SOLARIS OILFIELD INFRASTRUCTURE, INC. (NYSE:SOI) Files An 8-K Entry into a Material Definitive Agreement
Item1.01
| Entry into a Material Definitive Agreement. |
On May17, 2017, Solaris Oilfield Infrastructure, Inc. (the
Company) completed its initial public offering (the Offering) of
10,100,000 shares of the Companys ClassA common stock, par value
$0.01 per share (Class A Common Stock), at a price to the public
of $12.00 per share ($11.28 net of underwriting discounts and
commissions), to the Companys Registration Statement on FormS-1
(File No.333-216721), (as amended, the Registration
Statement).The material terms of the Offering are described in
the prospectus, dated May11, 2017 (the Prospectus), filed by the
Company with the Securities and Exchange Commission (the
Commission) on May15, 2017. The Company granted the underwriters
an option for a period of 30 days to purchase up to an additional
1,515,000 shares of ClassA Common Stock at the initial offering
price.
Registration Rights Agreement
On May17, 2017, in connection with the closing of the Offering,
the Company entered into a Registration Rights Agreement (the
Registration Rights Agreement) with certain shareholders
identified on the pages thereto as the Holders (the Holders).
to the Registration Rights Agreement, at any time after 180 days
after the date of the Prospectus, subject to the limitations set
forth therein, the Holders have the right to require the Company
by written notice to prepare and file a registration statement
registering the offer and sale of a number of their shares of
ClassA Common Stock. Reasonably in advance of the filing of any
such registration statement, the Company is required to provide
notice of the request to all other Holders, who may participate
in the registration. The Company is required to use all
commercially reasonable efforts to maintain the effectiveness of
any such registration statement until all shares covered by such
registration statement have been sold. Subject to certain
exceptions, the Company is not obligated to effect such a
registration within 90 days after the closing of any underwritten
offering of shares of ClassA Common Stock. The Company is also
not obligated to effect any registration where such registration
has been requested by the holders of Registrable Securities (as
defined in the Registration Rights Agreement) which represent
less than $35 million, based on the five-day volume weighted
average trading price of the ClassA Shares on the New York Stock
Exchange.
In addition, to the Registration Rights Agreement, the Holders
have the right to require the Company, subject to certain
limitations set forth therein, to effect a distribution of any or
all of their shares of ClassA Common Stock by means of an
underwritten offering. Further, subject to certain exceptions, if
at any time the Company proposes to register an offering of
ClassA Common Stock or conduct an underwritten offering, whether
or not for its account, then the Company must notify the Holders
of such proposal at least five business days before the
anticipated filing date or commencement of the underwritten
offering, as applicable, to allow them to include a specified
number of their shares in that registration statement or
underwritten offering, as applicable.
These registration rights are subject to certain conditions and
limitations, including the right of the underwriters to limit the
number of shares to be included in a registration or offering and
the Companys right to delay or withdraw a registration statement
under certain circumstances. The Company will generally pay all
registration expenses in connection with its obligations under
the Registration Rights Agreement, regardless of whether a
registration statement is filed or becomes effective.
The obligations to register shares under the Registration Rights
Agreement will terminate as to any Holder when the Registrable
Securities held by such Holder are no longer subject to any
restrictions on trading under the provisions of Rule 144 under
the Securities Act of 1933, as amended (the Securities Act),
including any volume or manner of sale restrictions. Registrable
Securities means all shares of ClassA Common Stock owned at any
particular point in time by a Holder other than shares (i)sold to
an effective registration statement under the Securities Act,
(ii)sold in a transaction to Rule 144 under the Securities Act,
(iii)that have ceased to be outstanding or (iv)that are eligible
for resale without restriction and without the need for current
public information to any section of Rule 144 under the
Securities Act.
The foregoing description of the Registration Rights Agreement is
qualified in its entirety by reference to the full text of the
Registration Rights Agreement, which is attached as Exhibit 4.1
to this Current Report on Form 8-K and incorporated in this
Item1.01 by reference.
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Tax Receivable Agreement
On May17, 2017, in connection with the Offering, the Company
entered into a Tax Receivable Agreement (the TRA) with the
members of Solaris Oilfield Infrastructure, LLC (Solaris LLC),
including certain of the Companys executive officers (the TRA
Holders). This agreement generally provides for the payment by
the Company of 85% of the net cash savings, if any, in U.S.
federal, state and local income tax and franchise tax that the
Company actually realizes (computed using simplifying assumptions
to address the impact of state and local taxes) or is deemed to
realize in certain circumstances in periods after the Offering as
a result of (i)certain increases in tax basis that occur as a
result of the Companys acquisition (or deemed acquisition for
U.S. federal income tax purposes) of all or a portion of such TRA
Holders units in Solaris LLC (Solaris LLC Units) in connection
with the Offering or to the exercise of the Redemption Right or
the Call Right (as defined in the TRA) and (ii)imputed interest
deemed to be paid by the Company as a result of, and additional
tax basis arising from, any payments the Company makes under the
Tax Receivable Agreement. The term of the TRA commences on May17,
2017 and continues until all such tax benefits have been utilized
or expired, unless the Company exercises its right to terminate
the TRA. The payments under the TRA will not be conditioned upon
a TRA Holder having a continued ownership interest in either
Solaris LLC or the Company.
