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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ | |
Filed by a Party other than the Registrant o | |
Check the appropriate box: |
o Preliminary Proxy Statement | |
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
þ Definitive Proxy Statement | |
o Definitive Additional Materials | |
o Soliciting Material Pursuant to §240.14a-12 |
Warrior Energy Services Corporation
Payment of Filing Fee (Check the appropriate box):
þ No fee required. | |
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
1) Title of each class of securities to which transaction applies: |
2) Aggregate number of securities to which transaction applies: |
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
4) Proposed maximum aggregate value of transaction: |
5) Total fee paid: |
o Fee paid previously with preliminary materials. |
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
1) Amount Previously Paid: |
2) Form, Schedule or Registration Statement No.: |
3) Filing Party: |
4) Date Filed: |
SEC 1913 (02-02) | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
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• | To vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 22, 2006, by and among Superior Energy Services, Inc., SPN Acquisition Sub, Inc., a wholly-owned subsidiary of Superior Energy Services, Inc. and Warrior Energy Services Corporation, pursuant to which Warrior will merge with and into SPN Acquisition Sub, Inc., at which time the corporate existence of Warrior will cease and SPN Acquisition Sub, Inc. will continue as the surviving corporation; and | |
• | To grant discretionary authority to vote upon any matters not known by our board of directors for a reasonable period of time before Warrior mailed this proxy statement/prospectus as may properly come before the meeting, including authority to vote in favor of any postponements or adjournments of the meeting, if necessary, to solicit additional proxies. |
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ANNEXES | ||||
Annex A Agreement and Plan of Merger, by and among Superior Energy Services, Inc., SPN Acquisition Sub, Inc. and Warrior Energy Services Corporation, dated as of September 22, 2006. | ||||
Annex B Opinion of Simmons & Company International, dated September 22, 2006. | ||||
Annex C Appraisal and Dissenters’ Rights under the Delaware General Corporation Law. |
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• | Superior Energy Services, Inc., a Delaware corporation, as “Superior”; | |
• | Warrior Energy Services Corporation, a Delaware corporation, as “Warrior”; | |
• | SPN Acquisition Sub, Inc., a newly formed Delaware corporation and a wholly owned subsidiary of Superior, as “Merger Sub”; | |
• | the merger of Warrior into Merger Sub and the conversion of shares of Warrior common stock into the right to receive cash and shares of Superior common stock as the “merger”; | |
• | the Agreement and Plan of Merger dated September 22, 2006 among Superior, Merger Sub and Warrior as the “merger agreement”; | |
• | theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as the “HSR Act” or the“Hart-Scott-Rodino Act”; and | |
• | the General Corporation Law of the State of Delaware as the “DGCL.” |
Q: | Why are Warrior stockholders receiving this proxy statement/prospectus? | |
A: | Superior and Warrior have agreed to the acquisition of Warrior by Superior under the terms of a merger agreement that is described in this proxy statement/prospectus. Please see “The Merger Agreement” beginning on page 46 of this proxy statement/prospectus. A copy of the merger agreement is attached to this proxy statement/prospectus asAnnex A. | |
In order to complete the merger, Warrior stockholders must adopt the merger agreement. Warrior will hold a special meeting of its stockholders to obtain this approval. | ||
This document is being provided by, and the enclosed proxy card is solicited by and on behalf of, the Warrior board of directors for use at the special meeting of Warrior stockholders. | ||
This proxy statement/prospectus contains important information about the merger, the merger agreement and the special meeting of the stockholders of Warrior, which you should read carefully. The enclosed voting materials allow you to vote your shares without attending the Warrior special meeting. | ||
Your vote is very important. Warrior encourages you to vote as soon as possible. | ||
Q: | What are Warrior’s stockholders voting on? | |
A: | Warrior stockholders are voting on a proposal to adopt the merger agreement. | |
Q: | What vote of Warrior stockholders is required to adopt the merger agreement? | |
A: | Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Warrior common stock. No vote of stockholders of Superior is required to adopt the merger agreement. |
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Q: | Who can attend and vote at the special meeting? | |
A: | All holders of record of Warrior common stock at the close of business on October 31, 2006, the record date, are entitled to notice of and to vote at the special meeting and any adjournments or postponements of the special meeting. However, a Warrior stockholder may only vote his or her shares if he or she is present in person or is represented by proxy at the Warrior special meeting. As of the record date, there were 11,237,944 shares of Warrior common stock outstanding and entitled to vote at the special meeting, held by 82 holders of record. | |
Q: | When and where will the special meeting of Warrior stockholders be held? | |
A: | The Warrior special meeting of stockholders will take place at Columbus Country Club, 2331 Military Road, Columbus, Mississippi 39705, on December 12, 2006, at 10:00 a.m. local time. | |
Q: | Why is Warrior proposing the merger? | |
A: | Warrior believes that the merger is in the best interests of Warrior and its stockholders. Warrior is proposing the merger to provide its stockholders with both the opportunity to receive a premium for their shares and to participate in the potential growth of the combined post-merger company. In addition, Warrior believes that the merger will allow Warrior to maximize its business opportunities and to compete more effectively during an economic downturn if the company is part of a larger and more diversified organization like Superior. To review the reasons for the merger in greater detail, see “The Merger — Warrior’s Reasons for the Merger” on page 33 and “The Merger — Recommendation of the Warrior Board of Directors” on page 35 of this proxy statement/prospectus. | |
Q: | How does the Warrior board of directors recommend the Warrior stockholders vote? | |
A: | The Warrior board of directors unanimously recommends that Warrior stockholders vote “FOR” the proposal to adopt the merger agreement. The Warrior board of directors has determined that the merger agreement and the merger are advisable and in the best interests of Warrior and its stockholders. Accordingly, the Warrior board of directors has approved the merger agreement and the merger. For a more complete description of the recommendation of the Warrior board of directors, see “The Merger — Warrior’s Reasons for the Merger” on page 33 and “The Merger — Recommendation of the Warrior Board of Directors” on page 35 of this proxy statement/prospectus. | |
Q: | What will happen in the merger? | |
A: | Pursuant to the terms of the merger agreement, Warrior will merge with and into Merger Sub, with Merger Sub surviving and continuing as a wholly-owned subsidiary of Superior. Immediately after the completion of the merger, Merger Sub will change its name to Warrior Energy Services Corporation and continue Warrior’s business and operations. | |
Q: | What consideration will Warrior stockholders receive in the merger? | |
A: | Under the terms of the merger agreement, as of the effective time of the merger, each issued and outstanding share of Warrior common stock will be converted into the right to receive $14.50 in cash and 0.452 shares of Superior common stock. The merger consideration is not subject to adjustment. No fractional shares will be issued. In lieu of any fractional shares, the holder of any fractional share will receive cash equal to the product of such fractional share and the average closing sales price of Superior’s common stock on the New York Stock Exchange, for the 10 consecutive trading days immediately preceding the third trading day before the closing. | |
Based on the number of shares of Superior and Warrior common stock outstanding on October 31, 2006, the record date for the Warrior special meeting, Superior will issue approximately 5.3 million shares of Superior common stock in the merger. Immediately after the merger, the former Warrior stockholders will own approximately 6% of the then-outstanding shares of Superior common stock. |
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Q: | When is the merger expected to be completed? | |
A: | Superior and Warrior are working to complete the merger as quickly as practicable. Among other conditions, Warrior must first obtain the approval of its stockholders at the special meeting. Warrior and Superior expect to complete the merger promptly following the special meeting. | |
Q: | What regulatory requirements must be satisfied to complete the merger? | |
A: | The waiting period under theHart-Scott-Rodino Antitrust Improvements Act, or HSR Act, must expire or be terminated. On October 25, 2006, the parties received notice that they had been granted early termination of the waiting period. Superiorand/or Warrior may be required to obtain certain other regulatory approvals. However, Superior and Warrior do not expect such approvals to delay closing or payment of the merger consideration. | |
Q: | Is Superior’s obligation to complete the merger subject to Superior receiving financing? | |
A: | No. Although Superior has entered into a commitment letter for a $200 million credit facility to provide financing for the merger, Superior must complete the merger regardless of whether it receives financing. | |
Q: | What are the United States federal income tax consequences of the merger? | |
A: | The merger has been structured to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. Generally, Warrior stockholders will not recognize any gain or loss with respect to the stock portion of the merger consideration, while with respect to the cash portion of the merger consideration, Warrior stockholders will generally recognize gain (but not loss) in an amount equal to the lesser of | |
• the amount of cash received pursuant to the merger (excluding any cash received in lieu of fractional shares of Superior), and | ||
• the amount, if any, by which the sum of the fair market value of the Superior shares as of the effective time of the merger and the amount of cash received pursuant to the merger for the Warrior shares exceeds the U.S. holder’s adjusted tax basis in the Warrior shares. | ||
Tax matters are complicated, and the tax consequences of the merger to each Warrior stockholder will depend on the facts of each stockholder’s situation. You are urged to read carefully the discussion in the section entitled “Material U.S. Federal Income Tax Consequences” beginning on page 82 of this proxy statement/prospectus and to consult with your tax advisor for a full understanding of the tax consequences of your participation in the merger. | ||
Q: | Are there any risks related to the merger or any risks relating to owning Superior common stock? | |
A: | Yes. You should carefully review the section entitled “Risk Factors” beginning on page 14 of this proxy statement/prospectus. In addition, we encourage you to read Superior’s and Warrior’s publicly filed documents incorporated by reference into this proxy statement/prospectus. | |
Q: | Where will my shares be listed after the merger? | |
A: | The shares of Superior common stock issued in the merger will be listed on the New York Stock Exchange, or the NYSE, and will trade under Superior’s ticker symbol “SPN.” | |
Q: | Who will serve on the board of directors of Superior after the merger? | |
A: | The current board of directors of Superior will continue to serve as the board of directors of Superior after the merger. No current member of the board of directors of Warrior will serve on the board of directors of Superior after the merger. | |
Q: | Who will be the executive officers of Superior after the merger? | |
A: | The current executive officers of Superior will continue to serve as executive officers of Superior after the merger. No current executive officer of Warrior will be offered a position as an executive officer of |
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Superior after the merger; however, certain of these individuals have agreed to accept employment with Superior other than as executive officers. | ||
Q: | Are Warrior stockholders entitled to appraisal or dissenters’ rights? | |
A: | Yes. Under Delaware law, you have the right to dissent from the merger and, in lieu of receiving the merger consideration, obtain payment in cash of the fair market value of your shares of Warrior common stock as determined by the Delaware Chancery Court. To exercise appraisal rights, you must strictly follow the procedures prescribed by Section 262 of the DGCL. See “Appraisal and Dissenters’ Rights” beginning on page 59 of this proxy statement/prospectus. In addition, the full text of the applicable provisions of Delaware law is included asAnnex C to this proxy statement/prospectus. | |
