the Stockholders Agreement, which will require us to nominate a number of individuals designated by Squadron for election to our board of directors such that the number of Squadron-designated directors serving on our board of directors is equal to:
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four, when Squadron beneficially owns 35% or more of the voting power of all outstanding shares of our capital stock entitled to vote in the election of our directors;
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three, when Squadron beneficially owns 20% or more, but less than 35%, of the voting power of all outstanding shares of our capital stock entitled to vote in the election of our directors; and
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two, when Squadron beneficially owns 10% or more, but less than 20%, of the voting power of all outstanding shares of our capital stock entitled to vote in the election of our directors.
In the case of any vacancy on our board of directors created by the death, resignation, retirement, disqualification or removal of a Squadron-designated director, the Stockholders Agreement will require us to nominate an individual designated by Squadron for election to fill such vacancy.
The Stockholders Agreement will remain in effect until Squadron beneficially owns less than 10% of the voting power of all shares of our capital stock entitled to vote in the election of our directors, unless we and Squadron agree that it terminate at an earlier date.
Upon the completion of this offering, Squadron will own approximately 44.6% of our outstanding common stock, based on the initial public offering price of $13.00 per share, and we will be required to nominate four individuals designated by Squadron for election to our board of directors.
As disclosed under ‘‘Use of Proceeds,’’ we intend to use a portion of the net proceeds from this offering to pay the accumulated and unpaid dividends on our Series B Preferred Stock, which will result in payments of approximately $5.5 million to Squadron, $15,100 to Mr. Throdahl and $8,000 to Mr. Berry.
Supply Relationships
In the past, we used each of FMI Hansa Medical Products, LLC, or FMI, and Structure Medical, LLC, or Structure Medical, as suppliers for components of our products. In 2017, FMI merged with and into Structure Medical. Structure Medical is owned by Squadron, and Mr. Pelizzon, one of our directors, is the President of Squadron and member of its Managing Commitee. We continue to use Structure Medical as a supplier for components of our products.
For the years ended December 31, 2014, 2015 and 2016 and the six months ended June 30, 2016 and 2017, we made payments to FMI totaling $1.4 million, $320,000, $546,000, $227,000 and $608,000, respectively. For the years ended December 31, 2014, 2015 and 2016 and the six months ended June 30, 2016 and 2017, we made payments to Structure Medical totaling $2.2 million, $880,000, $1.2 million, $329,000 and $497,000, respectively.
Real Estate Mortgage
In connection with the purchase of our office and warehouse space in Warsaw, Indiana in August 2013, we entered into a mortgage note payable to Tawani Enterprises Inc., the owner of which is a member of Squadron’s Managing Committee. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $15,543, with interest compounded at 5% until maturity in August 2028, at which time a final payment of principal and interest is due. The mortgage is secured by the related real estate and building. The mortgage balance was $1.8 million, $1.7 million, $1.6 million and $1.6 million as of December 31, 2014, 2015 and 2016 and June 30, 2017, respectively.
Registration Rights Agreement
On May 30, 2014, we entered into a registration rights agreement with Squadron, or the Registration Rights Agreement, which provides certain rights relating to the registration under the Securities Act of the shares of common stock issuable to Squadron upon the conversion of its Class A Preferred Stock and Class B Preferred Stock. These registration rights terminate when the securities subject to such rights have been sold pursuant to an effective registration under the Securities Act or pursuant to Rule 144 under the