| Item 1.01. | Entry into a Material Definitive Agreement. |
Asset Purchase Agreement and Convertible Note
On March 24, 2023, Dawson Geophysical Company
(the “Company”) entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Wilks Brothers, LLC, for the limited purposes set forth therein (“Wilks”)
and Breckenridge Geophysical, LLC (“Breckenridge”).
Pursuant
to the Purchase Agreement, and upon the terms and subject to the conditions described therein, the Company completed the purchase
of substantially all of the Breckenridge assets related to seismic data acquisition services other than its multi-client data library
(the “Assets”), in exchange for a combination of equity consideration and a convertible note (described below) (the “Transaction”).
The consideration
delivered by the Company to Wilks for the Assets consisted of the following equity consideration and convertible note (the “Consideration”):
| • | Equity Consideration. The Company delivered to Wilks an aggregate amount of 1,188,235
newly-issued shares of common stock of the Company (the “Issued Common Shares”). The
Issued Common Shares represent approximately 4.99% of the outstanding common stock of the Company (prior to giving effect to the issuance
of the Issued Common Shares). |
| • | Convertible Note. The Company delivered to Wilks a convertible promissory note (the “Convertible Note”) in
the principal amount of $9,880,000.50 payable on or after June 30, 2024 that, upon the terms and subject to the conditions
described therein, will automatically convert into 5,811,765 newly-issued shares of common stock of the Company (the
“Conversion Shares”) at a conversion price of $1.70 per share, subject to adjustment as described in the
Convertible Note, after the Company receives stockholder approval of the proposal to issue the Conversion Shares upon conversion of
the Convertible Note in accordance with Listing Rule 5635 of the NASDAQ Listed Company Manual. |
In addition, the Consideration is subject to a customary post-closing cash adjustment, as described in the Purchase Agreement.
The Purchase
Agreement contains representations, warranties and covenants of the parties customary for a transaction of this nature, including a covenant
that the Company will hold a special stockholders meeting as soon as reasonably practicable for the purpose of approving the issuance
of the Conversion Shares pursuant to the rules of the Nasdaq Stock Market.
Wilks
and its affiliates are the Company’s controlling shareholder and control approximately 74.46%
of its combined voting power (prior to giving effect to this Transaction). The Purchase
Agreement was approved by an independent special committee (the “Special Committee”) of the Company’s Board of Directors
consisting entirely of independent directors that are not affiliated with Wilks or its affiliates. The Company’s two directors that
are affiliates of Wilks, Matthew Wilks and Sergei Krylov, did not serve on the Special Committee. Houlihan Lokey Capital, Inc.
(“Houlihan Lokey”) acted as financial advisor
to the Special Committee and delivered an opinion to the effect that, as of the date thereof and based upon and subject to the various
assumptions made, procedures followed, matters considered and qualifications and limitations set forth therein, the Consideration to be
paid pursuant to the Purchase Agreement is fair to the Company from a financial point of view. The reference to Houlihan Lokey’s
opinion is qualified in its entirety by reference to the full text of its written opinion, which will be filed as an exhibit to the proxy
statement seeking approval of the proposal to issue the Conversion Shares upon conversion of the Convertible Note.
The written opinion will also describe the procedures followed, assumptions made, qualifications and limitations on the review undertaken
and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. Houlihan Lokey’s opinion is not
intended to be, and does not constitute, a recommendation to the Special Committee, the Board of Directors, any security holder or any
other party as to how to act or vote with respect to any matter relating to the Transaction or otherwise.
The foregoing descriptions of the Purchase Agreement
and the Convertible Note do not purport to be complete and are qualified in their entirety by reference to the full text of the Purchase
Agreement and the Convertible Note, which are filed as Exhibit 2.1 and Exhibit 10.1, respectively, to this Current Report on
Form 8-K (this “Current Report”) and are incorporated herein by reference.
Voting Agreement
On March 24, 2023 and in connection with the
Purchase Agreement, the Company and Wilks entered in to a Voting Agreement (the “Voting Agreement”) pursuant to which Wilks
agreed to, at any shareholder meeting held to approve the Transaction, vote the shares beneficially owned by Wilks in favor of (a) the
approval of the Transaction, (b) the approval of any proposal to adjourn or postpone any shareholder meeting to a later date if there
are not sufficient votes for the approval of the Transaction on the date on which such meeting is held, and (c) any other matter
necessary for consummation of the transactions contemplated by the Purchase Agreement or any other document related to the Transaction
which is considered at any such meeting or is the subject of any such consent solicitation.
The foregoing description of the Voting Agreement
does not purport to be complete and is qualified in its entirety by reference to the full text of the Voting Agreement, which is filed
as Exhibit 10.2 to this Current Report and is incorporated herein by reference.
Amendment to Credit Facility
On
March 21, 2023, the Company entered into a Fourth Loan Modification Agreement (the “Fourth Modification”) to the Loan
and Security Agreement (as amended by (i) that certain Loan Modification Agreement dated as of September 30, 2020, (ii) that
certain Second Loan Modification Agreement dated as of September 30, 2021, (iii) that certain Third Loan Modification Agreement
dated as of September 30, 2022, and (iv) the Fourth Modification, the “Loan Agreement”) for the purpose of
(a) amending the principal amount under the Company’s line of credit with its lender, Dominion Bank, a Texas state bank (the
“Lender”), and (b) obtaining the Lender’s consent with respect to the Company’s consummation of the Transaction
and related waivers with respect to implicated covenants. The Loan Agreement now provides for a secured revolving credit facility (the
“Revolving Credit Facility”) in an amount up to the lesser of (I) $5,000,000 or (II) a sum equal to (A) 80%
of the Company’s eligible accounts receivable plus (B) 100% of the amount on deposit with the Lender in the Company’s
collateral account, including a certificate of deposit for $5,000,000. Previously, the Lender’s commitment was for up to $10,000,000.
As of March 24, 2023, the Company has not borrowed any amounts under the Revolving Credit Facility.
The
Company received a limited waiver and consent from Lender with respect to any non-compliance with applicable covenants under the Loan
Agreement, including the tangible net worth covenant, in connection with the Transaction and the issuance of the Issued
Common Shares and the Convertible Note.
The foregoing description of the Fourth Modification
is qualified in its entirety by reference to the full text of the Fourth Modification, which is filed as Exhibit 10.3 to this Current
Report and is incorporated by reference herein.