Item 1.01
Entry Into A Material Definitive Agreement.
As
previously disclosed, on November 15, 2021, Waldencast Acquisition Corp. (“Waldencast”) entered into an Agreement
and Plan of Merger (the “Obagi Merger Agreement”), by and among Waldencast, Obagi Merger Sub, Inc., a Cayman Islands
exempted company limited by shares (“Merger Sub”) and an indirect wholly owned subsidiary of Waldencast, and Obagi
Global Holdings Limited, a Cayman Islands exempted company limited by shares (“Obagi”), and an Equity Purchase Agreement
(the “Milk Equity Purchase Agreement” and together with the Obagi Merger Agreement, the “Transaction Agreements”),
by and among Waldencast, Obagi Holdco 1 Limited, a limited company incorporated under the laws of Jersey, Waldencast Partners LP, a Cayman
Islands exempted limited partnership, Milk Makeup LLC, a Delaware limited liability company (“Milk”), certain members
of Milk and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as representative of
Milk’s equityholders.
In
connection with the transactions contemplated by the Transaction Agreements, on June 24, 2022, Waldencast Finco Limited, a wholly owned
subsidiary of Waldencast, entered into a Credit Agreement (the “Waldencast Credit Agreement”), by and among Waldencast
Finco Limited, as the borrower (the “Borrower”), Waldencast Partners LP, as the parent guarantor, the lenders party
thereto and JPMorgan Chase Bank, N.A., as administrative agent. Credit
Suisse AG, New York Branch acted as documentation agent and JPMorgan Chase Bank, N.A., Banco Santander, S.A. and Wells Fargo Securities,
LLC acted as joint bookrunners and joint lead arrangers under the Waldencast Credit Agreement. The
Waldencast Credit Agreement provides for a four-year secured first-lien (i) term loan facility in an aggregate principal amount of $175,000,000
and (ii) revolving loan facility in an aggregate principal amount of up to $50,000,000 (of which an aggregate principal amount of up
to $7,500,000 will be available, at the Borrower’s option, to be drawn in the form of letters of credit) (collectively, the “Waldencast
Credit Facilities”).
The
initial borrowing of the loans under the Waldencast Credit Agreement is subject to customary limited conditions precedent and are expected
to become available on the Funding Date (as defined in the Waldencast Credit Agreement). The proceeds of borrowings under the Waldencast
Credit Facilities will be used to (i) finance a portion of the consideration for the consummation of the transactions contemplated by
the Transaction Agreements, (ii) repay in full all outstanding amounts under, and terminate, the Existing Credit Agreements (as defined
in the Waldencast Credit Agreement) and (iii) fund working capital needs or other general corporate purposes.
Borrowings
under the Waldencast Credit Facilities will accrue interest at a rate per annum equal to, at the Borrower’s option, the Alternate
Base Rate or the Term Benchmark Rate (each, as defined in the Waldencast Credit Agreement) plus an applicable margin of 2.50% for Alternate
Base Rate borrowings and 3.50% for Term Benchmark Rate borrowings. This represents approximately half of the borrowing cost of the Existing
Credit Agreements, and accordingly, an encouraging expression of confidence by sophisticated, first tier lender banks.
Borrowings
under the Waldencast Credit Facilities may be prepaid without premium or penalty, subject to applicable notice requirements and the payment
of customary “breakage” costs.
As
of the Funding Date (as defined in the Waldencast Credit Agreement), obligations under the Waldencast Credit Agreement will be (i) guaranteed
by certain existing and future subsidiaries of the Borrower and (ii) secured by a first priority lien on substantially all of the assets
of Waldencast Partners LP, the Borrower and the subsidiary guarantors, in the case of each of clauses (i) and (ii) above, subject to
customary exceptions and limitations.
