Item 1.01
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Entry into a Material Definitive Agreement.
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Acquisition of S&D Coffee & Tea
On August 3, 2016, Cott Corporation (the Company) and its indirect wholly-owned subsidiary Sip Acquisition Company (Buyer) entered into
a Stock and Membership Interest Purchase Agreement (the Purchase Agreement) with S&D Coffee Holding Company (Holdings), the owners of Holdings, the owners of Arabica, LLC (Arabica), and Alan P. Davis and E.
Rhyne Davis, as Sellers Representative, pursuant to which Buyer will purchase from such owners all of the outstanding stock of Holdings and all of the outstanding membership interests of Arabica on a cash-free, debt-free basis (the
Acquisition). Holdings is the parent company of S&D Coffee & Tea, Inc. (S&D), a premium coffee roaster and provider of customized coffee, tea and extract solutions, and Arabica owns real estate that it leases to
S&D. The purchase price is $355.0 million payable in cash, subject to customary adjustments for cash, debt, working capital and other items.
The
Purchase Agreement contains warranties, covenants and conditions that the Company believes are customary for a transaction of this size and type, as well as indemnification provisions subject to specified limitations. The closing of the Acquisition
is subject to the satisfaction of certain conditions, but is not subject to any financing condition.
The Acquisition is expected to close in the third
quarter of 2016. The Purchase Agreement is subject to termination if the conditions to closing are not satisfied on or before September 30, 2016.
None of
Holdings, Arabica or their respective owners has a material relationship with the Company and the Acquisition will not be an affiliate transaction. Certain members of the S&D management team have agreed to join the Company and continue to lead
the S&D business following the Acquisition.
The foregoing summary of the terms of the Purchase Agreement is qualified in its entirety by reference to
the full text of the Purchase Agreement, a copy of which is attached as Exhibit 2.1 hereto and incorporated by reference herein.
Amended and
Restated ABL Facility
On August 3, 2016, the Company entered into an amendment and restatement agreement making effective an amended and restated
senior secured asset-based lending credit facility (the ABL Facility) that provides the Company and its subsidiaries with financing in the United States, Canada, the United Kingdom, Luxembourg and The Netherlands. The ABL Facility
amended and restated the Credit Agreement, dated as of August 17, 2010, as amended, which governed the Companys prior senior secured credit facility. As of the date hereof, the Company and its subsidiaries Cott Beverages Inc., Cott Beverages
Limited, DS Services of America, Inc. and Cliffstar LLC are borrowers under the ABL Facility.
The ABL Facility is a five-year revolving facility of up to
$500.0 million (subject to increase as described below). JPMorgan Chase Bank, N.A. serves as administrative agent and administrative collateral agent and JPMorgan Chase Bank, N.A., London Branch serves as U.K. security trustee.
Availability under the ABL Facility is dependent on a borrowing base calculated as a percentage of the value of eligible inventory, accounts receivable and
property, plant and equipment in the manner set forth in the credit agreement for the ABL Facility. The ABL Facility has subfacilities for letters of credit and swingline loans and geographical sublimits for the United Kingdom and The Netherlands
($100.0 million collectively) and Canada ($40.0 million). Subject to certain conditions, the ABL Facility may be increased up to an additional $100.0 million at the Companys option if lenders agree to increase their commitments.
The interest rate margin on loans under the facility is based on the amount of availability that the borrowers have under the facility. In general, the spread
on loans based on LIBOR will range from 1.25% to 1.75% and on an adjusted base rate will be -0.50% to 0.00%. There are also other rate options for U.K. and Canadian borrowings. The proceeds of the ABL Facility, to the extent not used to pay for the
Acquisition and fees, costs and expenses incurred by the Company in connection with the Acquisition and the ABL Facility, will be used to finance the working capital needs and general corporate purposes of the Company and its U.S., Canadian, U.K.,
Dutch and Luxembourg subsidiaries in the ordinary course of business. A limited amount of money may be loaned to the Companys subsidiaries in Mexico and elsewhere.
The debt under the ABL Facility is guaranteed by most of the Companys U.S., Canadian, U.K. and Luxembourg
subsidiaries and certain of the Companys Dutch subsidiaries. Subject to certain exceptions, the debt and guarantees are secured by (a) all of the Companys and guarantors ownership interests in their subsidiaries and (b)
substantially all of the personal property assets of the borrowers and the guarantors as well as specified real estate. The Company has agreed to pay usual and customary commitment fees that vary on a monthly basis depending on average utilization
of the ABL Facility.
The borrowers and restricted subsidiaries are subject to a number of business and financial covenants and events of default. The ABL
Facility contains customary restrictive covenants, including limitations on indebtedness, liens, mergers, consolidations, liquidations and sales, payment of dividends, investments, loans and advances, optional payments and modifications of
subordinated and other debt instruments, and transactions with affiliates. Events of default under the ABL Facility include nonpayment, inaccuracy of representations and warranties, violation of covenants, cross-default to other indebtedness,
bankruptcy, material judgments, and a change of control of the Company. Upon the occurrence of an event of default, the lenders may terminate the commitments and declare all loans due and payable. The Company has agreed to a mandatory prepayment
provision (but without a reduction of the commitment), subject to certain exceptions, upon a sale or transfer of assets of a borrower or guarantor, upon the receipt of proceeds from the issuance of any indebtedness, upon the occurrence of an
availability shortfall under the revolver, or upon receipt of insurance proceeds or condemnation awards.
The ABL Facility also contains a minimum fixed
charge coverage ratio covenant of 1.0 to 1.0 effective when and if (a) there exists an event of default or (b) excess availability is less than the greater of (i) 10.0% of the aggregate amount of all commitments at such time and
(ii) $37.5 million. If (a) there exists a payment, bankruptcy or other insolvency default or (b) excess availability is less than the greater of (i) 10% of the aggregate amount of all commitments at such time and (ii) $37.5
million for any period of five consecutive days, the lenders will take dominion over the cash and in some cases transfer collection accounts to the name of the administrative collateral agent. At all times that full cash dominion is in effect under
any security agreement (and at all times with respect to collections of the U.K. loan parties), amounts in the collection account will be applied to reduce amounts owing under the ABL Facility.
The Company does not have any material relationship with the Lenders who are party to the ABL Facility, other than (i) in respect of the ABL Facility and its
predecessor credit facilities, and (ii) affiliates of JPMorgan Chase Bank, N.A., Deutsche Bank AG, Bank of America, N.A., Wells Fargo Capital Finance, LLC and SunTrust Bank have performed, and may in the future perform various commercial
banking, investment banking, underwriting, trust and other financial advisory services for the Company, for which such affiliates have received, and will receive, customary fees and expenses.