Item 1.01.
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Entry into a Material Definitive Agreement.
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Purchase Agreement
On November 19,
2020, Charah Solutions, Inc. (the Company) entered into a definitive agreement (the Purchase Agreement) to sell its subsidiary engaged in maintenance, modification and repair services to the nuclear and fossil
power generation industry, Allied Power Holdings, LLC (Allied), to Allied Group Intermediate Holdings, LLC, (the Purchaser), an affiliate of Bernhard Capital Management LP, the Companys majority
shareholder, in an all-cash deal for $40 million (the Transaction). The Transaction is effective immediately. The Transaction has been approved by a special committee of the
Companys board of directors consisting solely of independent directors, which obtained a fairness opinion in connection with the Transaction. The final consideration for the Transaction is subject to adjustments for working capital and certain
other adjustments as set forth in the Purchase Agreement.
The parties have made customary representations and warranties and have agreed
to customary covenants in the Purchase Agreement. In addition, the Company has agreed to enter into a non-competition and non-solicitation arrangement under the Purchase
Agreement with the Purchaser, subject to customary exceptions.
The parties have also entered into a Transition Services Agreement
pursuant to which the Company will provide Allied and the Purchaser with certain transition assistance services from the date of the Transaction until April 30, 2021 in exchange for payment.
The foregoing summary of the Purchase Agreement and the transactions contemplated thereby does not purport to be complete and is subject to,
and qualified in its entirety by, the full text of the Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K (the Current Report) and is incorporated
herein by reference.
The Purchase Agreement has been included to provide investors and security holders with information regarding its
terms. It is not intended to provide any other factual information about the Company, Allied or the Purchaser or to modify or supplement any factual disclosures about the Company in its public reports filed with the SEC. The representations,
warranties and covenants contained in the Purchase Agreement were made only for purposes of the Purchase Agreement and as of specific dates, were solely for the benefit of the parties to the Purchase Agreement, and may be subject to important
qualifications and limitations agreed upon by the contracting parties, including being qualified by disclosure schedules containing information that modifies, qualifies or creates exceptions to such representations and warranties. The
representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the Purchase Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable
to the contracting parties that differ from those applicable to investors.
Credit Agreement Amendment
On November 19, 2020, the Company entered into Amendment No. 4 to Credit Agreement (the Credit Agreement
Amendment) with Bank of America, N.A., as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein. The Credit Agreement Amendment will, among other things, permit the Company to consummate the
Transaction and enter into a sale and leaseback transaction in respect of certain equipment.
In addition, the Credit Agreement Amendment
amends the required financial covenant ratios with which the Company must comply. After giving effect to the Credit Agreement Amendment, for the fiscal period ending December 31, 2020, the Company will be required to comply with a maximum
consolidated net leverage ratio of 5.50 to 1.00, decreasing to 4.80 to 1.00 for the fiscal periods ending March 31, 2021 through September 29, 2021, to 4.50 to 1.00 for the fiscal period ending September 30, 2021, and to 3.50 to 1.00
as of December 31, 2021 and thereafter. In addition, after giving effect to the Credit Agreement Amendment, the Company will also be required to comply with a minimum fixed charge coverage ratio of 1.00 to 1.00 as of March 31, 2021,
increasing to 1.20 to 1.00 as of June 30, 2021 and thereafter.
The Company will use the net proceeds from the Transaction to pay
outstanding term loans to be applied first to the prepayment of the delayed draw term loans in full and then to the prepayment of the closing date term loans in inverse order of maturity. The remainder of the net proceeds will be used to make a
prepayment on the revolving loans not later than November 30, 2020.