UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 9, 2007
CERIDIAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-15168 41-1981625
-------- ------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
3311 East Old Shakopee Road, Minneapolis, Minnesota 55425
---------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (952) 853-8100
--------------
No Change
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
EXPLANATORY NOTE
As previously disclosed, on May 30, 2007, Ceridian Corporation, a Delaware
corporation ("Ceridian" or the "Company"), Foundation Holdings, Inc., a Delaware
corporation ("Foundation Holdings"), and Foundation Merger Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of Foundation Holdings ("Merger Sub"),
entered into an Agreement and Plan of Merger (as amended, the "Merger
Agreement"). On November 9, 2007 at 7:47 a.m. Eastern Standard Time (the
"Effective Time"), Ceridian completed its merger with Merger Sub (the "Merger")
pursuant to the terms of the Merger Agreement. Foundation Holdings is indirectly
owned by Fidelity National Financial, Inc. and entities affiliated with Thomas
H. Lee Partners, L.P. (the "Sponsors") as well as other co-investors. Pursuant
to terms of the Merger Agreement, at the Effective Time, each share and share
equivalent of common stock, par value $0.01 per share of Ceridian issued and
outstanding immediately prior to the effective time of the Merger (the "Ceridian
Common Stock") was cancelled and automatically converted into the right to
receive $36, without interest and less any applicable withholding taxes, and
Ceridian became a wholly owned subsidiary of Foundation Holdings.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
1. SENIOR SECURED CREDIT FACILITIES
--------------------------------
Overview. In connection with the Merger, Merger Sub entered into a
senior secured credit agreement, dated as of November 9, 2007, among Merger Sub,
Ceridian Canada Ltd., a Canadian corporation (the "Canadian Revolver Borrower"),
and Ceridian Canada Holdings ULC, a Nova Scotia unlimited liability company (the
"Canadian Term Borrower" and together with Ceridian and the Canadian Revolver
Borrower, the "Borrowers"), the lenders party thereto, and Deutsche Bank AG New
York Branch as administrative agent and collateral agent and Deutsche Bank AG
Canada Branch, as Canadian Sub-Agent with respect to senior secured credit
facilities. By virtue of the Merger, the Company assumed the obligations of
Foundation Merger Sub, Inc. under the credit agreement. The senior secured
credit facilities provide for aggregate borrowings of up to $2,550.0 million
including:
o a revolving credit facility of up to $300.0 million, consisting of a
$225.0 million revolving credit facility available for loans in U.S.
dollars to the Company and a $75.0 million multicurrency revolving
credit facility available for loans to the Company or the Canadian
Revolver Borrower; no revolving loans were drawn at the closing of
the Merger; and
o a term loan facility of $2,250.0 million, consisting of a $2,140.0
million term loan drawn by the Company and a $110.0 million term
loan drawn by the Canadian Term Borrower; the entire amount of the
term loan facility was drawn concurrently with the consummation of
the Merger.
At the Borrowers' option and subject to certain conditions, the
Borrowers may increase the credit facilities in an aggregate amount not to
exceed $300.0 million without the consent of any person other than the
institutions agreeing to provide all or any portion of such increase.
All revolving loans incurred under the senior secured credit facilities
will mature six years and six months from the closing date. The term loan
facility will mature seven years from the closing date.
Interest Rate and Fees. Borrowings under the senior secured credit
facilities bear interest at a floating rate, which is, at the Company's option,
either (a) a Eurodollar or EURIBOR rate determined by reference to the costs of
funds for deposits in the currency of such borrowing for the interest period
relevant to such borrowing adjusted for certain additional costs plus an
applicable margin, (b) with respect to borrowings denominated in U.S. Dollars,
an alternative base rate (defined as the higher of (x) the Deutsche Bank AG New
York Branch prime rate and (y) the federal funds effective rate, plus one half
percent (.50%) per annum) plus an applicable margin or (c) with respect to
borrowings denominated in Canadian dollars, (x) a base rate determined by
reference to the prime rate of Canadian banks or (y) a BA (bankers' acceptance)
rate determined by reference to the rate offered for banker's acceptances in
Canadian dollars for the interest period relevant to such borrowing plus an
2
applicable margin. The applicable margin under the revolving credit facility
will be subject to adjustment based on the achievement of certain leverage
ratios. The interest rate payable under the senior secured credit facilities
will increase by 2.00% per annum during the continuance of any payment event of
default.
