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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): April 20, 2008
Basic Energy Services, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation )
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1-32693
(Commission
File Number)
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54-2091194
(IRS Employer
Identification No.) |
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500 W. Illinois, Suite 100
Midland, Texas
(Address of principal executive offices)
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79701
(Zip Code) |
Registrants telephone number, including area code: (432) 620-5500
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)
þ 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 (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On April 20, 2008, Basic Energy Services, Inc. (Basic) entered into an Agreement and Plan of
Merger (the Merger Agreement), by and among Basic, Grey Wolf, Inc., a Texas corporation (Grey
Wolf), and Horsepower Holdings, Inc., a Delaware corporation and a subsidiary owned equally by
Basic and Grey Wolf (Holdings), pursuant to which Basic and Grey Wolf will each merge with and
into Holdings, with Holdings continuing as the surviving corporation (the Mergers), upon the
terms and subject to the conditions of the Merger Agreement.
Upon completion of the Mergers, the Merger Agreement, which was unanimously approved by
Basics Board of Directors and the Board of Directors of Grey Wolf, provides that each share of
Basics common stock will be converted into the right to receive 0.9195 shares of common stock of
Holdings (together with the cash in lieu of fractional shares) and cash in an amount equal to
$6.70 (the Basic Merger Consideration). Pursuant to the Merger Agreement, each share of Grey
Wolfs common stock will be converted into the right to receive 0.2500 shares of Holdings (together
with cash in lieu of fractional shares) and cash in an amount equal to $1.82 (the Grey Wolf Merger
Consideration). Each option to purchase Basics common stock and each option to purchase Grey
Wolfs common stock will be assumed by Holdings, with the number of shares and exercise price per
share, in each case, adjusted pursuant to the terms of the Merger Agreement. Each share of Basics
restricted stock and each share of Grey Wolfs restricted stock will be converted into either (i)
the right to receive the Basic Merger Consideration or the Grey Wolf Merger Consideration,
respectively, or (ii) at the election of the holder, shares of Holdings common stock pursuant to
the adjustment fraction set forth in the Merger Agreement; provided, in either case, that each
share of Holdings common stock will be subject to the same vesting and forfeiture provisions to
which the shares of Basics restricted stock or Grey Wolfs restricted stock, as the case may be,
were subject. Shares of Basics restricted stock held by its
non-continuing directors and shares of
Grey Wolfs restricted stock held by its non-continuing directors will become immediately vested and
no longer subject to risk of forfeiture and will be converted into the right to receive the Basic
Merger Consideration or the Grey Wolf Merger Consideration, respectively.
The Merger Agreement provides that upon completion of the Mergers, the board of directors of
Holdings (the Holdings Board) will be composed of nine members, five of whom will be appointed by
Grey Wolf (the Grey Wolf Designated Directors) and four of whom will be appointed by Basic (the
Basic Designated Directors). The Holdings Board will initially be classified into three classes.
Two of the Grey Wolf Designated Directors and one of the Basic Designated Directors will comprise
the class of directors of the Holdings Board with terms expiring at the Holdings annual
stockholders meeting in 2009. One of the Grey Wolf Designated Directors and two of the Basic
Designated Directors will comprise the class of directors of the Holdings Board with terms expiring
at the Holdings annual stockholders meeting in 2010. Two of the Grey Wolf Designated Directors and
one of the Basic Designated Directors will comprise the class of directors of the Holdings Board
with terms expiring at the Holdings annual stockholders meeting in
2011. The Merger
Agreement provides that upon completion of the Mergers, Thomas P. Richards, Grey Wolfs Chairman of
the Board, President and Chief Executive Officer, will become Chairman of the Board of
Holdings, Kenneth V. Huseman, Basics President and Chief
Executive Officer, will become Chief Executive Officer of Holdings,
and David J. Crowley, Grey Wolfs Executive Vice President
and Chief Operating Officer, will become President and Chief
Operating Officer of Holdings. In addition, it is expected that Alan
Krenek, Basics Chief Financial Officer, will continue as Chief
Financial Officer of Holdings.
