Article 1.01. Signing of an important definitive agreement
September 10, 2021, we entered into a Loan and Security Agreement (the "Loan Agreement") with Structural Capital Investments III, LP("Structural" and together with the other lenders that are or become parties thereto, the "Lenders"), and Ocean II PLO LLC, as administrative and collateral agent for Structural and the Lenders ("Agent"), under the terms of which the Lenders have committed to lend us up to $50 millionin term loan financing to support our growth needs (the "Facility") until March 31, 2022. We also entered into a secured promissory note with the Agent evidencing our obligations under the Facility. Our obligations are further guaranteed by each of our subsidiaries and secured by our assets and the assets of our subsidiaries. We had previously entered a commitment letter with Structural with respect to this Facility, which we announced on August 9, 2021, in our quarterly report on Form 10-Q for the period ended June 30, 2021. The commitment letter terminated upon the entering of the Loan Agreement. There were no material changes to the Facility from those terms that we reported on August 9, 2021.
Interest accrues on any outstanding balance at a rate equal to the greater of 9.0% or the Prime Rate, plus 5.75% (the "Basic Rate") and is payable in advance. In addition, interest is paid in kind ("PIK") at a rate of 1.00% or 1.25% based on our ARR Ratio (discussed below), measured on a quarterly basis. The PIK interest is added to our outstanding balance and begins accruing interest at the Basic Rate. Interest only payments are due until
October 1, 2023. We could extend our interest only payments until October 1, 2024, if we have achieved an annualized EBITDA of $8.0 million, or $90.0 millionof annual recurring revenue before the end of the first twenty-four months of the Facility. Principal payments begin after the expiration of the interest only period (as extended, if applicable) and are based on a five year amortization schedule, with a balloon payment due on October 1, 2025.
Upon payment in full of the obligations under the Facility, we would pay the lenders a final payment commission equal to 1.0% of the increase in our market capitalization since
We have agreed to grant Lenders the right to participate in a future offer (whether public or private) under the same terms and conditions as other investors for an amount not exceeding
There will be no financial commitment if our net cash is equal to or greater than zero. If our net cash was less than zero, we would be subject to the following financial covenants:
•We must have unrestricted cash of no less than
$5.0 million•We must maintain an ARR ratio of no less than 0.70:1.00 for through September 10, 2023; and •We must maintain an ARR ratio of no less than 0.60:1.00 from September 10, 2023, through the remainder of the term of the Facility. The ARR ratio would be the ratio of our tested debt to our annual recurring revenue and would be measured on a quarterly basis. Our Tested Debt consists of our outstanding obligations under the Facility (exclusive of PIK interest) and any indebtedness issued or earnouts owed to sellers in connection with acquisitions. We used the loan proceeds from the Facility, in part, to repay our obligations to Wells Fargo N.A.under our third amended and restated credit agreement. We expect to use the remaining proceeds of the Facility for growth related initiatives and acquisitions. The foregoing description of the Facility, the Loan Agreement and the Secured Promissory Note does not purport to be complete and is qualified in its entirety by reference to the full text of the Loan Agreement and the Secured Promissory Note which are filed as Exhibits 10.1 and 10.2 to this Form 8-K and incorporated herein by reference. --------------------------------------------------------------------------------
Article 1.02. Termination of a material definitive agreement
September 10, 2021, and in conjunction with our entering the new Facility, we terminated our third amended and restated credit agreement (the "Wells Fargo Facility") dated December 31, 2019, with Wells Fargo N.A.("Wells Fargo") and paid Wells Fargo an aggregate amount of approximately $9.925 million(the "Payoff Amount") in full payment of our outstanding obligations under the Wells Fargo Facility. The Payoff Amount represented $9.750 milliondue on our outstanding term note, a prepayment premium in the amount of $147,500and an immaterial amount of interest, fees and other expenses due to Wells Fargo.
Our letter of engagement with Structural was also terminated on
Article 2.03. Creation of a direct financial obligation or obligation under an off-balance sheet arrangement of a registrant
The information set out in section 1.01 is incorporated herein by reference in its entirety.
Article 9.01. Financial statements and supporting documents
(d) Exhibits Exhibit No. Description Loan and Security Agreement, dated as of
Software, Inc., and Structural Capital Investments
as administrative and collateral agent and the
other lenders who are or
become parties thereto.* 10.2 Secured Term Promissory Note, dated as of
Software Inc., and Ocean II PLO LLC104 Cover Page Interactive Data File (embedded within
the Inline XBRL document).
*Certain schedules and similar attachments to this agreement have been omitted pursuant to Item 601(a)(5) of Rule S-K. We agree to furnish supplementally a copy of all omitted schedules and attachments to the
SECupon its request.
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