Item 1.01. | Entry into a Material Definitive Agreement. |
On May 18, 2023 (the “Closing Date”), Climb Global Solutions, Inc. (the “Company”) entered into a revolving credit agreement (the “Credit Agreement”) by and among the Company, Programmer’s Paradise, Inc. (“Paradise”), Climb Channel Solutions, Inc. (“Solutions”), Techxtend, Inc. (“Tech”), ISP International Software Partners, Inc. (“International”), Interwork Technologies Inc. (“Interwork” and, together with the Company, Paradise, Solutions, Tech, and International, the “U.S. Borrowers”), Climb Global Solutions Holdings UK LTD (“CGS UK”), Climb Global Solutions LTD (“CGSL” and, together with CGS UK, the “U.K. Borrowers” and, together with the U.S. Borrowers, the “Borrowers”), the other Loan Parties party thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A. (“JPM”), as Administrative Agent. The Credit Agreement provides for a revolving credit facility of up to $50.0 million, including the issuance of letters of credit and swingline loans not to exceed $2.5 million and $5.0 million, respectively, at any time outstanding (the “Credit Facility”). In addition, subject to certain conditions enumerated in the Credit Agreement, the Borrowers have the right to increase the revolving credit facility by a total amount not to exceed $20.0 million. The proceeds of the revolving loans, letters of credit and swingline loans under the Credit Agreement may be used for working capital needs, general corporate purposes and for acquisitions permitted by the terms of the Credit Agreement.
Each Borrower’s obligations, indebtedness and liabilities arising pursuant to the Credit Agreement and the other Loan Documents is unconditionally guaranteed by each other Borrower. The obligations of the Borrowers under the Credit Agreement are secured by a first-priority security interest in the assets of the Company and the other U.S. Borrowers pursuant to a pledge and security agreement (the “Pledge Agreement), dated May 18, 2023, by and among the Company and the other U.S. Borrowers and JPM, in its capacity as administrative agent, for the Lenders party to the Credit Agreement.
All outstanding loans issued pursuant to the Credit Agreement become due and payable, on May 18, 2028. There were no amounts outstanding under the Credit Facility as of the Closing Date.
Availability under the Credit Facility will be based on the borrowing base, which is calculated based on the valuation of 75.0% of the U.S. Borrowers’ eligible accounts receivable, as reduced by certain reserves.
Outstanding Loans comprising (i) ABR Borrowings (including Swingline Loans to any US Borrower) bear interest at the ABR plus the Applicable Rate, (ii) Term Benchmark Borrowings bear interest at the Adjusted Term SOFR Rate or the Adjusted EURIBOR Rate, as applicable, plus the Applicable Rate and (iii) RFR Loans bear interest at a rate per annum equal to the applicable Adjusted Daily Simple RFR plus the Applicable Rate. The Applicable Rate for borrowings varies (i) in the case of ABR Borrowings, from 0.50% to 0.75% and (ii) in the case of Term Benchmark Borrowings and RFR Loans, from 1.50% to 1.75%.
The commitment fee payable on the unused portion of the Credit Facility equals (i) 0.20% per annum if the average utilization of the Credit Facility is less than 50.0% or (ii) 0.10% per annum if the average utilization of the Credit Facility is 50.0% or greater during any calendar quarter.
The Credit Agreement contains customary affirmative covenants, such as financial statement and collateral reporting requirements. The Credit Agreement also contains customary negative covenants that limit the ability of the Company and the Borrowers, and each of the Company’s and the Borrowers’ respective subsidiaries to, among other things, incur indebtedness, create liens or permit encumbrances, or undergo certain fundamental changes. Additionally, under certain circumstances, the Company is required to maintain a minimum fixed charge coverage ratio.
The Credit Agreement contains customary events of default, such as the failure to pay principal or any interest on any Loan or any reimbursement in respect of any outstanding letter of credit when due and payable, any material breach of any representation or warranty, the failure to perform or observe any covenant contained in the Credit Agreement, subject to certain remedy periods, as applicable, initiation of bankruptcy or insolvency proceedings, defaults on certain other material indebtedness, and change of control. Upon an event of default, the lenders may, subject to customary cure rights, require the immediate payment of all amounts outstanding and foreclose on collateral.
