Pursuant to the Warrant Acquisition Agreement, for so long as the holder of the Warrant or its affiliates hold (a) at least 50% of the Warrant or (b) at least 50% of the shares issuable pursuant to the exercise of the Warrant, the holder of the Warrant shall be entitled to designate for nomination to the Issuer’s Board of Directors (the “Board”) a director to the Board and a non-voting observer. OC III, as current holder of the Warrant, has not yet designated an individual for nomination to the Board.
Reimbursement Agreement
On July 30, 2021, the Loan Parties entered into an Amendment No. 3 to Credit Agreement (the “Third Amendment”) with COF, as lender and letter of credit provider, and the Agent, pursuant to which, among other things, COF obtained a standby letter of credit (as may be amended from time to time, the “Third Amendment Letter of Credit”) from Wells Fargo Bank, N.A., in the principal amount of $25.0 million for the account of the Issuer and for the benefit of Siena Lending Group LLC (the “Revolving Loan Lender”). Pursuant to the Third Amendment, on July 30, 2021, the Issuer, COF, Alter Domus (US) LLC, as calculation agent, and the Agent entered into the Reimbursement Agreement, pursuant to which, among other things, the Issuer agreed to reimburse the Agent, for the account of COF, in the event of any drawings under the Third Amendment Letter of Credit by the Revolving Loan Lender.
In addition, pursuant to the Reimbursement Agreement, the Company shall make certain other payments as set forth below, so long as the Third Amendment Letter of Credit remains outstanding:
Letter of Credit Fee
The Issuer shall pay to the Agent, for the account of COF, an annual fee of $500,000, which shall be due and payable quarterly beginning on August 2, 2021, and every three months thereafter.
Equity Fee
Every three months (the “Measurement Period”), commencing on August 6, 2021, the Company shall pay to COF (or, so long as COF is the sole provider of the Third Amendment Letter of Credit, to OC III, if COF has timely notified the Issuer in writing of such designation) a fee (the “Equity Fee”) payable in shares of Common Stock. The Equity Fee shall be calculated by dividing $1.0 million by the volume weighted average price of the Common Stock on the Nasdaq Capital Market for the ten (10) trading days ending on the last business day of the applicable Measurement Period. The Company can opt to pay the Equity Fee in cash, in the amount of $1,000,000, if, and only if, (x) the Issuer has already issued as Equity Fees a number of shares of its Common Stock equal to (I) 5.0% multiplied by (II) the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock, and (y) the Company has at least $15,000,000 of Repayment Liquidity after giving effect to such payment. The term Repayment Liquidity, as defined in the Term Loan Credit Agreement, means (a) all unrestricted and unencumbered cash and cash equivalents of the Loan Parties, plus (b) the undrawn and available portion of the commitments under that certain Amended and Restated Loan and Security Agreement by and among the Loan Parties and the Revolving Loan Lender, minus (c) all accounts payable of the Loan Parties that are more than 30 days past due.
The Equity Fee shall no longer be paid once the Company has issued to COF and/or OC III Equity Fees in an amount of Common Stock equal to 9.99% multiplied by the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock (the “Maximum Equity”).
Cash Fee
The Issuer shall pay to the Agent, for the account of COF (or, so long as COF is the sole provider of the Third Amendment Letter of Credit, to OC III, if COF has timely notified the Issuer in writing of such designation) a cash fee (the “Cash Fee”) which shall be due and payable in cash quarterly beginning on the date that the Maximum Equity has been issued and thereafter on the business day immediately succeeding the last business day of the applicable Measurement Period. The Cash Fee shall be equal to $1,000,000, provided that, in the quarter in which the Maximum Equity is issued, such fee shall be equitably reduced by the value of any Equity Fee issued by the Issuer that quarter.
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