The
Waldencast Credit Agreement contains customary representations and warranties, affirmative covenants and events of default. The Waldencast
Credit Agreement also contains customary negative covenants including, among other things, limitations on the ability of the Borrower,
Waldencast Partners LP and certain of their subsidiaries to incur indebtedness, create liens, make investments, enter into mergers, consolidations
and other similar transactions, dispose of assets, declare dividends, enter into certain transactions with their affiliates and enter
into sale and leaseback transactions.
Additionally,
the Waldencast Credit Agreement requires the Borrower, Waldencast Partners LP and certain of their subsidiaries to comply with certain
financial covenants, including maintaining (i) a maximum Total Leverage Ratio of 4.50 to 1.00 which steps down over time to 3.75 to 1.00
and (ii) a minimum Interest Coverage Ratio of 3.00 to 1.00 (each, as defined in the Waldencast Credit Agreement), in each case, which
will take effect commencing with the first full fiscal quarter ending after the Funding Date.
As
a result of the entry into the Waldencast Credit Agreement, the previously announced PIPE commitments with certain PIPE investors in
the aggregate total amount of $113,000,000 and the previously announced Forward Purchase Agreements with Burwell Mountain Trust, Dynamo
Master Fund (each members of Waldencast Long-Term Capital LLC, Waldencast’s sponsor) and Beauty Ventures LLC in the aggregate total amount
of $333,000,000, Waldencast will receive aggregate proceeds of up to $671,000,000 (if all Waldencast shareholders exercise their rights
to redeem their shares) or up to approximately $1,016,000,000 (if no Waldencast shareholders exercise their rights to redeem their shares)
that may be used to (i) pay the cash consideration due to the equityholders of Milk and Obagi upon consummation of the transactions contemplated
by the Transaction Agreements, (ii) repay in full all outstanding amounts under, and terminate, the Existing Credit Agreements and (iii)
fund working capital needs or other general corporate purposes of Waldencast.
The foregoing
description of the Waldencast Credit Agreement and the transactions contemplated thereby is not complete and is subject to and qualified
in its entirety by reference thereto, a copy of which is filed with this Current Report on Form 8-K as Exhibit 2.1 and the terms of which
are incorporated by reference herein.
Additional
Information and Where to Find It
This
communication relates to proposed transactions between Obagi and Waldencast and Milk and Waldencast. This communication is not a proxy
statement or solicitation of a proxy, consent or authorization with respect to any securities or in respect of the potential transactions
and shall not constitute an offer to sell or a solicitation of an offer to buy the securities of Obagi or Milk, the combined company
or Waldencast, nor shall there be any sale of any such securities in any state or jurisdiction in which such offer, solicitation, or
sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction. In connection
with the proposed transactions, Waldencast filed a registration statement on Form F-4 with the SEC on February 14, 2022, as amended by
Amendment No. 1 to the registration statement on Form F-4 filed with the SEC on March 4, 2022, Amendment No. 2 to the registration statement
on Form F-4 filed with the SEC on March 18, 2022, Amendment No. 3 to the registration statement on Form F-4 filed with the SEC on April
27, 2022, Amendment No. 4 to the registration statement on Form F-4 filed with the SEC on May 13, 2022 and Amendment No. 5 to the registration
statement on Form F-4 filed with the SEC on June 16, 2022, which includes a document that serves as a prospectus and proxy statement
of Waldencast (the “proxy statement/prospectus”). The proxy statement/prospectus will be sent to all Waldencast shareholders.
Waldencast also will file other documents regarding the proposed transactions with the SEC. This communication does not contain all the
information that should be considered concerning the proposed transactions and is not intended to form the basis of any investment decision
or any other decision in respect of the proposed transactions. Before making any voting decision, investors and security holders of Waldencast
are urged to read the registration statement, the proxy statement/prospectus and all other relevant documents filed or that will be filed
with the SEC in connection with the proposed transactions as they become available because they will contain important information about
the proposed transactions.
Investors
and security holders may obtain free copies of the registration statement, the proxy statement/prospectus and all other relevant documents
filed or that will be filed with the SEC by Waldencast through the website maintained by the SEC at www.sec.gov.
