Item 1.01. Entry into a Material Definitive Agreement
Credit and Guaranty Agreement
Pursuant to the Agreement and Plan of Merger, dated as of November 8, 2015 (the Merger Agreement), by and among Rhombus Cinema Holdings, LP (formerly Rhombus Cinema Holdings, LLC), a Delaware limited partnership (Purchaser), Rhombus Merger Sub, Inc., a Delaware corporation and indirect, wholly owned subsidiary of Purchaser (Merger Sub), and RealD Inc., a Delaware corporation (the Company), on March 22, 2016 (the Closing Date), Merger Sub was merged with and into the Company (the Merger), with the Company continuing as the surviving corporation and as an indirect, wholly owned subsidiary of Purchaser.
In connection with the closing of the Merger, on March 22, 2016, the Company repaid all amounts outstanding under its existing senior secured credit facility with City National Bank, as administrative agent, and certain other financial institutions (the Existing Credit Facility) and terminated the Existing Credit Facility.
On March 22, 2016, in connection with the closing of the Merger, the Company entered into a credit and guaranty agreement (the Credit Agreement) with Highbridge Principal Strategies, LLC, as administrative agent and collateral agent and certain other financial institutions. The Credit Agreement consists of a $330.0 million term loan facility that matures March 22, 2021. Certain subsidiaries and parent entities of the Company guarantee the obligations of the Company under the Credit Agreement. All obligations under the Credit Agreement and the related guarantees are secured by a perfected first priority lien or security interest in substantially all of the Company and the guarantors assets.
The loans under the Credit Agreement bear interest, at the option of the Company, at either (a) a base rate based on the highest of (i) the U.S. Prime Lending Rate as published in The Wall Street Journal, (ii) the Federal Funds Effective Rate plus 0.50% and (iii) the sum of (A) the one (1) month LIBOR rate plus (B) 1.00% per annum (subject to a floor of 2.00%), plus 6.50%, or (b) a LIBOR-based rate (subject to a floor of 1.00%) plus 7.50%.
The loans are subject to customary representations, warranties and ongoing affirmative and negative covenants and events of default. The negative covenants include, among other things, limitations on indebtedness, liens, asset sales, mergers and acquisitions, investments, transactions with affiliates, dividends and other restricted payments and sale and leaseback transactions of the Company or any of its subsidiaries. The Credit Agreement also requires the Company to maintain a maximum leverage ratio.
Management Services Agreement
On March 22, 2016, in connection with the closing of the Merger, the Company entered into a separate management services agreement with an affiliate of Rizvi Traverse Management, LLC pursuant to which such affiliate will be entitled to receive a periodic fee in consideration of services to be provided to the Company in connection with the Merger and thereafter.