| Item 1.01 | Entry into a Material Definitive Agreement. |
On August 18, 2020, Landstar System, Inc. (the “Company”) and its wholly-owned subsidiary, Landstar System Holdings, Inc. (“LSHI”), amended and restated their existing senior $250 million revolving credit agreement (with an “accordion” feature providing for possible increase up to an aggregate amount of $400 million) (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders named therein, to extend the termination date and amend certain other terms. The amended and restated credit facility will expire in August 2023. As of August 18, 2020, there were no outstanding borrowings under the Credit Agreement.
The obligations under the Credit Agreement are guaranteed by substantially all of LSHI’s subsidiaries, subject to certain exceptions more particularly set forth in the Credit Agreement, including the exception set forth in the next succeeding sentence, and are unsecured, other than as noted in the next succeeding sentence. In lieu of any guarantee that would otherwise be required to be provided by certain foreign subsidiaries or domestic subsidiaries that are foreign subsidiary holding companies (as further defined in the Credit Agreement, “FSHCOs”), LSHI and subsidiary guarantors, as applicable, may pledge stock they hold in an amount not exceeding 65% of the voting stock and 100% of the non-voting stock of each such foreign subsidiary or FSHCO. Subsidiaries of LSHI that do not constitute guarantors include two FSHCOs for which the alternative provision of a pledge of stock has been made.
The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness and the incurrence of operating or capital lease obligations. The Credit Agreement also requires the Company to meet certain financial tests. The Company is required to, among other things, maintain a minimum Fixed Charge Coverage Ratio and limit its borrowings to a specified Leverage Ratio of indebtedness to earnings before interest, taxes, depreciation and amortization, as each is defined in the Credit Agreement.
The Credit Agreement provides for an event of default in the event, among other things, that a person or group acquires 35% or more of the outstanding capital stock of the Company, obtains the power to elect a majority of the Company’s directors, or the directors cease to consist of a majority of Continuing Directors, as defined in the Credit Agreement.
The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Credit Agreement, which is attached as Exhibit 10.1 to this report and is incorporated herein by reference.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth above in Item 1.01 is incorporated into Item 2.03 by reference.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. The following exhibit is filed herewith: |