Q: | What do Warrior stockholders need to do now in order to vote on the proposals being considered at the Warrior special meeting? | |
A: | After carefully reading and considering the information in this document, stockholders of Warrior may vote their shares of common stock by attending the special meeting and voting their shares in person, or by completing the enclosed proxy card, signing and dating it and mailing it in the enclosed postage-paid envelope to Warrior in a timely manner. If you hold your shares in an account with a broker or bank, you must instruct the broker or bank on how to vote your shares. If you vote by proxy, your proxy will be voted in accordance with the instructions you indicate on the proxy card, unless you revoke your proxy prior to the vote. The proxy also grants authority to the persons designated in the proxy to vote in accordance with their own judgment if an unscheduled matter is properly brought before the meeting. | |
Warrior stockholders who hold their shares in “street name,” meaning in the name of a bank, broker or other record holder, must either direct the record holder of their shares how to vote their shares or obtain a proxy from the record holder to vote at the special meeting. Banks, brokers or other record holders holding shares of Warrior common stock as nominees will not have discretionary authority to vote those shares in the absence of instructions from the beneficial owners of those shares, so the failure to provide voting instructions to your broker will also have the same effect as a vote against the merger. | ||
Alternatively, a Warrior stockholder may attend the Warrior special meeting and vote in person. For detailed information please see “The Special Meeting of Warrior Stockholders” on page 27. | ||
Q: | How many votes does a Warrior stockholder have? | |
A: | Each share of Warrior common stock that you own as of the record date entitles you to one vote. As of the close of business on October 31, 2006, there were 11,237,944 outstanding shares of Warrior common stock. As of that date, 86,275 of the outstanding shares entitled to vote at the special meeting of Warrior common stock were held by directors and executive officers of Warrior and their respective affiliates. | |
Q: | What constitutes a quorum at the Warrior special meeting? | |
A: | The presence of the holders of a majority of the shares entitled to vote at the Warrior special meeting constitutes a quorum. Presence may be in person or by proxy. You will be considered part of the quorum if you return a signed and dated proxy card, or if you are present in person at the special meeting. | |
Abstentions and shares voted by a bank or broker holding shares for a beneficial owner are counted as present and entitled to vote for purposes of determining a quorum. Abstentions and shares held by brokers who are not directed how to vote will have the effect of voting against the proposal to adopt the merger agreement. | ||
Q: | What if I plan to attend the Warrior special meeting? | |
A: | We recommend that you send in your proxy anyway. You may still attend the meeting and vote in person. | |
Q: | Should Warrior stockholders send in their Warrior stock certificates now? | |
A: | No. You should not send in your Warrior stock certificates now. Following the merger, a letter of transmittal will be sent to Warrior stockholders informing them of where to deliver their Warrior stock |
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certificates in order to receive shares of Superior common stock, the cash consideration and any cash in lieu of a fractional share of Superior common stock. You should not send in your Warrior stock certificates prior to receiving this letter of transmittal. | ||
Q: | What will happen if Warrior stockholders abstain from voting or fail to vote? | |
A: | Because the affirmative vote required to adopt the merger agreement is based upon the total number of outstanding shares of Warrior common stock, the failure to submit a proxy card or a voting instruction card or to vote in person, or the abstention from voting by a stockholder, will have the same effect as a vote against adoption of the merger agreement. | |
Q: | Can Warrior stockholders change their vote after delivering their proxy? | |
A: | Yes. A proxy solicited by the Warrior board of directors may be revoked at any time before it is voted at the special meeting by: | |
• giving a written notice to the Corporate Secretary of Warrior at the following address: |
Warrior Energy Services Corporation 2 Northpoint Drive, Suite 900 Houston, Texas 77060 Attention: Ron Whitter, Secretary |
• submission of a proxy bearing a later date filed with the Secretary of Warrior at or before the meeting by mail (in accordance with the instructions on the proxy card or voting instruction card); | ||
• attending the special meeting and voting in person at the meeting; or | ||
• if you have instructed a broker or bank to vote your shares, by following the directions received from your broker or bank to change those instructions. | ||
Q: | What should Warrior stockholders do if they receive more than one set of voting materials for the special meeting? | |
A: | You may receive more than one set of voting materials for the special meeting, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive. | |
Q: | Where can Warrior stockholders find more information about the special meeting, the merger agreement, the merger, Warrior or Superior? | |
A: | You can find more information about Warrior or Superior in each of the companies’ respective filings with the Securities and Exchange Commission, and with respect to Superior, the New York Stock Exchange, and with respect to Warrior, the Nasdaq Global Market. If you have any questions about the special meeting, the merger agreement, the merger or how to submit your proxy, or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card or voting instructions, you should contact Warrior at the address or phone number below. If your broker holds your shares, you may also call your broker for additional information. | |
If you have questions, you may also contact Warrior’s proxy solicitor, Georgeson, Inc., toll-free at866-695-6076. |
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1105 Peters Road
Harvey, Louisiana 70058
(504) 362-4321
100 Rosecrest Lane
Columbus, Mississippi 39701
(662) 329-1047
1105 Peters Road
Harvey, Louisiana 70058
(504) 362-4321
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• | the adoption of the merger agreement by holders of at least a majority of the outstanding shares of Warrior common stock; | |
• | the receipt of required regulatory approvals, including expiration or termination of any waiting periods, under the HSR Act; | |
• | the absence of any legal restraints or prohibitions preventing the completion of the merger; | |
• | the shares of Superior common stock issuable in the merger shall have been approved for listing on the NYSE; | |
• | the registration statement of which this proxy statement/prospectus is a part shall have been declared effective, no stop order suspending the effectiveness of the registration statement shall have been issued and no proceedings to suspend such effectiveness shall have been instituted or threatened by the SEC; |
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• | the representations and warranties of each party contained in the merger agreement that are qualified by materiality or material adverse effect shall be true and correct as of the effective time, and those representations and warranties that are not so qualified shall be true and correct in all material respects; | |
• | the absence of any material adverse change (as defined in the merger agreement) with respect to either Superior or Warrior; | |
• | the absence of Warrior stockholders exercising their appraisal and dissenters rights with respect to greater than 10% of the outstanding shares of Warrior common stock; | |
• | each party’s performance in all material respects of its obligations under the merger agreement; and | |
• | receipt by Superior and Warrior of an opinion of Jones, Walker, Waechter, Poitevent, Carrère & Denègre, L.L.P. to the effect that if the merger is consummated in accordance with the terms of the merger agreement, the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. |
• | by mutual written consent of Superior and Warrior, or by mutual action of their boards of directors; | |
• | by either Superior or Warrior, if: |
• | adoption of the merger agreement by the Warrior stockholders is not obtained upon a vote duly held; |
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• | the parties fail to consummate the merger on or before March 1, 2007, unless the failure to consummate the merger is the result of a material breach of the merger agreement by the party seeking the termination; | |
• | any governmental entity has issued a final and nonappealable order, decree or ruling or has taken any other final and nonappealable action that restrains, enjoins or prohibits the merger; or | |
• | either the chief executive officer or the chief financial officer of Warrior or Superior, respectively, has failed to provide the necessary certifications required under the Sarbanes-Oxley Act of 2002. |
• | by Warrior, if: |
• | prior to approval by Warrior’s stockholders of the merger agreement, the Warrior board of directors: |
• | receives an acquisition proposal that, in the exercise of its fiduciary obligations, it determines to be a superior proposal (as defined in the merger agreement); | |
• | notifies Superior that it has received a superior proposal and the material terms and conditions of the superior proposal and the identity of the party making the superior proposal; | |
• | within three days of that notice, Superior does not agree to amend the terms of the merger agreement in a manner no less favorable than the terms of the superior proposal; and | |
• | Warrior has paid to Superior a termination fee of $11.5 million; |
• | Superior or Merger Sub breaches any of their representations or warranties or fails to perform in any material respect any of their covenants, agreements or obligations under the merger agreement and, in either case, the breach or failure would result in a condition to closing not being satisfied and Superior and Merger Sub cannot or has not cured the breach or failure in all material respects within 30 days following receipt of written notice of such breach; |
• | by Superior, if: |
• | Warrior breaches any of its representations or warranties or fails to perform in any material respect any of its covenants, agreements or obligations under the merger agreement and, in either case, the breach or failure would result in a condition to closing not being satisfied and Warrior cannot or has not cured the breach or failure in all material respects within 30 days following receipt of written notice of such breach; | |
• | the Warrior board of directors withdraws or modifies its recommendation or approval or adoption of the merger or has publicly announced its intention to do so; | |
• | the Warrior board of directors recommends to the Warrior stockholders or publicly announces its intention to recommend an agreement with respect to another acquisition proposal; | |
• | a tender or exchange offer for at least 20% of the voting power of Warrior’s common stock is commenced and Warrior’s board of directors does not recommend to the Warrior stockholders rejection of the tender or exchange offer; or | |
• | Warrior has materially breached any of its obligations under the non-solicitation provision of the merger agreement. |
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Six Months | ||||||||||||||||||||
Fiscal Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenues | $ | 500,625 | $ | 564,339 | $ | 735,334 | $ | 363,247 | $ | 484,228 | ||||||||||
Income from operations | 67,343 | 76,289 | 125,603 | 77,919 | 130,399 | |||||||||||||||
Net Income | $ | 30,514 | $ | 35,852 | $ | 67,859 | $ | 42,263 | $ | 70,895 | ||||||||||
Basic earnings per share | $ | 0.41 | $ | 0.48 | $ | 0.87 | $ | 0.55 | $ | 0.89 | ||||||||||
Diluted earnings per share | $ | 0.41 | $ | 0.47 | $ | 0.85 | $ | 0.53 | $ | 0.87 | ||||||||||
Statement of Cash Flow Data: | ||||||||||||||||||||
Cash flows from operating activities | $ | 100,240 | $ | 91,331 | $ | 158,379 | $ | 79,658 | $ | 122,685 | ||||||||||
Cash flows used in investing activities | (56,160 | ) | (109,162 | ) | (96,935 | ) | (47,280 | ) | (153,011 | ) | ||||||||||
Cash flows from (used in) financing activities | (27,766 | ) | 13,325 | (21,588 | ) | 522 | 91,252 | |||||||||||||
Cash flows from investing activities data: | ||||||||||||||||||||
Acquisitions of businesses and oil and gas properties, net of cash acquired | $ | (14,298 | ) | $ | (35,037 | ) | $ | (2,749 | ) | $ | (5,273 | ) | $ | (56,453 | ) | |||||
Cash contributed to equity-method investment | — | — | — | — | (30,441 | ) | ||||||||||||||
Payments for capital expenditures | (50,175 | ) | (74,125 | ) | (125,166 | ) | (60,112 | ) | (82,048 | ) | ||||||||||
Balance Sheet Data(as of end of period): | ||||||||||||||||||||
Cash and cash equivalents | $ | 19,794 | $ | 15,281 | $ | 54,457 | $ | 47,877 | $ | 115,846 | ||||||||||
Property, plant and equipment — net | 427,360 | 515,151 | 534,962 | 510,756 | 608,548 | |||||||||||||||
Total assets | 832,863 | 1,003,913 | 1,097,250 | 1,047,212 | 1,316,483 | |||||||||||||||
Long-term debt, including current maturities | 269,726 | 256,716 | 217,406 | 250,811 | 312,504 | |||||||||||||||
