Item 1.01.
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Entry into a Material Definitive Agreement.
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Senior Lien Term Loan Facility
On August 29, 2017, DXP Enterprises, Inc. (the
Company
) entered into a Term Loan and Security Agreement (the
Term Loan
Agreement
) by and among the Company, the other persons party thereto from time to time as guarantors, the financial institutions party thereto from time to time as lenders and Goldman Sachs Bank USA, as administrative agent for the lenders
and as collateral agent for the secured parties. The Term Loan Agreement provides for a $250.0 million term loan (the
Term Loan Facility
) to (i) repay the indebtedness outstanding under the Amended and Restated Credit
Agreement, dated as of January 2, 2014, by and among, including others, the Company, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto and (ii) for other general corporate purposes of the
Company and its subsidiaries.
Subject to the conditions set forth in the Term Loan Agreement, the Term Loan Facility may be increased by incremental term
loans in an aggregate amount not to exceed (i) $30.0 million, in minimum increments of $10.0 million, plus (ii) secured and unsecured amounts if certain financial tests are met. The full terms of any incremental loans, including weighted
average time to maturity, will be set forth in a joinder agreement to be completed at the time of borrowing.
The Term Loan Facility will mature on
August 29, 2023 and is subject to quarterly amortization equal to 0.25% of the initial principal amount thereof, and with respect to any incremental term loans, as provided in their respective joinder agreements. Interest shall accrue on
outstanding borrowings under the Term Loan Agreement at a rate equal to LIBOR (with a floor of 1.00%) plus 5.50%, or base rate plus 4.50%, and interest accruing at the LIBOR rate is payable at the end of the applicable interest rate period (but at
least, each three months), and interest accruing at the base rate is payable on the last business day of each calendar quarter.
The Term Loan Facility is
guaranteed by each of the Companys direct and indirect material wholly owned subsidiaries, other than any of the Companys Canadian subsidiaries and certain other excluded subsidiaries (the
Guarantors
). The Term Loan
Facility is secured by substantially all of the assets of the Company, and the Guarantors; provided, that the Term Loan Facility is not secured by any liens on more than 65% of the voting stock of the Companys non-U.S. subsidiaries or assets
of the non-U.S. subsidiaries. The Term Loan Agreement contains representations and warranties and affirmative and negative covenants that are usual and customary, including representations, warranties and covenants that, among other things, restrict
the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales, pay dividends, and make distributions.
The Term Loan Agreement contains a financial covenant restricting the Company from allowing its ratio of consolidated borrowed money secured debt to consolidated EBITDA for any trailing four-fiscal quarter period to exceed certain levels set forth
in the Term Loan Agreement. Obligations under the Term Loan Agreement may be accelerated upon certain customary events of default (subject to notice and race periods, as appropriate), including among others: nonpayment of principal, interest or
fees; breach of the affirmative or negative covenants; breach of the representations or warranties in any material respect; event of default under, or acceleration of, other material indebtedness; bankruptcy or insolvency; material judgments entered
against the Company or any of its subsidiaries; invalidity or unenforceability of any security documentation associated with the Term Loan Facility; and a change of control of the Company. Subject to a six-month no call period, the term loans may be
voluntarily prepaid without penalty or premium. The term loans are subject to mandatory prepayments for assets sales, insurance and condemnation events, incurrence of certain debt and a percentage of excess cash flow, subject to a reduction of the
percentage upon meeting certain financial tests. Mandatory prepayments are subject to customary threshold and re-investment of proceeds requirements.
ABL Facility
Also, on August 29, 2017, the
Company entered into a Loan and Security Agreement (the
ABL Credit Agreement
) by and among the Company, certain of the Companys US subsidiaries, as borrowers (together with the Company, the
US Borrowers
),
certain of the Companys Canadian subsidiaries, as borrowers (the
Canadian Borrowers
, and together with the US Borrowers, the
Borrowers
), the lenders party thereto and Bank of America, N.A., as agent. The
ABL Credit Agreement provides for asset-based revolving loans (the
ABL Loans
) in an aggregate principal amount of up to $85.0 million, with up to $75.0 million to be made available to the US Borrowers (the
US ABL
Facility
) and up to $10.0 million to be made available to the Canadian Borrowers (the
Canadian ABL Facility
and together with the US ABL Facility, the
ABL Facility
).
Subject to the conditions set forth in the ABL Credit Agreement, the ABL Facility may be increased by up to an aggregate of $50.0 million, in minimum
increments of $10.0 million.
The ABL Facility will mature on August 29, 2022. Interest shall accrue on outstanding borrowings at a rate equal to
LIBOR or CDOR plus a margin ranging from 1.25% to 1.75% per annum, or at an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from 0.25% to 0.75% per annum, in each case, based upon the average daily
excess availability under the ABL Facility for the most recently completed calendar quarter. Fees ranging from 0.25% to 0.375% per annum will be payable on the portion of the US ABL Facility not in use at any given time, and fees ranging from
0.25% to 0.375% per annum will be payable on the portion of the Canadian ABL Facility not in use at any given time.
The obligations of the Borrowers under the ABL Facility are guaranteed by the Company and its direct and indirect
material wholly-owned subsidiaries other than certain excluded subsidiaries; provided that the obligations of the US Borrowers will not be guaranteed by any of the Companys Canadian subsidiaries. The ABL Facility is secured by substantially
all of the assets of the Borrowers; provided that the obligations of the US Borrowers will not be secured by any liens on more than 65% of the voting stock of the Companys non-U.S. subsidiaries or assets of the non-U.S. subsidiaries.
The ABL Credit Agreement contains representations and warranties and affirmative and negative covenants that are usual and customary, including
representations, warranties and covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any
other company, engage in asset sales, pay dividends, and make distributions. The ABL Credit Agreement contains a financial covenant restricting the Company from allowing its fixed charge coverage ratio be less than 1.00:1.00 during a compliance
period, which is triggered when the availability under ABL Facility falls below a threshold set forth in the ABL Credit Agreement. Obligations under the ABL Credit Agreement may be accelerated upon certain customary events of default (subject to
grace periods, as appropriate), including among others: nonpayment of principal, interest or fees; breach of the affirmative or negative covenants; breach of the representations or warranties in any material respect; event of default under, or
acceleration of, other material indebtedness; bankruptcy or insolvency; material judgments entered against the Company or any of its subsidiaries; invalidity or unenforceability of any security documentation associated with the ABL Facility; and a
change of control of the Company.
The foregoing descriptions of the Term Loan Agreement, the Term Loan Facility, the ABL Credit Agreement and the ABL
Facility do not purport to be complete and are qualified in their entirety by reference to the complete text of such agreements, copies of which will be filed as exhibits to the Companys Quarterly Report on Form 10-Q for the period ended
September 30, 2017 to be filed with the Securities and Exchange Commission (the
SEC
).