Completion of the Merger is conditioned upon, among other things, (i) adoption of the Merger
Agreement by the stockholders of both Basic and Grey Wolf, (ii) the receipt of required regulatory
approvals, (iii) the arrangements of financings to provide sufficient funds to pay the cash portion
of the merger consideration and repay or repurchase any indebtedness required to be repaid upon
consummation of the Mergers (either pursuant to the Commitment Letter (as defined below) executed
by Grey Wolf on April 20, 2008, or pursuant to an alternative financing on terms mutually
acceptable to Basic and Grey Wolf) and (iv) the absence of any material adverse effect with respect
to the respective businesses of Basic and Grey Wolf. DLJ Merchant Banking Partners III, L.P. and
certain affiliated funds (the DLJMB Affiliates) and Grey Wolf have entered into a voting agreement
whereby each DLJMB Affiliate has agreed to vote its shares of Basic common stock in favor of the Mergers, subject to
certain exceptions, including, among others, if Basics board of directors withdraws its
recommendation for the Mergers.
On April 20, 2008, Grey Wolf entered into a commitment letter (the Commitment Letter),
pursuant to which Goldman Sachs Credit Partners L.P., UBS Loan Finance LLC, and UBS Securities LLC
(collectively, the Commitment Parties) have committed to provide financing for the Mergers. The
Commitment Letter provides for a senior secured term loan facility to Holdings of up to $600
million and a senior secured revolved credit facility to Holdings of up to $325 million (together,
the Bank Facilities). The Commitment Parties commitments are subject to satisfaction of certain
conditions, including (i) no change shall have occurred since December 31, 2007, which has had or
could reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement)
with respect to Grey Wolf, Basic and their respective subsidiaries, taken as a whole, (ii) neither
Commitment Party becomes aware after April 20, 2008, that any information with respect to Grey
Wolf, Basic or the Mergers and the other transactions contemplated by, and in connection with, the
Mergers previously submitted to it was inaccurate or misleading in any material respect, and (iii)
each condition set forth in the Term
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Sheet and Condition Annex to the Commitment Letter has been satisfied and no covenant or
agreement in the Commitment Letter or Bank Facilities fee letter is not complied with.
The Merger Agreement contains customary representations, warranties and covenants and other
customary conditions. Investors are cautioned that the representations, warranties and covenants
included in the Merger Agreement were made by Basic and Grey Wolf to each other. These
representations, warranties and covenants were made as of specific dates and only for purposes of
the Merger Agreement and are subject to important exceptions and limitations, including a
contractual standard of materiality different from that generally relevant to investors, and are
qualified by information in disclosure schedules that the parties exchanged in connection with the
execution of the agreement. In addition, the representations and warranties may have been included
in the Merger Agreement for the purpose of allocating risk between Basic and Grey Wolf, rather than
to establish matters as facts.
The Merger Agreement contains certain termination rights for both Grey Wolf and Basic,
including, among others, if board of directors of Basic or Grey Wolf changes its recommendation to
its stockholders. Upon termination of the Merger Agreement under certain specified circumstances,
one party will be required to pay the other party a termination fee of $30 million. In addition,
Basic or Grey Wolf may terminate the Merger Agreement if the Mergers are not completed by November
30, 2008 and under certain other circumstances.
The Merger Agreement is described in this Current Report on Form 8-K and attached as Exhibit
2.1 hereto only to provide you with information regarding certain material terms and conditions,
and, except for its status as a contractual document that establishes and governs the legal
relationship among the parties thereto with respect to the Mergers, not to provide any other
factual information regarding Basic, Grey Wolf, their respective businesses or the actual conduct
of their respective businesses during the period prior to the consummation of the Mergers.
Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the
representations and warranties in the Merger Agreement as characterizations of the actual state of
facts about Basic, Grey Wolf or any other person. Furthermore, you should not rely on the covenants
in the Merger Agreement as actual limitations on the respective businesses of Basic and Grey Wolf,
because either party may take certain actions that are either expressly permitted in the disclosure
schedules to the Merger Agreement or as otherwise consented to by the appropriate party, which
consent may be given without notice to the public.
The foregoing description of the Merger Agreement does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1
hereto, and is incorporated herein by reference. The Merger Agreement provides further information
regarding the terms of the Mergers.
In connection with the Merger Agreement, Kenneth V. Huseman and Alan Krenek entered into
letter agreements with Basic waiving certain conditions relating to Good Reason for termination
under their current employment agreements. Upon completion of the Mergers, Messrs. Huseman and
Krenek would have been entitled to terminate their employment with Basic pursuant to their
employment agreements and trigger certain payments as outlined in such employment agreements, but
pursuant to the letter agreements, have waived such rights. The foregoing description of the
letter agreements does not purport to be complete and is qualified in its entirety by reference to
the letter agreements, which are filed as Exhibits 10.1 and 10.2, respectively, and are
incorporated herein by reference.
