Tucows : Material Agreement - Form 8-K

Item 1.01Entry into a Material Definitive Agreement.

Credit Agreement

On September 22, 2023, Tucows Inc. (the "Company") and its wholly owned subsidiaries, Tucows.com Co., Ting Inc., Tucows (Delaware) Inc., Wavelo, Inc. and Tucows (Emerald), LLC (each, a "Borrower" and together, the "Borrowers," collectively with the Company, "Tucows") and certain other subsidiaries of the Company, as guarantors, entered into a Credit Agreement (the "Credit Agreement") with Bank of Montreal, as administrative agent ("BMO" or the "Agent"), and the lenders party thereto, to, among other things, provide the Borrowers with a revolving credit facility in an aggregate amount not to exceed $240,000,000 (the "Credit Facility"). The Borrowers may request an increase to the Credit Facility through new commitments of up to $60,000,000 if the Total Funded Debt to Adjusted EBITDA Ratio (as defined in the Credit Agreement) is less than 3.75:1.00. The Credit Facility expires on September 22, 2026, which is the third anniversary of the effective date of the Credit Agreement.

Borrowings under the Credit Facility will accrue interest and standby fees based on the Company's Total Funded Debt to Adjusted EBITDA and the availment type as follows:

If Total Funded Debt to Adjusted EBITDA is less than 2.00:1.00, then:

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Canadian dollar borrowings based on the Canadian Dollar Offered Rate ("CDN$ CDOR Borrowings"), U.S. dollar borrowings based on the Secured Overnight Financing Rate ("US$ SOFR Borrowings") and letter of credit ("LC") fees will be at 1.50% margin;

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Canadian dollar borrowings based on Prime Rate ("CDN$ Prime Rate Borrowings"), Canadian dollar borrowings based on Base Rate ("CDN$ Base Rate Borrowings") and U.S. dollar borrowings based on Base Rate ("US$ Base Rate Borrowings") will be at 0.25% margin; and

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Standby fees will be at 0.30%.

If Total Funded Debt to Adjusted EBITDA is greater than or equal to 2.00:1.00 and less than 2.75:1.00, then:

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CDN$ CDOR Borrowings, US$ SOFR Borrowings and LC fees will be at 2.00% margin;

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CDN$ Prime Rate Borrowings, CDN$ Base Rate Borrowings and US$ Base Rate Borrowings will be at 0.75% margin; and

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Standby fees will be at 0.40%.

If Total Funded Debt to Adjusted EBITDA is greater than or equal to 2.75:1.00 and less than 3.50:1.00, then:

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CDN$ CDOR Borrowings, US$ SOFR Borrowings and LC fees will be at 2.50% margin;

-

CDN$ Prime Rate Borrowings, CDN$ Base Rate Borrowings and US$ Base Rate Borrowings will be at 1.25% margin; and

-

Standby fees will be at 0.50%.

If Total Funded Debt to Adjusted EBITDA is greater than or equal to 3.50:1.00, and less than 4.00:1.00, then:

-

CDN$ CDOR Borrowings, US$ SOFR Borrowings and LC fees will be at 3.00% margin;

-

CDN$ Prime Rate Borrowings, CDN$ Base Rate Borrowings and US$ Base Rate Borrowings will be at 1.75% margin; and

-

Standby fees will be at 0.60%.

If Total Funded Debt to Adjusted EBITDA is greater than or equal to 4.00:1.00, then:

-

CDN$ CDOR Borrowings, US$ SOFR Borrowings and LC fees will be at 3.50% margin;

-

CDN$ Prime Rate Borrowings, CDN$ Base Rate Borrowings and US$ Base Rate Borrowings will be at 2.25% margin; and

-

Standby fees will be at 0.70%.

The Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default. The Credit Agreement requires that the Company comply with certain customary non-financial covenants and restrictions. In addition, the Company has agreed to comply with the following financial covenants: (1) a leverage ratio by maintaining at all times a Total Funded Debt to Adjusted EBITDA Ratio of not more than (i) 4.50:1:00 at any time from and after the Closing Date to and including December 30, 2023; (ii) 4.25:1:00 from December 31, 2023 to and including March 30, 2024; (iii) 4.00:1.00 from March 31, 2024 to and including June 29, 2024; and (iv) 3.75:1.00 thereafter; and (2) an interest coverage ratio by maintaining as at the end of each rolling four financial quarter period, an Interest Coverage Ratio (as defined in the Credit Agreement) of not less than 3.00:1.00.

The foregoing description of the Credit Agreement and the Credit Facility does not purport to be complete and is subject to and qualified in its entirety by reference to the full text of the Credit Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated by reference.