For Eurodollar or EURIBOR loans, the Borrowers may select interest
periods of one, two, three or six months or, with the consent of all relevant
affected lenders, nine or twelve months. Interest will be payable at the end of
the selected interest period, but no less frequently than every three months
within the selected interest period.
The senior secured credit facilities also require payment of a
commitment fee on the average daily unused portion of the revolving commitments.
The Borrower must also pay customary letter of credit fees. Prior to the
maturity date, funds borrowed under the revolving credit facility may be
borrowed, repaid and reborrowed, without premium or penalty.
Mandatory Prepayments. Mandatory prepayments are required to prepay
amounts outstanding under the senior secured credit facilities in an amount
equal to:
o 100% (which percentage will be reduced to 50% or 0% depending on the
achievement of certain leverage ratios) of net cash proceeds from
certain asset dispositions and casualty or condemnation events by
the Company or any of its restricted subsidiaries, subject to
certain exceptions and reinvestment provisions;
o 100% of the net cash proceeds from the issuance or incurrence of any
additional debt by the Company or any of its restricted subsidiaries
(excluding debt permitted under the senior secured credit
facilities);
o 50% (which percentage will be reduced to 25% or 0% depending on the
achievement of certain leverage ratios) of excess cash flow, as
defined in the senior secured credit agreement; and
o 100% of the net cash proceeds in excess of a threshold amount
received in connection with any receivables facility.
Voluntary Repayments. Voluntary prepayments of principal amounts
outstanding under the senior secured credit facilities are permitted at any
time; however, if a prepayment of principal is made with respect to a Eurodollar
or EURIBOR loan on a date other than the last day of the applicable interest
period, the lenders will require compensation for any funding losses and
expenses incurred as a result of the prepayment.
Amortization. The term loan facility will be subject to amortization,
commencing after the first anniversary of the closing date, in equal quarterly
installments of principal in an aggregate annual amount equal to (a) 0.25% of
the original principal amount of the term loans and (b) in the case of
installments due in the fifth year following the closing date, 0.50% of the
original principal amount of the term loans, with the remaining balance payable
at maturity.
Guarantees and Security. Subject to certain exceptions, the senior
secured credit facilities are unconditionally guaranteed by the Company's
material domestic restricted subsidiaries. All obligations of each Canadian
borrower under the senior secured credit facilities are unconditionally
guaranteed by the Company, the Company's material domestic restricted
subsidiaries and, subject to certain exceptions and qualifications, the
respective Canadian borrowers.
The senior secured credit facilities and the guarantees of those
obligations are secured by, among other things:
o a first priority security interest in substantially all of the
assets of the Borrowers and the subsidiary guarantors, including,
without limitation, receivables, contracts, contract rights,
equipment, intellectual property, inventory and other tangible and
intangible assets, subject to certain customary exceptions;
3
o a pledge of (i) all of the Borrowers' present and future capital
stock and the present and future capital stock of each of the
Company's and each subsidiary guarantor's direct domestic
subsidiaries and (ii) 65% of the voting stock of each of the
Company's and each subsidiary guarantor's material direct foreign
subsidiaries, except to the extent such excess portion over 65%
secures the guaranty obligations of the Company or the Canadian Term
Borrower of the obligations of the Canadian Revolver Borrower; and
o all proceeds and products of the property and assets described
above.
Certain Covenants and Events of Default. The senior secured credit
facilities contain certain restrictive covenants which, among other things,
limit the incurrence of additional indebtedness, investments, dividends,
transactions with affiliates, asset sales, acquisitions, mergers and
consolidations, prepayments of other indebtedness, liens and encumbrances and
other matters customarily restricted in such agreements. In addition, the senior
secured credit facilities require us to maintain a secured debt ratio.
The senior secured credit facilities contain customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, cross-defaults to certain
other indebtedness in excess of specified amounts, certain events of bankruptcy
and insolvency, judgment defaults in excess of specified amounts, failure of any
material provision of any guaranty or security document supporting the senior
secured credit facilities to be in full force and effect, and a change of
control.
