Entegris (ENTG) 8-KEntry into a Material Definitive Agreement

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On July 6, 2022 (the “Closing Date”), Entegris, Inc., a Delaware corporation (“Entegris”) completed the acquisition of CMC Materials, Inc., a Delaware corporation (“CMC”) pursuant to the terms of the previously announced Agreement and Plan of Merger, dated as of December 14, 2021 (the “Merger Agreement”), by and among Entegris, CMC and Yosemite Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Entegris (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub merged with and into CMC (the “Merger”), with CMC surviving the Merger and becoming a wholly owned subsidiary of Entegris.

At the effective time of the Merger (the “Effective Time”), subject to the terms and conditions of the Merger Agreement, each share of common stock, par value $0.001 per share, of CMC (the “CMC Common Stock”) issued and outstanding immediately prior to the Effective Time (other than (i) shares of CMC Common Stock owned by CMC, Entegris or any of their respective subsidiaries immediately before the Effective Time and (ii) shares of CMC Common Stock as to which dissenters’ rights have been properly perfected) was converted into the right to receive $133.00 in cash (the “Cash Consideration”) and .4506 of a share (the “Exchange Ratio”) of Entegris common stock, plus cash in lieu of any fractional shares (the “Merger Consideration”).

Pursuant to the Merger Agreement, as of the Effective Time, (i) each outstanding option to purchase shares of CMC Common Stock vested in full and was assumed and converted into an option to purchase shares of Entegris common stock based on the Equity Award Exchange Ratio (defined below), (ii) each restricted share of CMC Common Stock vested in full and was cancelled and converted into the right to receive the Merger Consideration (with any accrued but unpaid dividends paid in cash), (iii) each time-based restricted stock unit award that was granted prior to the date of the Merger Agreement and/or to a non-employee member of the CMC board of directors vested in full and was cancelled and converted into the right to receive the Merger Consideration (with any accrued but unpaid dividend equivalents paid in cash), (iv) each other time-based restricted stock unit award not covered by clause (iii) was converted into a restricted stock unit award with respect to shares of Entegris common stock based on the Equity Award Exchange Ratio, (iv) each deferred stock unit award under CMC’s Directors’ Deferred Compensation Plan vested in full and was cancelled and converted into the right to receive the Merger Consideration (with any accrued but unpaid dividend equivalents paid in cash), (v) each contingent right to receive the cash value of a share of CMC Common Stock held by select employees of CMC who primarily provide services in a jurisdiction other than the United States vested in full and was cancelled and converted into the right to receive an amount in cash equal to the value of the Merger Consideration, and (vi) each performance-based restricted stock unit was assumed and converted into a time-based restricted stock unit award with respect to shares of Entegris common stock based on the Equity Award Exchange Ratio and the achievement of applicable performance metrics at the target level. The “Equity Award Exchange Ratio” means the sum of (i) the Exchange Ratio and (ii) the quotient (rounded to the fourth decimal place) of (i) the Cash Consideration divided by (ii) the volume weighted average price per share of Entegris common stock on the NASDAQ, for the consecutive period of 10 trading days beginning on the 12th trading day immediately preceding the closing date and concluding at the close of trading on the second trading day immediately preceding the closing date.

On the Closing Date, Entegris and certain of its subsidiaries entered into an Amendment and Restatement Agreement (the “Amendment”), which amended and restated the Credit and Guaranty Agreement dated as of November 6, 2018 (as previously amended, restated, amended and restated, supplemented, modified and otherwise in effect prior to the effectiveness of the Amendment, the “Existing Credit Agreement” and, the Existing Credit Agreement as amended by the Amendment, the “Amended Credit Agreement”), by and among Entegris, as borrower, certain subsidiaries of Entegris party thereto, as guarantors, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent.

