Item 1.01 Entry into a Material Definitive Agreement.
Stifel Loan and Security Agreement
On April 21, 2023, ZeroFox, Inc., as borrower (“ZFI”), and ZeroFox Holdings, Inc. (the “Company”) and its other subsidiaries, as guarantors, entered into a seventh amendment (the “Stifel LSA Amendment”) to the loan and security agreement with Stifel Bank which, among other things will increase the aggregate borrowing limit thereunder to $22.5 million and extend the maturity date to June 30, 2025. Additionally, the Stifel LSA Amendment imposes a new covenant (the “Liquidity Ratio Covenant”) whereby the ratio of (A) the unrestricted cash held by ZFI at Stifel Bank plus 50% of ZFI’s trade accounts receivable to (B) ZFI’s aggregate indebtedness to the Bank must equal at least 1.5 to 1.0. Compliance with the Liquidity Ratio Covenant is tested on the last day of each month. The Stifel LSA Amendment also requires ZFI to maintain unrestricted cash at Stifel Bank of at least $17.5 million at all times.
On April 21, 2023, ZFI borrowed an additional $7.5 million under the facility and increased its aggregate borrowings under the facility to $22.5 million.
Concurrently with entering into the Stifel LSA Amendment, the Company issued to Stifel Bank a warrant to purchase 128,676 shares of Company common stock at an exercise price of $1.36 per share (the “Stifel Warrant”). The Stifel Warrant will expire on April 21, 2033.
Affiliates of Stifel Bank have from time to time performed, and may in the future perform, various investment banking and other financial advisory services for the Company and/or its subsidiaries in the ordinary course of business, for which they received or will receive customary fees and commissions.
The foregoing description of Sifel LSA Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Stifel LSA Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by reference herein.
Renewal of Headquarters Lease
ZFI currently leases the Company’s headquarters at 1834 S. Charles Street, Baltimore, Maryland 21230 pursuant to the terms of a Lease Agreement dated February 27, 2016 (as amended, the “HQ Lease”) between ZFI and 1830 Charles Street LLC, a subsidiary of Wolf Acquisitions, L.P. Wolf Acquisitions, L.P. is wholly-owned by James C. Foster, the Company’s Chief Executive Officer and Chairman. The HQ Lease expired on February 28, 2023 and ZFI continued to lease the facility on a month-to-month basis. The Audit Committee of the Company’s Board of Directors approved an extension of the HQ Lease on terms that it believes respresent an arms’-length transaction. Following such approval by the Audit Committee, the parties entered into Amendment No. 2 to Lease Agreement on April 21, 2023 (the “Lease Amendment”) which extends the HQ Lease for an additional three (3) year term to expire on February 28, 2026. The new base rent is $27,083.33 per month and the base rent will automatically increase by three percent (3%) per annum. Following this three-year extension, ZFI will have the option to extend the HQ Lease for two (2) additional one-year terms.
The foregoing description of the Lease Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Lease Amendment, a copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated by reference herein.
