Item 1.01. Entry into a Material Definitive Agreement.
Stockholder Agreement
In connection with the Company’s issuance of the Stock Consideration (as defined below) to Colfax, in partial consideration of the Transaction, on the Closing Date the Company and Colfax entered into a Stockholder Agreement (the “Stockholder Agreement”). The Stockholder Agreement imposes certain restrictions on Colfax, including prohibiting certain transfers of the shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), issued to Colfax (i) until six months after the date of the Stockholder Agreement (the “Lock-Up Period”) or (ii) to certain competitors of the Company or certain other parties that beneficially own more than 5% of the Company’s then outstanding voting shares. Colfax is also subject to customary standstill limitations, including but not limited to, acquiring, offering or seeking to acquire any securities of the Company, participating in any acquisition of assets or business of the Company, participating in any “tender offer” involving securities of the Company, or otherwise acting in concert with others to seek to change, control or influence the board of directors or stockholders of the Company.
Under the Stockholder Agreement, so long as Colfax beneficially owns at least 5% of the total outstanding shares of Common Stock, Colfax agrees to vote its shares of Common Stock in a manner proportionally consistent with the vote of shares of Common Stock held by other stockholders of the Company. Colfax is also required to cause each voting security over which it has voting control to be voted at all meetings of stockholders of the Company.
After the expiration of the Lock-Up Period, Colfax has the right to demand that the Company register Colfax’s shares for resale pursuant to a Registration Statement on Form S-3 or such other registration form as the Company is eligible to use, which the Company will use its reasonable best efforts to file within 90 days of the Closing Date, if such a registration statement for Colfax’s shares is not already effective. Colfax also has the right to demand that the Company file a prospectus supplement to an effective Registration Statement on Form S-3 (a “Takedown Prospectus Supplement”) covering Colfax’s shares, and to effect an underwritten public offering pursuant to the Takedown Prospectus Supplement (an “Underwritten Offering”). Colfax is entitled to demand three Underwritten Offerings in a twelve-month period. The Company has the right to refuse Colfax’s demands to effect an Underwritten Offering in certain situations. Colfax also has the right to receive notice of any underwritten public offering of the Company’s securities, and to request to participate in such underwritten public offering, subject to certain limitations. Pursuant to the Stockholder Agreement, the Company will pay all expenses incurred in connection with Colfax’s registration rights (including reasonable fees of a single outside counsel and local counsel for Colfax), other than Colfax’s underwriting discounts. The Stockholder Agreement will terminate upon such time as there are no more shares of Common Stock covered by the Stockholder Agreement.
The foregoing description of the Stockholder Agreement is qualified in its entirety by reference to the Stockholder Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
Credit Agreement
On the Closing Date, the Company entered into a new Credit Agreement (the “New Credit Agreement”), by and among the Company, as borrower, certain domestic subsidiaries of the Company, as guarantors (the “Subsidiary Guarantors”), the lenders from time to time party thereto (the “Lenders”), Deutsche Bank AG New York Branch, as term loan administrative agent and collateral agent, SunTrust Bank, as revolver administrative agent, swing line lender and a letter of credit issuer, Deutsche Bank Securities Inc. and SunTrust Robinson Humphrey, Inc., as joint-lead arrangers and joint-bookrunners, and Citizens Bank, N.A. and HSBC Securities (USA) Inc. as co-managers. The New Credit Agreement provides for a seven-year senior secured term loan which was funded at closing in full, in an aggregate principal amount of $785.0 million, and a five-year senior secured revolving credit facility, available in an aggregate principal amount of up to $150.0 million. The term loan requires scheduled quarterly payments each in an amount equal to 0.25% of the initial aggregate principal amount of the term loan at closing, beginning with the quarter ending March 31, 2018, with the balance due at maturity. Additional loans of up to $150.0 million (plus the amount of certain voluntary prepayments) and an unlimited amount subject to compliance with a first lien net leverage ratio of 4.90 to 1.00 may be made available under the New Credit Agreement upon request of the Company subject to specified terms and conditions. The Company may repay any borrowings under the New Credit Agreement at any time, subject to certain
limited and customary restrictions stated in the New Credit Agreement; provided, however, that if the Company prepays all or any portion of the term loan in connection with a repricing transaction on or prior to the 6-month anniversary of the Closing Date, the Company must pay a prepayment premium of 1.0% of the aggregate principal amount of the term loan so prepaid. The outstanding principal amounts bear interest at a fluctuating rate per annum plus an applicable margin of 3.50% with respect to LIBOR loans and 2.50% with respect to base rate loans.
The New Credit Agreement contains customary representations and warranties for the benefit of the Lenders. Pursuant to the New Credit Agreement, the Company must comply with various non-financial covenants and, with respect to the revolving credit facility, a springing maximum first lien net leverage ratio covenant. The primary non-financial covenants include, but are not limited to, restrictions on the Company’s ability to conduct certain mergers or acquisitions, sell certain assets, incur certain future indebtedness or liens, sell or acquire certain subsidiaries, make certain restricted payments and make certain investments or loans. The New Credit Agreement also includes certain customary events of default, including, without limitation, payment defaults, representation or warranty inaccuracies, covenant violations, cross-defaults to other agreements evidencing indebtedness for borrowed money, invalidity of certain loan documents relating to the New Credit Agreement, certain judgments, bankruptcy and insolvency events and the occurrence of events constituting a Change of Control (as defined in the New Credit Agreement). The Lenders are entitled to accelerate repayment of the loans under the New Credit Agreement upon the occurrence and continuance of any events of default under the New Credit Agreement.
The New Credit Agreement replaced and terminated the Company’s prior Credit Agreement, dated as of May 11, 2017 (the “Prior Credit Agreement”), among the Company, as borrower, certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, SunTrust Bank, as administrative agent, swing line lender and a letter of credit issuer, SunTrust Robinson Humphrey, Inc., KeyBanc Capital Markets Inc. and Citizens Bank, National Association, as joint-lead arrangers and joint-bookrunners, KeyBank National Association, as syndication agent, and Citizens Bank, National Association, as documentation agent. At the time it was replaced and terminated, the Company had approximately $274 million outstanding under the Prior Credit Agreement. On the Closing Date, the Company borrowed the entire principal amount of the term loan and $40 million of revolving loans to finance, in part, the cash portion of the purchase price for the Transaction, repay amounts outstanding under the Prior Credit Agreement, and pay related fees, expenses and other transaction costs. In addition, certain of the lenders and the other parties to the New Credit Agreement and their respective affiliates are lenders and/or agents under the Prior Credit Agreement, the indebtedness outstanding under which was repaid in connection with the Transaction, and as such have received a portion of the net proceeds from the loans under the New Credit Agreement.
Each Subsidiary Guarantor irrevocably and unconditionally guarantees all of the obligations under the New Credit Agreement. To secure their respective obligations under the New Credit Agreement, the Company and each Subsidiary Guarantor have granted a lien in favor of the secured parties thereunder, in substantially all of their assets, subject to certain customary exclusions.
The foregoing description of the New Credit Agreement is qualified in its entirety by reference to the New Credit Agreement, which is filed as Exhibit 10.2 hereto and is incorporated herein by reference.