Item 1.01 Entry into a Material Definitive Agreement.
Second Amendment to Forbearance Agreement and Sixteenth Amendment to Credit Facility
On April 30, 2019, Revolution Lighting Technologies, Inc. (“Revolution” or the “Company”) and its direct and indirect subsidiaries (collectively, the “Obligors”) entered into a Second Amendment to Forbearance Agreement and Sixteenth Amendment (the “Sixteenth Amendment”) to its loan and security agreement (the “Loan Agreement”) with Bank of America N.A. (“Bank of America”). Under the terms of the Sixteenth Amendment, Bank of America agreed to forebear, until July 31, 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 deliver to Bank of America consolidated balance sheets as of the end of fiscal year 2018 and to maintain a minimum fixed charge coverage ratio of 1.1 to 1.0 for the fiscal quarter ended March 31, 2019, and its expected inability to maintain such minimum fixed charge coverage ratio for the fiscal quarter ending June 30, 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 July 31, 2019 or any Termination Event (as defined in the Loan Agreement, as previously amended).
In the Sixteenth Amendment, Bank of America agreed to continue lending to the Company under the revolving credit facility provided by the Loan Agreement through July 31, 2019, subject to the Company continuing to comply with its obligations under the Sixteenth Amendment, including not allowing any additional Defaults or Events of Default (as defined in the Loan Agreement) to occur. Under the Sixteenth Amendment, Base Rate Revolver Loans (as defined in the Loan Agreement) shall have an interest rate equal to the Base Rate (as defined in the Loan Agreement) plus 3.25%, and LIBOR Revolver Loans (as defined in the Loan Agreement) shall have an interest rate equal to LIBOR plus 4.25%. Such interest rates may be reduced by 0.25% if the Company (i) meets certain field examination obligations, as summarized below, and Bank of America receives an updated borrowing base certificate in substantial conformity with the results of such field examination and (ii) is not subject to any Default or Events of Default other than the defaults subject to forbearance in the Sixteenth Amendment. In the event the Obligors have not delivered sufficient information regarding the Obligors’ inventory to Hilco Valuation Services, LLC (“Hilco”) by May 6, 2019, such interest rates shall be increased by 0.25% until satisfactory evidence of such delivery has been provided to Bank of America.
In exchange for the forbearance granted under the Sixteenth Amendment, the Company agreed, among other things, to (i) pay a $12,500 fee, (ii) provide evidence to Lender by May 6, 2019 that Obligors have delivered sufficient information regarding the Obligors’ inventory to Hilco, so that Hilco may conduct a full appraisal of such inventory, (iii) fully cooperate with Bank of America’s field examiner to ensure that Bank of America shall receive a full inspection, audit and/or field examination of the Obligors’ books and records by May 31, 2019 (the “Field Report”), (iv) allow Bank of America to communicate directly with the Obligors’ financial consultant regarding all services to be rendered by such consultant to the Obligors, (v) not terminate or materially alter the engagement of the Obligors’ financial consultant without Bank of America’s consent, (vi) limit the cumulative use of cash by the Company for April, May and June 2019 in accordance with a new cash burn schedule, (vii) provide Bank of America with weekly updated cash flow reports and (viii) pay Bank of America’s expenses, including attorneys’ fees, in connection with the Sixteenth Amendment. Further, the Company agreed that Bank of America’s obligation to make revolver loans and issue letters of credit is immediately reduced from $32.5 million to $30.0 million.
Pursuant to the Sixteenth Amendment, Bank of America reserves the right to, in its sole discretion, make changes to advance rates or availability reserves, such changes to be implemented within 15 days of receipt of the Field Report.
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 Sixteenth Amendment increased the aggregate principal amount of Additional LaPenta Loans which can be made to the Company from $11.0 million to $16.0 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
