Item 1.01.
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Entry into a Material Definitive Agreement.
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On the Closing Date, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders and other
parties party thereto, Goldman Sachs Bank USA and Wells Fargo Bank, National Association, as administrative agents, and Goldman Sachs Bank USA, as collateral agent, which provides for senior secured financing of $1,750.0 million, consisting of a
term loan A facility (the “Term Loan A Facility”) in an aggregate principal amount of $400.0 million, a term loan B facility (the “Term Loan B Facility”) in an aggregate principal amount of $625.0 million and a revolving credit facility (the
“Revolving Credit Facility” and, together with the Term Loan A Facility and Term Loan B Facility, the “Senior Facilities”) in an aggregate principal amount of up to $725.0 million, including a letter of credit sub-facility of up to $50.0 million.
Proceeds of the loans borrowed under the Senior Facilities on the Closing Date were used to fund, in part, the transactions contemplated by
the Merger Agreement, including the consummation of the Merger, the repayment in full of the Existing Credit Facility and Existing Private Placement Notes (each as defined below) and certain of Knoll’s existing indebtedness, and to pay related fees
and expenses. As of the Closing Date, the Revolving Credit Facility had outstanding borrowings in an aggregate principal amount of $285.0 million. Proceeds of any loans under the Revolving Credit Facility borrowed after the Closing Date and letters
of credit will be used for general corporate purposes.
The Senior Facilities are guaranteed by each of the Company’s wholly owned domestic subsidiaries, including Knoll and its subsidiaries, and
are secured by substantially all assets of the Company and of each subsidiary guarantor, in each case subject to certain exceptions.
Borrowings under the Senior Facilities bear interest at a rate per annum equal to, at the Company’s option, either a LIBO rate (subject to a
0.00% floor) or a base rate, in each case plus an applicable margin of, initially, (i) in the case of borrowings under the Term Loan A Facility, 1.50% for LIBOR loans and 0.50% for base rate loans, (ii) in the case of borrowings under the Term Loan
B Facility, 2.00% for LIBOR loans and 1.00% for base rate loans and (iii) in the case of borrowings under the Revolving Credit Facility, 1.50% for LIBOR loans and 0.50% for base rate loans. The applicable margin for borrowings under each of the
Senior Facilities varies depending on the Company’s first lien secured net leverage ratio. The Company is also required to pay a commitment fee initially equal to 0.20% per annum to the lenders under the Revolving Credit Facility in respect of the
unutilized commitments thereunder. The commitment fee under the Revolving Credit Facility varies depending on the Company’s first lien secured net leverage ratio.
The Term Loan A Facility matures on the five-year anniversary of the Closing Date and amortizes in equal quarterly installments starting
with the first full fiscal quarter after the Closing Date, of (i) for the first eight full fiscal quarters following the Closing Date, 1.25% of the initial principal amount, (ii) for the next four fiscal quarters, 1.875% of the initial principal
amount and (iii) thereafter, 2.5% of the initial principal amount. The Term Loan B Facility matures on the seven-year anniversary of the Closing Date and amortizes in equal quarterly installments, starting with the first full fiscal quarter after
the Closing Date, of 0.25% of the initial principal amount. The Revolving Credit Facility matures on the five-year anniversary of the Closing Date. In addition, the Company is required to prepay outstanding loans under the Term Loan B Facility,
subject to certain exceptions, with up to 50% of the Company’s annual excess cash flow, as defined under the Credit Agreement, and outstanding loans under the Term Loan A Facility and the Term Loan B Facility, subject to certain exceptions, with up
to 100% of the net cash proceeds of certain recovery events and non-ordinary course asset sales (which percentages vary depending on the Company’s first lien secured net leverage ratio).
The Company may generally prepay outstanding loans under the Senior Facilities at any time, without prepayment premium or penalty, subject
to customary “breakage” costs with respect to LIBOR loans. Prepayments of the Term Loan B Facility in connection with certain “repricing events” resulting in a lower yield occurring at any time during the first six months after the Closing Date
must be accompanied by a 1.00% prepayment premium.
The Term Loan A Facility and Revolving Credit Facility require that the Company maintain a maximum first lien secured net leverage ratio, as
defined in the Credit Agreement, initially of 4.25 to 1.00 as of the last day of each fiscal quarter for which financials have been (or were required to be) delivered, commencing with the first full fiscal quarter after the Closing Date, stepping
down to 3.75 to 1.00 over time. At the Company’s election, in certain circumstances, such ratio may be increased by up to 0.50 to 1.00.
The Senior Facilities contain certain affirmative and negative covenants that limit the ability of the Company, among other things and
subject to certain significant exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, asset sales and acquisitions, pay dividends and make other restricted payments and enter into transactions with
affiliates.
The Senior Facilities contain certain events of default, including relating to a change of control. If an event of default occurs, the
lenders under the Senior Facilities will be entitled to take various actions, including the acceleration of amounts due under the Senior Facilities.
The foregoing description of the Credit Agreement and the Senior Facilities is not intended to be complete and is qualified in its entirety
by reference to the Credit Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.