SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 27, 2001
Acterna Corporation
(Exact name of registrant as specified in its charter)
Delaware 000-07438 04-2258582
(State or other jurisdiction of (Commission File No.) (IRS Employee
incorporation) Identification No.)
20410 Observation Drive
Germantown, Maryland 20876
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (301) 353-1550
Item 5. Other Events.
On December 27, 2001, Acterna LLC ("Acterna LLC"), a Delaware limited
liability company that is wholly-owned and controlled by Acterna Corporation
("Acterna"), agreed to issue and sell (such issuance and sale, the
"Transaction") $75,000,000 aggregate principal amount of 12% Senior Secured
Convertible Notes Due 2007 (the "Notes") to Clayton, Dubilier & Rice Fund VI
Limited Partnership (the "Investor") on the terms and conditions set forth in an
Investment Agreement, dated as of December 27, 2001 (the "Investment
Agreement"), among Acterna, Acterna LLC and the Investor. A copy of the
Investment Agreement, as well as a copy of the Form of Note issuable under the
Investment Agreement, are filed as exhibits to this Form 8-K.
The Investor and Clayton, Dubilier & Rice Fund V Limited Partnership
("CD&R Fund V") together own approximately 80% of Acterna's outstanding common
stock and are jointly managed by Clayton, Dubilier & Rice, Inc. As a result of
this relationship, a special committee of independent directors of Acterna
evaluated the terms of the Transaction and unanimously determined that such
terms were fair to Acterna from a financial point of view. The Transaction
closed on January 15, 2002.
The material terms of the Notes are as follows:
o Interest and Maturity. The Notes bear interest at a rate per
annum of 12% and mature on December 31, 2007 (the "Maturity
Date"). Interest on the Notes is payable semi-annually in
arrears on each March 31st and September 30th, with interest
payments commencing on March 31, 2002. At the option of Acterna
LLC, interest is payable in cash or in-kind by the issuance of
additional Notes. Due to limitations imposed by its senior
secured credit facility, as amended (see below), Acterna LLC
expects to pay interest on the Notes in-kind by issuing
additional Notes.
o Conversion. Subject to prior approval of Acterna's stockholders
(as described below), at the option of the Investor (or any
subsequent holder of Notes), at any time prior to the Maturity
Date, the Notes may be converted into newly-issued shares of the
common stock, par value $0.01 per share, of Acterna (the "Common
Stock"), at a conversion price (the "Conversion Price") of $3.00
per share, subject to customary antidilution adjustments.
o Redemption, Repurchase or Repayment; Issuance of Warrants.
Acterna LLC may redeem the Notes, in whole or in part, and
without penalty or premium, at any time prior to the Maturity
Date. In addition, Acterna LLC is required to offer to
repurchase the Notes upon a change of control and upon the
disposition of certain assets. If any Note is redeemed,
repurchased or repaid for any reason prior to the Maturity Date,
the holder thereof will be entitled to receive from Acterna a
warrant (a "Warrant") to purchase a number of newly-issued
shares of Common Stock equal to the number of shares of Common
Stock that such Note was convertible into immediately prior its
redemption, repurchase or repayment. The exercise price of such
Warrant will be the Conversion Price in effect immediately prior
to such Warrant's issuance, subject to customary antidilution
adjustments. Subject to the approval of Acterna's stockholders
(as described below), Warrants will be exerciseable upon
issuance and will expire on the Maturity Date. A copy of the
Form of Warrant issuable under the Investment Agreement is filed
as an exhibit to this Form 8-K.
o Conversion of Notes and Exercise of Warrants Subject to
Stockholder Vote. In order to comply with the rules of the
Nasdaq National Market, where the Common Stock is listed, the
terms of the Notes and Warrants provide that no Note or Warrant
may be converted or exercised, as the case may be, until the
stockholders of Acterna have approved the issuance of the shares
of Common Stock upon such conversion or exercise. Acterna
expects to obtain such approval by obtaining the written consent
of its stockholders. Without giving effect to the Transaction,
the Investor and CD&R Fund V collectively own approximately 80%
of the outstanding Common Stock. Each has indicated that it
intends to vote its shares in favor of the
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Transaction, thereby assuring that Acterna will receive the
stockholder approval necessary to comply with the Nasdaq rules.
