Item 1.01 Entry Into
a Material Definitive Agreement.
Atlas Technical Consultants,
Inc., a Delaware corporation (the “Company”), is the sole managing member of Atlas TC Holdings LLC, a Delaware limited
liability company (“Holdings”). Holdings is the sole managing member of Atlas Intermediate Holdings LLC, a Delaware
limited liability company (“Intermediate”).
Term
Loan Agreement and ABL Revolver Agreement
On February 25, 2021,
Intermediate, as the borrower, entered into two new credit facilities consisting of (i) a $432.0 million senior secured term loan
at closing and, subject to the satisfaction of certain terms and conditions, a committed delayed draw term loan facility in an
aggregate principal amount of up to $75.0 million and an uncommitted incremental term loan facility that may be incurred after
closing (the “Term Loan”) pursuant to a Credit Agreement dated February 25, 2021, by and among Holdings, Intermediate,
Wilmington Trust, National Association, as administrative agent and collateral agent, and certain lenders thereto, including certain
Blackstone entities, which may include, Blackstone Alternative Credit Advisors LP, and its managed funds and accounts, and its
affiliates, Blackstone Holdings Finance Co. L.L.C. and its affiliates, and/or certain other of their respective funds, accounts,
clients managed, advised or sub-advised, or any of their respective affiliates (the “Term Loan Agreement”) and (ii)
a $40.0 million senior secured revolver which aggregate principal amount may be increased, subject to the satisfaction of certain
terms and conditions, including obtaining commitments therefor, by up to $20,000,000 (the “Revolver”) pursuant to that
certain Credit Agreement dated February 25, 2021, by and among Holdings, Intermediate, JPMorgan Chase Bank, N.A., as administrative
agent, swingline lender, issuing bank, lender, sole bookrunner and sole lead arranger (the “ABL Revolver Agreement,”
and together with the Term Loan Agreement, collectively the “Credit Agreements”). The Term Loan Agreement refinances
that certain Credit Agreement dated as of February 14, 2020 (as amended to date, the “Existing Credit Agreement”),
with Macquarie Capital Funding LLC, as administrative agent and certain lenders, which repayment was effectuated partially in cash
and partially by way of a cashless exchange of existing term loans and preferred equity for Term Loans.
The initial Term Loan
will mature on February 25, 2028 and the Revolver will mature on February 25, 2026.
Interest on any outstanding
borrowings is payable monthly under the ABL Revolver Agreement, quarterly under the Term Loan Agreement or, in each case, at the
end of the applicable interest period in arrears. The cash interest rates under the Term Loan Agreement will be equal to either
(i) the Adjusted LIBO Rate (as defined in the Term Loan Agreement), plus 5.50%, or (ii) an Alternate Base Rate (as defined in the
Term Loan Agreement), plus 4.50%. The interest rates under the ABL Revolver Agreement will be equal to either (i) the Adjusted
LIBO Rate (as defined in the ABL Revolver Agreement), plus 2.50%, or (ii) the ABR (as defined in the ABL Revolver Agreement), plus
1.50%.
The Credit Agreements
are guaranteed by Holdings and secured by (i) in the case of the ABL Revolver Agreement, a first priority security interest in
the current assets, including accounts receivable, of Holdings, Intermediate and its subsidiaries and (ii) in the case of the Term
Loan Agreement, a pledge of the equity interests of the subsidiaries of Holdings and Intermediate, and subject to the first lien
security interest on current assets under the Revolver, a first priority lien on substantially all other assets of Holdings, Intermediate
and all of their direct and indirect subsidiaries.
The Term Loan Agreement
contains a financial covenant which requires Holdings, Intermediate and all of their direct and indirect subsidiaries on a consolidated
basis to maintain a Total Net Leverage Ratio (as defined in each Credit Agreement) tested on a quarterly basis that does not exceed
(i) 8.25 to 1.00 with respect to the fiscal quarters ending on April 2, 2021 and July 2, 2021, (ii) 8.00 to 1.00 for the fiscal
quarters ending October 1, 2021 and December 31, 2021, (iii) 7.50 to 1.00 for the fiscal quarters ending April 1, 2022 and July
1, 2022, (iv) 7.25 to 1.00 for the fiscal quarters ending September 30, 2022 and December 30, 2022, (v) 7.00 to 1.00 for the fiscal
quarters ending March 31, 2023 and June 30, 2023, (vi) 6.75 to 1.00 for the fiscal quarters ending September 29, 2023 and December
29, 2023, and (vii) 6.50 to 1.00 for March 29, 2024 and each fiscal quarter ending thereafter.
