Item 1.01 Entry into a Material Definitive Agreement.
Supply Agreement
In connection with the
closing of the transactions contemplated by the LOrange Agreement, described in Item 2.01, MTU Friedrichshafen GmbH, a limited liability company under German law (MTU) and a subsidiary of Rolls-Royce PLC
(Rolls-Royce), and LOrange GmbH, a limited liability company under German Law (LOrange), entered into a long-term supply agreement, dated June 1, 2018 (the LTSA). Following the closing of the
LOrange Agreement, LOrange became a wholly-owned subsidiary of Woodward, Inc., a Delaware corporation (the Company).
Pursuant to the terms of the LTSA, LOrange will continue to supply to MTU and its affiliates within Rolls-Royce certain liquid fuel
injection systems, injectors, pumps and other associated parts and components for industrial diesel, heavy fuel oil and dual-fuel engines in a manner consistent with the supply of such products prior to the transaction. The LTSA has an initial term
that extends through December 31, 2032. During the term of the LTSA, MTU is required to continue to purchase certain of these products exclusively from LOrange, subject to certain limitations specified therein, at pricing that has been
negotiated at arms-length.
The foregoing description of the LTSA does not purport to be complete and is qualified in its entirety by
reference to the agreement and the exhibits attached thereto, copies of which the Company plans to file as an exhibit to its Quarterly Report on Form 10-Q for the period ending June 30, 2018.
Note Purchase Agreement
On May 31,
2018, the Company entered into a Note Purchase Agreement (the 2018 Note Purchase Agreement) with the purchasers named therein (the Purchasers) relating to the sale by the Company and the purchase by the Purchasers of an
aggregate principal amount of $400,000,000 of senior unsecured notes comprised of (a) $85,000,000 aggregate principal amount of its Series P Senior Notes due May 30, 2025 (the Series P Notes), (b) $85,000,000 aggregate
principal amount of its Series Q Senior Notes due May 30, 2027 (the Series Q Notes), (c) $75,000,000 aggregate principal amount of its Series R Senior Notes due May 30, 2029 (the Series R Notes),
(d) $75,000,000 aggregate principal amount of its Series S Senior Notes due May 30, 2030 (the Series S Notes), and (e) $80,000,000 aggregate principal amount of its Series T Senior Notes due May 30, 2033 (the
Series T Notes; together with the Series P Notes, the Series Q Notes, the Series R Notes, and the Series S Notes, the Notes), in a series of private placement transactions.
The Series P Notes have a maturity date of May 30, 2025 and generally bear interest at a rate of 4.27% per annum. The Series Q Notes
have a maturity date of May 30, 2027 and generally bear interest at a rate of 4.35% per annum. The Series R Notes have a maturity date of May 30, 2029 and generally bear interest at a rate of 4.41% per annum. The Series S Notes
have a maturity date of May 30, 2030 and generally bear interest at a rate of 4.46% per annum. The Series T Notes have a maturity date of May 30, 2033 and generally bear interest at a rate of
4.61% per annum. In connection with the issuance of the Notes, the Company entered into cross-currency swap transactions in respect of each tranche of Notes based on a foreign exchange rate
equal to $1.158 United States Dollars per 1 Euro, which effectively reduced the interest rates on the Series P Notes to 1.82% per annum, the Series Q Notes to 2.15% per annum, the Series R Notes to 2.418% per annum, the Series S
Notes to 2.546% per annum and the Series T Notes to 2.897% per annum. Interest on the Notes will be payable semi-annually on May 30 and November 30 of each year until all principal is paid. Interest payments on the Notes commence
on November 30, 2018.
The Companys obligations under the 2018 Note Purchase Agreement and the Notes will rank at all times at
least pari passu, without preference or priority, with all other unsecured unsubordinated debt of the Company (collectively, the Existing Unsecured Indebtedness), including the Companys outstanding debt under the revolving credit
agreement, dated July 10, 2013, between the Company and a syndicate of lenders led by Wells Fargo Bank, National Association, as administrative agent.
The 2018 Note Purchase Agreement contains restrictive covenants customary for such financings, including, among other things, covenants that
place limits on each Companys ability to incur liens on assets, incur additional debt (including a leverage test), transfer or sell the Companys assets, merge or consolidate with other persons and enter into material transactions with
affiliates. The 2018 Note Purchase Agreement also contains financial covenants which require Woodward to maintain a specified leverage ratio of net indebtedness to consolidated EBITDA and a minimum consolidated net worth, which are, in each case,
consistent with financial covenants set forth in the Existing Unsecured Indebtedness.
