SEVENTY SEVEN ENERGY INC. FILES (8-K) Disclosing Entry into a Material Definitive Agreement, Termination of a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant,

Edgar Glimpses |

Item 1.01 Entry into a Material Definitive Agreement.

On June 30, 2014, Chesapeake Energy Corporation ("Chesapeake") completed the previously announced spin-off of its oilfield services business (the "Spin-off"), formerly operating as Chesapeake Oilfield Operating, L.L.C. ("COO"), into a stand-alone, publicly traded company named Seventy Seven Energy Inc. ("SSE"). To effect the Spin-off, Chesapeake distributed to its stockholders one share of common stock of SSE for every fourteen shares of Chesapeake common stock outstanding as of 5:00 p.m. New York City time on June 19, 2014, the record date for the distribution.

In connection with the Spin-off, COO and/or its affiliates entered into definitive agreements with Chesapeake and/or its affiliates that, among other things, set forth the terms and conditions of the Spin-off and provide a framework for SSE's relationship with Chesapeake after the Spin-off, including a Master Separation Agreement (the " Master Separation Agreement"), a Tax Sharing Agreement (the "Tax Sharing Agreement"), an Employee Matters Agreement (the "Employee Matters Agreement") and a Transition Services Agreement (the "Transition Services Agreement"). Descriptions of these and other definitive agreements entered into in connection with the Spin-off are included below.

Master Separation Agreement

On June 25, 2014, COO entered into the Master Separation Agreement with Chesapeake, which sets forth the agreements between SSE and Chesapeake regarding the principal transactions necessary to effect the Spin-off. The Master Separation Agreement also sets forth other agreements that govern certain aspects of SSE's relationship with Chesapeake after the completion of the Spin-off. The foregoing description of the Master Separation Agreement is not complete and is qualified in its entirety by reference to the full text of the Master Separation Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated by reference into this Item 1.01.

Tax Sharing Agreement

On June 25, 2014, COO entered into a Tax Sharing Agreement with Chesapeake, which governs the parties' respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. The foregoing description of the Tax Sharing Agreement is not complete and is qualified in its entirety by reference to the full text of the Tax Sharing Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by reference into this Item 1.01.

Employee Matters Agreement

On June 25, 2014, COO entered into an Employee Matters Agreement with Chesapeake, which allocates liabilities and responsibilities relating to employee compensation and benefit plans and programs and other related matters in connection with the Spin-off, including the treatment of holders of Chesapeake stock options, restricted stock, restricted stock units and performance share units, and cooperation between COO and Chesapeake in the sharing of employee information and maintenance of confidentiality. The foregoing description of the Employee Matters Agreement is not complete and is qualified in its entirety by reference to the full text of the Employee Matters Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated by reference into this Item 1.01.

Transition Services Agreement

On June 25, 2014, COO entered into a Transition Services Agreement with Chesapeake, in which Chesapeake agreed to provide various administrative services and assets to COO for specified periods, including (i) marketing and corporate communication services, (ii) human resources services, (iii) information technology services, (iv) security services, (v) risk management services, (vi) tax services, (vii) HSE services, (viii) maintenance services, (ix) internal audit services, (x) accounting services, (xi) treasury services; and (xii) certain other services specified in the agreement. The foregoing description of the Transition Services Agreement is not complete and is qualified in its entirety by reference to the full text of the Transition Services Agreement, which is filed as Exhibit 10.3 to this Current Report on Form 8-K and incorporated by reference into this Item 1.01.

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New Services Agreement

On June 25, 2014, Performance Technologies, L.L.C., a wholly owned subsidiary of COO ("PTL"), entered into a new services agreement with Chesapeake Operating, Inc. governing its provision of hydraulic fracturing services for Chesapeake following the Spin-off (the "New Services Agreement"). The New Services Agreement became effective on July 1, 2014 and has a three-year term. Under the . . .

Item 1.02. Termination of a Material Definitive Agreement.