If the Company elects to terminate the TRA early, it would be
required to make an immediate payment equal to the present value
of the anticipated future tax benefits subject to the TRA (based
upon certain assumptions and deemed events set forth in the TRA).
In addition, payments due under the TRA will be similarly
accelerated following certain mergers or other changes of
control.
The foregoing description is not complete and is qualified in its
entirety by reference to the full text of the TRA, which is
attached as Exhibit 10.1 to this Current Report on Form 8-K and
incorporated in this Item1.01 by reference.
First Amendment to Credit Agreement
On May17, 2017, in connection with the Offering, the Company
entered into a First Amendment (the First Amendment) to the
Credit Agreement, dated as of December1, 2016 (the the Credit
Agreement and, as amended by the First Amendment, the Amended
Credit Facility), by and among the Company, as borrower, each of
the lenders party thereto and Woodforest National Bank, as
administrative agent (the Administrative Agent). The First
Amendment, among other things, modified the terms of the Credit
Agreement to (i)increase the Revolving Facility (as defined in
the Prospectus) from $1.0 million to $20.0 million, (ii)decrease
the Advance Loan Facility (as defined in the Prospectus) from
$10.0 million to $0 and (iii)amend both the scheduled maturity
date of the Revolving Facility and the Advance Loan Facility to
be May17, 2021. Additionally, the First Amendment increased the
accordion feature of the Revolving Facility from $1.0 million to
$10.0 million, which accordion may be elected by the Company at
any time prior to the scheduled maturity date of the Revolving
Facility so long as no default or event of default shall have
occurred and be continuing and provided that no lender has any
obligation to increase its own revolving credit commitment.
The Amended Credit Agreement permits extensions of credit up to
the lesser of $20.0 million and a borrowing base that is
determined by calculating the amount equal to the sum of (i)80%
of the Eligible Accounts (as defined in the Amended Credit
Agreement), (ii)65% of the Eligible Inventory/Equipment Value
(Appraised) (as defined in the Amended Credit Agreement) and
(iii)75% of the Eligible Inventory/Equipment Value (New Build,
Acquired or Upgraded) (as defined in the Amended Credit
Agreement). The borrowing base is calculated on a monthly basis
to a borrowing base certificate delivered to the Administrative
Agent and an annual appraisal on the equipment delivered to the
Administrative Agent (provided that the Administrative Agent may,
at its discretion, require a desktop appraisal on equipment every
six months).
Borrowings under the Amended Credit Facility continue to bear
interest at one-month LIBOR plus an applicable margin and
interest continues to be payable monthly. The First Amendment
decreased the applicable margins to an applicable margin range
from 3.00% to 4.00% depending on our leverage ratio. The First
Amendment also increased the monthly commitment fee we pay on
undrawn amounts of the Revolving Facility to a range from 0.1875%
to 0.50% depending on our leverage ratio; provided, however that
we will not be required to pay such commitment fee for any month
when we have outstanding borrowings greater than 50.0% of the
commitments under the Revolving Facility.
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The Amended Credit Agreement requires that we maintain, at all
times, a ratio of net funded indebtedness to consolidated EBITDA
of not more than 2.50 to 1.00, provided that net funded
indebtedness is subject to a cash adjustment with respect to any
unrestricted cash and cash equivalents of the Borrower and its
subsidiaries in an amount equal to the lesser of $10.0 million or
50% of unrestricted cash and cash equivalents of the Company and
its subsidiaries. The Amended Credit Facility also requires that
we maintain, at all times, a ratio of consolidated EBITDA to
fixed charges of not less than 1.25 to 1.00. Additionally, our
capacity to make capital expenditures is capped at $80.0 million
for each fiscal year plus, for fiscal years beginning on
January1, 2019, any unused availability for capital expenditures
from the immediately preceding fiscal year; provided, however
that we are permitted to make any capital expenditures in an
amount equal to the proceeds of equity contributions made to the
Company used to fund such capital expenditures.
The foregoing description is not complete and is qualified in its
entirety by reference to the full text of the First Amendment,
which is attached as Exhibit 10.2 to this Current Report on Form
8-K and incorporated in this Item1.01 by reference.
Amended and Restated Administrative Services
Agreement
On May 17, 2017, in connection with the Offering, the Company
entered into an Amended and Restated Administrative Services
Agreement (the Services Agreement) with Solaris LLC and Solaris
Energy Management, LLC (SEM). to the Services Agreement, SEM has
agreed to provide certain administrative and related services to
the Company and Solaris LLC in exchange for reimbursement of its
direct expenses and an allocation of its indirect expenses
attributable to the provision of such services.
The foregoing description is not complete and is qualified in its
entirety by reference to the full text of the Services Agreement,
which is attached as Exhibit 10.3 to this Current Report on Form
8-K and incorporated in this Item 1.01 by reference.
