| Item 1.01 |
Entry into a Material Definitive Agreement. |
Background
As previously reported, on September 29, 2023, given the unavailability of additional sources of liquidity and after considering strategic alternatives, IronNet, Inc. (the “Company”) ceased substantially all of its business activities. The board of directors of the Company further authorized the Company to take such actions necessary to prepare for and, subject to final approval by the board of directors to be given at a subsequent meeting, file a voluntary petition for relief under the applicable provisions of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court (the “Bankruptcy Filing”) as expeditiously as possible. Subsequently, management of the Company sought out potential financing sources that could fund, in whole or in part, the Company’s liquidity needs in connection with a Bankruptcy Filing. Certain key vendors of the Company have suspended their services to the Company. Management continues to negotiate with these key vendors, including for the provider of the Company’s cloud computing platform, to restore the previously-suspended services that the Company needs to operate and service the Company’s customers.
Debtor-in-Possession Financing Term Sheet
In connection with the foregoing, on October 10, 2023, the Company, IronNet Cybersecurity, Inc. (“IronNet Cybersecurity”), and ITC Global Advisers LLC (“ITC GA”), and/or ITC GA’s designated affiliates and/or related funds or accounts, and such other lender parties that have agreed or may agree from time to time to provide commitments to fund the DIP Facility (as defined below) (the “DIP Facility Lender”) entered into a binding term sheet for debtor-in-possession financing (the “Term Sheet”), which sets forth the principal terms of a superpriority, senior secured debtor-in-possession credit facility (the “DIP Facility”, the credit agreement evidencing the DIP Facility, the “DIP Credit Agreement” and, together with the other definitive documents governing the DIP Facility and the DIP order, collectively, the “DIP Documents”), pursuant to which the DIP Facility Lender will provide the Company with a senior (priming) secured and superpriority debtor-in-possession delayed-draw term loan credit facility in an aggregate principal amount not to exceed $10,000,000, (the “Maximum Facility Amount”), consisting of up to $8,500,000 of term loans (the “DIP Term Loans”) and $1,500,000 of the Bridge Amount (as defined below) (collectively, the “DIP Loans”), subject to the terms and conditions set forth in the Term Sheet. Until the entry of a final order approving the DIP Facility by the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), a maximum amount of up to $4,500,000 of the DIP Facility (inclusive of the Bridge Amount) would be available on an interim basis.
Upon the execution of the Term Sheet, the DIP Facility Lender advanced $1,500,000 (the “Bridge Amount”) to the Company. The Bridge Amount is secured by all the assets of the Company and IronNet Cybersecurity, provided, however, that to the extent the DIP Facility Lender fails to fund any of the DIP Loans after the date on which the Bankruptcy Court shall have entered an interim order approving the DIP Facility (the “Interim Order”), such security interest shall be limited to only the assets of IronNet, Inc. and shall not include a security interest in any intellectual property or the assets of IronNet Cybersecurity, with such revocation of security interest effective as of the date the Bridge Amount is funded
The DIP Loans will accrue interest at a per annum rate of 16.00%, payable in kind on the termination of the DIP. Upon the occurrence of an event of default under the Term Sheet, the interest rate on outstanding DIP Loans would increase by 2.00% per annum. The Company is obligated to pay agency fees in the amount of $300,000.
The DIP Facility Lender’s commitment to provide the DIP Facility shall terminate, and the aggregate principal amount owing under the DIP Facility, all accrued and unpaid interest thereon, and all fees and expenses incurred by the administrative agent and the collateral agent for the DIP Facility Lender with respect to the DIP Facility (in such capacities, the “DIP Facility Agent”) and the DIP Facility Lender as provided in the Term Sheet in connection with the DIP Facility shall be repaid in full on the earliest to occur of: (a) the date which is 180 days after the date of commencement of proceedings under Chapter 11 of the Bankruptcy Code (such cases, the “Chapter 11 Cases”), unless extended by agreement of the DIP Facility Agent in its sole discretion; (b) the effective date of any Chapter 11 plan confirmed in any of the Chapter 11 Cases; (c) the entry of an order for the dismissal or conversion to Chapter 7 of the Bankruptcy Code of any of the Chapter 11 Cases; (d) the closing of a sale of all or substantially all assets or equity of the Company and IronNet Cybersecurity; or (e) the date of any event of default under the DIP Credit Agreement or any of the DIP Documents and the election of the DIP Facility Agent to terminate the DIP Facility commitments following any such event of default and the expiration of all applicable notice and cure periods.