In connection with the Spin-off, on June 25, 2014, COO terminated its existing Credit Agreement, dated as of November 3, 2011 (as amended, the "Existing Credit Agreement"), among COO, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent. As of March 31, 2014, the Existing Credit Agreement consisted of a $500.0 million credit facility, $464.3 million of which was outstanding as of March 31, 2014. Loans outstanding under the Existing Credit Agreement were previously scheduled to mature on November 3, 2016. A portion of the proceeds from the Term Loan Credit Agreement and the ABL Credit Agreement were used to repay in full all amounts outstanding under the Existing Credit Agreement on the date of termination. A summary of the terms of the Existing Credit Agreement can be found in the section entitled "Description of Material Indebtedness - Existing Credit Facility" in SSE's Registration Statement on Form 10, filed with the Securities and Exchange Commission on June 16, 2014, as amended, and declared effective on June 17, 2014, and is incorporated by reference into this Item 1.02.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information regarding the Term Loan Credit Agreement, ABL Credit Agreement and the offering of the 2022 Notes included in Item 1.01 above is incorporated by reference into this Item 2.03.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On June 11, 2014, COO and COS Holdings, LLC, COO's sole shareholder, approved and adopted, and on June 27, 2014, the board of directors of SSE ratified, the Seventy Seven Energy Inc. 2014 Incentive Plan (the "Incentive Plan") for employees, non-employee directors and consultants of SSE and its affiliates, effective as of the Spin-off. Awards that may be granted under the Incentive Plan consist of the following: stock options, restricted stock, performance awards, restricted stock units, stock appreciation rights, cash awards, dividend equivalents, and other stock-based awards. The Incentive Plan limits the number of shares that may be delivered pursuant to awards to 8,400,000 shares of SSE common stock. The Incentive Plan will be administered by the compensation committee of the board of directors of SSE or a successor committee appointed by the board (provided that director awards will be granted by the board of directors).

The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Incentive Plan, which is filed as Exhibit 10.8 to this Form 8-K and is incorporated into this Item 5.02 by reference.

Item 8.01 Other Events. Conversion

On June 27, 2014, COO, an Oklahoma limited liability company, converted to SSE, an Oklahoma corporation (the "Conversion"), by filing a certificate of conversion and a certificate of incorporation (the "Certificate of Incorporation") with the Secretary of State of the State of Oklahoma. In connection with the Conversion, SSE also adopted Bylaws ("Bylaws").

The Certificate of Incorporation provides that SSE's shareholders may act at an annual or special meeting of shareholders and, to the extent permitted by law, may also act by written consent. The Bylaws provide that only a majority of SSE directors or the chairman of the board of directors may call a special meeting of the board of directors or the shareholders of SSE. The Certificate of Incorporation also includes a forum selection clause designating the state district court or federal district courts in Oklahoma County, Oklahoma as the sole and exclusive forum for derivative actions, actions asserting a claim for breach of fiduciary duties and certain other matters.

The Certificate of Incorporation provides that the number of directors will be fixed exclusively by, and may be increased or decreased exclusively by, the board of directors of SSE from time to time, but will not be less than three nor more than nine, which limits require approval of 66 2/3\% of the voting power of SSE's voting stock to amend. The Certificate of Incorporation and Bylaws provide that directors may be removed only for cause and by a vote of at least 50\% of the voting power of SSE's outstanding voting stock. A vacancy on the board of directors may be filled by a vote of a majority of the directors in office, and a director appointed to fill a vacancy serves for the remainder of the term of the director in which the vacancy occurred, except that if SSE's shareholders remove an incumbent director for cause, the resulting vacancy may be filled by the shareholders at that time.

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The Bylaws contain advance notice and other procedural requirements that apply to shareholder nominations of persons for election to SSE's board of directors at any annual or special meeting of shareholders and to shareholder proposals that shareholders take any other action at any annual meeting. In the case of any annual meeting, a shareholder proposing to nominate a person for election to SSE's board of directors or proposing that any other action be taken must give SSE's corporate secretary written notice of the proposal not less than 90 days and not more than 120 days before the anniversary of the date of the immediately preceding annual meeting of shareholders. These shareholder proposal deadlines are subject to exceptions if the pending annual meeting date is more than 30 days prior to or more than 30 days after the anniversary of the immediately preceding annual meeting. If the chairman of SSE's board of directors or a majority of SSE's board of directors calls a special meeting of shareholders for the election of directors, a shareholder proposing to nominate a person for that election must give SSE's corporate secretary written notice of the proposal not earlier than 120 days prior to that special meeting and not later than the last to occur of (1) 90 days prior to that special meeting or (2) the 10th day following the day we publicly disclose the date of the special meeting. The Bylaws prescribe specific information that any such shareholder notice must contain.

