In addition, subject to the terms and conditions of the Keane Group Contingent Value Rights Agreement (the “CVR Agreement”) which was entered on the Closing Date, the Principal Seller and the Permitted Holders (as defined in the CVR Agreement, and together with the Principal Sellers, the “CVR Holders”) received one non-transferable contingent value right for each Acquisition Share, which collectively entitle the CVR Holders to receive an aggregate payment (the “Aggregate CVR Payment Amount”) equal to the CVR Payment Amount (as defined herein) multiplied by the number of Acquisition Shares held by the CVR Holders on the CVR Payment Date (as defined herein), provided that the Twenty-Day VWAP (as defined herein) is less than $19.00. The date of such payment (the “CVR Payment Date”) shall occur on April 10, 2018, the fifth business day following the date that is nine months after the Closing Date (such date, the “Maturity Date”). The “CVR Payment Amount” will be equal to the difference between (a) $19.00 and (b) the arithmetic average of the dollar volume weighted average price of the Company’s common stock on each trading day for twenty (20) trading days randomly selected by the Company during the thirty (30) trading day period immediately preceding the last business day prior to the Maturity Date (the “Twenty-Day VWAP”), provided that the CVR Payment Amount shall not exceed $2.30. The Aggregate CVR Payment Amount shall be reduced on a dollar for dollar basis if (i) the aggregate gross proceeds received in connection with the resale of any Acquisition Shares plus (ii) the product of the number of Acquisition Shares held by the CVR Holders on the CVR Payment Date and the Twenty-Day VWAP plus (iii) the Aggregate CVR Payment Amount exceeds $165 million. The foregoing description of the CVR Agreement does not purport to be complete and is qualified in its entirety by reference to the CVR Agreement, which is filed as Exhibit 10.1 hereto, and is incorporated into this report, by reference.
In addition, pursuant to the terms of the Purchase Agreement, the Company entered into lockup agreements on the Closing Date with each of the Principal Seller and the Permitted Holders which, subject to certain exceptions, restrict the ability of the Principal Seller and the Permitted Holders to dispose of the Acquisition Shares (i) for a period from the Closing Date until July 18, 2017 without the prior written consent of each of the Company and Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC (as representatives of the several underwriters party to the Company’s Underwriting Agreement, dated January 19, 2017) and (ii) for a period from the Closing Date until six months after the Closing Date without the prior written consent of the Company. The foregoing description of the lockup agreements does not purport to be complete and is qualified in its entirety by reference to the form of lockup agreement, which is filed as Exhibit 10.2 hereto, and is incorporated into this report, by reference.
In addition, pursuant to the terms of the Purchase Agreement, the Company entered into an Amended and Restated Stockholders’ Agreement, dated as of July 3, 2017, by and among the Company, the Principal Seller, WDE RockPile Aggregate, LLC and Keane Investor Holdings LLC (“Keane Investor”) (the “Amended and Restated Stockholders’ Agreement”), primarily to provide (i) that the Company will be obligated to register for resale, under certain conditions, the Acquisition Shares and (ii) that the Principal Seller will be entitled to designate, subject to certain conditions, one (1) observer to the Company’s Board of Directors. The remainder of the terms of the Amended and Restated Stockholders’ Agreement are substantially similar to the terms and conditions of the Stockholders’ Agreement, dated as of January 20, 2017, by and between the Company and Keane Investor, which is described in Item 13, “Certain Relationships and Related Party Transactions-Stockholders’ Agreement,” of the Company’s Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 21, 2017. The Amended and Restated Stockholders’ Agreement is filed herewith as Exhibit 10.3 and is incorporated herein by reference.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2017 and is incorporated herein by reference.