Item 1.01. Entry into a Material Definitive Agreement.
Stock
Purchase Agreement
On December 12, 2017, Oil States International, Inc., a Delaware corporation (the “
Company
”), entered into a stock purchase agreement (the “
Purchase Agreement
”), pursuant to which GD Development Corporation, a Delaware corporation and a wholly-owned subsidiary of the Company (the “
Buyer
”), has agreed to acquire from GEODynamics B.V., a Netherlands private limited liability company (the “
Seller
”), 100% of the equity interests in GEODynamics, Inc., a Delaware corporation (“
GEODynamics
”), in exchange for a purchase price to be paid by the Buyer to the Seller (the “
Transaction
”) consisting of a payment to occur at the closing of the Transaction (“
Closing
”) which includes an aggregate cash consideration of $300 million, subject to customary adjustments for working capital, net indebtedness and transaction expenses as of Closing, and issuance at Closing of 8.66 million shares of the Company’s common stock, par value $0.01 per share (the “
Common Stock
”), valued at approximately $200 million based on a 20-day volume weighted average price through December 11, 2017. The Seller will also receive an unsecured promissory note payable with an aggregate principal amount of $25 million, bearing interest at 2.5% per annum, which will mature 18 months following Closing and may be subject to certain set-offs by the Buyer.
The Company entered into the Purchase Agreement with (i) the Buyer, (ii) the Seller, (iii) LRP IV Luxembourg Holdings S.A.R.L., a Luxembourg limited liability company, and LRP V Luxembo
urg Holdings S.A.R.L., a Luxembourg limited liability company, (iv) Oakall Management Limited, LLC, a Texas limited liability company, and GEODynamics Partners LLC, a Delaware limited liability company, (v) David Sanford Wesson, Robert E. Davis and Johnny Joslin, each a natural Person (each such Person, collectively with the entities listed in clauses (iii) and (iv), the “
Seller Shareholders
”).
The Purchase Agreement contains customary representations and warranties by the parties. In addition, the parties
have agreed to covenants relating to, among other things, (i) the conduct of the business of GEODynamics during the interim period between the execution of the Purchase Agreement and Closing and (ii) the obligation to use commercially reasonable efforts to cause the Transaction to be consummated and to obtain expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“
HSR Act
”).
The completion of the Transaction is subject to satisfaction or waiver of certai
n closing conditions, including but not limited to: (i) the absence of any law, order, decree or injunction prohibiting the consummation of the Transaction, (ii) the expiration or termination of any waiting period under the HSR Act, (iii) subject to specified materiality standards, the accuracy of the representations and warranties of each party, (iv) compliance by each party in all material respects with its covenants and (v) the absence of a Material Adverse Effect (as defined in the Purchase Agreement) during the interim period between the date of execution of the Purchase Agreement and Closing.
Each party has agreed to indemnify the other for breaches of representations and warranties, breaches of covenants and certain other matters, subject to certain e
xceptions and limitations. Subject to the satisfaction of the closing conditions and regulatory approval, the Transaction is expected to close in the first quarter of 2018. The foregoing description of the Purchase Agreement is only a summary, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.
In connection with the Closing, t
he Company and the Seller will enter into a Registration Rights Agreement that will grant the Seller certain customary registration rights for shares of Common Stock issued by the Company as consideration pursuant to the Purchase Agreement, pursuant to a resale shelf registration statement as required by the Registration Rights Agreement.
Amendment No. 2 to the Credit Agreement
On December
12, 2017, the Company entered into Amendment No. 2 (the “
Second Amendment
”) to its Credit Agreement, dated as of May 28, 2014 (as amended by the Consent and Amendment No. 1, dated as of October 3, 2016 and the Second Amendment, the “
Credit Agr
eement
”), among the Company, as Borrower, certain subsidiaries of the Company, as guarantors, the lenders party thereto and Wells Fargo Bank, N.A., as Administrative Agent. Pursuant to the Second Amendment, the Credit Agreement has been amended to, among other things:
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Provide for a reduction in the revolving loan commitments under the Credit Agreement from $600 million to $425 million;
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Increase the interest rate margins such that:
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When the Company’s utilization of the facility is less than or equal to 50%, the interest rates for the revolving loans will range from LIBOR+1.75% to LIBOR+3.00% based on a leverage ratio-based grid; and
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When the Company’s utilization of the facility is in excess of 50%,
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Prior to May 28, 2018, the highest two levels of the leverage-based grid will be increased by 50 basis points such that the interest rates on the revolving loans will range from LIBOR+1.75% to LIBOR+3.50% based on a leverage ratio-based grid;
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On or after May 28, 2018, the highest two levels of the leverage-based grid will be increased by 150 basis points such that the interest rates on the revolving loans will range from LIBOR+1.75% to LIBOR+4.50% based on a leverage ratio-based grid;
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Remove the ability to increase the revolving commitments pursuant to the accordion feature of the Credit Agreement;
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Specifically permit the Transaction under the negative covenants of the Credit Agreement subject to a minimum amount of the consideration being paid in equity interests of the Company;
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Add an additional restriction to the Permitted Acquisition Investment basket requiring that the aggregate amount of consideration for any additional acquisitions not exceed $25 million (exclusive of any amount financed from the proceeds of equity issuances by the Company);
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Specifically permit additional investments in foreign subsidiaries of the Company subject to a $25 million cap and there being no event of default under the Credit Agreement at the time of such investment;
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Specifically permit the incurrence of additional unsecured indebtedness subject to compliance with a pro forma leverage ratio less than or equal to 3.75:1.00 and the repayment of revolving loans with the proceeds of such indebtedness without any further reduction of the revolving commitments; and
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Upon the Closing of the Transaction, temporarily increase the maximum permitted level of the total leverage covenant from 3.25x to 3.75x for the quarters ended March 31, 2018 and June 30, 2018.
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From time to time, the lenders under the Credit Agreement or their respective affiliates have performed, and may in the future perform,
various commercial banking, investment banking and other financial advisory services for the Company, for which the Company pays customary fees and expenses.
The foregoing description of the
Second Amendment is only a summary, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Second Amendment, a copy of which is filed as Exhibit 4.1 to this Current Report on Form 8-K and incorporated herein by reference.