Item 1.01 Entry into a Material Definitive Agreement
On September 6, 2019, Cantel Medical Corp. (the Company) entered into a First Amendment (the Amendment), by and among the Company, the subsidiary obligors party thereto, the lenders party thereto, and Bank of America, N.A. as administrative agent (the Administrative Agent), amending that certain Fourth Amended and Restated Credit Agreement (the Existing Credit Agreement and as amended by the Amendment, the Amended Credit Agreement) dated as of June 28, 2018, among the Company, the subsidiary obligors party thereto (together with the Company, the Loan Parties and each individually a Loan Party), the lenders party thereto and the Administrative Agent. The Amendment adds a $400 million delayed draw term loan facility (the Delayed Draw Facility), which the Company may draw subject to the satisfaction of certain limited conditions precedent, to the Companys Existing Credit Agreement, in addition to the existing tranche A term loan and existing revolving credit facility. Pursuant to the Amended Credit Agreement, subject to the satisfaction of certain conditions precedent, including the consent of the lenders, the Company may from time to time increase its borrowing capacity under the revolving credit facility by, or incur incremental term loans in, an aggregate amount not to exceed the sum of (i) the greater of (x) $300 million or (y) an amount equal to two times the Companys consolidated EBITDA, calculated on a pro forma basis, plus (ii) the aggregate principal amount of voluntary prepayments of the revolving loans and term loans.
The Delayed Draw Facility and a portion of the revolving credit facility will be used to finance all or a portion of the cash consideration for the Companys acquisition of Hu-Friedy Mfg. Co., LLC (Hu-Friedy), a Delaware limited liability company, pursuant to that certain Purchase and Sale Agreement with Hu-Friedy, Dental Holding, LLC, a Delaware limited liability company and the sole member of Hu-Friedy, and, for limited purposes set forth therein, Ken Serota and Ron Saslow, dated as of July 29, 2019 and as previously disclosed on the Companys Form 8-K filed July 30, 2019. The remaining proceeds of the Amended Credit Agreement will be used to refinance certain existing indebtedness of the Company and Hu-Friedy and to pay the fees and expenses incurred in connection therewith, as well as for working capital, capital expenditures and other lawful corporate purposes.
Borrowings under the Amended Credit Agreement bear interest at rates ranging from 0.00% to 1.25% above prime rate for base rate borrowings, or at rates ranging from 1.00% to 2.25% above the London Interbank Offered Rate (LIBOR) for LIBOR based borrowings, depending on the Companys Consolidated Leverage Ratio, which is the consolidated ratio of total funded debt (minus certain unrestricted cash) to consolidated EBITDA. The Amended Credit Agreement also provides for fees on the unused portion of the revolving credit facility at rates ranging from 0.20% to 0.40%, depending on the Companys Consolidated Leverage Ratio.
The Amended Credit Agreement contains affirmative and negative covenants reasonably customary for similar credit facilities and is secured by (i) substantially all assets of the Company and its U.S.-based subsidiaries, (ii) a pledge by each Loan Party of all of the outstanding shares of its U.S.-based subsidiaries and 65% of the outstanding shares of certain of Cantels foreign-based subsidiaries and (iii) a guaranty by Cantels domestic subsidiaries.
The foregoing description of the Amended Credit Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Amended Credit Agreement, a copy of which is attached at Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.