The Credit Agreement also contains representations and warranties and affirmative and negative covenants customary for financings of this type as well as customary events of default. Certain of the customary negative covenants limit the ability of the Company and certain of its subsidiaries, among other things, to incur future debt, grant liens, make investments, make acquisitions, make certain restricted payments and sell assets, subject to certain exceptions. In addition, the Credit Agreement requires the Company to comply with a minimum liquidity covenant of $5 million at all times (subject to adjustment based on the principal amount drawn and EBITDA). The representations, warranties and covenants contained in the Credit Agreement were made solely for the benefit of the parties to the Credit Agreement. In addition, such representations, warranties and covenants (i) are intended not as statements of fact, but rather as a way of allocating the risk between the parties to the Credit Agreement, (ii) have been qualified by reference to confidential disclosures made by the parties in connection with the Credit Agreement and (iii) may apply standards of materiality in a way that is different from what may be viewed as material by shareholders of, or other investors in, the Company. Accordingly, the Credit Agreement is included with this filing only to provide investors with information regarding the terms of transaction, and not to provide investors with any other factual information regarding the Company. Shareholders should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Credit Agreement, which subsequent information may or may not be fully reflected in public disclosures.
Security Agreements
On the Closing Date, pursuant to the related security agreement between the Company, each of its subsidiary guarantors and the Agent, dated as of May 29, 2020 (the “Security Agreement”) and the related intellectual property security agreement between the Company, each of its subsidiary guaranties and the Agent, dated as of May 29, 2020 (the “IP Security Agreement”), the Company and each of its subsidiary guarantors granted the Agent, for its benefit and the benefit of the Lenders, a security interest in substantially all of their assets to secure their obligations to the Agent under the Credit Agreement.
Pledge Agreement
On the Closing Date, pursuant to the related pledge agreement between the Company, each of its subsidiary guarantors and the Agent, dated as of May 29, 2020 (the “Pledge Agreement”) the Company and each of its subsidiary guarantors agreed to pledge to the Agent, for its benefit and the benefit of the Lenders, all of their capital stock, shares and other equity interests and securities to secure their obligations to the Agent under the Credit Agreement.
Warrants
On the Closing Date, the Company issued warrants to the Lender to purchase an aggregate of 527,100 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) at an exercise price equal to $4.59 per share (the “Warrants”).
The Warrants are exercisable until the seventh anniversary of the Closing Date. The holder of each Warrant has the right to net exercise the Warrant for shares of Common Stock upon exercise. The Company also granted registration rights to holders of the Warrants to register the Common Stock subject to such Warrants (the “Warrant Shares”) under the Securities Act of 1933, as amended (the “Securities Act”) in the event the Company files a registration statement with the U.S. Securities and Exchange Commission under the Securities Act covering its equity securities, subject to the terms and conditions included in the Warrant.
The Company relied on the exemption from registration contained in Section 4(2) of the Securities Act, and Regulation D, Rule 506 thereunder, for the issuance of the Warrants and the Warrant Shares. As part of executing the Credit Agreement and receiving the Warrants and the Warrant Shares, each of lenders under the credit agreement represented that it is an “accredited investor” as defined in Regulation D of the Securities Act and that the securities purchased by it will be acquired solely for its own account for investment and not with a view to or for sale or distribution of the Warrants or the Warrant Shares or any part thereof.
The foregoing descriptions of the Credit Agreement, the Security Agreement, the IP Security Agreement and the Warrants do not purport to be complete and are qualified in their entirety by reference to the full text of the Common Stock Purchase Warrant, the Credit Agreement, the Security Agreement and the IP Security Agreement, which are filed herewith as Exhibits 4.1, 10.1, 10.2 and 10.3, respectively, to this Current Report on Form8-K and are incorporated herein by reference.