Total stockholder’s equity | 368,129 | 433,879 | 524,374 | 476,514 | 606,198 |
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Six Months Ended | ||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenues | $ | 45,757 | $ | 53,687 | $ | 73,667 | $ | 34,157 | $ | 59,814 | ||||||||||
Income from continuing operations | 1,386 | 4,630 | 15,344 | 6,561 | 14,584 | |||||||||||||||
Depreciation and amortization | 4,653 | 5,179 | 5,208 | 2,563 | 5,469 | |||||||||||||||
Net income (loss) per share — basic | (4.43 | ) | (1.41 | ) | 5.75 | 3.49 | 1.30 | |||||||||||||
Net income (loss) per share — diluted | (4.43 | ) | (1.41 | ) | 4.41 | 3.49 | 0.98 | |||||||||||||
Statement of Cash Flow Data: | ||||||||||||||||||||
Cash provided by operating activities | $ | 10,593 | $ | 3,562 | $ | 17,483 | $ | 6,385 | $ | 9,522 | ||||||||||
Cash provided by (used in) investing activities | (3,367 | ) | 4,210 | (61,517 | ) | (5,467 | ) | (25,132 | ) | |||||||||||
Cash provided by (used in) financing activities | (4,955 | ) | (9,785 | ) | 42,087 | (1,692 | ) | 17,510 | ||||||||||||
Balance Sheet Data (as of end of the period): | ||||||||||||||||||||
Current assets | $ | 16,035 | $ | 15,665 | $ | 23,106 | $ | 18,707 | $ | 36,115 | ||||||||||
Total assets | 41,401 | 30,109 | 101,634 | 35,008 | 132,193 | |||||||||||||||
Current liabilities | 64,439 | 8,789 | 16,944 | 8,317 | 30,137 | |||||||||||||||
Total liabilities | 64,905 | 55,318 | 117,205 | 55,856 | 65,590 | |||||||||||||||
Stockholders’ equity (accumulated deficit) | (23,504 | ) | (23,209 | ) | (15,571 | ) | (20,849 | ) | 62,603 |
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Six Months | ||||||||
Ended | Year Ended | |||||||
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands, except per share data) | ||||||||
Statement of Operations data: | ||||||||
Total revenues | $ | 544,042 | $ | 837,654 | ||||
Net income | 89,562 | 101,633 | ||||||
Earnings per commons share: | ||||||||
Basic | $ | 1.05 | $ | 1.22 | ||||
Diluted | $ | 1.04 | $ | 1.20 |
As of | ||||
June 30, 2006 | ||||
Balance Sheet data: | ||||
Total assets | $ | 1,689,315 | ||
Long-term debt (including current maturities of long-term debt) | 512,504 | |||
Shareholders’ equity | 739,975 |
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Six Months Ended | Year Ended | |||||||
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Superior historical | ||||||||
Net income per share — basic | $ | 0.89 | $ | 0.87 | ||||
Net income per share — diluted | $ | 0.87 | $ | 0.85 | ||||
Book value at end of period — diluted | $ | 7.47 | $ | 6.58 | ||||
Superior pro forma consolidated | ||||||||
Net income per share — basic | $ | 1.05 | $ | 1.22 | ||||
Net income per share — diluted | $ | 1.04 | $ | 1.20 | ||||
Book value at end of period — diluted | $ | 8.56 | $ | 7.74 | ||||
Warrior historical | ||||||||
Net income per share — basic | $ | 1.30 | $ | 5.75 | ||||
Net income per share — diluted | $ | 0.98 | $ | 4.41 | ||||
Book value at end of period — diluted | $ | 7.66 | $ | (5.89 | ) | |||
Pro forma consolidated Warrior equivalent(1) | ||||||||
Net income per share — basic | $ | 0.48 | $ | 0.55 | ||||
Net income per share — diluted | $ | 0.47 | $ | 0.54 | ||||
Book value at end of period — diluted | $ | 3.87 | $ | 3.50 |
(1) | Does not reflect the $14.50 cash component of the merger consideration. |
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2004 | ||||||||
High | Low | |||||||
First quarter | $ | 10.95 | $ | 8.98 | ||||
Second quarter | $ | 11.30 | $ | 8.65 | ||||
Third quarter | $ | 12.93 | $ | 9.98 | ||||
Fourth quarter | $ | 15.73 | $ | 11.95 |
2005 | ||||||||
High | Low | |||||||
First quarter | $ | 19.75 | $ | 14.58 | ||||
Second quarter | $ | 18.46 | $ | 13.71 | ||||
Third quarter | $ | 24.10 | $ | 17.64 | ||||
Fourth quarter | $ | 23.98 | $ | 17.33 |
2006 | ||||||||
High | Low | |||||||
First quarter | $ | 27.61 | $ | 21.30 | ||||
Second quarter | $ | 35.87 | $ | 26.21 | ||||
Third quarter | $ | 35.75 | $ | 21.44 |
2004 | ||||||||
High | Low | |||||||
First quarter | $ | 4.10 | $ | 2.50 | ||||
Second quarter | $ | 4.00 | $ | 0.50 | ||||
Third quarter | $ | 2.50 | $ | 1.00 | ||||
Fourth quarter | $ | 2.40 | $ | 1.00 |
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2005 | ||||||||
High | Low | |||||||
First quarter | $ | 2.70 | $ | 1.50 | ||||
Second quarter | $ | 6.10 | $ | 1.20 | ||||
Third quarter | $ | 9.00 | $ | 4.50 | ||||
Fourth quarter | $ | 12.00 | $ | 6.70 |
2006 | ||||||||
High | Low | |||||||
First quarter | $ | 21.00 | $ | 10.35 | ||||
Second quarter | $ | 32.20 | $ | 20.60 | ||||
Third quarter | $ | 25.89 | $ | 13.90 |
Superior | Warrior | |||||||
Common Stock | Common Stock | |||||||
September 22, 2006 | $ | 26.18 | $ | 14.34 | ||||
November 2, 2006 | $ | 31.20 | $ | 28.31 |
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• | the acceleration of vesting, prior to the effective time of the merger, of Warrior stock options and restricted stock units for directors and officers; |
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• | the payment of a $500,000 incentive bonus to Mr. Jenkins upon completion of the merger; | |
• | the new employment agreement between Mr. Jenkins and Superior to be effective upon completion of the merger; | |
• | the payment to Mr. McNally of a change of control payment upon the termination of his employment agreement after completion of the merger, which will be equal to $1.5 million if the merger closes on or before December 31, 2006 or three times his total salary and bonus paid over the preceding 12 months if the merger closes after December 31, 2006; | |
• | indemnification of directors of Warrior against certain liabilities; and | |
• | liability insurance for directors and officers of Warrior. |
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• | Warrior may be required to pay Superior $11.5 million, if the merger agreement is terminated under certain circumstances; | |
• | The current market price of Warrior common stock may reflect a market assumption that the merger will occur, and a failure to complete the merger could result in a negative perception by the stock market of Warrior generally and a resulting decline in the market price of Warrior common stock; | |
• | Certain costs relating to the merger (such as legal, accounting and financial advisory fees) are payable by Warrior whether or not the merger is completed; | |
• | There may be substantial disruption to the business of Warrior and a distraction of its management and employees fromday-to-day operations, because matters related to the merger may require substantial commitments of time and resources, which could otherwise have been devoted to other opportunities that could have been beneficial to Warrior; | |
• | Warrior’s business could be adversely affected if it is unable to retain key employees or attract qualified replacements; and | |
• | Warrior would continue to face the risks that it currently faces as an independent company, as further described in the documents that Warrior has filed with the SEC that are incorporated by reference into this proxy statement/prospectus. |
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• | limiting its ability to obtain additional financing on satisfactory terms to fund its working capital requirements, capital expenditures, acquisitions, investments, debt service requirements and other general corporate requirements; | |
• | increasing its vulnerability to general economic downturns, competition and industry conditions, which could place it at a competitive disadvantage compared to its competitors that are less leveraged; | |
• | increasing its exposure to rising interest rates because a portion of its borrowings will be at variable interest rates; | |
• | reducing the availability of its cash flow to fund its working capital requirements, capital expenditures, acquisitions, investments and other general corporate requirements because it will be required to use a substantial portion of its cash flow to service debt obligations; and | |
• | limiting its flexibility in planning for, or reacting to, changes in its business and the industry in which it operates. |
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• | the performance of obligations under the merger agreement; | |
• | changes in applicable law, rule or regulation or the application thereof; | |
• | changes affecting the economy or the oilfield services industry generally; | |
• | changes in the market price of oil or natural gas or the number of active drilling rigs operating; | |
• | changes in the market price of Superior’s or Warrior’s common stock; or | |
• | any changes or effects arising out of the public announcement or pending nature of the merger. |
• | oil and gas prices and industry perceptions of future price levels; | |
• | the cost of exploring for, producing and delivering oil and gas; | |
• | the ability of oil and gas companies to generate capital; | |
• | the sale and expiration dates of offshore leases; |
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• | the discovery rate of new oil and gas reserves; and | |
• | local and international political and economic conditions. |
• | changes in competitive prices; | |
• | fluctuations in the level of activity in major markets; | |
• | an increased number of liftboats in the Gulf of Mexico; | |
• | general economic conditions; and | |
• | governmental regulation. |
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• | fires; | |
• | explosions, blowouts, and cratering; | |
• | hurricanes and other extreme weather conditions; | |
• | mechanical problems, including pipe failure; | |
• | abnormally pressured formations; and | |
• | environmental accidents, including oil spills, gas leaks or ruptures, uncontrollable flows of oil, gas, brine or well fluids, or other discharges of toxic gases or other pollutants. |
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• | the presence of unanticipated pressure or irregularities in formations; | |
• | equipment failures or accidents; | |
• | adverse weather conditions; | |
• | compliance with governmental requirements; and | |
• | shortages or delays in obtaining drilling rigs or in the delivery of equipment and services. |
• | worldwide or regional demand for energy, which is affected by economic conditions; |
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• | the domestic and foreign supply of oil and gas; | |
• | weather conditions; | |
• | domestic and foreign governmental regulations; | |
• | political conditions in oil and gas producing regions; | |
• | the ability of members of the Organization of Petroleum Exporting Countries to agree upon and maintain oil prices and production levels; and | |
• | the price and availability of alternative fuel sources. |
• | there is a change in the expected differential between the underlying price in the hedging agreement and actual prices received; | |
• | Superior’s productionand/or sales of natural gas are less than expected; | |
• | payments owed under derivative hedging contracts typically come due prior to receipt of the hedged month’s production revenue; and | |
• | the other party to the hedging contract defaults on its contract obligations. |
• | the level of domestic production and imports of oil and gas; | |
• | the proximity of gas production to gas pipelines; | |
• | the availability of pipeline capacity; | |
• | the demand for oil and natural gas by utilities and other end users; | |
• | the availability of alternate fuel sources; | |
• | state and federal regulation of oil and gas marketing; and |
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• | federal regulation of gas sold or transported in interstate commerce. |
• | lack of sufficient executive-level personnel; | |
• | increased administrative burden; and | |
• | increased logistical problems common to large, expansive operations. |
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• | political, social and economic instability; | |
• | potential seizure or nationalization of assets; |
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• | increased operating costs; | |
• | modification or renegotiating of contracts; | |
• | import-export quotas; | |
• | currency fluctuations; and | |
• | other forms of government regulation which are beyond Superior’s control. |
• | the awarding of contracts to local contractors; | |
• | the employment of local citizens; and | |
• | the establishment of foreign subsidiaries with significant ownership positions reserved by the foreign government for local citizens. |
• | the factors described under “Risk Factors” beginning on page 14 of this proxy statement/prospectus; |
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• | the factors that generally affect Warrior’s and Superior’s businesses as further outlined in their respective “Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference herein, and elsewhere in this proxy statement/prospectus, including the performance of contracts by suppliers, customers and partners; employee management issues; and complexities of global political and economic developments; and | |
• | the fact that, following the merger, the actual results of the combined company could differ materially from the expectations set forth in this proxy statement/prospectus and the documents incorporated by reference. |
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• | giving a written notice to the Corporate Secretary of Warrior; | |
• | submission of a proxy bearing a later date filed with the Secretary of Warrior at or before the meeting by mail; | |