The Certificate of Incorporation and Bylaws provide that SSE shareholders may adopt, amend and repeal the Bylaws at any regular or special meeting of shareholders by a vote of at least 66 2/3\% of the voting power of its outstanding voting stock, provided the notice of intention to adopt, amend or repeal the Bylaws has been included in the notice of that meeting. The Certificate of Incorporation also confers on SSE's board of directors the power to adopt, amend or repeal the Bylaws with the affirmative vote of a majority of the directors then in office.

The Certificate of Incorporation authorizes SSE's board of directors, without the approval of its shareholders, to provide for the issuance of all or any shares of SSE's preferred stock in one or more series and to determine the designation, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions applicable to any of those rights, including dividend rights, voting rights, conversion or exchange rights, terms of redemption and liquidation preferences, of each series. The issuance of shares of preferred stock or rights to purchase shares of our preferred stock could discourage an unsolicited acquisition proposal. In addition, under some circumstances, the issuance of preferred stock could adversely affect the voting power of our common shareholders.

The foregoing descriptions of the Certificate of Incorporation and Bylaws are not complete and are qualified in their entirety by reference to the full text of such documents, which are filed as Exhibits 3.1 and 3.2, respectively, to this Current Report on Form 8-K and incorporated by reference into this Item 8.01.

Press Release Announcing Completion of the Spin-off

On July 1, 2014, SSE issued a press release announcing completion of the Spin-off, a copy of which is included with this Current Report on Form 8-K as Exhibit 99.1 and incorporated by reference into this Item 8.01.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits. Exhibit Number Description 2.1 Master Separation Agreement, dated as of June 25, 2014, by and between Chesapeake Oilfield Operating, L.L.C. and Chesapeake Energy Corporation. 3.1 Certificate of Incorporation of Seventy Seven Energy Inc. 3.2 Bylaws of Seventy Seven Energy Inc. 4.1 Supplemental Indenture, dated June 26, 2014, by and between Chesapeake Oilfield Operating, L.L.C., Chesapeake Oilfield Finance, Inc., Seventy Seven Operating LLC and The Bank of New York Mellon Trust Company N.A.

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4.2 Indenture dated June 26, 2014, by and between Chesapeake Oilfield Operating, L.L.C. and Wells Fargo Bank, National Association. 4.3 Form of 6.5\% Senior Note due 2022 (included in Exhibit 4.2). 10.1 Tax Sharing Agreement, dated June 25, 2014, by and between Chesapeake Oilfield Operating, L.L.C. and Chesapeake Energy Corporation. 10.2 Employee Matters Agreement, dated June 25, 2014, by and between Chesapeake Oilfield Operating, L.L.C. and Chesapeake Energy Corporation. 10.3 Transition Services Agreement, dated as of June 25, 2014, by and between Chesapeake Oilfield Operating, L.L.C. and Chesapeake Energy Corporation. 10.4 Services Agreement (hydraulic fracturing), dated June 25, 2014, by and between Performance Technologies, L.L.C. and Chesapeake Operating, Inc. 10.5 Term Loan Credit Agreement, dated June 25, 2014, by and among Chesapeake Oilfield Operating, L.L.C., Seventy Seven Operating LLC, as borrower, Bank of America, N.A., as administrative agent and the lenders named therein. 10.6 ABL Credit Agreement, dated June 25, 2014, by and among Nomac Drilling, L.L.C., Performance Technologies, L.L.C., Great Plains Oilfield Rental, L.L.C., Hodges Trucking Company, L.L.C. and Oilfield Trucking Solutions, L.L.C., as borrowers, the guarantors named therein, Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Bank, National Association and Bank of America, N.A., as joint lead arrangers and joint book runners, Bank of America, N.A., as syndication agent, Credit Agricole Corporate and Investment Bank and SunTrust Bank, as co-documentation agents, and the lenders named therein. 10.7 Registration Rights Agreement, dated as of June 2, 2014, by and between Chesapeake Oilfield Operating, L.L.C. and Merrill Lynch, Pierce Fenner & Smith Incorporated. 10.8 Seventy Seven Energy Inc. 2014 Incentive Plan. 99.1 Press Release dated July 1, 2014.

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