Item 1.01 Entry into a Material Definitive Agreement
On October 22, 2018, KLX Energy Services Holdings, Inc. (the Company) entered into a Unit Purchase Agreement (the Unit Purchase Agreement) by and among the Company, KLX Energy Services LLC, a wholly-owned subsidiary of the Company, District 5 Investments, LP (D5), 3M Capital, Inc. (3M) and Marco D. Davis (Davis and, together with D5 and 3M, each individually, a Seller and, collectively, the Sellers) pursuant to which the Company agreed to acquire (the Acquisition) 100% of the outstanding units of Motley Services, LLC (Motley) from the Sellers for a purchase price of $139.2 million in cash, subject to certain purchase price adjustments, and $9.0 million of shares of the Companys common stock payable to certain employees of Motley. The shares will be issued in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the Securities Act). The Company intends to fund the cash consideration and other amounts payable in connection with the Acquisition with a portion of the proceeds from a debt financing.
In the Unit Purchase Agreement, KLX Energy Services LLC and the Sellers have made customary representations and warranties relating to their respective businesses and have agreed to customary covenants relating to the Acquisition. Among other things, prior to the consummation of the Acquisition, the Sellers will be subject to certain business conduct restrictions with respect to the operation of Motleys business. In addition, KLX Energy Services LLC and the Sellers have agreed to indemnify each other for losses arising from certain breaches of the Unit Purchase Agreement and for certain other matters.
The Acquisition is expected to be consummated in late October or early November 2018. The consummation of the Acquisition is subject to certain customary closing conditions, including, among other things, (i) the absence of a material adverse effect on Motley or the ability of the Sellers to consummate the Acquisition, (ii) the expiration or termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (iii) the accuracy of the representations and warranties of the parties (generally subject to a customary material adverse effect standard (as described in the Unit Purchase Agreement) or other customary materiality qualifications), (iv) the absence of any governmental restriction on the consummation of the Acquisition and (v) material compliance by the parties with their respective covenants and agreements under the Unit Purchase Agreement. The Unit Purchase Agreement also contains certain termination rights, including the right of either party to terminate the Unit Purchase Agreement if the consummation of the Acquisition has not occurred on or before December 21, 2018, or if the Company has not obtained any portion of the proceeds expected from a debt financing by November 15, 2018.
The foregoing description of the Unit Purchase Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the Unit Purchase Agreement, a copy of which is filed herewith as Exhibit 2.1 and is incorporated by reference herein.
The foregoing summary has been included to provide investors and security holders with information regarding the terms of the Unit Purchase Agreement. However, it is not intended to provide any other factual information about the Company, Motley or their respective subsidiaries and affiliates. The Unit Purchase Agreement contains representations and warranties by each of the parties to the Unit Purchase Agreement, which were made only for purposes of that agreement and as of specified dates. The representations, warranties and covenants in the Unit Purchase Agreement were made solely for the benefit of the parties to the Unit Purchase Agreement, are subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Unit Purchase Agreement instead of establishing these matters as facts, and are subject to standards of materiality applicable to the contracting parties that may differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Motley or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Unit Purchase Agreement, which subsequent information may or may not be fully reflected in the Companys public disclosures.
In connection with the Acquisition, the Company entered into an amendment (the First Amendment) to the Companys $100 million asset-based revolving credit facility (Credit Facility). Among other things, the amendment permits the incurrence of indebtedness necessary to consummate the Acquisition. A copy of the First Amendment is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference to this Item 1.01. The description above does not provide a complete description of the Credit Facility and is qualified in its entirety by the complete text of the Credit Facility itself.
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