• | attending the special meeting and voting in person at the meeting; or | |
• | if you have instructed a broker or bank to vote your shares, by following the directions received from your broker or bank to change those instructions. |
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• | the board’s familiarity with, and understanding of, Warrior’s business, financial condition, results of operations, current business strategy and earnings and prospects and of Superior’s business, financial condition, results of operations, business strategy and earnings (including the report of Warrior’s management on the results of its due diligence review of Superior); | |
• | the possible alternatives to the merger (including the possibility of continuing to operate as an independent entity) and the perceived risks thereof, the range of possible benefits to Warrior’s stockholders of such alternatives and the timing and likelihood of accomplishing the goal of any of such alternatives, and the board’s assessment that the merger with Superior presents a superior opportunity to such alternatives; | |
• | the board’s understanding of the current and prospective markets in which Warrior operates, the competitive landscape for energy service industry participants generally and the likely effect of these factors on Warrior in light of, and in the absence of, the merger; | |
• | the board’s understanding, and management’s review, of Warrior’s current and prospective business, and the board’s and management’s belief that: |
• | the trading value for shares of Warrior common stock was not likely to exceed the value of the merger consideration in the foreseeable future if Warrior remained independent; | |
• | maximizing Warrior’s business opportunities would require significant capital outlays that would be borne significantly more readily if the company were part of a larger and more diversified organization; and | |
• | the ability of Warrior to compete effectively during an industry downturn would be enhanced if the company were part of a larger and more diversified organization; |
• | the board’s understanding, and management’s review, of overall market conditions, including then-current industry conditions and Warrior’s trading price, and the board’s determination that, in light of these factors, the timing of a potential transaction was favorable to Warrior; | |
• | the fact that the $26.33 per share value of the consideration to Warrior’s stockholders in the merger (based on the closing price of Superior shares on the NYSE composite transaction reporting system on the last trading day prior to the date of the public announcement of the proposed merger) represents; |
• | a premium of $11.99, or approximately 84%, over the closing sale price of $14.34 for Warrior’s common stock on that day; and | |
• | a premium of $7.91, or approximately 43%, over the average closing sale price of $18.42 for Warrior’s common stock over the 30 trading day period preceding the date of public announcement of the proposed merger; |
• | the financial presentation of Simmons to the Warrior board of directors on September 22, 2006 and the opinion of Simmons rendered on September 22, 2006 to the Warrior board of directors to the effect that, based upon and subject to the matters set forth in its written opinion, as of September 22, 2006, the consideration to be received by Warrior stockholders as set forth in the merger agreement was fair |
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to such stockholders from a financial point of view, as more fully described below under the caption “The Merger — Opinion of Warrior’s Financial Advisor”; |
• | the fact that, because a portion of the merger consideration is payable in the form of Superior shares, Warrior stockholders will have the opportunity to participate in the performance of the combined post-merger company; in that regard, the Warrior board understood that the volatility of prices for energy service company stocks would cause the value of the merger consideration to fluctuate, perhaps significantly, but was of the view that on a long-term basis it would be desirable for stockholders to have an opportunity to retain some continuing investment in the post-merger combined company; | |
• | The view of the board of directors that the merger will provide Warrior stockholders the opportunity to benefit from greater liquidity of their investment due to the greater trading volume of the Superior common stock in comparison to the Warrior common stock; | |
• | the terms of the merger agreement, including the blend of cash and stock consideration, as reviewed by the Warrior board of directors with Warrior’s legal advisors, including: |
• | the conditions to closing of the merger, including the absence of a financing condition, and the fact that approval by Superior’s stockholders was not required; and | |
• | Warrior’s ability to furnish information to and conduct negotiations with a third party, terminate the merger agreement, and enter into an agreement relating to a superior proposal under certain circumstances, as more fully described under “The Merger Agreement — No Solicitation”; |
• | management’s assessment that Superior has the financial capability to consummate the merger; | |
• | the view of the Warrior board of directors, based upon the advice of management after consultation with its legal counsel, that the regulatory approvals necessary to consummate the merger could be obtained; | |
• | the expectation that the merger would qualify as a reorganization for federal income tax purposes and the receipt by Warrior stockholders of shares of Superior common stock would not be taxable for U.S. federal income tax purposes; | |
• | the fact that gains from the cash portion of the merger consideration would be taxable to Warrior stockholders for U.S. federal income tax purposes; and | |
• | the fact that Warrior will no longer exist as an independent company and its stockholders will no longer directly participate in the growth of Warrior or the pursuit of its stand-alone business plan. |
• | the risks of the type and nature described under “Risk Factors”; | |
• | the possibility that the DOJ, the FTC or other regulatory authorities might seek to enjoin or otherwise prevent the merger, which possibility the board considered to be low; | |
• | with respect to the equity component of the consideration, the volatility of trading prices of energy service companies, and the fact that the fixed exchange ratio, by its nature, would not adjust upwards to compensate for declines, or downwards to compensate for increases, in Superior’s stock price prior to completion of the merger; and that the terms of the merger agreement did not include “collar” provisions or stock-price-based termination rights that would be triggered by a decrease in the value of the equity component of the merger consideration attributable to the Superior stock price; | |
• | the interests of certain of Warrior’s executive officers and directors described under “The Merger — Interests of Warrior’s Directors and Executive Officers in the Merger”; | |
• | the restrictions on the conduct of Warrior’s business prior to the consummation of the merger, requiring Warrior to conduct its business in the ordinary course consistent with past practice subject to specific |
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limitations, which may delay or prevent Warrior from undertaking business opportunities that may arise pending completion of the merger; |
• | the risks and contingencies related to the announcement and pendency of the merger, the possibility that the merger will not be consummated and the potential negative effect of public announcement of the merger on Warrior’s sales, operating results and stock price and Warrior’s ability to retain key management and personnel; | |
• | the requirement that Warrior submit the merger agreement to its stockholders even if the Warrior board withdraws its recommendation, which could delay or prevent Warrior from pursuing a superior proposal if one were to become available; | |
• | the requirement that, while Warrior is not prohibited from responding (at any time prior to Warrior’s stockholders’ adoption of the merger agreement and in the manner provided in the merger agreement) to certain acquisition proposals that are reasonably likely to lend to a superior proposal, Superior may terminate the merger agreement in the circumstances described under “The Merger Agreement — Termination”; and | |
• | the risk, which is common in transactions of this type, that the terms of the merger agreement, including provisions relating to Warrior’s payment of a termination fee under specified circumstances, might discourage other parties that could otherwise have an interest in a business combination with, or an acquisition of, Warrior from proposing such a transaction (see “The Merger Agreement — Termination”). |
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• | the Agreement and Plan of Merger dated as of September 22, 2006; | |
• | the financial statements and other information concerning Warrior, including Warrior’s Annual Reports onForm 10-K for each of the years in the three-year period ended December 31, 2005, the Quarterly Reports onForm 10-Q for the quarters ended March 31, 2006 and June 30, 2006, the Current Reports onForm 8-K filed on February 13, 2006, February 14, 2006, February 22, 2006, March 31, 2006, April 3, 2006, April 19, 2006, April 24, 2006, April 27, 2006, May 9, 2006, May 12, 2006, May 26, 2006, August 1, 2006, August 3, 2006, August 10, 2006, August 16, 2006, and August 17, 2006, and theForm S-1 filed on February 13, 2006 and all subsequent amendments thereto; | |
• | certain other internal information, primarily financial in nature, concerning the business and operations of Warrior furnished to Simmons by Warrior, including financial forecasts; | |
• | the financial statements and other information concerning Superior, including Superior’s Annual Reports onForm 10-K for each of the years in the three-year period ended December 31, 2005, the Quarterly Reports onForm 10-Q for the quarters ended March 31, 2006 and June 30, 2006, the Current Reports onForm 8-K filed on March 22, 2006, April 27, 2006, May 5, 2006, May 9, 2006, May 17, 2006, May 23, 2006, May 25, 2006, June 6, 2006, June 26, 2006, July 27, 2006, July 28, 2006, and August 11, 2006, the Proxy Statement on Schedule 14A filed on April 20, 2006, theForm S-4 filed on August 16, 2006, and theForm S-8 filed on August 22, 2006; | |
• | certain other internal information, primarily financial in nature, concerning the business and operations of Superior furnished to Simmons by Superior, including financial forecasts; | |
• | certain publicly available information concerning the trading of, and the trading market for, Superior common stock; | |
• | certain publicly available information with respect to certain other companies that Simmons believes to be comparable to Warrior or Superior and the trading markets for certain of such other companies’ securities; | |
• | certain publicly available information concerning the estimates of the future operating and financial performance of Warrior, Superior and the comparable companies prepared by industry experts unaffiliated with either Warrior or Superior; and | |
• | certain publicly available information concerning the nature and terms of certain other transactions considered relevant to the inquiry. |
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• | Comparable Company Analysis for Energy Service Companies. Simmons reviewed publicly available information with respect to certain publicly traded energy service companies. Simmons examined the public valuation multiples and projected growth rates for each company and Superior. Although none of the selected companies is directly comparable to Superior’s energy services operations, Simmons selected a group of companies from the universe of possible companies based on its views as to the comparability of the financial and operating characteristics of energy service companies to Superior’s energy services operations. With respect to each such analysis, Simmons made such comparisons with the following companies: Allis Chalmers Energy Inc., Basic Energy Services Inc., BJ Services Company, Complete Production Services, Inc., Core Laboratories N.V., Key Energy Services Inc., Newpark Resources, Inc., Oil States International, Inc., RPC Inc., Superior Well Services, Inc., Tetra Technologies, Inc. and W-H Energy Services Inc. |
• | Comparable Company and Transaction Analysis for Gulf of Mexico Oil and Gas Exploration and Production (“E&P”) Companies. Simmons reviewed publicly available information with respect to certain publicly traded Gulf of Mexico focused E&P companies. Although none of the selected companies is directly comparable to Superior’s oil and gas production segment, Simmons selected a group of companies from the universe of possible companies based on its views as to the comparability of the financial and operating characteristics of E&P companies to Superior’s oil and gas production segment. With respect to each such analysis, Simmons made such comparisons with the following companies: Bois d’Arc, Inc., Energy Partners, Ltd., Petroquest Energy Inc., Stone Energy Corporation and W&T Offshore, Inc. |
