| Item 1.01 | Entry into a Material Definitive Agreement |
Amendment to Forbearance Agreement and Fifteenth Amendment to Credit Facility
On February 7, 2019, Revolution Lighting Technologies, Inc. (“Revolution” or the “Company”) and its direct and indirect subsidiaries entered into an Amendment to Forbearance Agreement and Fifteenth Amendment (the “Fifteenth Amendment”) to its loan and security agreement (the “Loan Agreement”) with Bank of America N.A. (“Bank of America”). Under the terms of the Fifteenth Amendment, Bank of America agreed to forebear, until April 30, 2019, from exercising its rights and remedies as a result of breaches of certain covenants under the Loan Agreement, including the Company’s failure to maintain a minimum fixed charge coverage ratio of 1.1 to 1.0 for the fiscal quarter ended December 31, 2018 and its expected inability to maintain such minimum fixed charge coverage ratio for the fiscal quarter ending March 31, 2019. If the Company is not able to obtain a further amendment of the Loan Agreement or extend the forbearance, all principal, interest and other amounts outstanding under the Loan Agreement will become due and payable upon the earlier of 5 p.m. on April 30, 2019 or any Termination Event (as defined in the Loan Agreement, as previously amended).
In the Fifteenth Amendment, Bank of America agreed to continue lending to the Company under the revolving credit facility provided by the Loan Agreement through April 30, 2019, subject to the Company continuing to comply with its obligations under the Fifteenth Amendment including not allowing any additional Defaults or Events of Default (as defined in the Loan Agreement) to occur. Bank of America also agreed to a 0.5% reduction in the interest rate on the outstanding balance under the Loan Agreement to LIBOR plus 4.25% through April 30, 2019. In exchange for the forbearance granted under the Fifteenth Amendment, the Company agreed, among other things, to (i) pay a $12,500 fee, (ii) engage an appraiser by February 15, 2019 to complete a full appraisal of inventory immediately after the close of the fiscal month ending March 31, 2019, (iii) engage, by February 15, 2019, a full inspection and/or field examination of the Company’s books and records to be completed immediately after the close of the fiscal month ending March 31, 2019, (iv) limit the cumulative use of cash by the Company for January, February and March 2019 in accordance with a new cash burn schedule and (v) provide Bank of America with weekly updated cash flow reports. Further, the Company agreed that Bank of America’s obligation to make revolver loans and issue letters of credit is immediately reduced from $38.0 million to $32.5 million.
As previously disclosed, Robert V. LaPenta, Sr., the Company’s Chairman, CEO and President, and his affiliate, Aston Capital, LLC (“Aston”), have funded the Company through continued periodic loans, and the Company previously issued a consolidated note, dated as of November 21, 2018, to Mr. LaPenta and Aston (the “Consolidated Note”) to reflect these loans. Subsequent to the issuance of the Consolidated Note, Mr. LaPenta has also made additional loans to the Company, and the Company may borrow additional funds from Mr. LaPenta (each, “Additional LaPenta Loans”). The Fifteenth Amendment increased the aggregate principal amount of Additional LaPenta Loans which can be made to the Company from $5.0 million to $10.0 million. Any Additional LaPenta Loans must be made pursuant to notes on the same terms as the Consolidated Note and will be subject to approval by the Audit Committee of the Company’s Board of Directors (the “Board of Directors”). Any Additional LaPenta Loans to the Company in excess of $10.0 million would require the approval of both the Audit Committee of the Board of Directors and Bank of America. As of February 7, 2019, the aggregate principal amount of Additional LaPenta Loans was $4.0 million. The Company anticipates that Mr. LaPenta will loan the Company an additional $2.0 million in the coming days, and the Company plans to apply the $2.0 million in proceeds to its outstanding balance under the Loan Agreement.
As of February 5, 2019, the Company had total debt of approximately $67.5 million, including aggregate principal and interest outstanding under the Company’s line of credit with Bank of America of approximately $23.6 million, aggregate principal and interest outstanding under loans from Mr. LaPenta and Aston of approximately $42.4 million and approximately $1.5 million from other sources. As of February 6, 2019, the Company estimates that it had $1.5 million of available liquidity, reflecting its net cash position plus the remaining borrowing availability under the Loan Agreement. To the extent that the Company obtains access to higher levels of collateral, it may also borrow additional funds under Loan Agreement up to the maximum of $32.5 million.
