Item 1.01 Conclusion of a definitive material agreement.
Securities purchase agreement
November 2, 2022, Masonite Corporation, a Delaware Corporation("Buyer"), a wholly-owned subsidiary of Masonite International Corporation, a British Columbiacorporation ("Masonite"), entered into a Securities Purchase Agreement (the "SPA"), by and among Cyprium Investors V LP, a Delawarelimited partnership ("Cyprium Investors V"), Cyprium Parallel Investors V LP, a Delawarelimited partnership ("Cyprium Parallel V"), 1492 Capital LLC, an Ohiolimited liability company ("1492 Capital"), Nationwide Defined Benefit Master Trust, an employee pension plan organized in New York("Nationwide"), Bruce Procton, a natural person, the Rose E. Procton Irrevocable Trustu/a/d 12/31/12, the Alexander M. Procton Irrevocable Trustu/a/d 12/31/12, the Jonas M. Procton Irrevocable Trustu/a/d 12/31/12, Kevin MacDonald, a natural person, Walter Hammond, a natural person, Greg McGehee, a natural person, and Larry Repar, a natural person (collectively, the "Endura Stockholders"), Cyprium Investors V, Cyprium Parallel V, 1492 Capital and Nationwide (collectively, the "Endura Warrant Holders"), EPI Holdings, Inc., a Delawarecorporation ("Endura"), and Bruce Procton, a natural person, as Endura's equityholders' representative, pursuant to which Buyer will acquire all of the rights and interests in and to the capital stock of Endura (the "Acquisition", and together with the other transactions contemplated therein, the "Transactions").
The total cash consideration payable by Buyer to Endura's equityholders for the Acquisition is
$375 million(the "Base Purchase Price"), subject to customary adjustments for cash, indebtedness, transaction expenses, change of control payments and working capital. $20 millionfrom the Base Purchase Price will be held back by Buyer from the closing purchase price to secure any purchase price adjustment and satisfy certain indemnification claims.
The consummation of the Transactions is subject to the satisfaction or waiver of certain customary closing conditions, including, but not limited to, (a) the accuracy of each party's representations and warranties (subject to customary materiality and other qualifiers), (b) each party's performance and compliance with its covenants contained in the SPA, (c) the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (d) receipt of certain consents from commercial counterparties of Endura, and (e) the absence of any statute, rule, regulation, order, injunction or decree or other legal restraint or prohibition (whether temporary, preliminary or permanent), in each case, that the effect of restraining, enjoining or otherwise prohibiting or makes illegal the consummation of the Transactions.
The total consideration payable by the buyer is expected to be funded by a combination of cash on hand, borrowings under the Amended ABL Facility (as defined below) and a new scheduled term loan. The Operations are not subject to a financing condition.
Representations, Warranties and Covenants
The SPA contains customary representations, warranties and covenants. Certain key executives of Endura will be subject to non-compete and non-solicitation obligations for a period of between three to five years following the closing.
The SPA contains indemnification obligations of certain Endura's equityholders for breaches of representations and warranties and pre-closing covenants, subject to certain limitations. Except for certain fundamental representations and fraud, the indemnification obligations of such former Endura's equityholders is limited to
$18 million, and at the second-anniversary date of the closing date, any remaining funds will be released to such former Endura's equityholders, subject to any then-pending claims.
The SPA may be terminated under certain circumstances prior to the closing of the Transactions, (i) by mutual written consent of Buyer, Endura or the Endura's equityholders' representative, (ii) by either Buyer or Endura or the Endura's equityholders' representative if the other party breaches its representations, warranties or covenants such that the applicable condition in the SPA would not be satisfied, and such party fails to cure such breach (other than for certain limited exceptions), (iii) by either Buyer, Endura or the Endura's equityholders' representative if the Transactions are not consummated by
December 31, 2022, subject to one automatic 30-day extension followed by an additional 30-day extension if mutually agreed between the parties, in each case, if the only remaining condition to be satisfied related to the failure to obtain regulatory approval, (iv) by Buyer, if a 2 -------------------------------------------------------------------------------- material adverse effect on Endura occurs and (v) by either Buyer, Endura or the Endura's equityholders' representative if any governmental entity issues an order or taken any other action restraining, enjoining or otherwise prohibiting or makes illegal the consummation of the Transactions and such order or other action has become final and non-appealable. The description of the SPA set forth under this Item 1.01 does not purport to be complete and is qualified in its entirety by reference to the full text of the SPA, which is attached hereto as Exhibit 2.1 and incorporated herein by reference.