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• | Premium Paid Analysis. Simmons analyzed the premiums implied by the merger consideration and compared that to the premiums paid in acquisitions of U.S. public companies since January 1, 2004 with transaction values of $300 million to $500 million and also in public energy service industry transactions since March of 2000. Simmons determined that the median one-day, one-week and four-week premiums paid in the U.S. public market transactions to be 22.5%, 22.0% and 27.3%, respectively. Simmons also noted that the premiums to be paid by Superior in the merger were 60.4%, 51.7% and 39.6% at one day, one week and four weeks, respectively (based on a value of $26.43 per share implied by the closing sales price per share of Superior stock on September 19, 2006). Simmons determined the overall median premiums in the energy service transactions to be 18.3% and 26.9% based on the closing sale price one-day and30-days prior to public announcement of the transaction, respectively. Simmons also noted that the premiums to be paid by Superior in the merger were 60.4% and 34.5% at one-day and30-days, respectively (based on a value of $26.43 per share implied by the closing sales price per share of the Superior common stock on September 19, 2006). | |
• | Historical Trading Analysis. Simmons analyzed the relationship between Superior’s and Warrior’s share prices over an extended period of time. Simmons calculated the ratio of the market price of Warrior’s share price to the market price of Superior’s share price over various periods of time and compared those historical ratios to the implied merger share price ratio of 1.001x as if the transaction were all stock (based on a value of $26.43 per share implied by the closing sales price per share of the Superior common stock on September 19, 2006). |
Implied Historical | ||||
Period | Exchange Ratio | |||
September 19, 2006 closing price | 0.624x | |||
30-day trading average ending September 19, 2006 | 0.619x | |||
60-day trading average ending September 19, 2006 | 0.624x | |||
120-day trading average ending September 19, 2006 | 0.687x |
• | Comparable Company Analysis. Simmons reviewed publicly available information with respect to certain well service companies. Simmons examined the public valuation multiples and projected growth rates for each company and Warrior. Although none of the selected companies is directly comparable to Warrior, Simmons selected a group of companies from the universe of possible companies based on its views as to the comparability of the financial and operating characteristics of energy service companies to Warrior operations. With respect to each such analysis, Simmons made such comparisons with the following companies: Allis Chalmers Energy Inc., Basic Energy Services, Inc., BJ Services Company, Complete Production Services, Inc., Core Laboratories N.V., Key Energy Services, Inc., Newpark Resources, Inc., Oil States International, Inc., RPC, Inc., Superior Well Services, Inc., Tetra Technologies, Inc. and W-H Energy Services, Inc. Public valuation multiples and projected growth rates of Superior were also considered. |
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• | Comparable Transactions Analysis. Simmons analyzed certain information relating to selected transactions in the energy services industry since March 2004. Specifically, Simmons calculated, when available, the TTM EBITDA and current year EBITDA multiples implied by the transaction value of the selected transactions. Simmons determined the selected transactions’ range of ratios of transaction value to each of (i) TTM EBITDA and (ii) current year EBITDA ranges were 5.7x to 9.0x and 4.9x to 6.6x, respectively. Simmons also indicated the ratio of the merger’s transaction value to each of (i) TTM EBITDA and (ii) current year EBITDA were 9.4x and 7.6x, respectively (based on a value of $26.43 per share implied by the closing sales price per share of the Superior common stock on September 19, 2006). | |
• | Discounted Cash Flow Analysis. Simmons performed a discounted cash flow analysis of the projected cash flows of Warrior for the calendar years 2006 through 2010. Simmons assumed discount rates from 12.0% to 15.0% and calculated terminal values using a range of multiples of projected 2010 EBITDA from 5.0x to 7.0x. Simmons conducted this analysis using an EBITDA based on each of a base case, a downside case and an upside case. The discount rates reflected an estimate of the weighted average cost of capital. |
• | Contribution Analysis. Simmons reviewed certain historical and estimated future financial information, including, among other things, EBITDA, unlevered net income, unlevered cash flow, net income and cash flow for Warrior and Superior based on historical financial data for calendar year 2005 and projections provided by management for the calendar years 2006 and 2007. Based on this information, Simmons compared the relative contribution of each company to the whole and the implied equity value based on the percentage contribution of Warrior and Superior. |
Average | ||||||||||||||||||||||||
(Excluding | ||||||||||||||||||||||||
Implied Warrior | Net Income | |||||||||||||||||||||||
Stock Price per | EBITDA | Unlevered | Unlevered | and Cash | ||||||||||||||||||||
Share (All Stock) | Per Share | Net Income | Cash Flow | Net Income | Cash Flow | Flow) | ||||||||||||||||||
2005 Historical | $ | 25.51 | $ | 30.54 | $ | 24.35 | $ | 40.38 | $ | 28.72 | $ | 26.80 | ||||||||||||
2006 Projected | 19.41 | 18.56 | 19.42 | 17.42 | 18.56 | 19.13 | ||||||||||||||||||
2007 Projected | 26.88 | 22.71 | 28.12 | 20.93 | 26.01 | 25.90 |
• | Accretion/Dilution Analysis. Simmons prepared a pro forma merger model that incorporated Superior’s and Warrior’s management financial projections for the years 2006 and 2007, as well as the estimated pre-tax cost savings, estimated transaction costs and estimated synergies that could result from the merger. Simmons then compared Superior’s management and Warrior’s management forecasts of the earnings and cash flow per share for Superior, on a stand-alone basis to the earnings and cash |
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flow per share for Superior following the completion of the merger. Based on such analysis the proposed transaction would be dilutive to earnings per share and accretive to cash flow per share in 2006 and accretive to earnings per share and cash flow per share in 2007. |
• | The transaction is expected to be accretive to earnings and cash flow in 2007; | |
• | The combined company will greatly expand Superior’s onshore operations in the continental U.S. market; and | |
• | Warrior possesses an experienced management team. |
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Number of | ||||||||||||||||
Warrior Shares of | ||||||||||||||||
Common Stock Underlying | Value of | |||||||||||||||
Unexercised Options | Unexercised Options | |||||||||||||||
Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||
William L. Jenkins | 300,000 | 0 | $ | 6,344,280 | $ | 0 | ||||||||||
Robert J. McNally | 0 | 10,000 | 0 | 75,476 | ||||||||||||
Ron E. Whitter | 0 | 0 | 0 | 0 | ||||||||||||
Gerald M. Hage | 0 | 0 | 0 | 0 | ||||||||||||
Robert L. Hollier | 0 | 0 | 0 | 0 | ||||||||||||
John T. McNabb, II | 0 | 0 | 0 | 0 |
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Unvested | Value of | |||||||
Restricted | Restricted | |||||||
Stock Unit Awards | Stock Units | |||||||
William L. Jenkins | 0 | $ | 0 | |||||
Robert J. McNally | 96,682 | 2,769,707 | ||||||
Ron E. Whitter | 0 | 0 | ||||||
Gerald M. Hage | 2,000 | 57,295 | ||||||
Robert L. Hollier | 2,000 | 57,295 | ||||||
John T. McNabb, II | 2,000 | 57,295 |
Shares | ||||||||
Beneficially | Percentage | |||||||
Name | Owned(1) | of Class(1) | ||||||
William L. Jenkins | 370,825 | 3.3 | % | |||||
Robert J. McNally | 4,300 | * | ||||||
Ron E. Whitter | 0 | * | ||||||
Gerald M. Hage | 2,150 | * | ||||||
Robert L. Hollier | 7,000 | * | ||||||
John T. McNabb, II | 2,000 | * | ||||||
All executive officers and directors as a group (6 persons) | 386,275 | 3.4 | % |
* | Represents less than 1% of the outstanding Warrior common stock. | |
(1) | Shares beneficially owned include restricted stock held by the executive officers and directors of Warrior over which they have voting power but not investment power. Shares of common stock which were not outstanding but which could be acquired by a person upon exercise of an option within 60 days of October 31, 2006, including 300,000 shares underlying options held by Mr. Jenkins, are deemed outstanding for the purpose of computing the percentage of outstanding shares beneficially owned by such person. |
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Such shares, however, are not deemed to be outstanding for the purpose of computing the percentage of outstanding shares beneficially owned by any other person. |
• | an effective registration statement under the Securities Act covering the resale of those shares; | |
• | an exemption under paragraph (d) of Rule 145 under the Securities Act; or | |
• | any other applicable exemption under the Securities Act. |
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• | corporate organization, qualifications to do business and good standing; | |
• | subsidiaries and ownership of equity interests; | |
• | capital structure, including the repurchase, exercise, termination or amendment to the reasonable satisfaction of Superior of Warrior’s outstanding warrants prior to the effective time of the merger; | |
• | corporate power and authority to enter into the merger agreement and due execution, delivery and enforceability of the merger agreement; | |
• | absence of conflict with, violation of or default under the certificate of incorporation, bylaws, material agreements, licenses or permits, or applicable law as a result of execution and delivery of the merger agreement and consummation of the merger; | |
• | consents, approvals, orders and authorizations of, and registrations, declarations and filings with any governmental entity required by or with respect to Warrior in connection with the execution and delivery of the merger agreement or the consummation of the merger; | |
• | timely and accurate filings with the SEC in compliance with applicable rules and regulations and compliance with the Sarbanes-Oxley Act of 2002 and Nasdaq listing standards; | |
• | financial statements and accounts receivable; | |
• | absence of specified changes or events since June 30, 2006; | |
• | absence of undisclosed liabilities; | |
• | absence of default or violation of Warrior’s certificate of incorporation or bylaws or any applicable order, writ, injunction, decree, statute, rule or regulation; | |
• | inapplicability of requirements of anti-takeover laws; | |
• | recommendation of Warrior’s board of directors that the Warrior stockholders adopt the merger agreement and receipt of a written fairness opinion of Warrior’s financial advisor; | |
• | absence of required consents and votes other than the required vote of Warrior stockholders to adopt the merger agreement; | |
• | absence of pending or threatened material litigation or judgments or injunctions that could reasonably be expected to delay the merger; | |
• | employee benefit plans; | |
• | tax matters and “excess parachute payments,” as defined in the Internal Revenue Code; | |
• | environmental matters; | |
• | compliance with laws and permits; | |
• | material contracts and absence of breach of or default under material contracts; | |
• | customers and suppliers; | |
• | real property matters; | |
• | personal property matters; | |
• | intellectual property matters; | |
• | labor matters; | |
• | accuracy of information supplied by Warrior to be included in the registration statement and proxy statement/prospectus; |
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• | insurance matters; | |
• | related party transactions; | |
• | propriety of past payments by Warrior and its directors, officers, agents and employees; and | |
• | broker’s and finder’s fees. |
• | corporate organization, qualifications to do business and good standing; | |
• | capital structure; | |
• | corporate power and authority to enter into the merger agreement and due execution, delivery and enforceability of the merger agreement; | |
• | absence of conflict with, violation of or default under Superior’s certificate of incorporation, bylaws, material agreements, licenses or permits or applicable law as a result of execution and delivery of the merger agreement and consummation of the merger; | |
• | consents, approvals, orders and authorizations of, and registrations, declarations and filings with any governmental entity required by Superior or with respect to Superior in connection with the execution and delivery of the merger agreement or the consummation of the merger; | |
• | timely and accurate filings with the SEC in compliance with applicable rules and regulations and compliance with the Sarbanes-Oxley Act of 2002 and NYSE listing standards; | |
• | absence of material adverse change since June 30, 2006; | |
• | absence of requirement for Superior stockholder approval or adoption of the merger agreement; | |
• | accuracy of information to be included in the registration statement and proxy statement/prospectus; | |
• | broker’s and finder’s fees; | |
• | absence of pending or threatened material litigation or judgments or injunctions that could reasonably be expected to delay the merger; | |
• | funding for the cash portion of merger consideration; | |
• | certain tax matters; and | |
• | continuation of Warrior’s historic business. |
• | carry on its business in the usual, regular and ordinary course; and |