The ABL Revolver Agreement
contains a “springing” financial covenant which requires Holdings, Intermediate and all of their direct and indirect
subsidiaries on a consolidated basis to maintain a Fixed Charge Coverage Ratio (as defined in the ABL Revolver Agreement) of no
less than 1.10 to 1.00 when the outstanding principal amount of loans under the Revolver exceeds $0 or the aggregate exposure for
letters of credit under the Revolver exceeds $5 million.
The Credit Agreements
also include a number of customary negative covenants. Such covenants, among other things, limit or restrict the ability of each
of Holdings, Intermediate and all of their direct and indirect subsidiaries to:
|
●
|
incur additional indebtedness and make guarantees;
|
|
●
|
incur liens on assets;
|
|
●
|
engage in mergers or consolidations or fundamental changes;
|
|
●
|
dispose of assets;
|
|
●
|
pay dividends and distributions or repurchase capital stock;
|
|
●
|
make investments, loans and advances, including acquisitions;
|
|
●
|
amend organizational documents and other material contracts;
|
|
●
|
enter into certain agreements that would restrict the ability to incur liens on assets;
|
|
●
|
repay certain junior indebtedness and in the case of the ABL Revolver Agreement, make certain payments on the Term Loans;
|
|
●
|
enter into certain transactions with affiliates;
|
|
●
|
amend certain documents governing indebtedness;
|
|
●
|
enter into sale leaseback transactions;
|
|
●
|
change fiscal periods; and
|
|
●
|
change the conduct of its business.
|
The aforementioned
restrictions are subject to certain exceptions including (i) the ability to incur additional indebtedness, liens, investments,
dividends and distributions, and prepayments of junior indebtedness subject, in each case, to compliance with certain financial
metrics and/or certain other conditions and (ii) a number of other traditional exceptions that grant the Company continued flexibility
to operate and develop its business.
The Credit Agreements
also include customary affirmative covenants, representations and warranties and events of default.
The foregoing description
of the Credit Agreements does not purport to be complete and is qualified in its entirety by the full text of the Term Loan Agreement,
which is attached hereto as Exhibit 10.1, and the ABL Revolver Agreement, which is attached hereto as Exhibit 10.2, and are both
incorporated herein by reference.
The
representations, warranties and covenants contained in the Credit Agreements were made only for the purpose of the Credit Agreements
and as of specific dates, were solely for the benefit of the parties to the Credit Agreements, and may be subject to limitations
agreed upon by the parties, including being qualified by disclosures for the purpose of allocating contractual risk between the
parties instead of establishing matters as facts; and may be subject to standards of materiality applicable to the contracting
parties that differ from those applicable to investors or security holders. Accordingly, investors should not rely on
the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts
or condition of the Company.
Amendment No. 1 to
Amended and Restated Limited Liability Company Agreement of Holdings
On February 25, 2021,
the Company, in its capacity as the managing member of Holdings, entered into Amendment No. 1 to the Amended and Restated Limited
Liability Company Agreement of Holdings (the “Holdings A&R LLC Agreement”) to allow Holdings, at the direction
of the Board of Directors of the Company (the “Board”), to redeem all of the Series A Senior Preferred Units of Holdings
(the “Preferred Units”) at any time using the proceeds from the refinancing of the Existing Credit Agreement.
The foregoing description
of Amendment No. 1 does not purport to be complete and is qualified in its entirety by the full text of Amendment No. 1, which
is attached hereto as Exhibit 10.3 and is incorporated herein by reference.
Blackstone
Redemption
On February 25, 2021,
following the execution of Amendment No. 1 to the Holdings A&R LLC Agreement, Holdings elected to redeem all of the 145,000
Preferred Units then outstanding and held by GSO COF III AIV-2 LP for $1,084.96 per Preferred Unit for a total redemption price
of $157,371,024.84 (the “Redemption”). Following the Redemption, (i) the Preferred Units will no longer be deemed outstanding,
(ii) all dividends on the Preferred Units will cease to accrue, and (iii) all rights of the holders thereof as holders of Preferred
Units shall cease and terminate, except for the right to receive payment under the Redemption.