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KTOS > SEC Filings for KTOS > Form 8-K on 15-May-2014All Recent SEC Filings

Show all filings for KRATOS DEFENSE & SECURITY SOLUTIONS, INC.

Form 8-K for KRATOS DEFENSE & SECURITY SOLUTIONS, INC.


15-May-2014

Entry into a Material Definitive Agreement, Termination


Item 1.01 Entry into a Material Definitive Agreement.

Senior Secured Notes

On May 14, 2014, Kratos Defense & Security Solutions, Inc. (the "Company," "we," or "our") completed an offering of $625 million aggregate principal amount of 7.000% senior secured notes due 2019 (the "Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the "Act"). The proceeds from the offering will be used to refinance the Company's existing 10% senior secured notes due 2017 and to pay all fees and expenses related thereto. The Notes are governed by the Indenture dated as of May 14, 2014 (the "Indenture") among the Company, certain of the Company's subsidiaries (the "Guarantors") and Wilmington Trust, National Association, as Trustee and Collateral Agent.

The Notes bear interest at a rate of 7.000% per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for. Interest on the Notes is payable in arrears on May 15 and November 15 of each year, beginning on November 15, 2014. The Notes will be fully and unconditionally guaranteed by the Guarantors.

The Notes and the guarantees will be our and each Guarantor's senior secured obligations and will be equal in right of payment with all other senior obligations of the Guarantors' existing and future secured debt to the extent of the assets securing that secured debt. The Company's obligations under the Notes are secured by a first priority security interest in certain collateral described in the Indenture and a second priority security interest in certain other collateral described in the Indenture where the lenders under the Credit Agreement (as described below) have a first priority security interest. The lenders under the Credit Agreement and the collateral agent and trustee with respect to the Notes have entered into an intercreditor agreement to govern the relative priority of the collateral.

The Notes will be redeemable, in whole or in part, at any time on or after May 15, 2016 on the redemption dates and at the respective redemption prices specified in the Indenture. In addition, we may redeem up to 35% of the Notes before May 15, 2016 with the net proceeds of certain equity offerings. We may also redeem some or all of the Notes before May 15, 2016 at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date, plus a "make whole" premium. In addition, at one time prior to May 15, 2016, we may redeem up to 10% of the original aggregate principal amount of the Notes issued under the Indenture at a redemption price . . .



Item 1.02 Termination of a Material Definitive Agreement.

On May 14, 2014, the Company completed the satisfaction and discharge of the Indenture, dated May 19, 2010, by and among the Company, the subsidiaries of the Company that are Guarantors thereunder, and Wilmington Trust, National Association (successor by merger to Wilmington Trust FSB), as Trustee and Collateral Agent (as amended and supplemented from time to time prior to the date hereof, the "Existing Indenture") governing the Company's 10% Senior Secured Notes due 2017 (the "2017 Notes"). Interested parties should read the Company's announcements and public filings regarding the 2017 Notes.

This current report does not constitute a notice of redemption under the optional redemption provisions of the Existing Indenture, nor does it constitute an offer to sell, or a solicitation of an offer to buy, any security. No offer, solicitation, or sale will be made in any jurisdiction in which such an offer, solicitation, or sale would be unlawful.



Item 2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangementof a Registrant.

The information set forth in Item 1.01 of this current report is incorporated herein by reference into this Item 2.03.



Item 2.04 Triggering Events That Accelerate or Increase a Direct
Financial Obligation under an Off-Balance Sheet Arrangement.

On May 14, 2014, the Company notified Wilmington Trust, National Association (successor by merger to Wilmington Trust FSB), the trustee for the 2017 Notes, of its election to call for redemption on June 13, 2014 (the "Redemption Date") all of the outstanding 2017 Notes and instructed the trustee to provide notice of such redemption to the holders of the 2017 Notes in accordance with the terms of the Exiting Indenture. The 2017 Notes will be redeemed at a redemption price of 105.000% of the outstanding principal amount of the 2017 Notes being redeemed, plus accrued and unpaid interest, if any, up to, but excluding the Redemption Date. Following the redemption, none of the 2017 Notes will remain outstanding. This current report does not constitute a notice of redemption of the 2017 Notes.



