Item 1.01 – Entry into a Material Definitive Agreement.
Merger Agreement
On December 18, 2019, Forbes Energy Services Ltd., a Delaware corporation (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Superior Energy Services, Inc., a Delaware corporation (“Superior”), New NAM, Inc., a Delaware corporation and a newly formed, wholly owned subsidiary of Superior (“NAM”), Spieth Newco, Inc., a Delaware corporation and a newly formed, wholly owned subsidiary of the Company (“Holdco”), Spieth Merger Sub, Inc., a Delaware corporation and a newly formed, wholly owned subsidiary of Holdco (“NAM Merger Sub”), and Fowler Merger Sub, Inc., a Delaware corporation and a newly formed, wholly owned subsidiary of Holdco (“Fowler Merger Sub”). Upon the terms and subject to the conditions set forth in the Merger Agreement, NAM Merger Sub will merge with and into NAM (the “NAM Merger”) and Forbes Merger Sub will merge with and into the Company (the “Forbes Merger,” and together with the NAM Merger, the “Mergers”), with each of NAM and the Company continuing as surviving entities and wholly owned subsidiaries of Holdco. On December 17, 2019, the board of directors of the Company and the board of directors of Superior each unanimously approved the Merger Agreement.
Prior to the effective time of the Mergers (the “Effective Time”), Superior and certain of its subsidiaries will enter into a separation agreement (the “Separation Agreement”) setting forth the terms of the consolidation of Superior’s U.S. service rig, coiled tubing, wireline, pressure control, flowback, fluid management and accommodation services lines (the “Superior U.S. Business”) under the ownership of NAM as contemplated by the Merger Agreement. Upon the terms and subject to conditions set forth in the Separation Agreement, Superior and its subsidiaries party thereto will enter into a series of transactions to effectuate an internal reorganization (the “Reorganization”) such that, after giving effect to the Reorganization, the Superior U.S. Business will be separated from Superior and consolidated under NAM.
At the Effective Time, the holders of shares of common stock, par value $0.01 per share, of the Company (“Forbes Common Stock”) that are (i) issued and outstanding immediately prior to the Effective Time or that constitute Exchange Shares (as defined below) or (ii) issuable upon conversion of the Forbes Convertible PIK Notes (as defined below) in accordance with the Merger Agreement, will, by virtue of the Forbes Merger, have the right to receive a number of shares of the voting Class A common stock, par value $0.01 per share, of Holdco (“Holdco Class A Common Stock”) that, taken together with the Contribution Shares (as defined below), will be equal to 50.1% of the outstanding Holdco Class A Common Stock. The Holdco Class A Common Stock issued to holders of Forbes Common Stock and Forbes Convertible PIK Notes will collectively represent an approximate 35% economic interest in Holdco (the “Forbes Merger Consideration”). An aggregate of 1.5% of the Forbes Merger Consideration shall be allocated, pro rata, to the outstanding shares of Forbes Common Stock (including for this purpose shares issuable in respect of awards of restricted stock units and performance stock units of the Company, but excluding Exchange Shares). An aggregate of 98.5% of the Forbes Merger Consideration shall be allocated, pro rata, to (x) the Forbes Convertible PIK Notes converted into shares of Forbes Common Stock in accordance with the indenture governing the Forbes Convertible PIK Notes, (y) the Exchange Notes (as defined below) and (z) the Contribution Notes (as defined below). At the Effective Time, Superior, through its subsidiaries, will, by virtue of the NAM Merger, receive (i) 49.9% of the issued and outstanding Holdco Class A Common Stock, (ii) 100% of the issued and outstandingnon-voting Class B common stock, par value $0.01 per share, of Holdco (“Holdco Class B Common Stock” and, together with the Holdco Class A Common Stock, “Holdco Common Stock”) and (iii) Holdco Secured Notes (as defined below) issued pursuant to the Exchange Financing (as defined below) (such shares of Holdco Class A Common Stock, shares of Holdco Class B Common Stock and Holdco Secured Notes, collectively, the “NAM Merger Consideration”). The Holdco Common Stock issued to Superior as NAM Merger Consideration will represent an approximate 65% economic interest in Holdco. Each of the Company’s and Superior’s economic interest in Holdco will be subject to adjustment within certain parameters (but not more than 0.73%) based on the net debt position of the Company immediately prior to the closing of the Mergers.
Each award of restricted stock units and performance stock units of the Company will be treated as follows:
| • | | each outstanding award of a restricted stock unit granted under the Company’s equity compensation plans (the “Forbes Stock Plans”) that is subject to time-based vesting requirements will immediately vest and thereupon be cancelled and converted into a share of Forbes Common Stock. The holder of each such share of Forbes Common Stock will have the right to receive the Forbes Merger Consideration; and |
| • | | each outstanding award of a restricted stock unit granted under the Forbes Stock Plans that is subject to performance-based vesting requirements will immediately vest and be cancelled and converted into a share of Forbes Common Stock. The holder of each such share of Forbes Common Stock shall have the right to receive the Forbes Merger Consideration. |