Item 1.01. – Entry into a Material Definitive Agreement
On
November
15,
2021,
Cal-Maine
Foods,
Inc.
(the
“Company”)
entered
into
an Amended
and
Restated
Credit Agreement
effective as of that date (the “Credit Agreement”), among the Company, as borrower (the “Borrower”), the wholly-owned direct
and
indirect
domestic
subsidiaries
of
the
Company
as
guarantors
(the
“Guarantors”),
BMO
Harris
Bank
N.A.
(the
“Administrative Agent”), as
Administrative Agent, Swingline Lender and L/C Issuer, BMO Harris Bank N.A., Greenstone Farm
Credit Services, ACA,
AgFirst Farm Credit Bank, Compeer
Financial, ACA
and Farm Credit Bank of
Texas, as the initial lenders
and such other lenders
from time to time
party thereto (the “Lenders”),
and BMO Capital Markets,
as the sole Lead
Arranger and
sole Book
Runner and
GreenStone Farm
Credit Services,
ACA, as
Syndication
Agent.
The Credit
Agreement amends
and restates
the Company’s existing Credit Agreement dated July 10, 2018.
The Credit Agreement provides for an increased senior secured revolving credit
facility in an initial aggregate principal amount
of up
to $250 Million
(the “Credit Facility”
or “Revolver”), which
includes a $15
Million sublimit for
the issuance of
standby
letters of credit and a $15 Million sublimit
for swingline loans.
The Credit Facility also includes an accordion
feature permitting
the Borrower, with the consent
of the Administrative
Agent, to increase the Credit
Facility in the aggregate
up to $200 Million by
adding one or more incremental senior secured term loans or increasing one or more times
the revolving commitments under the
Revolver.
The proceeds of the Credit Facility can be used
by the Company for general working capital and
corporate purposes,
capital expenditures, to refinance existing indebtedness, to finance permitted acquisitions and fund fees and expenses associated
with the Credit Agreement. As of November 18, 2021, no amounts were borrowed under the Credit
Facility and $4.1 Million in
standby letters of credit were issued under the Credit Facility.
The Credit Facility has a term of five years and will mature
on November 15, 2026, at which time all amounts outstanding
under
the Credit Agreement will be due and payable in full.
The interest rate in connection with loans made
under the Credit Facility will be based, at
the Borrower’s election, on either the
Eurodollar Rate plus the Applicable Margin or
the Base Rate plus
the Applicable Margin. The “Base Rate” means a
fluctuating
rate per annum equal to the highest of
(a) the federal funds rate plus 0.50% per
annum, (b) the prime rate of interest established
by the
Administrative Agent,
and (c) the
Eurodollar Rate
for an interest
period of one
month plus 1%
per annum, subject
to certain
interest rate floors.
The “Eurodollar Rate” means the reserve adjusted rate at which Eurodollar deposits
in the London interbank
market for an interest period of one, two, three, six or twelve months (as selected by the Borrower)
are quoted.
The “Applicable
Margin” means 0.00% to
0.75% per annum for
Base Rate Loans and
1.00% to 1.75% per
annum for Eurodollar Rate Loans,
in
each
case
depending
upon
the Total
Funded
Debt
to
Capitalization
Ratio
for
the
Company
at
the
quarterly
pricing
date.
In
addition, the Company will pay a commitment fee
on the unused portion of the Credit Facility
payable quarterly from 0.15% to
0.25%
in each case depending
upon the Total
Funded Debt to Capitalization
Ratio for the Company
at the quarterly pricing
date.
The Credit Agreement contains customary provisions
regarding replacement of the Eurodollar Rate.
The Credit
Facility is
secured by
a first-priority
perfected security
interest in
substantially all
of the
Borrower’s and the
guarantors’
accounts,
payment
intangibles,
instruments
(including
promissory
notes),
chattel
paper,
inventory
(including
farm
products) and deposit accounts maintained with BMO Harris Bank N.A., the
Administrative Agent.
The
Credit Agreement
contains
customary
covenants,
including,
but
not
limited
to,
restrictions
on
the
incurrence
of
liens,
incurrence of additional
debt, sales of
assets and other
fundamental corporate changes
and investments. The
Credit Agreement
requires maintenance of two financial
covenants: (i) a maximum
Total Funded Debt to Capitalization
Ratio tested quarterly of no
greater than 50%;
and (ii) requirement
to maintain Minimum
Tangible Net Worth
at all times
of $700 Million
plus 50% of
net
income
(if
net
income
is
positive)
less
permitted
restricted
payments
for
each
fiscal
quarter
after
November
27,
2021.
Additionally, the Credit
Agreement requires that Fred R.
Adams Jr., his spouse, natural
children, sons-in-law or grandchildren,
or
any trust, guardianship,
conservatorship or custodianship for
the primary benefit of
any of the
foregoing, or any
family limited
partnership, similar limited liability company or other entity
that 100% of the voting control of such
entity is held by any of the
foregoing, shall maintain at least 50% of the Company's voting stock.
Failure to satisfy any of these covenants will constitute a
default under the terms of
the Credit Agreement.
Further, under the terms of
the Credit Agreement,
payment of
dividends under
the Company's
current dividend
policy of
1/3 of
the Company's
net income
computed in
accordance with
generally accepted
accounting principles and payment of
other dividends or repurchases by
the Company of its
capital stock is allowed, as
long as
after giving effect to such
dividend payments or repurchases no default
has occurred and is continuing
and the sum of cash
and
cash equivalents of the Company and its subsidiaries plus availability under the Revolving Facility equals at
least $50 Million.
The Credit Agreement
also includes
customary events
of default
and customary
remedies upon
the occurrence
of an
event of
default, including acceleration of the amounts
due under the Credit Facility and
foreclosure of the collateral securing the
Credit