Item 3.02. Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 of this current report is incorporated by reference into this Item 3.02.



Item 3.03 Material Modification to Rights of Security Holders.

Pursuant to the terms of the Indenture and the Credit Agreement, the Company is subject to certain restrictions on its ability to pay dividends or make other distributions or payments on account of any redemption, retirement or purchase of any capital stock. The information regarding such restrictions set forth in Item 1.01 and the Indenture and the Credit Agreement, each incorporated by reference therein, is incorporated by reference into this Item 3.03



Item 5.07 Submission of Matters to a Vote of Security Holders.

On May 14, 2014, the Company held its annual meeting of stockholders (the "Annual Meeting"). As of the record date for the Annual Meeting, there were 57,420,366 shares of the Company's common stock outstanding. At the Annual Meeting, the holders of 50,892,990 shares were represented in person or by proxy. Set forth below is a brief description of each matter acted upon by the stockholders of the Company at the Annual Meeting and the final voting results for each such proposal. These proposals are set out in more detail in the Company's Proxy Statement for the Annual Meeting filed with the Securities and Exchange Commission on April 11, 2014.

1. The stockholders considered a proposal to elect each of the individuals named below as directors to serve until the next annual meeting or until their successors are duly elected and qualified. The nominees for election to the Board of Directors were elected, each to serve until the next annual meeting, based upon the following votes:

                                                                            Broker
                           Nominee              For      Against  Abstain Non-Votes
                           Scott Anderson    38,124,754 1,166,404 81,859  11,519,973
                           Bandel Carano     37,625,067 1,698,047 49,903  11,519,973
                           Eric DeMarco      38,010,506 1,168,983 193,528 11,519,973
                           William Hoglund   36,847,330 2,265,384 260,303 11,519,973
                           Scot Jarvis       37,027,880 2,265,567 79,570  11,519,973
                           Jane Judd         36,925,400 2,368,227 79,390  11,519,973

                           Samuel Liberatore 36,947,098 2,346,720 79,199  11,519,973




2. The stockholders considered a proposal to ratify the selection of Deloitte &
Touche LLP as the Company's independent registered public accounting firm for
the fiscal year ending December 28, 2014. This proposal was approved based upon
the following votes:

                                                               For     49,717,551
                                                               Against  1,107,871
                                                               Abstain     67,568

3. The stockholders considered a proposal to approve the adoption of the Company's 2014 Equity Incentive Plan. This proposal was approved based upon the following votes:

                                                      For              36,362,218
                                                      Against           2,709,348
                                                      Abstain             301,451

                                                      Broker Non-Votes 11,519,973




4. The stockholders considered a proposal to approve, on an advisory
(non-binding) basis, the compensation of the Company's named executive officers,
as presented in the Company's 2014 Proxy Statement. This proposal was approved
based upon the following votes:

                                                      For              36,475,580
                                                      Against           2,700,288
                                                      Abstain             197,149

Broker Non-Votes 11,519,973



Item 8.01 Other Events.

On May 15, 2014, the Company issued a press release announcing that it completed an offering of $625 million aggregate principal of senior secured notes. A copy of the press release is attached as Exhibit 99.1 to this current report and is incorporated herein by reference.



Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

                 Exhibit No.   Description
                 4.1           Indenture, dated as of May 14, 2014, among Kratos
                               Defense & Security Solutions, Inc., as Issuer, the
                               Guarantors party thereto, and Wilmington Trust,
                               National Association, as Trustee and Collateral
                               Agent.

                 10.1          Registration Rights Agreement, dated as of May 14,
                               2014, among Kratos Defense & Security Solutions,
                               Inc., as Issuer, the Guarantors party thereto, and
                               SunTrust Robinson Humphrey, Inc., as Representative
                               of the Initial Purchasers.

                 10.2          Credit and Security Agreement, dated as of May 14,
                               2014, among Kratos Defense & Security Solutions,
                               Inc., as Borrower, the lenders named therein,
                               SunTrust Bank, as Agent, and SunTrust Robinson
                               Humphrey, Inc., as Lead Arranger and Sole Book
                               Runner.

                 99.1          Press Release, issued by Kratos Defense & Security
                               Solutions, Inc. on May 15, 2014.




Section 6.11. Employee Benefits Plans.