The Amended Credit Agreement provides for senior secured credit facilities in an aggregate principal amount equal to $3.070 billion, consisting of (a) a senior secured term loan credit facility in an aggregate principal amount equal to  $2.495 billion (the “Initial Term Loan Facility”) and (b) a senior secured revolving credit facility in an aggregate amount equal to $575 million (the “Revolving Facility” and, together with the Initial Term Loan Facility, the “Credit Facilities”). The Revolving Faclity contains a $57.5 million sublimit for swingline loans. The Revolving Facility also contains a $70.0 million sublimit for the issuances of letters of credit. Borrowings and Letters of Credit under the Revolving Facility, at Entegris’ option, may be denominated in US dollars or Euros, Sterling, Singapore Dollars or Yen (the “Foreign Currencies”).  Swingline Loans will be denominated in US dollars. On the Closing Date, borrowings under the Credit Facilities, together with proceeds of the Bridge Credit Facility and the Notes, and cash on hand, were used to (a) finance a portion of Merger Consideration, (b) pay the fees and expenses related to the Merger, the Notes offerings, the Credit Facilities and the Bridge Credit Facility and (c) repay certain existing indebtedness of CMC and Entegris.  Thereafter, borrowings under the Revolving Facility and any remaining proceeds of the Initial Term Loan Facility may be used to finance working capital and general corporate purposes of Entegris and its subsidiaries.

The commitments under the Revolving Facility expire on July 6, 2027, and any loans then outstanding will be payable in full at that time.  All outstanding loans under Initial Term Loan Facility are due and payable on July 6, 2029.

Under the Amended Credit Agreement, Entegris may, at its option, add one or more additional tranches of term loans or add one or more additional tranches of revolving credit commitments, without the consent of any lenders not participating in such additional borrowings, up to an aggregate amount of the greater of $1,100 million and 100% of Consolidated Adjusted EBITDA (as defined in the Amended Credit Agreement) for the then most recent period of four fiscal quarters for which financial statements are available, plus an amount equal to certain prepayments or redemptions indebtedness under the Credit Facilities and certain other permitted pari passu indebtedness, plus additional amounts based on the satisfaction of certain leverage ratio tests, subject to certain customary conditions and applicable lenders committing to provide the additional funding. There can be no assurance that additional funding would be available.

Entegris’ obligation under the Credit Facilities are guaranteed by certain of Entegris’ wholly-owned domestic restricted subsidiaries (including CMC and certain of its wholly-owned domestic subsidiaries (the “CMC Guarantors”) and, collectively, the “Subsidiary Guarantors”), subject to customary exceptions and limitations.  Entegris’ obligations under the Credit Facility and the Subsidiary Guarantors’ obligations under the related guarantees are secured by a first-priority lien on substantially all of the assets of Entegris and the Subsidiary Guarantors, subject to customary exceptions and limitations, on a pari passu basis with the obligations under the Secured Notes, pursuant to customary intercreditor arrangements set forth in that certain Equal Priority Intercreditor Agreement, dated as of July 6, 2022 (the “New Notes Intercreditor Agreement”), among Entegris, certain subsidiaries of Entegris, Morgan Stanley Senior Funding, Inc., as senior credit facilities collateral agent, and Truist Bank, as notes collateral agent.

Borrowings under the Initial Term Loan Facility bear interest at a rate per annum equal to, at Entegris’ option, either (i) Term SOFR plus an applicable margin of 3.00% or (ii) a base rate plus an applicable margin of 2.00%.  From and after the Closing Date and until the first business day after Entegris delivers the financial statements for the fiscal quarter ended December 31, 2022 and the related compliance certificate to the administrative agent pursuant to the Amended Credit Agreement, borrowings under the Revolving Facility bear interest at a rate per annum equal to, at Entegris’ option, either (i) Term SOFR, in the case of US dollar denominated borrowings, or the applicable benchmark rate as further described in the Amended Credit Agreement, in the case of Foreign Currencies, in each case, plus an applicable margin of 1.75% or (ii) a base rate, plus an applicable margin of 0.75%.  Thereafter, borrowing under the Revolving Facility bear interest at a rate per annum equal to, at Entegris’ option, (i) Term SOFR, in the case of US dollar denominated borrowings, or the applicable benchmark rate as further described in the Amended Credit Agreement, in the case of Foreign Currencies, in each case, plus an applicable margin ranging from 1.25% to 1.75%, in each case, depending on the first lien net leverage ratio of Entegris and its restricted subsidiaries (the “First Lien Net Leverage Ratio”), and (ii) a base rate, plus an applicable margin ranging from 0.25% to 0.75%, depending on the First Lien Net Leverage Ratio. Swingline loans under the Revolving Facility bear interest at a rate per annum equal to the base rate plus the applicable margin otherwise applicable to base rate borrowings under the Revolving Facility.