2. INDENTURE AND SENIOR NOTES DUE 2015
-----------------------------------
Overview. On November 9, 2007 (the "Issue Date"), the Company issued
$825,000,000 aggregate principal amount of 11-1/4% Senior Notes due 2015 (the
"Senior Cash Pay Notes") and $475,000,000 aggregate principal amount of
12-1/4%/13% Senior Toggle Notes due 2015 (the "Senior Toggle Notes", and
together with the Senior Cash Pay Notes, the "Notes") under an indenture, dated
as of November 9, 2007 among Ceridian Corporation, the guarantors party thereto
and Wells Fargo Bank, National Association, as trustee (the "Indenture"). The
net proceeds from the offering of the Notes, together with the borrowings under
the senior secured credit facilities and the equity contribution by the
Sponsors, were used to consummate the Merger.
Interest. The Company will pay interest on the Notes on each May 15 and
November 15 of each year, commencing on May 15, 2008. Interest on the Senior
Cash Pay Notes will accrue in cash at a rate of 11-1/4% per annum. Cash interest
on the Senior Toggle Notes will accrue at a rate of 12-1/4% per annum, and PIK
interest on the Senior Toggle Notes will accrue at a rate of 13% per annum. The
payment of interest on the Senior Toggle Notes for the initial interest period
will be payable in cash on May 15, 2008. For any interest period thereafter
through November 15, 2011, the Company may elect to pay interest on the Senior
Toggle Notes entirely in cash, entirely by increasing the principal amount of
the Senior Toggle Notes or by issuing new notes ("PIK interest") or by paying
interest on half of the principal amount of the Senior Toggle Notes in cash and
half in PIK interest. After November 15, 2011, all interest on the Senior Toggle
Notes will be payable entirely in cash. If the Company elects to pay any PIK
interest, it will increase the principal amount of the Senior Toggle Notes in an
amount equal to the amount of PIK interest for the applicable interest payment
period (rounded up to the nearest $1.00 in the case of global notes) due to
holders of Senior Toggle Notes on the relevant record date. All payments of
interest on the Senior Cash Pay Notes will be payable in cash.
The Notes will mature on November 15, 2015.
Guarantees. The Notes will be initially jointly and severally
guaranteed, on an unsecured senior basis, by the Company's directly and
indirectly wholly-owned domestic subsidiaries that are guaranteeing the
Company's senior secured credit facilities described above. Each of the
guarantees of the Notes will be a general unsecured obligation of each
guarantor, will be pari passu in right of payment with all existing and future
senior indebtedness of each such entity, and will be effectively subordinated to
all existing and future secured indebtedness of each such entity to the extent
of the value of the assets securing such indebtedness and will be senior in
right of payment to all existing and future subordinated indebtedness of each
such entity. The Notes will be structurally subordinated to indebtedness and
other liabilities of subsidiaries of the Company that do not guarantee the
Notes.
4
Ranking. The Notes are the Company's senior unsecured obligations and
rank senior in right of payment to the Company's future indebtedness and other
obligations that are, by their terms, expressly subordinated in right of payment
to the Notes; will rank equally in right of payment to the Company's existing
and future indebtedness and other obligations that are not, by their terms,
expressly subordinated in right of payment to the Notes; will be effectively
subordinated in right of payment to all of the Company's existing and future
secured indebtedness, to the extent of the value of the assets securing such
indebtedness, and be structurally subordinated to all obligations of each of the
Company's subsidiaries that is not a guarantor of the Notes.
Mandatory Redemption; Offer to Purchase; Open Market Purchases. The
Company is not required to make any sinking fund payments with respect to the
Notes. However, under certain circumstances in the event of an asset sale or, as
described under "Change of Control" below, the Company may be required to offer
to purchase Notes. The Company may from time to time purchase Notes in the open
market or otherwise.
Optional Redemption- Senior Cash Pay Notes. The Company may redeem some
or all of the Senior Cash Pay Notes for cash at any time before November 15,
2011 at a price equal to 100% of the principal amount of the Senior Cash Pay
Notes redeemed plus an applicable premium (specified in the Indenture) as of the
date of redemption and accrued and unpaid interest to the redemption date.