(a) US Employee Benefit Plans. Schedule 6.11 hereto (as such schedule may be amended or supplemented from time to time) identifies each ERISA Plan. No ERISA Event has occurred or is expected to occur with respect to an ERISA Plan. Full payment has been made of all amounts that a Controlled Group member is required, under applicable law or under the governing documents, to have paid as a contribution to or a benefit under each ERISA Plan. The liability of each Controlled Group member with respect to each ERISA Plan has been fully funded based upon reasonable and proper actuarial assumptions, has been fully insured, or has been fully reserved for on its financial statements. No changes have occurred or are expected to occur that would cause a material increase in the cost of providing benefits under the ERISA Plan. With respect to each ERISA Plan that is intended to be qualified under Code Section 401(a), (a) the ERISA Plan and any associated trust operationally comply with the applicable requirements of Code Section 401(a); (b) the ERISA Plan and any associated trust have been amended to comply with all such requirements as currently in effect, other than those requirements for which a retroactive amendment can be made within the "remedial amendment period" available under Code Section 401(b) (as extended under Treasury Regulations and other Treasury pronouncements upon which taxpayers may rely); (c) the ERISA Plan and any associated trust have received a favorable determination letter from the Internal Revenue Service stating that the ERISA Plan qualifies under Code Section 401(a), that the associated trust qualifies under Code Section 501(a) and, if applicable, that any cash or deferred arrangement under the ERISA Plan qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at a time for which the above-described "remedial amendment period" has not yet expired; (d) the ERISA Plan currently satisfies the requirements of Code Section 410(b), without regard to any retroactive amendment that may be made within the above-described "remedial amendment period"; and (e) no contribution made to the ERISA Plan is subject to an excise tax under Code Section 4972. With respect to any Pension Plan, the "accumulated benefit obligation" of Controlled Group members with respect to the Pension Plan (as determined in accordance with Statement of Accounting Standards No. 87, "Employers' Accounting for Pensions") does not exceed the fair market value of Pension Plan assets.


(b) Foreign Pension Plan and Benefit Plans. Schedule 6.11 hereto (as such schedule may be amended or supplemented from time to time) lists all Foreign Benefit Plans and Foreign Pension Plans currently maintained or contributed to by the Borrower and any appropriate Foreign Subsidiaries. The Foreign Pension Plans are duly registered under all applicable laws which require registration. The Borrower and any appropriate Foreign Subsidiaries have complied with and performed all of its obligations under and in respect of the Foreign Pension Plans and Foreign Benefit Plans under the terms thereof, any funding agreements and all applicable laws (including any fiduciary, funding, investment and administration obligations) except to the extent as would not reasonably be expected to have a Material Adverse Effect. All employer and employee payments, contributions or premiums to be remitted, paid to or in respect of each Foreign Pension Plan or Foreign Benefit Plan have been paid in a timely fashion in accordance with the terms thereof, any funding agreement and all applicable laws except to the extent the failure to do so would not reasonably be expected to have a Material Adverse Effect. There are no outstanding actions or suits concerning the assets of the Foreign Pension Plans or the Foreign Benefit Plans. Each of the Foreign Pension Plans is fully funded on an ongoing basis as required by all laws applicable to such Foreign Pension Plans (using actuarial methods and assumptions as of the date of the valuations last filed with the applicable Governmental Authorities and that are consistent with generally accepted actuarial principles).

Section 6.12. Consents or Approvals. No consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person is required to be obtained or completed by any Company in connection with the execution, delivery or performance of any of the Loan Documents that has not already been obtained or completed.

Section 6.13. Solvency. The Borrower has received consideration that is the reasonably equivalent value of the obligations and liabilities that the Borrower has incurred to the Agent and the Lenders. After giving effect to the execution and delivery of the Loan Documents and the transactions contemplated by the Senior Note Documents and the making of the Loans under this Agreement, each Credit Party is Solvent. No Credit Party is engaged or about to engage in any business or transaction for which the assets retained by it are or will be an unreasonably small amount of capital, taking into consideration the obligations to the Agent and the Lenders incurred hereunder. No Credit Party intends to, nor does any Credit Party believe that it will, incur debts beyond its ability to pay such debts as they mature.

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