Item 1.01. Entry into a Material Definitive Agreement.
On April 28, 2017, Bob Evans Farms, Inc., a Delaware corporation (the
Company
), entered into a $300.0 million
Credit Agreement (the
Credit Agreement
) among its wholly-owned subsidiaries, BEF Foods, Inc., an Ohio corporation (the
Borrower
), as borrower, Bob Evans Farms, LLC, an Ohio limited liability company, Bob Evans
Holding, Inc., an Ohio corporation, BEF Management, Inc., an Ohio corporation, Bob Evans Transportation Company, LLC, an Ohio limited liability company (the
Guarantors
), and the Company, as guarantors; Bank of America, N.A., as
administrative agent, swingline lender and L/C issuer; PNC Bank, National Association and JPMorgan Chase Bank, N.A., as
co-syndication
agents; Merrill Lynch, Pierce, Fenner & Smith Incorporated,
JPMorgan Chase Bank, N.A. and PNC Capital Markets LLC, as joint lead arrangers and joint bookrunners; and PNC Bank, National Association, JPMorgan Chase Bank, N.A., Bank of America, N.A., Fifth Third Bank, and Wells Fargo Bank, National Association,
as lenders. All obligations under the Credit Agreement are unconditionally guaranteed by the Company and the Guarantors. The Credit Agreement is secured by a first-priority security interest in certain property and assets of the Company, the
Borrower and the Guarantors, including accounts receivable, inventory, equipment, intellectual property and certain other assets, including stock pledges of certain material direct subsidiaries. The Company and its subsidiaries from time to time
have had, and may continue to have, various commercial, lending or other relationships with the lenders that are parties to the Credit Agreement and the lenders respective affiliates.
The Credit Agreement represents a syndicated secured revolving credit facility under which up to $300.0 million will be available, with a
letter of credit
sub-facility
of $20.0 million, and an accordion option to increase the revolving credit commitment to $400.0 million.
The primary purposes of the Credit Agreement are for
stand-by
letters of credit in the ordinary course
of business as well as working capital, refinancing of existing indebtedness, capital expenditures, acquisitions, stock repurchases, dividends, including a
one-time
dividend to the Companys stockholders
in an aggregate amount not to exceed $200.0 million, and other general corporate purposes.
The Credit Agreement has a maturity date
of April 28, 2022.
Borrowings under the Credit Agreement bear interest, at Borrowers option, at a rate based on the Eurodollar
Rate or the Base Rate, plus a margin based on the Consolidated Leverage Ratio, as detailed in the Credit Agreement, ranging from 1.25% to 2.00% per annum for Eurodollar Rate, and ranging from 0.25% to 1.00 % per annum for Base Rate. Base
Rate means, for any day, a fluctuating per annum rate of interest equal to the highest of (i) the Federal Funds Rate, plus 0.5%, and (ii) Bank of America, N.A.s prime rate, and (iii) the Eurodollar Rate, plus 1.0%.
As of the date of this Current Report on Form
8-K,
the margin on LIBOR-based loans was 1.50% per annum and the margin on Base Rate-based loans was 0.50% per annum.
Commitment fees payable under the Credit Agreement are also based on the Consolidated Leverage Ratio and range from 0.20% per annum to
0.30% per annum of the average unused portion of the total lender commitments then in effect. As of the date of this Current Report on Form
8-K,
the commitment fee is to accrue at a rate of 0.20% per
annum.
Bank of America, N.A. has also agreed to make discretionary Swingline Loans (as defined in the Credit Agreement) to the Borrower
in an aggregate principal amount at any time outstanding that
will not result in (a) the aggregate principal amount of outstanding Swingline Loans exceeding $25.0 million; or (b) the sum of various other credit exposures under the Credit
Agreement exceeding certain specified levels.
The terms of the Credit Agreement provide for customary representations and warranties and
affirmative covenants. The Credit Agreement also contains negative covenants usual and customary for a transaction of this nature, including the following limitations on and containing customary covenants with restrictions on: liens; restricted
payments (provided there will be no limit on dividends or stock repurchases so long as no event of default or potential event of default exists before or after giving effect to such dividend or stock repurchase, including pro forma compliance with
the Consolidated Interest Coverage Ratio and Consolidated Leverage Ratio); additional indebtedness (permitting note issuances not to exceed $200.0 million) and guaranties; additional investments and loans; fundamental changes; dispositions;
affiliate transactions; burdensome agreements; prepayment of junior debt; change in business; and change in fiscal year, among others.
The terms of the Credit Agreement provide the following financial covenants:
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(a)
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Consolidated Interest Coverage Ratio
. The Consolidated Interest Coverage Ratio, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, commencing with the fiscal quarter ending
July 28, 2017, shall not be less than 3.00 to 1.00; and
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(b)
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Consolidated Leverage Ratio
. The Consolidated Leverage Ratio, calculated as of the end of each fiscal quarter for the four quarters then ended, shall not exceed 3.50 to 1.00; provided, however, the Borrower may
request, no more than two times during the term of this Agreement, an increase in the Consolidated Leverage Ratio set forth above to 4.00 to 1.00 for two fiscal quarters following delivery of written notification from the Borrower of a Qualified
Acquisition, involving total cash or
non-cash
consideration in excess of $50,000,000 and thereafter reducing to 3.75 to 1.00 for two additional fiscal quarters and subject to the consummation of such Qualified
Acquisition.
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The terms of the Credit Agreement include customary events of default such as payment defaults, cross-defaults
to other material indebtedness, undischarged material judgments, bankruptcy and insolvency, the occurrence of a defined change in control, or the failure to observe the negative covenants and other covenants related to the operation and conduct of
the business of the Company and its subsidiaries. Upon an event of default, the Lenders will not be obligated to make loans or other extensions of credit and may, among other things, terminate their commitments to the Borrower and declare any then
outstanding loans due and payable immediately.
A copy of the Credit Agreement is attached as Exhibit 10.1 to this Current Report on
Form 8-K
and incorporated herein by reference. The foregoing summary of the Credit 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 Credit Agreement.