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• | use reasonable efforts to preserve intact its current business organizations, keep available the services of its current officers and employees and preserve its relationships with those persons having business dealings with Warrior. |
• | declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock; | |
• | split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities pertaining to its capital stock; | |
• | purchase, redeem or otherwise acquire any shares of capital stock or any other securities, rights, warrants or options pertaining to Warrior capital stock, except in connection with Warrior stock options or Warrior restricted stock units in effect as of the date of the merger agreement; | |
• | issue, deliver, sell, pledge, dispose or otherwise encumber any of Warrior’s capital stock (other than the issuance of shares upon the exercise of Warrior stock options or the vesting of Warrior restricted stock units) or any derivative securities of Warrior; | |
• | amend any of its charter documents; | |
• | acquire or agree to acquire any business entity or division thereof or any assets that would be material to Warrior, except in the ordinary course of business; | |
• | sell, lease, mortgage, pledge, grant a lien on or otherwise encumber or dispose of any of its properties or assets (except in the ordinary course of business or in a transaction or series of transactions involving less that $500,000 in the aggregate); | |
• | except for borrowings under Warrior’s existing line of credit, incur any indebtedness, guarantee indebtedness, or issue debt securities or make any loans, advances or capital contributions to any person other than to Warrior; | |
• | make or incur any capital expenditure other than (a) amounts set forth in Warrior’s most recent capital budget included with the merger agreement or (b) any single capital expenditure in excess of $250,000 or in the aggregate in excess of $500,000; | |
• | make any material election relating to taxes; | |
• | pay, discharge or satisfy any claims, liabilities or obligations, other than in the ordinary course of business; | |
• | waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which Warrior is a party; | |
• | adopt a plan of complete or partial liquidation or resolutions authorizing a liquidation or a dissolution, merger, consolidation, restructuring, recapitalization or reorganization; | |
• | enter into any collective bargaining agreement; | |
• | change any accounting principles used by Warrior, except as required by the SEC or Financial Accounting Standards Board; | |
• | enter into any new, or amend any existing, severance agreement or arrangement, deferred compensation arrangement or employment agreement with any officer, director or employee, except that in certain cases Warrior may hire additional employees to the extent management deems it to be in Warrior’s best interest; | |
• | adopt any new benefit plan, program or arrangement or amend any existing benefit plan (other than amendments required by law or to maintain the tax qualified status of such plans); |
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• | grant any increases in employee compensation, other than in the ordinary course of business or to avoid the loss of key personnel; | |
• | grant any stock options or stock awards; | |
• | authorize, commit or agree to take any of the foregoing actions; or | |
• | take any action that would, or that could reasonably be expected to, result in any of Warrior’s representations and warranties becoming untrue in any material respect. |
• | declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock; | |
• | amend any of its charter documents; | |
• | adopt a plan of complete or partial liquidation or dissolution or resolutions authorizing such a liquidation or dissolution; or | |
• | take any action that would, or that could reasonably be expected to, result in any of Superior’s or Merger Sub’s representations and warranties becoming untrue in any material respect. |
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• | adoption of the merger agreement by holders of at least a majority of the outstanding shares of Warrior common stock; | |
• | expiration or termination of any waiting periods under the HSR Act; | |
• | absence of any temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the merger, so long as the parties have used their reasonable efforts to prevent the entry of any such injunction or other order and appeal as promptly as possible any injunction or other order that may be entered; |
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• | the registration statement of which this proxy statement/prospectus is a part will have been declared effective under the Securities Act, no stop order suspending the effectiveness of the registration statement will have been issued by the SEC and no proceedings for that purpose will have been instituted or threatened; and | |
• | receipt by Superior and Warrior of an opinion of Jones, Walker, Waechter, Poitevent, Carrère & Denègre, L.L.P. to the effect that if the merger is consummated in accordance with the terms of the merger agreement, the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. |
• | Warrior’s performance in all material respects of its obligations under the merger agreement; | |
• | as of the effective time of the merger, the representations and warranties of Warrior that are qualified by materiality or material adverse effect will be true and correct and the representations and warranties of Warrior that are not so qualified will be true and correct in all material respects; | |
• | absence of any material adverse change with respect to Warrior; | |
• | absence of Warrior stockholders exercising their appraisal and dissenters rights with respect to greater than 10% of the outstanding shares of Warrior common stock; and | |
• | receipt from Warrior of a certified copy of resolutions duly adopted by its board of directors approving the merger agreement and consummation of the merger and directing the submission of the merger to a vote of its stockholders. |
• | Superior’s and Merger Sub’s performance in all material respects of their obligations under the merger agreement; | |
• | as of the effective time of the merger, the representations and warranties of Superior and Merger Sub that are qualified by materiality or material adverse effect will be true and correct and the representations and warranties of Superior and Merger Sub that are not so qualified will be true and correct in all material respects; | |
• | absence of any material adverse change with respect to Superior; | |
• | receipt from Superior and Merger Sub of certified copies of resolutions duly adopted by their boards of directors approving the merger agreement and consummation of the merger; and | |
• | approval for listing of the Superior shares to be issued in the merger on the New York Stock Exchange. |
• | by mutual written consent of Superior and Warrior, or by mutual action of their boards of directors; | |
• | by either Superior or Warrior, if: |
• | adoption of the merger agreement by the Warrior stockholders is not obtained upon a vote duly held; |
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• | the parties fail to consummate the merger on or before March 1, 2007, unless the failure to consummate the merger is the result of a material breach of the merger agreement by the party seeking the termination; | |
• | any governmental entity has issued a final and nonappealable order, decree or ruling or has taken any other final and nonappealable action that restrains, enjoins or prohibits the merger; or | |
• | either the chief executive officer or the chief financial officer of Warrior or Superior, respectively, has failed to provide the necessary certifications when due as required under the Sarbanes-Oxley Act of 2002; |
• | by Warrior, if: |
• | prior to approval by Warrior’s stockholders of the merger agreement, the Warrior board of directors: |
• | receives an acquisition proposal that, in the exercise of its fiduciary obligations, it determines to be a superior proposal (as defined below); | |
• | notifies Superior that it has received a superior proposal and the material terms and conditions of the superior proposal and the identity of the party making the superior proposal; | |
• | within three days of that notice, Superior does not agree to amend the terms of the merger agreement in a manner no less favorable than the terms of the superior proposal; and | |
• | Warrior has paid to Superior a termination fee of $11.5 million; |
• | Superior or Merger Sub breaches any of their representations or warranties or fails to perform in any material respect any of their covenants, agreements or obligations under the merger agreement and, in either case, the breach of failure would result in a condition to closing not being satisfied and Superior and Merger Sub cannot or has not cured the breach or failure in all material respects within 30 days following receipt of written notice of such breach; |
• | by Superior, if: |
• | Warrior breaches any of its representations or warranties or fails to perform in any material respect any of its covenants, agreements or obligations under the merger agreement and, in either case, the breach or failure would result in a condition to closing not being satisfied and Warrior cannot or has not cured the breach or failure in all material respects within 30 days following receipt of written notice of such breach; | |
• | the Warrior board of directors withdraws or modifies its recommendation or approval or adoption of the merger or has publicly announced its intention to do so; | |
• | the Warrior board of directors recommends to the Warrior stockholders or publicly announces its intention to recommend an agreement with respect to another acquisition proposal; | |
• | a tender or exchange offer for at least 20% of the voting power of Warrior’s common stock is commenced and Warrior’s board of directors does not recommend to the Warrior stockholders rejection of the tender or exchange offer; or | |
• | Warrior has materially breached any of its obligations under the non-solicitation provision of the merger agreement. |
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• | extend the time for the performance of any of the obligations or the other acts of the other parties; | |
• | waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement; or | |
• | waive compliance with any of the agreements or conditions contained in the merger agreement. |
• | solicit, initiate or encourage or otherwise intentionally facilitate the making of any acquisition proposal (as defined below); | |
• | enter into any agreement (other than permitted confidentiality and standstill agreements) with respect to any acquisition proposal; or | |
• | participate in any discussions or negotiations regarding, or furnish any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any acquisition proposal. |
• | a merger or other business combination involving Warrior; | |
• | acquiring from Warrior or any of its affiliates in any manner, directly or indirectly, 20% or more of the voting securities of Warrior or 20% or more of the assets of Warrior; or | |
• | acquiring from the stockholders of Warrior by tender offer, exchange offer or otherwise more than 20% of the outstanding Warrior shares. |
• | furnish information to a third party pursuant to a confidentiality agreement and otherwise enter into discussions and negotiations with a third party as to any acquisition proposal that the Warrior board of directors believes is reasonably likely to lead to a superior proposal (as defined below); and |
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• | make inquiries of a third party regarding the acquisition proposal that would enable the board of directors to determine if the acquisition proposal is a superior proposal. |
• | withdraw or modify, or propose publicly to do the same, the approval or recommendation of the merger agreement and merger by the Warrior board of directors; or | |
• | approve or recommend, or propose publicly to do the same, any acquisition proposal. |
• | reasonably likely to be consummated taking into account the person making such acquisition and all legal, financial, regulatory and other relevant aspects; and | |
• | more favorable to Warrior stockholders from a financial point of view than the merger and one which the board intends to recommend that the Warrior stockholders approve. |
• | the termination of the merger agreement by Warrior as permitted in the no-solicitation provision; or | |
• | the termination of the merger agreement due to Warrior’s material breach of any of its obligations under the no-solicitation provision. |
• | if a transaction is consummated, which if offered or proposed, would constitute an acquisition proposal; provided, that all references in the definition of acquisition proposal to 20% are deemed to be 50% for purposes of the termination fee; |
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• | if a definitive agreement that would, if consummated constitute an acquisition proposal, is entered into; or provided, that all references in the definition of acquisition proposal to 20% are deemed to be 50% for purposes of the termination fee; | |
• | if (a) any person or group acquires beneficial ownership or the right to acquire beneficial ownership of outstanding shares of capital stock of Warrior then representing 50% or more of the combined power to vote generally for the election of directors, and (b) Warrior’s board of directors has taken any action for the benefit of such person that facilitates the acquisition. |