Long Term Incentive Plan
The description of the Solaris Oilfield Infrastructure, Inc. Long
Term Incentive Plan (the LTIP) provided below under Item5.02 is
incorporated in this Item1.01 by reference. A copy of the LTIP is
attached as Exhibit10.4 to this Current Report on Form8-K and is
incorporated in this Item1.01 by reference.
| Item2.03 |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information provided in Item1.01 hereto under the heading
First Amendment to Credit Agreement is incorporated by reference
into this Item2.03.
| Item3.03 |
Material Modification to Rights of Security Holders. |
The information provided in Item1.01 hereto under the heading
Registration Rights Agreement and in Item5.03 hereto is
incorporated by reference into this Item3.03.
| Item5.02 |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Long Term Incentive Plan
Effective May17, 2017, the Board of Directors of the Company (the
Board) adopted the LTIP for the benefit of employees, directors
and consultants of the Company and its affiliates. The LTIP
provides for the grant of all or any of the following types of
equity-based awards: (1)incentive stock options qualified as such
under U.S. federal income tax laws; (2)stock options that do not
qualify as incentive stock options; (3)stock appreciation rights;
(4)restricted stock awards; (5)restricted stock units; (6)bonus
stock; (7)performance awards; (8)dividend equivalents; (9)other
stock-based awards; (10)cash awards; and (11)substitute awards.
Subject to adjustment in accordance with the terms of the LTIP,
5,118,080 shares of ClassA Common Stock have been reserved for
issuance to awards under the LTIP. ClassA Common Stock withheld
to satisfy exercise prices or tax withholding obligations will be
available for delivery to other awards. The LTIP will be
administered by the Board, the Compensation Committee of the
Board or an alternative committee appointed by the Board.
The foregoing description of the LTIP is not complete and is
qualified in its entirety by reference to the full text of the
LTIP, which is attached as Exhibit10.4 to this Current Report on
Form8-K and is incorporated in this Item5.02 by reference.
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| Item5.03 |
Amendments to Articles of Incorporation or Bylaws; Changes in Fiscal Year. |
Amended and Restated Certificate of
Incorporation
On May17, 2017, prior to the closing of the Offering, the Company
amended and restated its Certificate of Incorporation (as amended
and restated, the Certificate of Incorporation), which was filed
with the Secretary of State of the State of Delaware on May17,
2017.A description of the Certificate of Incorporation is
contained in the section of the Prospectus entitled Description
of Capital Stock and is incorporated herein by reference.
The foregoing description and the description contained in the
Prospectus are qualified in their entirety by reference to the
full text of the Certificate of Incorporation, which is attached
as Exhibit3.1 to this Current Report on Form8-K and is
incorporated in this Item5.03 by reference.
Amended and Restated Bylaws
On May17, 2017, prior to the closing of the Offering, the Company
amended and restated its Bylaws (as amended and restated, the
Bylaws).A description of the Bylaws is contained in the section
of the Prospectus entitled Description of Capital Stock and is
incorporated herein by reference.
The foregoing description and the description contained in the
Prospectus are qualified in their entirety by reference to the
full text of the Bylaws, which is attached as Exhibit3.2 to this
Current Report on Form8-K and is incorporated in this Item5.03 by
reference.
| Item9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
|
ExhibitNo. |
Description |
|
| 3.1 |
Amended and Restated Certificate of Incorporation of Solaris Oilfield Infrastructure, Inc. |
|
| 3.2 |
Amended and Restated Bylaws of Solaris Oilfield Infrastructure, Inc. |
|
| 4.1 | Registration Rights Agreement | |
| 10.1 | Tax Receivable Agreement | |
| 10.2 | First Amendment to Credit Agreement | |
| 10.3 | Amended and Restated Administrative Services Agreement | |
| 10.4 |
Solaris Oilfield Infrastructure, Inc. Long Term Incentive Plan (incorporated by reference to Exhibit 4.3 to the Registrants Form S-8 Registration Statement (File No.333-218043) filed with the Commission on May16, 2017). |
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About SOLARIS OILFIELD INFRASTRUCTURE, INC. (NYSE:SOI)
Solaris Oilfield Infrastructure, Inc. manufactures and provides its mobile proppant management systems that unload, store and deliver proppant at oil and natural gas well sites. The Company offers its services to oil and natural gas exploration and production (E&P) companies, as well as oilfield service companies. Its mobile proppant system is designed to address the challenges associated with transferring large quantities of proppant to the well site, including the cost and management of last mile logistics. Its systems provide 2.5 million pounds of proppant storage capacity. The Company manufactures its systems at its facility in Early, Texas, The Company’s system provides Streamlined last mile logistics and Improved execution to meet completion designs. Its systems provide triple the storage capacity, such as trailer-mounted, hydraulically powered storage bins. Its integrated PropView system delivers real-time proppant inventory and consumption levels. SOLARIS OILFIELD INFRASTRUCTURE, INC. (NYSE:SOI) Recent Trading Information
SOLARIS OILFIELD INFRASTRUCTURE, INC. (NYSE:SOI) closed its last trading session down -0.03 at 11.85 with 244,942 shares trading hands.