Modification of the ABL installation
The information set forth below in Section 2.03 of this Current Report on Form 8-K is incorporated by reference into this Section 1.01.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Modification of the ABL installation
October 28, 2022, Masonite and certain of its subsidiaries entered into an amendment (the "ABL Amendment") to our asset-based revolving credit facility, dated as of January 31, 2019(as amended prior to the date hereof, the "ABL Facility" and, as amended by the ABL Amendment, the "Amended ABL Facility"), which, among other things, (i) increased the revolving credit commitments available thereunder by $100 million(subject to certain specified sublimits available thereunder as specified therein) to an aggregate amount of $350 millionand (ii) replaced the LIBOR-based interest rate applicable to borrowings thereunder in U.S.dollars with an interest rate based on the sum of (x) a "Term SOFR" rate published by the CME Group Benchmark Administration Limited(CBA) plus (y) 10 basis points. The terms of the ABL Facility remained otherwise substantially unchanged. The description of the ABL Amendment set forth under this Item 2.03 does not purport to be complete and is qualified in its entirety by reference to the full text of the ABL Amendment, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Section 7.01 Disclosure of FD Rules.
The information and exhibit provided pursuant to this Item 7.01 shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities under that Section 18, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such a filing.
This Current Report on Form 8-K contains "forward-looking statements" within the meaning of the federal securities laws, including our discussion of the pending acquisition of Endura, including its expected closing date, the receipt of required regulatory approvals and our ability to successfully integrate Endura's business and achieve the expected synergies, and statements relating to our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy and product development efforts and ability to achieve the revenues, cost savings, synergies and other anticipated benefits associated with the pending transaction. When used in this Current Report on Form 8-K, such forward-looking statements may be identified by the use of such words as "may," "might," "could," "will," "would," "should," "expect," "believes," "outlook," "predict," "forecast," "objective," "remain," "anticipate," "estimate," "potential," "continue," "plan," "project," "targeting," or the negative of these terms or other similar terminology. Forward-looking statements involve significant known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Masonite, or industry results, to be materially different from any future plans, goals, targets, objectives, results, performance or achievements expressed or implied by such forward-looking statements. As a result, such forward-looking statements should not be read as guarantees of future performance or results, should not be unduly relied upon, and will not necessarily be accurate indications of whether or not such results will be achieved. Factors that could cause actual results to differ materially from the results discussed in the forward-looking statements include, but are not limited to, downward trends in our end markets and in economic conditions; reduced levels of residential new construction, residential repair, renovation and remodeling, and non-residential building construction activity due to increases in mortgage rates, changes in mortgage interest deductions and related tax changes and reduced availability of financing; competition; the 3 -------------------------------------------------------------------------------- continued success of, and our ability to maintain relationships with, certain key customers in light of customer concentration and consolidation; our ability to accurately anticipate demand for our products; impacts on our business including seasonality, weather and climate change; scale and scope of the ongoing coronavirus ("COVID-19") pandemic and its impact on our operations, customer demand and supply chain; inflation, including increases in prices of raw materials and fuel; tariffs and evolving trade policy and friction between
the United Statesand other countries, including China, and the impact of anti-dumping and countervailing duties; increases in labor costs, the availability of labor, or labor relations (i.e., disruptions, strikes or work stoppages); our ability to manage our operations including potential disruptions, manufacturing realignments (including related restructuring charges) and customer credit risk; product liability claims and product recalls; our ability to generate sufficient cash flows to fund our capital expenditure requirements, to meet our pension obligations and to meet our debt service obligations, including our obligations under the ABL Facility; limitations on operating our business as a result of covenant restrictions under our existing and future indebtedness, including our senior notes and ABL Facility; fluctuating foreign exchange and interest rates; our ability to replace our expiring patents and to innovate, keep pace with technological developments and successfully consummate and integrate acquisitions; the continuous operation of our information technology and enterprise resource planning systems and management of potential cyber security threats and attacks; political, economic and other risks that arise from operating a multinational business; uncertainty relating to the United Kingdom'sexit from the European Union; retention of key management personnel; and environmental and other government regulations, including the United States Foreign Corrupt Practices Act ("FCPA"), and any changes in such regulations. For a more detailed discussion of these factors, see the information under the captions "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Forward Looking Statements" in our most recent annual report on Form 10-K filed with the SECon February 24, 2022, in each case as updated by our subsequent filings with the SEC. Masonite undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Item 9.01 Financial statements and supporting documents.
Exhibit No. Description 2.1 Securities Purchase Agreement, dated as of
Masonite, Endura, Endura Stockholders, Endura
Mandate holders and Endura
equityholders' representative 10.1 Amendment No. 3 to the Second Amended and
Restated credit agreement and
Facility Increase Amendment, dated as of
Masonite Corporation, Premdor Crosby
limited, the other
subsidiary of Masonite party thereto, each
lending party and Wells
Bank, National Association, as administrative agent 99.1 Press release issued by Masonite International Corporationon November 3, 2022104 Cover Page Interactive Data File (formatted as
Inline XBRL and content in
* Appendices and certain exhibits have been omitted in accordance with SK Rule 601(b)(2). The declarant hereby undertakes to provide in addition to the
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