o Registration Rights. Shares of Common Stock issuable upon the
conversion of Notes or exercise of Warrants will have the same
registration rights as the shares of Common Stock currently held
by the Investor and CD&R Fund V. A copy of an amendment to the
existing Registration Rights Agreement is filed as an exhibit to
this Form 8-K.
o Covenants and Restrictions. While Acterna remains subject to the
financial covenants under its senior secured credit facility,
the Investment Agreement and the Notes do not impose any
additional financial covenants. However, under the Investment
Agreement and the Notes, Acterna and its subsidiaries will be
subject to certain affirmative covenants, which are
substantially the same as those under its senior secured credit
facility, and certain negative covenants, which are
substantially the same as those contained in the indenture for
the 9.75% Senior Subordinated Notes Due 2008 of Acterna LLC.
o Security. The Notes are secured by liens on certain of the
property and assets of, and guarantees by, Acterna and its
subsidiaries. The security interests of the holders of the Notes
are second in priority to those of the lenders under Acterna's
senior secured credit facility.
Concurrently with its agreement to the Transaction, Acterna entered
into an amendment to the Credit Agreement governing its senior secured credit
facility. Under the amendment, the lenders under the Credit Agreement, among
other things, agreed to waive for a specified period certain of the financial
covenants of Acterna under the Credit Agreement and consented to the
Transaction, and Acterna became subject to certain additional covenants and
restrictions, including, without limitation, new minimum liquidity and EBITDA
requirements and additional restrictions on Acterna's ability to make capital
expenditures, incur and guarantee debt, make investments, optionally prepay the
9.75% Senior Subordinated Notes Due 2008 of Acterna LLC and dispose of assets.
The amendment also, among other things, adds additional prepayment requirements,
establishes additional guarantees and pledges of collateral and increases the
interest rates on loans under the senior secured credit facility by 0.75%. A
copy of the amendment is filed as an exhibit to this Form 8-K.
Item 7. Exhibits.
Exhibit 4.1: Investment Agreement, dated as of December 27, 2001, among
Acterna, Acterna LLC and the Investor.
Exhibit 4.2: Form of Note issuable under the Investment Agreement.
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Exhibit 4.3: Form of Warrant issuable under the Investment Agreement.
Exhibit 4.4: Amendment No. 2, dated as of January 15, 2002, among
Acterna, the Investor and CD&R Fund V, to that certain Registration Rights
Agreement, dated as of May 21, 1998, among Acterna, the Investor, CD&R Fund V
and certain other parties.
Exhibit 10.1: Second Credit Agreement Amendment, dated as of December
27, 2001, among Acterna, Acterna LLC, certain subsidiaries of Acterna LLC,
JPMorgan Chase Bank (as successor by merger to the Morgan Guaranty Trust Company
of New York), as Administrative Agent, and certain of the lenders under the
Credit Agreement establishing Acterna's senior secured credit facility. The
Credit Agreement is incorporated by reference to Exhibit 10.1 to the Annual
Report on Form 10-K of Dynatech Corporation for the fiscal year ended March 31,
2000, filed with the Securities and Exchange Commission on June 29, 2000.
Exhibit 10.2: Guarantee and Collateral Agreement, dated as of December
27, 2001, made by Acterna, Acterna LLC and certain subsidiaries of Acterna LLC
for the benefit of the Investor.
Exhibit 10.3: Intercreditor Agreement, dated as of December 27, 2001,
between JPMorgan Chase Bank and the Investor, and consented to by Acterna and
Acterna LLC.
Exhibit 99.1: Press Release, dated December 3, 2001, entitled "Acterna
Corporation Announces New Investment Proposal by Clayton, Dubilier & Rice",
which release is furnished but not filed as part of Item 9 of this report.
Exhibit 99.2: Press Release, dated December 20, 2001, entitled "Acterna
Corporation Announces $75 Million Investment by Clayton, Dubilier & Rice and
Amendment to Senior Credit Agreement", which release is furnished but not filed
as part of Item 9 of this report.
Item 9. Regulation FD Disclosure.
Attached hereto as Exhibits 99.1 and 99.2 and furnished but not filed
are press releases regarding the Transaction and the amendment to the Credit
Agreement governing Acterna's senior secured credit facility.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACTERNA CORPORATION
Date: January 16, 2002
By: /s/ Mark V.B. Tremallo
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Name: Mark V.B. Tremallo
Title: Corporate Vice President,
General Counsel and Secretary
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