The
documents filed by Waldencast with the SEC also may be obtained free of charge at Waldencast’s website at https://www.waldencast.com
or upon written request to 10 Bank Street, Suite 560, White Plains, NY 10606.
Participants
in the Solicitation
Waldencast,
Obagi, and Milk, and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies
from Waldencast’s shareholders in connection with the proposed transaction. A list of the names of the directors and executive
officers of Waldencast and information regarding their interests in the business combinations is set forth in Waldencast’s registration
statement on Form S-1 (File No. 333-253370) filed with the SEC on March 15, 2021. Additional information regarding the interests of such
persons will be contained in the registration statement and the proxy statement/prospectus when available. You may obtain free copies
of these documents as described in the preceding paragraph.
Forward-Looking
Statements
This
communication contains certain forward-looking statements within the meaning of the federal securities laws with respect to the proposed
transactions among Obagi, Milk and Waldencast, including statements regarding the intended benefits of the transactions, the anticipated
timing of the transactions and the growth strategies of Waldencast, Obagi and Milk. These forward-looking statements generally are identified
by the words “estimates,” “projects,” “expects,” “anticipates,” “forecasts,”
“plans,” “intends,” “believes,” “seeks,” “may,” “will,” “would,”
“should,” “future,” “propose,” “target,” “goal,” “objective,”
“outlook” and variations of these words or similar expressions (or the negative versions of such words or expressions) are
intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions
or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are
outside the control of Waldencast, Obagi, and Milk, that could cause actual results or outcomes to differ materially from those discussed
in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include, but are not limited
to: (i) the risk that the transactions may not be completed in a timely manner or at all, which may adversely affect the price of Waldencast’s
securities, (ii) the risk that Waldencast shareholder approval of the proposed transactions is not obtained, (iii) the inability to recognize
the anticipated benefits of the proposed transactions, which may be affected by, among other things, the amount of funds available in
Waldencast’s trust account following any redemptions by Waldencast’s shareholders, (iv) the failure to receive certain governmental
and regulatory approvals, (v) the inability to complete the PIPE Investment or the Forward Purchase Agreements investments (as such terms
are defined in the registration statement on Form F-4 discussed above), (vi) the occurrence of any event, change or other circumstance
that could give rise to the termination of the Obagi Merger Agreement or the Milk Equity Purchase Agreement (as such terms are defined
in the registration statement on Form F-4 discussed above), (vii) changes in general economic conditions, including as a result of the
COVID-19 pandemic, (viii) the outcome of litigation related to or arising out of the proposed transactions, or any adverse developments
therein or delays or costs resulting therefrom, (ix) the effect of the announcement or pendency of the transactions on Obagi’s
or Milk’s business relationships, operating results, and businesses generally, (x) the ability to continue to meet Nasdaq’s
listing standards following the consummation of the proposed transactions, (xi) costs related to the proposed transactions, (xii) that
the price of Waldencast’s securities may be volatile due to a variety of factors, including Waldencast’s, Obagi’s or
Milk’s inability to implement their business plans or meet or exceed their financial projections and changes in the combined capital
structure, (xiii) the ability to implement business plans, forecasts, and other expectations after the completion of the proposed transactions,
and identify and realize additional opportunities and (xiv) the ability of Obagi and Milk to implement their strategic initiatives and
continue to innovate their existing products and anticipate and respond to market trends and changes in consumer preferences. The foregoing
list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described
in the “Risk Factors” section of Waldencast’s registration statement on Form S-1 (File No. 333-253370), the registration
statement on Form F-4 discussed above, the proxy statement/prospectus and other documents filed or that may be filed by Waldencast from
time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events
and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of
the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Obagi, Milk and Waldencast
assume no obligation and do not intend to update or revise these forward-looking statements, whether as a result of new information,
future events, or otherwise. Neither Waldencast, Obagi, or Milk gives any assurance that Waldencast, Obagi or Milk, or the combined company,
will achieve their expectations.