New ABL Facility
In connection with the Restructuring, Key expects to negotiate and enter into the New ABL Facility. The RSA obligates Key to negotiate in good
faith with the ABL Lenders to reduce the minimum availability threshold before the fixed charge coverage ratio covenant is tested, increase the advance rates and allow additional collateral to be introduced as eligible collateral for purposes of the
borrowing base.
MIP
In connection with the Restructuring, the RSA contemplates adoption of the MIP representing up to 9% of the Companys outstanding shares
after giving effect to the issuance of new shares pursuant to the Restructuring. Under the RSA, initial allocations and amounts for future issuances will be subject to the mutual agreement of Key and the Supporting Term Lenders.
Governance
The parties to the RSA have agreed that at the completion of the Restructuring the Board will consist of seven directors, each of whom will
have one vote, comprised of: the CEO, one non-independent director selected by Soter Capital LLC (Soter), who, based on a Schedule 13D/A filed with the Securities and Exchange Commission (the
SEC) on March 18, 2019, beneficially owned 10,309,609 shares of the common stock of the Company representing approximately 50.6% of the outstanding shares, and five directors who will meet the independent director
requirements set forth in Section 303A of the NYSE Listed Company Manual and be selected by the Supporting Term Lenders. At the closing of the Restructuring, the Company and Supporting Term Lenders will enter into the Stockholders Agreement,
which, among other things, will grant the Supporting Term Lenders certain board nomination rights based on their ongoing percentage ownership. Under the Stockholders Agreement, Supporting Term Lenders holding more the 25% of the Companys
outstanding shares as of the closing of the Restructuring will be entitled to nominate two directors and Supporting Term Lenders holding between 10% and 25% of the Companys outstanding shares as of the closing of the Restructuring will be
entitled to nominate one director. All future nominees of Supporting Term Lenders, other than Soter nominees, must meet the independent director requirements set forth in Section 303A of the NYSE Listed Company Manual. During the
time that Soter holds between 10% and 25% of the Companys outstanding shares as of the closing of the Restructuring, Soter will be entitled to nominate one non-independent director to the Board. In
addition, following the Restructuring, Supporting Term Lenders will be entitled to appoint a non-voting board observer subject to specified ownership thresholds.
The Stockholders Agreement will also grant the Supporting Term Lenders certain demand and piggyback registration
rights and customary information rights. In addition, the Stockholders Agreement will bind the Supporting Term Lenders to certain tag-along and drag-along rights at any time the Company
does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, or listed on any over-the-counter market or
national securities exchange.
The RSA extends the forbearances and other obligations contemplated by the Term Loan Forbearance Agreement
until the RSA is validly terminated in accordance with its terms. The RSA automatically terminates upon (i) the consummation of the Restructuring, (ii) the issuance of an order enjoining the Restructuring or declaring the RSA
unenforceable, or (iii) the mutual agreement of Key and Supporting Term Lenders holding 66.6% of the term loans held by Supporting Term Lenders. Key may also terminate the RSA (i) in the event the Restructuring has not been consummated
within 75 days after the effectiveness of the RSA and (ii) upon a determination by the Board that the Restructuring would be inconsistent with their fiduciary duties. The Supporting Term Lenders holding 66.6% of the term loans may terminate the
RSA (i) in the event the Restructuring has not been consummated within 75 days after the effectiveness of the RSA, (ii) upon the occurrence of certain termination events set forth in the Term Loan Forbearance Agreement, or (iii) in
the event Key files or publicly announces that it will file, join in or support any plan of reorganization, including any in-court bankruptcy proceeding, other than as contemplated in the RSA. In addition, Key
and Supporting Term Lenders holding 66.6% of the term loans may each terminate the RSA upon certain breaches of the RSA by the applicable counterparties.
The foregoing description of the RSA is qualified in its entirety by reference to the complete text of the RSA, attached hereto as Exhibit
10.1 and incorporated herein by reference.