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FINANCIAL INFORMATION
• | Superior will pay $175.2 million in cash ($14.50 per share of outstanding Warrior common stock) and issue an aggregate of 5.3 million shares of Superior common stock (at an exchange ratio of 0.452 shares of Superior common stock for each share of Warrior common stock) for all the outstanding Warrior common stock, restricted stock units and options. | |
• | Superior will enter into a $200 million term loan to fund the cash portion of the merger consideration and refinance Warrior’s existing debt. Superior will provide the remaining funds needed for the merger consideration and Warrior’s debt refinancing from its cash and cash equivalents. | |
• | Superior’s common stock assumed to be issued in connection with the merger is valued at $25.39 per share, the average closing market price per share for the five trading day period beginning two trading days before the merger announcement date of September 25, 2006. |
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• | The unaudited pro forma condensed consolidated balance sheet assumes the merger had occurred on June 30, 2006, and the unaudited pro forma condensed consolidated statements of operations assume the merger occurred on January 1, 2005. | |
• | Preliminary estimates, assumptions and pro forma adjustments to state the assets and liabilities of Warrior to be acquired at fair value are based on Warrior’s June 30, 2006 balance sheet. | |
• | The unaudited pro forma condensed consolidated balance sheet assumes Superior’s cash investment in Coldren Resources and Coldren Resources’ acquisition of the Acquired Properties occurred on June 30, 2006, and the unaudited pro forma condensed consolidated statements of operations assume these transactions occurred on January 1, 2005. | |
• | Warrior acquired Bobcat on December 16, 2005 for approximately $53.2 million. The unaudited pro forma condensed consolidated statements of operations assume the acquisition of Bobcat by Warrior had occurred on January 1, 2005. |
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June 30, 2006
Superior | Warrior | Pro Forma | Pro Forma | |||||||||||||
Historical | Historical | Adjustments | Consolidated | |||||||||||||
(In thousands) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 115,846 | $ | 5,029 | $ | (59,182 | )(b) | $ | 61,693 | |||||||
Accounts receivable, net | 233,496 | 25,568 | — | 259,064 | ||||||||||||
Current portion of notes receivable | 4,712 | — | — | 4,712 | ||||||||||||
Prepaid insurance and other | 58,493 | 5,518 | — | 64,011 | ||||||||||||
Total current assets | 412,547 | 36,115 | (59,182 | ) | 389,480 | |||||||||||
Property, plant and equipment, net | 608,548 | 45,756 | 5,000 | (c) | 659,304 | |||||||||||
Goodwill, net | 224,346 | 14,040 | 233,652 | (a) | 472,038 | |||||||||||
Notes receivable | 26,085 | — | — | 26,085 | ||||||||||||
Equity-method investments | 32,541 | — | 27,340 | (d) | 59,881 | |||||||||||
Other assets, net | 12,416 | 36,281 | 33,830 | (e) | 82,527 | |||||||||||
Total assets | $ | 1,316,483 | $ | 132,192 | $ | 240,640 | $ | 1,689,315 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 45,846 | $ | 10,241 | $ | — | $ | 56,087 | ||||||||
Accrued expenses | 76,323 | 2,979 | — | 79,302 | ||||||||||||
Income taxes payable | 50,740 | — | — | 50,740 | ||||||||||||
Fair value of commodity derivative instruments | 5,658 | — | — | 5,658 | ||||||||||||
Current portion of decommissioning liabilities | 14,081 | — | — | 14,081 | ||||||||||||
Current maturities of long-term debt | 810 | 16,916 | (14,916 | )(f) | 2,810 | |||||||||||
Total current liabilities | 193,458 | 30,136 | (14,916 | ) | 208,678 | |||||||||||
�� | ||||||||||||||||
Deferred income taxes | 95,321 | 12,485 | 13,350 | (g) | 121,156 | |||||||||||
Decommissioning liabilities | 106,482 | — | — | 106,482 | ||||||||||||
Long-term debt | 311,694 | 26,968 | 171,032 | (f) | 509,694 | |||||||||||
Other long-term liabilities | 3,330 | — | — | 3,330 | ||||||||||||
Stockholders’ equity: | ||||||||||||||||
Preferred stock | — | — | — | — | ||||||||||||
Common stock | 80 | 16 | (11 | )(h) | 85 | |||||||||||
Additional paid in capital | 433,415 | 92,058 | 41,714 | (h) | 567,187 | |||||||||||
Accumulated other comprehensive income, net | 1,104 | — | — | 1,104 | ||||||||||||
Retained earnings (accumulated deficit) | 171,599 | (29,471 | ) | 29,471 | (h) | 171,599 | ||||||||||
Total stockholders’ equity | 606,198 | 62,603 | 71,174 | 739,975 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 1,316,483 | $ | 132,192 | $ | 240,640 | $ | 1,689,315 | ||||||||
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Acquired | ||||||||||||||||||||
Superior | Warrior | Properties | Pro Forma | Pro Forma | ||||||||||||||||
Historical | Historical | Historical | Adjustments | Consolidated | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Oilfield service and rental revenues | $ | 435,132 | $ | 59,814 | $ | — | $ | — | $ | 494,946 | ||||||||||
Oil and gas revenues | 49,096 | — | — | — | 49,096 | |||||||||||||||
Total revenues | 484,228 | 59,814 | — | — | 544,042 | |||||||||||||||
Cost of oilfield services and rentals | 194,541 | 32,244 | — | — | 226,785 | |||||||||||||||
Cost of oil and gas sales | 32,907 | — | — | — | 32,907 | |||||||||||||||
Total cost of services, rentals and sales | 227,448 | 32,244 | — | — | 259,692 | |||||||||||||||
Depreciation, depletion, amortization and accretion | 48,642 | 5,469 | — | 3,819 | (j) | 57,930 | ||||||||||||||
General and administrative expenses | 77,739 | 7,517 | — | — | 85,256 | |||||||||||||||
Income from operations | 130,399 | 14,584 | — | (3,819 | ) | 141,164 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest expense, net | (10,400 | ) | (3,132 | ) | — | (6,137 | )(k) | (19,669 | ) | |||||||||||
Interest income | 2,222 | — | — | — | 2,222 | |||||||||||||||
Loss on early extinguishment of debt | (12,596 | ) | — | — | — | (12,596 | ) | |||||||||||||
Earnings in equity-method investments, net | 1,148 | — | 60,253 | (i) | (32,639 | )(l) | 28,762 | |||||||||||||
Gain on sale of fixed assets | — | 7 | — | — | 7 | |||||||||||||||
Other income | — | 50 | — | — | 50 | |||||||||||||||
Income before income taxes | 110,773 | 11,509 | 60,253 | (42,595 | ) | 139,940 | ||||||||||||||
Income taxes | 39,878 | 4,281 | — | 6,219 | (m) | 50,378 | ||||||||||||||
Net income | $ | 70,895 | $ | 7,228 | $ | 60,253 | $ | (48,814 | ) | $ | 89,562 | |||||||||
Basic earnings per share | $ | 0.89 | $ | 1.05 | ||||||||||||||||
Diluted earnings per share | $ | 0.87 | $ | 1.04 | ||||||||||||||||
Weighted average common shares used in computing earnings per share: | ||||||||||||||||||||
Basic | 79,719 | 84,988 | ||||||||||||||||||
Incremental common shares from stock options | 1,422 | 1,422 | ||||||||||||||||||
Incremental common shares from restricted stock units | 36 | 36 | ||||||||||||||||||
81,177 | 86,446 | |||||||||||||||||||
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Year Ended December 31, 2005
Bobcat | Acquired | |||||||||||||||||||||||
Superior | Warrior | Prior to | Properties | Pro Forma | Pro Forma | |||||||||||||||||||
Historical | Historical | Acquisition | Historical | Adjustments | Consolidated | |||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||
Oilfield service and rental revenues | $ | 656,423 | $ | 73,667 | $ | 28,653 | $ | — | $ | — | $ | 758,743 | ||||||||||||
Oil and gas revenues | 78,911 | — | — | — | — | 78,911 | ||||||||||||||||||
Total revenues | 735,334 | 73,667 | 28,653 | — | — | 837,654 | ||||||||||||||||||
Cost of oilfield services and rentals | 330,200 | 43,495 | 13,235 | — | — | 386,930 | ||||||||||||||||||
Cost of oil and gas sales | 45,804 | — | — | — | — | 45,804 | ||||||||||||||||||
Total cost of services, rentals and sales | 376,004 | 43,495 | 13,235 | — | — | 432,734 | ||||||||||||||||||
Depreciation, depletion, amortization and accretion | 89,288 | 5,208 | 1,508 | — | 10,196 | (j) | 106,200 | |||||||||||||||||
General and administrative expenses | 140,989 | 9,620 | 4,324 | — | — | 154,933 | ||||||||||||||||||
Reduction in value of assets | 6,994 | — | — | — | — | 6,994 | ||||||||||||||||||
Gain on sale of liftboats | 3,544 | — | — | — | — | 3,544 | ||||||||||||||||||
Income from operations | 125,603 | 15,344 | 9,586 | — | (10,196 | ) | 140,337 | |||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Interest expense, net | (21,862 | ) | (4,097 | ) | (439 | ) | — | (17,810 | )(k) | (44,208 | ) | |||||||||||||
Interest income | 2,201 | — | — | — | — | 2,201 | ||||||||||||||||||
Earnings in equity-method investments, net | 1,339 | — | — | 135,038 | (i) | (71,711 | )(l) | 64,666 | ||||||||||||||||
Gain on sale of fixed assets | — | 83 | (78 | ) | — | — | 5 | |||||||||||||||||
Change of control expense | — | (2,705 | ) | — | — | — | (2,705 | ) | ||||||||||||||||
Other expense | — | (240 | ) | (5 | ) | — | — | (245 | ) | |||||||||||||||
Reduction in value of equity-method investment | (1,250 | ) | — | — | — | — | (1,250 | ) | ||||||||||||||||
Income before income taxes | 106,031 | 8,385 | 9,064 | 135,038 | (99,717 | ) | 158,801 | |||||||||||||||||
Income taxes | 38,172 | 176 | 3,399 | — | 15,421 | (m) | 57,168 | |||||||||||||||||
Net income | $ | 67,859 | $ | 8,209 | $ | 5,665 | $ | 135,038 | $ | (115,138 | ) | $ | 101,633 | |||||||||||
Basic earnings per share | $ | 0.87 | $ | 1.22 | ||||||||||||||||||||
Diluted earnings per share | $ | 0.85 | $ | 1.20 | ||||||||||||||||||||
Weighted average common shares used in computing earnings per share: | ||||||||||||||||||||||||
Basic | 78,321 | 83,590 | ||||||||||||||||||||||
Incremental common shares from stock options | 1,414 | 1,414 | ||||||||||||||||||||||
Incremental common shares from restricted stock units | — | — | ||||||||||||||||||||||
79,735 | 85,004 | |||||||||||||||||||||||
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1. | Calculation of Purchase Price of Warrior |
Warrior Shares Outstanding: | ||||
Warrior common stock outstanding at September 22, 2006 (includes 347,929 shares issuable upon vesting of restricted stock units) | 11,424,208 | |||
Warrior Class A Options (exercise price of $7.50) outstanding at September 22, 2006 | 659,074 | |||
Warrior Class B Options (exercise price of $21.10) outstanding at September 22, 2006 | 10,000 | |||
Warrior estimated shares outstanding | 12,093,282 | |||
Cash Payments: | ||||
Payment of $14.50 per share to 12,083,282 Warrior estimated shares outstanding (includes 11,424,208 shares of Warrior common stock outstanding, including restricted stock units, and 659,074 Warrior Class A Options outstanding at September 22, 2006) | $ | 175,208 | ||
Estimated direct transaction costs payable by Superior to be capitalized as part of the purchase price for Warrior (including financial advisory fees, legal fees, accounting fees and other items) | 10,000 | |||
Total cash paid | 185,208 | |||
Stock Consideration: | ||||
An estimated 5,163,742 shares of Superior common stock issued for Warrior common stock outstanding (11,424,208 Warrior shares at a 0.452 exchange ratio) multiplied by the Superior share price of $25.39 (the average closing market price for the five trading day period beginning two trading days before the merger announcement date of September 25, 2006) | 131,107 | |||
An estimated 103,216 shares of Superior common stock issued for Warrior Class A Options outstanding multiplied by the Superior share price of $25.39 (The 103,230 shares are calculated by multiplying the average closing price of Superior stock for 10 consecutive trading days immediately preceding the third trading day before the closing of the merger (“Superior Stock Closing FMV” which is assumed to be $25.39 herein) times the exchange ratio of 0.452 less the exercise price of $7.50 divided by the Superior Stock FMV multiplied by the 659,074 Class A Options outstanding.) | 2,621 | |||
An estimated 1,921 shares of Superior common stock issued for Warrior Class B Options outstanding multiplied by the Superior share price of $25.39 (The 1,930 shares are calculated by multiplying the Superior Stock Closing FMV times the exchange ratio of 0.452 plus $14.50 less the exercise price of $21.10 divided by the Superior Stock FMV multiplied by the 10,000 Class B Options outstanding.) | 49 | |||
Total equity consideration | 133,777 | |||
Total Estimated Purchase Price | $ | 318,985 | ||
Preliminary estimated allocation of purchase price: | ||||
Current assets | $ | 36,115 | ||
Property, plant and equipment | 50,756 | |||
Goodwill | 247,692 | |||
Intangible and other assets | 67,361 | |||
Current liabilities | (30,136 | ) | ||
Deferred income taxes | (25,835 | ) | ||
Long-term debt | (26,968 | ) | ||
$ | 318,985 | |||
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2. | Pro Forma Adjustments |
Total estimated purchase price | $ | 318,985 | ||
Less book value of Warrior’s net assets | 62,603 | |||
Adjustments to historical net book value: | ||||
Adjust property, plant and equipment to fair value (see note (c)) | 5,000 | |||
Adjust intangible assets to fair value (see note (e)) | 31,080 | |||
Adjust deferred taxes as a result of asset fair values adjustments (see note (g)) | (13,350 | ) | ||
Pro forma goodwill adjustment | 233,652 | |||
Total cash purchase price to acquire all outstanding | ||||
Warrior stock, restricted stock units and options, including estimated direct transaction fees and costs associated with the merger | $ | (185,208 | ) | |
