Item 1.01. Entry into a Material Definitive Agreement
Credit Agreement
On March 1, 2019 (the “Closing Date”), Fortive Corporation, a Delaware corporation (the “Company”), entered into a term loan credit agreement with Bank of America, N.A., as Administrative Agent, and a syndicate of lenders party thereto, which provides for a364-day delayed-draw term loan facility up to an aggregate principal amount of $1,000 million (the “Credit Agreement”). At the closing, the Company did not borrow any funds under the Credit Agreement.
The Borrower may borrow up to the full amount of the term loan under the Credit Agreement through up to two draws during the period from and including the Closing Date to 12:00 noon on the date that falls 90 days after the Closing Date (the date of such borrowing, the “Funding Date”).
Repayment of the principal amount borrowed under the Credit Agreement is due no later than 364 days after the Funding Date.
Borrowings under the Credit Agreement bear interest at the Company’s option as follows: (1) Eurodollar Rate Loans (as defined in the Credit Agreement) bear interest at a variable rate equal to the London inter-bank offered rate plus a margin of between 75.0 and 97.5 basis points, depending on the Company’s long-term debt credit rating; and (2) Base Rate Loans (as defined in the Credit Agreement) bear interest at a variable rate equal to the highest of (a) the Federal funds rate (as published by the Federal Reserve Bank of New York from time to time) plus 1/2 of 1%, (b) Bank of America’s prime rate as publicly announced from time to time and (c) the Eurodollar Rate (as defined in the Credit Agreement) plus 1%; provided that in no event will Eurodollar Rate Loans or Base Rate Loans bear interest at a rate lower than 0%.
The Credit Agreement requires the Company to maintain a Consolidated Net Leverage Ratio (as defined in the Credit Agreement) of 3.50 to 1.00 or less; provided, that the maximum Consolidated Net Leverage Ratio will be increased to 4.00 to 1.00 for the four consecutive full fiscal quarters immediately following the consummation of any acquisition by the Company or any subsidiary of the Company in which the purchase price exceeds $250 million; provided, further, that, if the 2018 Credit Agreement (as defined in the Credit Agreement) is amended, restated, supplemented or otherwise modified after the date of the Credit Agreement, including by means of any refinancing, refunding, renewal, replacement or extension thereof, to allow for a maximum “Consolidated Net Leverage Ratio” to be increased to a higher level than set forth in the Credit Agreement for any period, then, upon the effectiveness of such amendment, restatement, supplement or other modification, the maximum Consolidated Net Leverage Ratio permitted by the Credit Agreement shall be automatically increased to the maximum “Consolidated Net Leverage Ratio” set forth in the 2018 Credit Agreement. In addition, the “Consolidated Net Leverage Ratio” definition will be automatically modified to conform to any amendment, restatement, supplement or other modification to the 2018 Credit Agreement. The Credit Agreement also requires the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of 3.50 to 1.00 or more. The Consolidated Net Leverage Ratio and Consolidated Interest Coverage Ratio will be tested beginning with the fiscal quarter ending March 31, 2019.
Borrowings under the Credit Agreement are prepayable at the Company’s option in whole or in part without premium or penalty. Amounts borrowed under the Credit Agreement may not be reborrowed once repaid.
The Company’s obligations under the Credit Agreement are unsecured. The Credit Agreement contains customary representations, warranties, conditions precedent, events of default, indemnities and affirmative and negative covenants, including covenants that, among other things, restrict the ability of the Company and certain of its subsidiaries to: incur liens; incur indebtedness; make restricted payments; sell or otherwise dispose of the Company’s or any subsidiary’s assets; enter into certain mergers or consolidations; and use proceeds of borrowings under the Credit Agreement for other than permitted uses. These covenants are subject to a number of important exceptions and qualifications. Certain changes of control with respect to the Company would constitute an event of default under the Credit Agreement.
Upon the occurrence and during the continuance of an event of default, the lenders may declare the outstanding advances and all other obligations under the Credit Agreement immediately due and payable.
