Item 1.01.
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Entry into a Material Definitive Agreement.
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Stock Purchase Agreement
On April 2, 2018, NN, Inc., a Delaware corporation (the
Company
), entered into a Stock Purchase Agreement (the
Stock Purchase Agreement
), solely for the purposes of Article V and Article XI therein, with Precision Engineered Products LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (the
Purchaser
), Paragon Equity LLC, a Delaware limited liability company (the
Seller
), and PMG Intermediate Holding Corporation, a Delaware corporation (
PMG
), pursuant to which Purchaser agreed to
acquire from Seller (the
Acquisition
) all of the outstanding capital stock of PMG.
The purchase price the Company has
agreed to pay in connection with the Acquisition is $375 million in cash (the
Purchase Price
), subject to adjustment for PMGs indebtedness, working capital and cash balance at the closing of the Acquisition (the
Closing
). The Purchase Price is also subject to adjustment for certain Acquisition-related expenses.
The Stock
Purchase Agreement contains customary representations and warranties and covenants by each party. The Closing of the Acquisition is subject to customary closing conditions, including the expiration or termination of the applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Companys and the Purchasers obligations under the Stock Purchase Agreement are not conditioned on receipt of financing. The parties are obligated, subject to
certain limitations, to indemnify the other under the Stock Purchase Agreement for certain customary and other specified matters, including breaches of representations and warranties, nonfulfillment or breaches of covenants and for certain
liabilities and third-party claims.
The foregoing descriptions of the Stock Purchase Agreement and the Acquisition are subject to, and
qualified in their entirety by, the full text of the Stock Purchase Agreement, which is attached hereto as Exhibit 2.1 to this Current Report on Form
8-K
and incorporated by reference herein. The Stock
Purchase Agreement has been included as an exhibit hereto solely to provide the Companys investors and security holders with information regarding its terms. It is not intended to be a source of financial, business or operational information
about the Company or its subsidiaries or affiliates. The representations, warranties and covenants contained in the Stock Purchase Agreement: (i) are made only for purposes of the Stock Purchase Agreement and are made as of specific dates;
(ii) are solely for the benefit of the parties; (iii) may be subject to qualifications and limitations agreed upon by the parties in connection with negotiating the terms of the Stock Purchase Agreement, including being qualified by
confidential disclosures made for the purpose of allocating contractual risk between the parties rather than establishing matters as facts; and (iv) may be subject to standards of materiality applicable to the contracting parties that differ
from those applicable to investors or security holders. The Companys investors and security holders should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts
or condition of the Company or its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Stock Purchase Agreement, which subsequent
information may or may not be fully reflected in public disclosures.
Debt Commitment Letter
In connection with entering into the Stock Purchase Agreement, on April 2, 2018, the Company also entered into a commitment letter (the
Debt Commitment Letter
) with SunTrust Bank and SunTrust Robinson Humphrey, Inc. (collectively, the
Commitment Parties
), pursuant to which, subject to the terms and conditions set forth therein, the Commitment
Parties have committed to provide (i) if certain
2
amendments to the Existing Credit Agreement, as hereinafter defined (the
Required Amendments
), are obtained, a $200 million incremental senior secured first lien term loan
facility (the
Incremental Facility
), and (ii) if the Required Amendments are not obtained, senior secured first lien credit facilities in the amount of $1,125 million consisting of (a) a senior secured first lien
term loan facility in the amount of $1,025 million (the
Term Loan Facility
) and (b) a senior secured first lien revolving credit facility in the amount of up to $100 million (the
Revolving Credit
Facility
). Funds received from the foregoing credit facilities (the
Credit Facilities
) will be used, together with cash on hand, to finance a portion of the Purchase Price of the Acquisition, to pay certain fees and
expenses incurred in connection therewith and to refinance certain existing indebtedness of the Company, its subsidiaries and PMG.
If the
Company issues equity securities to finance a portion of Purchase Price, the amount of cash available under the Incremental Facility or the Term Loan Facility, as applicable, will automatically be reduced, on a
dollar-for-dollar
basis, by the aggregate net proceeds from the issuance or sale prior to the Closing.
The Credit Facilities will be guaranteed by all of the Companys domestic subsidiaries that guarantee the Companys existing Amended
and Restated Credit Agreement, dated as of September 30, 2016 (as amended by the Incremental Amendment to Amended and Restated Credit Agreement, dated as of October 31, 2016, Amendment No. 1 to the Amended and Restated Credit
Agreement, dated as of April 3, 2017, Amendment No. 2 to the Amended and Restated Credit Agreement, dated as of August 15, 2017 and Amendment No. 3 to the Amended and Restated Credit Agreement, dated as of November 24, 2017,
as amended, the
Existing Credit Agreement
) and by the direct or indirect, material, domestic subsidiaries acquired by Purchaser pursuant to the Acquisition. The interest rate of the Incremental Facility and of the Term Loan
Facility, as applicable, will be LIBOR plus 3.75%, and depending on the Companys leverage ratios, the interest rate of the Revolving Credit Facility will range from LIBOR plus 2.50% to LIBOR plus 3.50%. The Incremental Facility would be
subject to an amortization schedule with final payment due on October 19, 2022. The Term Loan Facility would be subject to an amortization schedule with final payment due seven years following the Closing. The final maturity of the Revolving
Credit Facility would occur on the fifth anniversary of the Closing.
Some of the Commitment Parties or their respective affiliates from
time to time have provided in the past and may provide in the future investment banking, commercial lending and financial advisory services to the Company and its affiliates in the ordinary course of business.
The foregoing description of the Debt Commitment Letter is qualified in its entirety by reference to the full text of the Debt Commitment
Letter which is attached as Exhibit 10.1 to this Current Report on Form
8-K
and is incorporated by reference herein.