Payment of Warrior debt | (43,884 | ) | ||
Gross proceeds from incurrence of $200 million term loan | 200,000 | |||
Payment of loan costs related to the incurrence of the $200 million term loan | (2,750 | ) | ||
Remaining cash investment in Coldren Resources (see note (d)) | (27,340 | ) | ||
Pro forma cash adjustments | $ | (59,182 | ) | |
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Non-deductible adjustment to assess Warrior’s identifiable intangible assets at their estimated fair value (see note (e)) | $ | 31,080 | ||
Non-deductible adjustment to assess Warrior’s property, plant and equipment at its estimated fair value (see note (c)) | 5,000 | |||
36,080 | ||||
Deferred tax rate | 37 | % | ||
Adjustment to deferred income taxes | $ | 13,350 | ||
Six Months | Year Ended | |||||||
Ended | December 31, | |||||||
June 30, 2006 | 2005 | |||||||
Revenues in excess of direct operating expenses of Acquired Properties | $ | 150,632 | $ | 337,596 | ||||
Ownership percentage via equity investment | 40 | % | 40 | % | ||||
Adjustment to earnings in equity-method investment, net | $ | 60,253 | $ | 135,038 | ||||
Six Months | Year Ended | |||||||
Ended | December 31, | |||||||
June 30, 2006 | 2005 | |||||||
Additional depreciation expense resulting from Superior’s adjustment to Warrior’s property, plant and equipment to fair value with an estimated average life of approximately 7 years | $ | 357 | $ | 714 | ||||
Additional amortization expense resulting from Superior’s adjustment to Warrior’s identifiable intangible assets to fair value with estimated useful lives ranging from approximately 1 to 10 years | 3,462 | 6,924 | ||||||
Additional depreciation and amortization expense resulting from Warrior’s adjustments to Bobcat’s property, plant and equipment and identifiable intangible assets to fair value | — | 2,558 | ||||||
Adjustment to depreciation, depletion, amortization and accretion | $ | 3,819 | $ | 10,196 | ||||
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Six Months | Year Ended | |||||||
Ended | December 31, | |||||||
June 30, 2006 | 2005 | |||||||
Elimination of Warrior interest expense | $ | 3,132 | $ | 4,097 | ||||
Elimination of Bobcat interest expense | — | 439 | ||||||
Additional interest expense resulting from Warrior’s acquisition of Bobcat in December 2005 | — | (5,546 | ) | |||||
Additional interest expense resulting from Superior’s issuance of $200 million in term debt at an estimated interest rate of 7.52% for the six months ended June 30, 2006 and 6.22% for the year ended December 31, 2005 (based on the terms of the term loan commitment letter of LIBOR plus 225 basis points), as well as amortization of the related $2,750 loan costs over the seven year term | (7,716 | ) | (12,833 | ) | ||||
Additional interest expense resulting from Superior’s $57.7 million initial cash investment in Coldren Resources financed with a portion of the new unsecured senior notes at 67/8% issued on May 22, 2006 | (1,553 | ) | (3,967 | ) | ||||
Interest expense adjustment | $ | (6,137 | ) | $ | (17,810 | ) | ||
Six Months | Year Ended | |||||||
Ended | December 31, | |||||||
June 30, 2006 | 2005 | |||||||
Estimated depreciation, depletion, amortization and accretion expenses | $ | (81,598 | ) | $ | (179,278 | ) | ||
Ownership percentage via equity investment | 40 | % | 40 | % | ||||
Adjustment to earnings in equity-method investment, net | $ | (32,639 | ) | �� | $ | (71,711 | ) | |
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• | the agreement of merger does not amend in any respect the certificate of incorporation of the constituent corporations; | |
• | each share of stock of the constituent corporation outstanding immediately prior to the merger is to be an identical outstanding or treasury share of the surviving corporation after the merger; and | |
• | either no shares of common stock of the surviving corporation and no shares, securities or obligations convertible into the common stock are to be issued under the agreement of merger, or the number of shares of common stock issued or so issuable does not exceed 20% of the number of shares of common stock outstanding immediately prior to the merger. |
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• | prior to the time the stockholder became an interested stockholder, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; | |
• | the interested stockholder owned at least 85% of the voting stock of the corporation, excluding specified shares, upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder; or | |
• | on or subsequent to the time the stockholder became an interested stockholder, the business combination is approved by the board of directors of the corporation and authorized by the affirmative vote, at an annual or special meeting and not by written consent, by at least 662/3% of the outstanding voting shares of that corporation, excluding shares held by that interested stockholder. |
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• | an individual U.S. citizen or resident alien; | |
• | a corporation, partnership or other entity created or organized under U.S. law (federal or state); | |
• | an estate whose worldwide income is subject to U.S. federal income tax; or | |
• | a trust if a court within the United States of America is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust. |
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• | the amount of cash received pursuant to the merger (excluding any cash received in lieu of fractional shares of Superior), and | |
• | the amount of gain realized on the transaction, which is the amount, if any, by which the sum of the fair market value of the Superior shares as of the effective time of the merger and the amount of cash received pursuant to the merger for these Warrior shares exceeds the U.S. holder’s adjusted tax basis in these Warrior shares. |
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• | reduced by |
• | the portion of his or her adjusted tax basis in those Warrior shares that is allocable to a fractional share of Superior shares for which cash is received, and | |
• | the amount of cash received by him or her for these Warrior shares in the merger, and |
• | increased by the amount of gain (including the portion of this gain that is treated as a dividend as described above) recognized by him or her in the exchange (but not by any gain recognized upon the receipt of cash in lieu of a fractional share of Superior shares pursuant to the merger). |
• | the taxpayer identification number provided is correct or that the holder is awaiting a taxpayer identification number, and | |
• | the holder is not subject to backup withholding because |
• | the holder is exempt from backup withholding, | |
• | the holder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of the failure to report all interest or dividends, or |
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• | the Internal Revenue Service has notified the holder that he is no longer subject to backup withholding. |
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• | annual report of Superior onForm 10-K for the fiscal year ended December 31, 2005, filed with the SEC on March 10, 2006; | |
• | quarterly report of Superior onForm 10-Q for the quarterly period ended March 31, 2006, filed with the SEC on May 9, 2006; | |
• | quarterly report of Superior onForm 10-Q for the quarterly period ended June 30, 2006, filed with the SEC on August 8, 2006; | |
• | current reports of Superior onForm 8-K orForm 8-K/A filed on February 1, 2006, March 1, 2006, May 5, 2006, May 9, 2006, May 11, 2006, May 17, 2006, May 23, 2006, May 25, 2006, June 6, 2006, June 26, 2006, July 27, 2006, September 22, 2006, September 25, 2006 and September 26, 2006; and | |
• | the description of Superior’s common stock contained in its registration statement onForm 8-A filed with the SEC on June 15, 1992, as amended. |
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• | annual report of Warrior onForm 10-K for the fiscal year ended December 31, 2005, filed with the SEC on March 31, 2006; | |
• | quarterly report of Warrior onForm 10-Q for the quarterly period ended March 31, 2006, filed with the SEC on May 15, 2006; | |
• | quarterly report of Warrior onForm 10-Q for the quarterly period ended June 30, 2006, filed with the SEC on August 11, 2006; and | |
• | current reports of Warrior onForm 8-K orForm 8-K/A filed on January 23, 2006, February 13, 2006, February 14, 2006, February 22, 2006, March 31, 2006, April 3, 2006, April 19, 2006, April 24, 2006, April 27, 2006, May 9, 2006, May 26, 2006, August 1, 2006, August 3, 2006, August 17, 2006 and September 25, 2006. |
1105 Peters Road
Harvey, Louisiana 70058
Attn: Greg Rosenstein, Investor Relations
Telephone:(504) 362-4321
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2 Northpoint Drive, Suite 900
Houston, Texas 77060
Attn: Rob McNally, Executive Vice President
Telephone:(832) 775-0016
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By and Among
SUPERIOR ENERGY SERVICES, INC.,
SPN ACQUISITION SUB, INC.
And
WARRIOR ENERGY SERVICES CORPORATION
Dated as of September 22, 2006
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Page | ||||||
Article 1 Definitions | A-1 | |||||
Section 1.1 | Definitions | A-1 | ||||
Article 2 The Merger | A-6 | |||||
Section 2.1 | The Merger | A-6 | ||||
Section 2.2 | Effective Time | A-6 | ||||
Section 2.3 | Effects of The Merger | A-6 | ||||
Section 2.4 | Certificate of Incorporation and Bylaws | A-6 | ||||
Section 2.5 | Officers | A-6 | ||||
Section 2.6 | Further Assurances | A-6 | ||||
Section 2.7 | Closing | A-7 | ||||
Article 3 Effect of The Merger on the Capital Stock of The Constituent Companies; Exchange of Certificates | A-7 | |||||
Section 3.1 | Effect on Capital Stock | A-7 | ||||
Section 3.2 | Surviving Company to Make Certificates Available | A-8 | ||||
Section 3.3 | Dividends; Transfer Taxes | A-9 | ||||
Section 3.4 | No Fractional Shares | A-9 | ||||
Section 3.5 | Return of Exchange Fund | A-10 | ||||
Section 3.6 | Further Ownership Rights in Company Common Stock | A-10 | ||||
Section 3.7 | Closing of the Company’s Transfer Books | A-10 | ||||
Section 3.8 | Withholding Rights | A-10 | ||||
Section 3.9 | Adjustments. | A-10 | ||||
Article 4 Representations and Warranties | A-11 | |||||
Section 4.1 | Representations and Warranties of The Company | A-11 | ||||
Section 4.2 | Representations and Warranties of Parent and Merger Sub | A-22 | ||||
Article 5 Covenants Relating to Conduct of Business | A-25 | |||||
Section 5.1 | Conduct of Business of The Company | A-25 | ||||
Section 5.2 | Conduct of Business of Parent and Merger Sub. | A-26 | ||||
Article 6 Additional Agreements | A-27 | |||||
Section 6.1 | Registration Statement; Stockholder Approval | A-27 | ||||
Section 6.2 | Access to Information | A-28 | ||||
Section 6.3 | Reasonable Efforts; Notification | A-28 | ||||
Section 6.4 | Indemnification and Insurance | A-29 | ||||
Section 6.5 | Fees and Expenses | A-30 | ||||
Section 6.6 | Public Announcements | A-30 | ||||
Section 6.7 | Agreement to Defend | A-30 | ||||
Section 6.8 | Benefit Matters | A-30 | ||||
Section 6.9 | Affiliate Agreements; Tax Treatment | A-31 | ||||
Article 7 Conditions Precedent | A-31 | |||||
Section 7.1 | Conditions to Each Party’s Obligation to Effect The Merger | A-31 | ||||
Section 7.2 | Conditions to Obligations of Parent and Merger Sub | A-31 | ||||
Section 7.3 | Condition to Obligations of The Company | A-32 | ||||
Article 8 Termination, Amendment and Waiver | A-33 | |||||
Section 8.1 | Termination | A-33 |
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Section 8.2 | Procedure for Termination, Amendment, Extension or Waiver | A-34 | ||||
Section 8.3 | Effect of Termination | A-34 | ||||
Section 8.4 | Amendment | A-34 | ||||
Section 8.5 | Extension; Waiver | A-34 | ||||
Article 9 Special Provisions as to Certain Matters | A-34 | |||||
Section 9.1 | Takeover Defenses of The Company | A-34 | ||||
Section 9.2 | No Solicitation | A-34 | ||||
Section 9.3 | Fee and Expense Reimbursements | A-36 | ||||
Article 10 General Provisions | A-37 | |||||
Section 10.1 | Survival | A-37 | ||||
Section 10.2 | Notices | A-37 | ||||
Section 10.3 | Interpretation | A-37 | ||||
Section 10.4 | Counterparts | A-38 | ||||
Section 10.5 | Entire Agreement; No Third-Party Beneficiaries | A-38 | ||||
Section 10.6 | Governing Law | A-38 | ||||
Section 10.7 | Assignment | A-38 | ||||
Section 10.8 | Enforcement of the Agreement | A-38 | ||||
Section 10.9 | Attorney’s Fees | A-38 | ||||
Section 10.10 | Performance by Merger Sub | A-38 | ||||
Section 10.11 | Severability | A-38 | ||||
Schedules | ||||||
Schedule I — Company Disclosure Schedule | ||||||
Schedule II — Company’s Knowledge | ||||||
Schedule III — Parent’s Knowledge | ||||||
Exhibits | ||||||
Exhibit A — Form of Rule 145 Letter Agreement |
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EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT COMPANIES;
EXCHANGE OF CERTIFICATES
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By: | /s/ Terence E. Hall |
Title: | Chairman of the Board and Chief Executive Officer |
By: | /s/ Terence E. Hall |
Title: | Chairman of the Board and Chief Executive Officer |
By: | /s/ William L. Jenkins |
Title: | President and Chief Executive Officer |
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By: | /s/ Frederick W. Charlton |
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 12, 2006.
YOU VOTE “FOR” ADOPTION OF THE MERGER AGREEMENT.
oFor | oAgainst | oAbstain |