Unutilized commitments under the Revolving Facility are subject to a per annum fee of (i) from and after the Closing Date and until the first business day after Entegris delivers the financial statements for the fiscal quarter ended December 31, 2022 and the related compliance certificate to the administrative agent pursuant to the Amended Credit Agreement, 0.30% and (ii) thereafter, (x) a range of 0.20% to 0.30%, depending on the First Lien Net Leverage Ratio.

The Amended Credit Agreement contains customary representations and warranties and affirmative covenants. The Amended Credit Agreement also includes negative covenants that limit, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt and mergers and acquisitions.  The Amended Credit Agreement also includes a “springing” financial covenant that would require Entegris to maintain a First Lien Net Leverage Ratio of 5.20:1.00 or less as of the end of any period of four fiscal quarters ending after December 31, 2022 if at any time Entegris has revolving borrowings, unreimbursed letter of credit drawings and undrawn letters of credit (subject to certain exceptions) outstanding in an amount in excess of 35.0% of the aggregate commitments in respect of the Revolving Facility.

The Amended Credit Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the Credit Facilities to be in full force and effect, and a change of control. If an event of default occurs and is continuing, Entegris may be required immediately to repay all amounts outstanding under the Amended Credit Agreement.

On the Closing Date, Entegris and the Subsidiary Guarantors entered into a 364-Day Bridge Credit and Guaranty Agreement (the “Bridge Credit Agreement”), among Entegris, as borrower, certain subsidiaries of Entegris party thereto, as guarantors, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent. The Bridge Credit Agreement provides for a senior unsecured term loan facility  in an aggregate principal amount equal to $275 million (the “Bridge Credit Facility”). On the Closing Date, proceeds of the Bridge Credit Facility, together with proceeds of the Credit Facilities and the Notes, and cash on hand, were used to (a) finance a portion of Merger Consideration, (b) pay the fees and expenses related to the Merger, the Notes offerings, the Credit Facilities and the Bridge Credit Facility and (c) repay certain existing indebtedness of CMC and Entegris and any remaining proceeds of the Bridge Credit Facility will be used to finance working capital and general corporate purposes of Entegris and its subsidiaries following the Closing Date.  All outstanding loans under the Bridge Credit Facility are due and payable on the date that is 364 days after the Closing Date.

Borrowings under the Bridge Credit Facility bear interest at a rate per annum equal to, at Entegris’ option, either (i) Term SOFR plus an applicable margin of 4.55% or (ii) a base rate plus an applicable margin of 3.55%.  In addition to paying interest on the outstanding principal under the Bridge Credit Facility, Entegris will pay to each lender under the Bridge Credit Agreement duration fees equal to 0.25% of the aggregate outstanding principal amount of such lender’s loans under the Bridge Credit Facility at 90, 180 and 270 days after the Closing Date.

Entegris’ obligation under the Bridge Credit Facility are guaranteed, on an unsecured basis, by the Subsidiary Guarantors, subject to customary exceptions and limitations.

The Bridge Credit Agreement contains customary representations and warranties and affirmative covenants. The Bridge Credit Agreement also includes negative covenants that limit, among other things, additional subsidiary indebtedness, additional liens, sales of assets and mergers and acquisitions.

The Bridge Credit Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, and a change of control. If an event of default occurs and is continuing, Entegris may be required immediately to repay all amounts outstanding under the Bridge Credit Agreement.

The foregoing descriptions of the Amended Credit Agreement and the Bridge Credit Agreement are qualified in their entirety by reference to each agreement, copies of which are filed as Exhibits 4.10 and 4.11 hereto and are incorporated by reference in this Item 1.0.

The description of the effects of the Merger Agreement and the transactions contemplated by the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement, which was filed as Exhibit 2.1 to Entegris’ Form 8-K, filed with the Securities and Exchange Commission on December 16, 2021 and which is incorporated herein by reference.

On July 6, 2022, Entegris issued a press release announcing the completion of the Merger. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is hereby furnished pursuant to this Item 7.01.

The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing.

Entegris’ unaudited pro forma condensed combined statement of operations and explanatory notes for the year ended December 31, 2021 and three months ended April 2, 2022 and Entegris’ unaudited pro forma condensed combined balance sheet and explanatory notes as of April 2, 2022 are attached as Exhibit 99.2 to Entegris’ Current Report filed on June 16, 2022 and are incorporated herein by reference.

The additional pro forma financial information required by this Item will be filed by amendment to this Current Report on Form 8-K not later than 71 calendar days following the date that this Report is required to be filed.

(d) Exhibits