Item 1.01 Entry into a Material Definitive Agreement.
Note Purchase Agreement with Jackson Investment Group, LLC
On October 26, 2020, we entered into a Second Amended and Restated Note Purchase Agreement (the “Amended Note Purchase Agreement”) and an Amended and Restated Senior Secured 12% Promissory Note (the “Jackson Note”) with Jackson Investment Group, LLC (“Jackson”), which amended and restated our Amended and Restated Note Purchase Agreement with Jackson dated September 15, 2017 (the “Existing Note Purchase Agreement”). The Amended Note Purchase Agreement refinances an aggregate of $48.7 million of indebtedness (the “Loan”) advanced to us by Jackson pursuant to the Existing Note Purchase Agreement and a Senior Secured 12% Promissory Note. In connection with the amendment and restatement, we paid Jackson an amendment fee of $488,123.92
Under the terms of the Amended Note Purchase Agreement and Jackson Note, we are required to pay interest on the Loan at a per annum rate of 12%. The interest is payable monthly in cash; provided that, we may elect to pay up to 50% of monthly interest in-kind (“PIK Interest”) by adding such PIK Interest to the outstanding principal balance of the Jackson Note. For any month that we elect to pay interest in-kind, we are required to pay Jackson a fee in shares of our common stock (“PIK Fee Shares”) in an amount equal to $25,000 divided by the average closing price, as reported by Nasdaq, of such shares of common stock over the 5 trading days prior to the applicable monthly interest payment date. If such average market price is less than $0.50, or is otherwise undeterminable because such shares of common stock are no longer publicly traded or the closing price is no longer reported by Nasdaq, then the average closing price for these purposes shall be deemed to be $0.50, and if such average closing price is greater than $3.50, then the average closing price for these purposes shall be deemed to be $3.50. For the period of November 2020 through and including March 2021, each monthly interest payment shall be reduced by $166,000, and for the period commencing May 2021 through and including September 2021, each monthly interest payment shall be increased by $166,000.
Under the terms of the Amended Note Purchase Agreement, we are required to make a mandatory prepayment of the principal amount of the Jackson Note of not less than $3,000,000 no later January 31, 2021. The entire outstanding principal balance of the Jackson Note shall be due and payable on September 30, 2022. The Loan continues to be secured by substantially of our and our domestic subsidiaries’ assets pursuant to the Amended and Restated Security Agreement with Jackson, dated September 15, 2017.
The Amended Note Purchase Agreement contains customary events of default for a senior secured loan including, among other events of default, (i) failure to timely pay interest and principal, (ii) other breaches and violation of the Amended Note Purchase Agreement, (iii) bankruptcy and insolvency events affecting us and/or subsidiaries and (iv) the occurrence of a material adverse effect on the Company. In addition to customary remedies for senior secured lenders following an event of default, Jackson shall have the right to cause us to engage a financial advisor to provide a valuation analyses of us as a going concern and analyses of strategic alternatives that may be available to us. We will be obligated to provide all such analyses to Jackson.
The Amended Note Purchase Agreement also contains restrictions against incurrence of additional debt, payment of dividend or other distribution (whether in cash, securities or other property) on any of our equity interest or repayment of debt, consolidations, mergers, sales of assets or change in control and financial covenants.
The foregoing description of the Amended Note Purchase Agreement and the Jackson Note do not purport to be complete and are qualified in its entirety by reference to the full text of the Amended Note Purchase Agreement and the Jackson Note, copies of which are attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively, and incorporated herein by reference.
Amendment to Warrant Agreement with Jackson Investment Group, LLC
On October 26, 2020, in connection with the entry into the Amended Note Purchase Agreement, we entered into Amendment No. 3 to the Amended and Restated Warrant Agreement, dated April 25, 2018, as amended (the “Warrant”), with Jackson. Pursuant to Amendment No. 3, the exercise price of the Warrant was reduced from $1.66 per share to $1.00 per share and the term of the Warrant was extended to January 26, 2026.
The foregoing description of Amendment No. 3 does not purport to be complete and is qualified in its entirety by reference to the full text of Amendment No. 3, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.
Amendments to our Credit Agreement with MidCap
In addition, on October 26, 2020, we entered into Amendment No. 17 to Credit and Security Agreement with MidCap Funding IV Trusts (“MidCap”), dated April 8, 2015, whereby, among other things, MidCap agreed to extend the maturity date of our outstanding asset based revolving loan until September 1, 2022. In addition, we also agreed to certain amendments to the financial covenants contained in the Credit and Security Agreement as more particularly described in Amendment No. 17.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment No. 17, a copy of which is attached hereto as Exhibit 10.4 and incorporated herein by reference.