Item 1.01 Entry into a Material Definitive Agreement.
On July 6, 2018, Kadant Inc., a Delaware corporation (“Parent”) and certain of its domestic subsidiaries, Kadant Johnson LLC (“Kadant Johnson”), Kadant Black Clawson LLC (“Kadant Black”) and Verus Lebanon, LLC (“Verus”, and collectively with Parent, Kadant Johnson, and Kadant Black, “Kadant” or “Borrower”), borrowed $21.0 million from Citizens Bank, N.A. (the “Lender”) pursuant to a promissory note dated July 6, 2018 (the “Loan”) in favor of the Lender. The Loan is repayable in quarterly installments of $262,500 over a ten-year period (“Term”) with any remaining principal balance and accrued interest due upon maturity. Interest on the Loan accrues and is payable quarterly in arrears at a fixed rate of 4.45% per annum. The Borrower is not permitted to prepay the Loan in any amount in the first twelve months of the Term. Any voluntary prepayments will be subject to a 2.00% prepayment fee if paid in the second twelve months of the Term, and subject to a 1.00% prepayment fee if paid in the third twelve months of the Term. Thereafter, no prepayment fee will be applied to voluntary prepayment by the Borrower.
The Loan is secured by certain real estate and related personal property of Kadant, pursuant to the Mortgage, Security Agreement and Assignment of Leases and Rents by Parent in favor of the Lender; the Mortgage by Kadant Johnson in favor of the Lender; and the Open-End Mortgage, Security Agreement, and Assignment of Leases and Rents by Verus in favor of the Lender; each dated as of July 6, 2018 (collectively, “Mortgage and Security Agreements”). The properties subject to the Mortgage and Security Agreements are located in Auburn, Massachusetts; Three Rivers, Michigan; and Lebanon, Ohio. Kadant has the right to substitute other real property and/or collateral in the event of the sale of any of the properties subject to the Mortgage and Security Agreements. Parent and the subsidiary owners of the real property have also provided certain indemnities to the Lender for hazardous materials and discharges on the property, as is customary in commercial real estate mortgages.
The obligations of Kadant under the Loan may be accelerated upon the occurrence of an Event of Default (as defined in the Mortgage and Security Agreements), which includes customary events of default including, without limitation, payment defaults, defaults in the performance of covenants and obligations, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, liens on the properties or collateral and uninsured judgments. In addition, the occurrence and continuation after any applicable notice or cure period of an event of default under Kadant’s existing revolving credit facility, effective as of March 1, 2017, and as amended to date (the “Credit Facility”), among Parent, as Borrower, the Foreign Subsidiary Borrowers from time to time parties thereto (as those terms are defined in the Credit Facility), the several banks and other financial institutions or entities from time to time parties thereto, and Citizens Bank, N.A., as Administrative Agent and Multi-currency Administrative Agent, would be an event of default under the Loan.
The forgoing description of the Loan does not purport to be a complete statement of the terms and conditions of the Loan and is qualified in its entirety by reference to the full text of the Loan filed with this report as Exhibit 99.1. The forgoing descriptions of the Mortgage and Security Agreements do not purport to be complete statements of the terms and conditions of such agreements and are qualified in their entirety by reference to the full text of the Mortgage, Security Agreement, Assignment of Leases and Rents, the Mortgage, and the Open-End Mortgage, Security Agreement, and Assignment of Leases and Rents, filed with this report as Exhibits 99.2, 99.3, and 99.4, respectively.