On or after November 15, 2011, the Senior Cash Pay Notes may be
redeemable at the Company's option at the redemption prices (expressed as
percentages of principal amount of the Senior Cash Pay Notes to be redeemed)
plus accrued and unpaid interest thereon to the applicable redemption date,
subject to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date, if redeemed during the
twelve-month period beginning on November 15 of each of the years indicated
below:
YEAR PERCENTAGE
---------------------------------------------------------- --------------
2011...................................................... 105.625%
2012...................................................... 102.813%
2013 and thereafter....................................... 100.000%
In addition, until November 15, 2010, the Company may, at its option,
redeem up to 35% of the then outstanding aggregate principal amount of the
Senior Cash Pay Notes at a redemption price equal to 111.250% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon to the
applicable redemption date, subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date, with the net cash proceeds of one or more equity offerings to the extent
such net cash proceeds are contributed to the Company; provided that at least
50% of the sum of the aggregate principal amount of the Senior Cash Pay Notes
originally issued under the Indenture and any additional Senior Cash Pay Notes
issued under the Indenture after the Issue Date remains outstanding immediately
after the occurrence of such redemption and that each such redemption occurs
within 180 days of the date of closing of each such equity offering.
Optional Redemption- Senior Toggle Notes. The Company may redeem some
or all of the Senior Toggle Notes for cash at any time before November 15, 2011
at a price equal to 100% of the principal amount of the Senior Toggle Notes
redeemed plus an applicable premium (specified in the Indenture) as of the date
of redemption and, without duplication, accrued and unpaid interest to the
redemption date.
On and after November 15, 2011, the Senior Toggle Notes may be
redeemable at the Company's option at the redemption prices (expressed as
percentages of principal amount of the Senior Toggle Notes to be redeemed), plus
accrued an unpaid interest thereon to the applicable redemption date, subject to
the rights of holders of record on the relevant record date to receive interest
due on the relevant interest payment date, if redeemed during the twelve-month
period beginning on November 15 of each of the years indicated below:
5
YEAR PERCENTAGE
---------------------------------------------------------- --------------
2011...................................................... 106.125%
2012...................................................... 103.063%
2013 and thereafter....................................... 100.000%
In addition, until November 15, 2010, the Company may, at its option,
redeem up to 35% of the then outstanding aggregate principal amount of the
Senior Toggle Notes at a redemption price equal to 112.250% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon to the
applicable redemption date, subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date, with the net cash proceeds of one or more equity offerings to the extent
such net cash proceeds are contributed to the Company; provided that at least
50% of the sum of the aggregate principal amount of the Senior Toggle Notes
originally issued under the Indenture and any additional Senior Toggle Notes
issued under the Indenture after the Issue Date (but excluding PIK Notes)
remains outstanding immediately after the occurrence of such redemption and that
each such redemption occurs within 180 days of the date of closing of each such
equity offering.
The Company may provide in any redemption notice that payment of the
redemption price and performance of its obligations with respect thereto may be
performed by another Person.
Covenants. The Indenture contains covenants limiting the Company's
ability and the ability of its restricted subsidiaries to, among other things:
o incur additional debt or issue certain preferred stock;
o pay dividends or make distributions on the Company's capital stock
or redeem, repurchase or retire the Company's capital stock or
subordinated debt;
o make certain investments;
o create liens on the Company's or its subsidiary guarantors' assets
to secure debt;
o create restrictions on the payment of dividends or other amounts to
the Company from its restricted subsidiaries that are not guarantors
of the Notes;
o enter into transactions with affiliates;
o merge or consolidate with another person or sell or otherwise
dispose of all or substantially all of the Company's assets;
o sell assets, including capital stock of the Company's subsidiaries;
and
o designate the Company's subsidiaries as unrestricted subsidiaries.
Events of Default. The Indenture also provides for customary events of
default, including, without limitation, payment defaults, covenant defaults,
cross-defaults to certain other indebtedness in excess of specified amounts,
certain events of bankruptcy and insolvency, judgment defaults in excess of
specified amounts and the failure of any guaranty by a significant party to be
in full force and effect. If any such event of default occurs, it may permit or
require the principal, premium, if any, interest and any other monetary
obligations on all the then outstanding Notes issued under the Indenture to be
due and payable immediately.
6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CERIDIAN CORPORATION
/s/ Gary M. Nelson
----------------------------------------
Gary M. Nelson
Executive Vice President, Chief
Administrative Officer, General Counsel
and Corporate Secretary
Dated: November 16, 2007
7