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Item 1.01
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Entry into a Material Definitive Agreement.
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On December 22, 2021, Aterian, Inc. (the “Company”) entered into a Credit and Security Agreement (the “Credit Agreement”) together with certain of its subsidiaries party thereto as borrowers, the entities party thereto as lenders (the “Lenders”), and Midcap Funding IV Trust, as administrative agent, pursuant to which, among other things, (i) the Lenders agreed to provide a revolving credit facility in a principal amount of up to $40,000,000, subject to a borrowing base consisting of, among other things, inventory and sales receivables (subject to certain reserves), and (ii) the Company agreed to issue to MidCap Funding XXVII Trust a warrant (the “Warrant”) to purchase up to an aggregate of 200,000 shares of common stock of the Company, par value $0.0001 per share (“Common Stock”), in exchange for the Lenders extending loans and other extensions of credit to the Company under the Credit Agreement.
On December 22, 2021, the Company used $$27.6 million of the net proceeds from the initial loan under the Credit Agreement to repay all amounts owed under those certain senior secured promissory notes issued by the Company to High Trail Investments SA LLC and High Trail Investments ON LLC in an initial principal amount of $110,000,000, as amended (the “Terminated Notes”). The Company expects to use the remaining proceeds of any loans under the Credit Agreement for working capital and general corporate purposes.
The obligations under the Credit Agreement are a senior secured obligation of the Company and rank senior to all indebtedness of the Company. Borrowings under the Credit Agreement bear interest at a rate per annum equal to 5.50%, plus, at the Company’s option, either a base rate or a LIBOR rate. The Company will also be required to pay a commitment fee of 0.50% in respect of the undrawn portion of the commitments, which is generally based on average daily usage of the facility during the immediately preceding fiscal quarter. The Credit Agreement does not require any amortization payments.
The Credit Agreement imposes certain customary affirmative and negative covenants upon the Company, as well as covenants that (i) restrict the Company and its subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions, (ii) restrict the ability of the Company and its subsidiaries from making certain investments, subject to specified exceptions, (iii) restrict the declaration of any dividends or other distributions, subject to exceptions for specified subsidiaries of the Company, (iv) require the Company and its subsidiaries to maintain either a minimum amount of liquidity or a minimum amount of availability.
The Credit Agreement includes events of default that are customary for these types of credit facilities, including the occurrence of a change of control.
The Warrant has an exercise price of $4.70 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, is immediately exercisable, has a term of ten years from the date of issuance and is exercisable on a cash or cashless basis.
The foregoing summaries of the Credit Agreement and the Warrant do not purport to be complete and are qualified in their entirety by reference to the copies of the Credit Agreement and the form of Warrant that are filed herewith as Exhibits 10.1 and 4.1, respectively.
The representations, warranties and covenants contained in the Credit Agreement and the Warrant were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to the Credit Agreement and the Warrant, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Credit Agreement and the Warrant are incorporated herein by reference only to provide investors with information regarding the terms of the Credit Agreement and the Warrant, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the Securities and Exchange Commission.