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Item 1.01.
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Entry into a Material Definitive Agreement.
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New Credit Facilities
On April 4, 2017, The KeyW Corporation
(“KeyW”) entered into (a) a $135 million term loan facility (the “Term Loan Facility”) and (b) a $50 million
revolving credit facility (the “Revolving Loan Facility”), the terms of which are set forth in a Credit Agreement (the
“Credit Agreement”), dated as of April 4, 2017 (the “Closing Date”), by and among KeyW, as borrower, The
KeyW Holding Corporation (the “Company”), the several lenders party thereto, Royal Bank of Canada, as administrative
agent and collateral agent (the “Agent”), and RBC Capital Markets, as lead arranger and bookrunner. Subject to the
terms and conditions of the Credit Agreement, on April 4, 2017, KeyW borrowed an aggregate of $135 million under the Term Loan
Facility (the “Term Loan Proceeds”) and an aggregate of $10 million under the Revolving Loan Facility (the “Revolver
Proceeds”).
Use of Proceeds
The Term Loan Proceeds were used (i) to
pay, directly or indirectly, the purchase price of KeyW’s previously announced acquisition (the “Acquisition”)
of Sotera Holdings Inc. (“Sotera”) pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”),
dated as of March 8, 2017, by and among KeyW, Sandpiper Acquisition Corporation, Sotera and Sotera Equity Partners GP LLC; (ii)
to refinance, repay or terminate, including discharging and releasing all security and guaranties in respect of, and the termination
and unwinding of any interest rate hedging agreements in connection therewith, certain of KeyW’s and Sotera’s and its
subsidiaries’ existing third party indebtedness for borrowed money (the “Refinancing”); and (iii) to pay related
transaction fees and expenses.
The Revolver Proceeds were used to fund
upfront fees required to be paid on the Closing Date. The proceeds of any borrowings under the Revolving Credit Facility made after
the Closing Date will be available for any purpose not prohibited by the terms of the Credit Agreement.
Interest Rates
Borrowings under the Credit Agreement were
and will be incurred in U.S. Dollars. All borrowings under the Credit Agreement may, at KeyW’s option, be incurred as either
eurodollar loans (“Eurodollar Loans”) or base rate loans (“Base Rate Loans”).
Eurodollar Loans will accrue interest,
for any interest period, at (a) the Eurodollar Rate (as defined in the Credit Agreement) plus (b) an applicable margin of
3.75%.
Base Rate Loans will accrue interest, for
any interest period, at (a) a base rate per annum equal to the highest of (i) the Federal funds rate plus 1/2 of 1%, (ii) the prime
commercial lending rate announced by the Royal Bank of Canada from time to time as its prime lending rate and (iii) the Eurodollar
Rate for a one month interest period plus 1.00%, plus (b) an applicable margin of 2.75%.
After the completion of KeyW’s fiscal
quarter ending June 30, 2017, the applicable margin for borrowings under the Revolving Credit Facility may be decreased if KeyW’s
consolidated net leverage ratio decreases.
Maturity Dates
The Term Loan Facility and the Revolving
Loan Facility mature on the earlier of (i) the five year anniversary of the Closing Date, and (ii) the date that is 180 days prior
to the scheduled maturity date of the Company’s 2.50% convertible senior notes due 2019, unless such notes are converted
into equity or otherwise repaid or refinanced.
Mandatory Prepayments
Amounts outstanding under the Credit Agreement
will be subject to mandatory prepayments, subject to customary exceptions, from the net cash proceeds to KeyW, the Company or any
of their respective subsidiaries from certain asset sales or recovery events.
Certain Covenants and Events of Default
The Credit Agreement contains affirmative
and negative covenants that are customary for credit agreements of this nature. The negative covenants include, among other things,
limitations on asset sales, mergers and acquisitions, indebtedness, liens, investments and transactions with affiliates. The Credit
Agreement contains two financial covenants: (i) a maximum total leverage ratio of consolidated total indebtedness to consolidated
earnings before interest, taxes, depreciation and amortization and other adjustments described in the Credit Agreement (“consolidated
EBITDA”) for the trailing four consecutive quarters of (a) 5.50 to 1.00 for any period ending on or prior to June 30, 2017,
(b) 5.00 to 1.00 for any period thereafter ending on or prior to December 31, 2019, and (c) 4.50 to 1.00 for each fiscal quarter
thereafter; and (ii) a minimum interest coverage ratio of consolidated EBITDA to consolidated interest expense for the trailing
four consecutive quarters of 3:00 to 1:00.
The Credit Agreement includes customary
events of default that include, among other things, non-payment defaults, inaccuracy of representations and warranties, covenant
defaults, cross default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, ERISA defaults
and a change of control default. The occurrence of an event of default could result in the acceleration of the obligations under
the Credit Agreement and cross-default other indebtedness of KeyW.
Certain Relationships
In the ordinary course of their respective
businesses, certain of the lenders and other parties to the Credit Agreement and their respective affiliates have engaged, and
may engage, in commercial banking, investment banking, financial advisory or other services with KeyW and any of its affiliates
for which they have in the past and/or may in the future receive customary compensation and expense reimbursement.
A copy of the Credit Agreement is filed
with this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference, and the foregoing description of
the Credit Agreement is qualified in its entirety by reference thereto.
Security Agreement
On April 4, 2017, KeyW entered into a Security
Agreement (the “Security Agreement”) with the Company, the other signatories thereto, as grantors, and the Agent, as
collateral agent, pursuant to which KeyW’s obligations under the Credit Agreement are secured by a pledge of substantially
all of the assets of KeyW, the Company, and each other grantor, including a pledge of the equity interests in certain of KeyW’s
domestic and first-tier foreign subsidiaries, subject to customary exceptions.
A copy of the Security Agreement is filed
with this Current Report on Form 8-K as Exhibit 10.2 and is incorporated herein by reference, and the foregoing description of
the Credit Agreement is qualified in its entirety by reference thereto.
Guaranty Agreement
On April 4, 2017, the Company and certain
subsidiaries of KeyW entered into a Guaranty Agreement (the “Guaranty Agreement”) with the Agent, pursuant to which
they guaranteed KeyW’s obligations under the Credit Agreement.
A copy of the Guaranty Agreement is filed
with this Current Report on Form 8-K as Exhibit 10.3 and is incorporated herein by reference, and the foregoing description of
the Credit Agreement is qualified in its entirety by reference thereto.