The 2018 Note Purchase Agreement also contains
events of default customary for such financings, the occurrence of which would permit the Purchasers of the Notes to accelerate the amounts due thereunder. In the event of default, the interest rate accruing on each of the Notes would increase by
2%.
The Companys payment and performance obligations under the 2018 Note Purchase Agreement and the Notes, including without
limitation the obligations for payment of all principal, interest and any applicable prepayment compensation amount on the Notes, are guaranteed (i) by Woodward FST, Inc., MPC Products Corporation and Woodward HRT, Inc., each a wholly owned
subsidiary of the Company.
The Company, at its option, is permitted at any time to prepay all or any part of the then-outstanding
principal amount of any series of the Notes at 100% of the principal amount of the series of Notes to be prepaid (but, in the case of partial prepayment, not less than $1,000,000), together with interest accrued on such amount to be prepaid to the
date of prepayment, plus any applicable prepayment compensation amount and, if any holder of the Notes has entered into a cross-currency swap agreement in respect of the Note held by such holder, certain losses (if any) incurred by such holder under
such cross-currency swap agreement as a result of such prepayment.
Amendments to Existing Note Purchase Agreements
On May 31, 2018, the Company entered into (1) Amendment No. 1 to Note Purchase Agreement (the 2013 Agreement
Amendment) with the then current holders of the entire outstanding principal amount of the notes issued under the Existing 2013 Note Purchase Agreement (defined below), (2) Amendment No. 1 to Note Purchase Agreement (the 2016
Series M Agreement Amendment) with the then current holders of the entire outstanding principal amount of the notes issued under the Existing 2016 Series M Note Purchase Agreement (defined below), and (3) Amendment No. 1 to Note
Purchase Agreement (the 2016 Series N and O Agreement Amendment; together with the 2016 Series M Agreement Amendment, the 2016 Agreement Amendments) with the then current holders of the entire outstanding principal amount of
the notes issued under the Existing 2016 Series N and O Note Purchase Agreement (defined below).
The 2013 Agreement Amendment amends that
certain Note Purchase Agreement, dated October 1, 2013, among the Company and the noteholders party thereto (the Existing 2013 Note Purchase Agreement) relating to the issuance and sale by the Company of $50,000,000 aggregate
principal amount of its Series G Senior Notes due November 15, 2020, $25,000,000 aggregate principal amount of its Series H Senior Notes due November 15, 2023, $25,000,000 aggregate principal amount of its Series I Senior Notes due
November 15, 2025, $50,000,000 aggregate principal amount of its Floating Rate Series J Senior Notes due November 15, 2020, $50,000,000 aggregate principal amount of its Series K Senior Notes due November 15, 2023, and $50,000,000
aggregate principal amount of its Series L Senior Notes due November 15, 2023. The 2016 Series M Agreement Amendment amends that certain Note Purchase Agreement, dated September 23, 2016, among the Company and the noteholders party thereto
(the Existing 2016 Series M Note Purchase Agreement) relating to the issuance and sale by the Company of 40,000,000 aggregate principal amount of its Series M Senior Notes due September 23, 2026. The 2016 Series N and O
Agreement Amendment amends that certain Note Purchase Agreement, dated September 23, 2016, among Woodward International Holding B.V., a subsidiary of the Company organized under the laws of The Netherlands (the BV Subsidiary), the
Company, as parent guarantor, and the noteholders party thereto (the Existing 2016 Series N and O Note Purchase Agreement; together with the Existing 2016 Series M Note Purchase Agreement, the Existing 2016 Note Purchase
Agreements) relating to the issuance and sale by the BV Subsidiary of 77,000,000 aggregate principal amount of its Series N Senior Notes due September 23, 2028 and 43,000,000 aggregate principal amount of its Series O Senior
Notes due September 23, 2031. The 2013 Agreement Amendment and the 2016 Agreement Amendments each provide for changes to, among other things, conform certain of the negative covenants in the Existing 2013 Note Purchase Agreement and the
Existing 2016 Note Purchase Agreements, respectively, to the corresponding covenant provisions in the 2018 Note Purchase Agreement.
The
foregoing descriptions of the 2013 Agreement Amendment and the 2016 Agreement Amendments and related matters are qualified in their entirety by reference to the 2013 Agreement Amendment and the 2016 Agreement Amendments, which are filed as Exhibits
10.2, 10.3 and 10.4 hereto, respectively, and incorporated herein by reference.