Item 1.01. Entry into a Material Definitive Agreement.
Purchase Agreement
On September 24, 2017, CIRCOR
International, Inc., a Delaware corporation (the Company), entered into a Purchase Agreement (the Purchase Agreement) by and between Colfax Corporation, a Delaware corporation (Colfax), and the Company. Pursuant
to the Purchase Agreement, the Company has agreed, subject to the satisfaction or waiver of certain conditions, to purchase the fluid handling business of Colfax (the Business) for consideration consisting of $542,000,000 in cash,
3,283,424 unregistered shares (the Stock Consideration) of common stock, par value $0.01 per share, of the Company (the Company Stock) and the assumption of approximately $150,000,000 of net pension liabilities (the
Transaction). The cash consideration is subject to customary working capital adjustments. The Company expects to finance the cash consideration through a combination of committed debt financing and cash on hand.
The Transaction has been unanimously approved by the board of directors of the Company.
The Purchase Agreement contains customary representations and warranties made by the Company and Colfax. The Company and Colfax have also agreed to comply
with covenants during the interim period between the date of the execution of the Purchase Agreement and the date of consummation of the Transaction (the Closing). In addition, the Purchase Agreement provides that the parties will
indemnify each other for breaches of these representations, warranties and covenants, subject to certain limitations, and for certain other matters.
Under the Purchase Agreement, Colfax will agree for a period of three years after Closing to certain
non-competition
restrictions, subject to certain exceptions.
At the Closing, the Company, Colfax and certain of their affiliates will enter into a transition services
agreement providing for transitional services between the parties.
Consummation of the Transaction is subject to customary conditions to closing,
including (a) the absence of any statute, rule, regulation, executive order, decree, preliminary or permanent injunction or restraining order prohibiting or restricting the consummation of the Transaction, and (b) the receipt of required
antitrust approvals (and the expiration or termination of the applicable antitrust waiting periods). In addition, the Companys and Colfaxs obligation to effect the Transaction is subject to certain other conditions, including
(a) subject to the standards set forth in the Purchase Agreement, the accuracy of the representations and warranties of the other party, (b) compliance of the other party with its covenants in all material respects, and (c) no events
having occurred that would have a material adverse effect on the other party. The obligation of the Company to complete the Transaction is also subject to Colfaxs delivery of the consent of the lenders under Colfaxs existing credit
facility.
The Purchase Agreement contains certain customary termination rights, including, among others, the right of either the Company or Colfax to
terminate the Purchase Agreement if the Closing has not occurred on or prior to March 26, 2018 (the Outside Date), subject to certain conditions, although either the Company or Colfax may extend the Outside Date to June 25,
2018 in certain circumstances. In the event that the Purchase Agreement is terminated by Colfax when all of the mutual conditions and the conditions of the Company to close the Transaction (other than those that are to be satisfied at the Closing)
have been satisfied and Colfax confirms in a written notice delivered to the Company that Colfax is prepared to and able to, and will, consummate the Closing on the date on which the Closing should have occurred under the Purchase Agreement, and the
Company fails to consummate the Closing on such date, then the Company will be required to pay Colfax a reverse termination fee of $50,000,000.
The
representations and warranties in the Purchase Agreement reflect negotiations between the parties and are not intended as statements of fact to be relied upon by the Companys stockholders; in certain cases, these representations and warranties
merely represent allocation decisions among the parties, have been modified or qualified by certain confidential disclosures that were made between the parties in connection with the negotiation of the Purchase Agreement, which disclosures are not
reflected in the Purchase Agreement itself, may no longer be true as of a given date and may apply standards of materiality in a way that is different from what may be viewed as material by stockholders. As such, the representations and warranties
are solely for the benefit of the parties to the Purchase Agreement and may be limited or modified by a variety of factors, including: subsequent events, information included in public filings, disclosures made during negotiations, correspondence
between the parties and disclosure schedules to the Purchase Agreement.
The foregoing description of the Transaction and the Purchase Agreement does not purport to be complete and is
qualified in its entirety by reference to the Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.
Commitment Letter
In connection with the Purchase
Agreement, the Company entered into a debt commitment letter (the Commitment Letter), dated as of September 24, 2017, with Deutsche Bank AG New York Branch (DBNY), Deutsche Bank Securities Inc. (DBSI),
SunTrust Robinson Humphrey, Inc. (STRH) and SunTrust Bank (SunTrust, and together with DBNY, DBSI and STRH, the Commitment Parties), pursuant to which, among other things, the Commitment Parties have committed to
provide the Company with a secured term loan facility in an aggregate principal amount of $785,000,000, the proceeds of which will be used to finance, in part, the aggregate transaction consideration for the Transaction and related fees, costs and
expenses and to refinance certain existing indebtedness of the Company. In addition, the Commitment Parties have committed under the Commitment Letter to provide the Company with a $150,000,000 secured revolving credit facility for certain fees,
costs and expenses in connection with the Transaction, working capital, capital expenditures and general corporate purposes, as needed. The credit facilities will be secured by a first-priority security interest in certain assets of the Company and
certain of its subsidiaries. The Commitment Parties obligations to provide financing under the Commitment Letter are subject to certain terms and conditions, including, without limitation: consummation of the Transaction in all material
respects in accordance with the Purchase Agreement; execution and delivery of definitive documentation consistent with the Commitment Letter, including any documents and instruments as may be required to perfect the Commitment Parties security
interests in the collateral; delivery of certain pro forma and other financial information; subject to certain limitations, absence of a material adverse effect on the Business; accuracy of specified representations and warranties with respect to
the Business in the Purchase Agreement and specified representations and warranties of the Company to be set forth in the definitive loan documents; concurrent repayment of certain outstanding debt of the Company; and other customary closing
conditions. The final termination date for the Commitment Letter is March 26, 2018, subject to an extension of the Outside Date in the Purchase Agreement until June 25, 2018 solely for purposes of obtaining regulatory approvals. The new
senior secured credit facilities would replace the Companys existing senior secured credit facilities.
The foregoing description of the Commitment
Letter does not purport to be complete and is qualified in its entirety by reference to the Commitment Letter, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
Stockholder Agreement
The Company and Colfax have agreed
that upon the consummation of the Transaction and in connection with the Companys issuance of the Stock Consideration to Colfax, the Company and Colfax will enter into a Stockholder Agreement (the Stockholder Agreement). The
Stockholder Agreement will impose certain restrictions on Colfax, including prohibiting certain transfers of the shares of Company Stock issued to Colfax (i) until six months after the date of the Stockholder Agreement or (ii) to certain
competitors of the Company or certain other parties, as well as customary standstill limitations.
Under the Stockholder Agreement, so long as Colfax
beneficially owns at least 5% of the total outstanding shares of Company Stock, Colfax will agree to vote its shares of Company Stock in a manner proportionally consistent with the vote of shares of Company Stock held by other stockholders of the
Company. Colfax will be entitled to demand and piggy-back registration rights.
The foregoing description of the Stockholder Agreement does not purport to
be complete and is qualified in its entirety by reference to the form of Stockholder Agreement, which is filed as Exhibit 10.2 hereto, and is incorporated herein by reference.