Item 8.01 Other Events
On April 21, 2008, Grey Wolf and Basic announced the signing of a definitive merger agreement
providing for the acquisition by merger of Basic and Grey Wolf as described in Item 1.01 above. A
copy of the joint press release is filed as Exhibit 99.1 hereto and is incorporated herein by
reference.
Forward Looking Statements and Additional Information
Basic may make statements herein that are forward-looking statements as defined by the
Securities and Exchange Commission (the SEC). All statements, other than statements of
historical fact, included herein that address activities, events or developments that Basic
expects, believes or anticipates will or may occur in the future are forward-looking statements.
These forward-looking statements are subject to risks and uncertainties that may cause actual
results to differ materially, including required approvals by stockholders and regulatory agencies,
the possibility that the anticipated benefits from the proposed mergers cannot be fully realized,
the possibility that costs or difficulties related to integration of the two companies will be
greater than expected, the impact of competition and other risk factors included in the reports
filed with the SEC by Grey Wolf, Inc. (Grey Wolf) and Basic Energy Services, Inc. (Basic
Energy Services). Readers are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. Except as required by law, Basic does not intend to update or
revise its forward-looking statements, whether as a result of new information, future events or
otherwise.
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Additional Information and Where to Find It
In connection with the proposed mergers, a registration statement of Horsepower Holdings, Inc.
(Holdings), which will include proxy statements of Basic Energy Services and Grey Wolf and other
materials, will be filed with the Securities and Exchange Commission. INVESTORS AND SECURITY
HOLDERS ARE URGED TO CAREFULLY READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS
AND THESE OTHER MATERIALS REGARDING THE PROPOSED TRANSACTION WHEN THEY BECOME AVAILABLE, BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT BASIC ENERGY SERVICES, GREY WOLF, HOLDINGS AND THE PROPOSED
TRANSACTION. Investors and security holders may obtain a free copy of the registration statement
and the proxy statement/prospectus when they are available and other documents containing
information about Basic Energy Services and Grey Wolf, without charge, at the SECs web site at www.sec.gov,
Basic Energy Services web site at www.basicenergyservices.com, and Grey Wolfs web site at
www.gwdrilling.com. Copies of the registration statement and the proxy statement/prospectus and the
SEC filings that will be incorporated by reference therein may also be obtained for free by
directing a request to either Investor Relations, Basic Energy Services, Inc., 432-620-5510 or to
Investor Relations, Grey Wolf, Inc., 713-435-6100.
Participants in the Solicitation
Basic Energy Services
and Grey Wolf and their respective directors, officers and certain other members
of management may be deemed to be participants in the solicitation of proxies from their respective
stockholders in respect of the mergers. Information about these persons can be found Grey Wolfs
proxy statement relating to its 2008 annual meetings of stockholders as filed with the SEC on April
8, 2008. Information concerning beneficial ownership of Basic Energy Services stock by its directors and
certain of its executive officers is included in its proxy statement dated April 5, 2007 and
subsequent statements of changes in beneficial ownership on file with the SEC. Additional
information about the interests of such persons in the solicitation of proxies in respect of the
merger will be included in the registration statement and the joint proxy statement/prospectus to
be filed with the SEC in connection with the proposed transaction.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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2.1
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Agreement and Plan of Merger, by and among Basic
Energy Services, Inc., Grey Wolf, Inc. and Horsepower Holdings, Inc.,
dated as of April 20, 2008 |
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10.1
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Letter Agreement, by and between Kenneth V. Huseman
and Basic Energy Services, Inc., dated as of April 20, 2008. |
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10.2
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Letter Agreement, by and between Alan Krenek and
Basic Energy Services, Inc., dated as of April 20, 2008. |
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99.1
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Joint press release dated April 21, 2008 |
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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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Basic Energy Services, Inc.
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Date: April 21, 2008 |
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/s/ Alan Krenek
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Alan Krenek |
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Senior Vice President, Chief Financial Officer, Treasurer and Secretary |
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EXHIBIT INDEX
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Exhibit No.
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Description |
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2.1
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Agreement and Plan of Merger, by and among Basic Energy Services,
Inc., Grey Wolf, Inc. and Horsepower Holdings, Inc., dated as of April 20, 2008 |
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10.1
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Letter Agreement, by and between Kenneth V. Huseman and Basic
Energy Services, Inc., dated as of April 20, 2008. |
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10.2
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Letter Agreement, by and between Alan Krenek and Basic Energy
Services, Inc., dated as of April 20, 2008. |
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99.1
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Joint press release dated April 21, 2008 |