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Item 1.01.
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Entry into a Material Definitive Agreement.
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Term Loan
The Company and its subsidiary, Innovative Food Properties, LLC (“IFP”), as borrowers, entered into two similar Loan Agreements, dated as of the Closing Date (the “Term Loan Agreements”), with the Lender for an aggregate of $10,455,680, before fees, first-lien secured term loans (the “Term Loans”). The Term Loan Agreements provide for the Term Loans to be disbursed in two tranches. On the Closing Date, an initial loan in the amount of $5,695,052.11 was disbursed by the Lender with such proceeds used to repay the Company’s existing term loans with Fifth Third Bank. The initial loan tranche of the Term Loans mature on November 28, 2022 (the “Maturity Date”), however, upon receipt of the USDA Guarantee, the bridge loan will convert into long term financing and the second tranche of the Term Loans, in the aggregate amount of $4,760,627.89, will be disbursed and the Company will have the option of extending the term of the Term Loans to June 6, 2052. A portion of the second tranche, in the amount of $2,314,629.58, will be disbursed by the Lender to an account maintained with the Lender (the “Debt Service Reserve”) to be utilized by the Company, at the discretion of the Lender, only for specific uses through June 1, 2024, as detailed in the Loan Agreements. Any unutilized amount remaining in the Debt Service Reserve after June 1, 2024, shall be applied to the Indebtedness, and any amount remaining in the Debt Service Reserve after the Indebtedness has been paid in full shall be returned to the Company.
Amounts outstanding under the Term Loans will bear interest at the rate equal to the lesser of (a) the Maximum Lawful Rate, or (b) the greater of (i) WSJP (the “Prime Rate” as published by The Wall Street Journal) plus 1.25% per annum or (ii) 4.50% per annum.
The Term Loan Agreements contain negative covenants that, subject to certain exceptions, limits the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates.
The Term Loan Agreements also provides that the Company and its subsidiaries on a consolidated basis, must have a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00, as described in detail in the Loan Agreements.
The Term Loan Agreements contain events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, and certain judgment defaults as specified in the Term Loan Agreements. If an event of default occurs, the maturity of the amounts owed under the Term Loan Agreements may be accelerated.
The obligations under the Term Loan Agreements are guaranteed by the Company and IFP and are secured by mortgages on their real estate located in Florida, Illinois and Pennsylvania and substantially all of their assets, in each case, subject to certain exceptions and permitted liens.
Revolving Credit Facility
The Company entered into a Loan Agreement (the “Revolver Loan Agreement”), dated as of June 6, 2022 (the “Closing Date”), with MapleMark Bank (the “Lender”) for a $2,014,333.34 senior secured revolving credit facility (the “Revolver Loan”). The Revolver Loan Agreement replaces, and pays off, the Company’s existing asset-based revolving credit agreement with Fifth Third Bank. Any amounts borrowed under the Revolver Loan will bear interest at the greater of (a) the Base Rate (the rate of interest per annum quoted in the “Money Rates” section of The Wall Street Journal from time to time and designated as the “Prime Rate”) plus 0.25% per annum and (b) 3.50% per annum. As detailed in the Revolver Loan Agreement, the Revolver Loan matures on November 28, 2022 and in the event United States Department of Agriculture issues a guarantee of repayment of the Revolver Loan in favor of the Lender pursuant to its Business and Industry Loan Guarantee Program (the “USDA Guarantee”), at the Company’s option, the amount of the Revolver Loan can be expanded to $3,000,000 and its term extended to November 28, 2023.
The Revolver Loan Agreement contains negative covenants that, subject to certain exceptions, limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. The Company is also subject to a fixed charge coverage ratio covenant for the Revolver Loan as described in more detail in the Revolver Loan Agreement.
The Revolver Loan Agreement contains events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, certain judgment defaults, and loss of liens or guarantees as specified in the Revolver Loan Agreement. If an event of default occurs, the commitments of the Lender to lend under the Revolver Loan Agreement may be terminated and the maturity of the amounts owed may be accelerated.
The obligations under the Revolver Loan Agreement are guaranteed by the Company and each of its subsidiaries and are secured by substantially all of the assets of the Company and its subsidiaries, in each case, subject to certain exceptions and permitted liens.
The foregoing descriptions of the Revolver Loan Agreement and the Term Loan Agreements (collectively, the “Loan Agreements”), as well as their respective material ancillary documents (e.g., mortgages, security agreements, notes) are qualified in their respective entireties by reference to the respective agreements attached as exhibits to this Form 8-K and incorporated by reference in this Item 1.01. Defined terms used in this 8-K and not defined herein shall the meanings assigned them in the respective Loan Agreements. No assurance can be given that any event described herein as occurring after the date hereof will in fact occur on a timely basis or at all.