Item
1.01 Entry into a Material Definitive Agreement.
On
May 31, 2019, GlyEco, Inc. (the “Company”) and GlyEco West Virginia, Inc. (f/k/a Recovery Solutions & Technologies,
Inc.), a Delaware corporation and wholly-owned subsidiary of the Company (“
GlyEco WV
” and collectively with
the Company, the “
GlyEco Parties
”) entered into a combined equipment finance transaction with NFS Leasing,
Inc., a Massachusetts corporation (“
NFS
”) that consists of a new offer of lease and a lease line (the “
Lease
”)
for certain operational equipment used in the Company’s glycol recovery and recycling operations (the “
Equipment
”).
The GlyEco Parties previously entered into a master equipment lease agreement, as modified (the “
Lease Agreement
”)
with NFS for the lease of the Equipment by the Company, which was previously disclosed in the Company’s Current Report on
Form 8-K filed with the U.S. Securities and Exchange Commission (“
SEC
”) on April 17, 2017.
The
Lease consists of total aggregate financing in the amount not to exceed $4,550,000 (exclusive of shipping and tax), consisting
of agreed upon advance payments (plus applicable upfront tax) and a first monthly payment, a security deposit, and an origination
fee in the amounts set forth on schedule 4 to the Lease Agreement (“
Schedule 4
”), and sixty (60) monthly payments
and certain credit conditions as set forth on Schedule 4.
On
May 31, 2019, in connection with the Lease, the GlyEco Parties also entered into a second amendment to the Lease Agreement (“
Amendment
No. 2 to Lease Agreement
”), an addendum to Schedule 4 (“
Addendum to Schedule 4
”) and a royalty agreement
(the “
Royalty Agreement
”). The obligations of the Company to NFS under the Lease Agreement, as amended by Amendment
No. 2 to Lease Agreement and any prior amendments thereto, Schedule 4 and Addendum to Schedule 4 are secured by substantially
all of the assets of the GlyEco Parties pursuant to two security agreements between NFS and each of the Company and GlyEco WV
(the “
GlyEco Amended and Restated Security Agreement
” and the “
GlyEco WV Amended and Restated Security
Agreement
”, respectively) and a patent security agreement between NFS and the Company (the “
Patent Security
Agreement
”). On May 31, 2019, in connection with the Lease the Company also entered in a conditional patent assignment
with NFS (the “
Conditional Patent Assignment
”) whereby the Company assigned certain of its intellectual property
to NFS.
On
May 31, 2019, in connection with the Lease, the Company issued a Series B Common Stock Purchase Warrant to NFS (the “
Series
B Warrant
”) to purchase up to 287,770 shares of the Company’s common stock, par value $0.0001 per share (the “
Common
Stock
”). The Series B Warrant is exercisable commencing on the date of issuance at an exercise price of $1.39 per share.
The Series B Warrant will expire on the fifth (5
th
) anniversary of their date of issuance. The exercise price is subject
to adjustment upon stock splits, reverse stock splits, and similar capital changes. NFS does not have a right to exercise its
Series B Warrant to the extent that such exercise would result in NFS being the beneficial owner in excess of 4.99% (or, upon
election of NFS, to 9.99% or greater), which beneficial ownership limitation may be increased or decreased up to 9.99% or greater
upon notice to the Company, provided that any increase in such limitation will not be effective until 61 days following notice
to the Company.
The
proceeds from the Lease will be used by the Company to pay various accounts payable in the total amount of $2,840,832.00.
On
May 31, 2019, the Company issued an amended and restated 12.5% senior, subordinated, unsecured promissory note, due June 1, 2024,
to each of (a) Wynnefield Small Cap Value, L.P. I, (b) Wynnefield Small Cap Value, L.P., (c) Richard Geib, the Company’s
Chief Executive Officer (“
CEO
”), (d) Jennifer Geib, the CEO’s spouse, and (e) Charles Trapp, a director
of the Company (each a “
Holder
”, and collectively, the “
Holders
”), in the principal amounts
of $1,337,095.06, $863,541.60, $1,516,169.00, $1,516,169.00 and $55,295.68, respectively (each a “
Note
”, and
collectively, the “
Notes
”). Provided that the Company’s obligations to NFS have been satisfied in full,
and NFS has no obligation to make any further advances to the Company, at any time upon ten (10) days written notice to the Holder,
the Company may prepay any portion of the principal amounts of the Notes and any accrued and unpaid interest. If the Company exercises
its right to prepay any of the Notes, the Company shall make payment to such Holder of an amount in cash equal to the sum of (i)
the then outstanding principal amount of the Note to be prepaid and (ii) the accrued and unpaid interest on such outstanding principal
amount to be prepaid. Upon the occurrence of an event of default under the Notes, then, subject to the subordination provision
contained in the Notes, the Company must repay to the Holders a 125% premium of the outstanding principal amount of the Notes
and accrued and unpaid interest thereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages
due in respect of the Notes. The Company’s Chairman of the Board, Dwight Mamanteo, is a portfolio manager of Wynnefield
Capital. The Notes supersede and replace 10% senior, unsecured promissory notes (the
“Original Notes
”) previously
issued to the Holders. As an inducement to NFS to enter into the Lease, the Holders have agreed to amend and restate the Original
Notes, by, among other things, changing the principal amount under the Original Notes to reflect the outstanding principal amount
and accrued but unpaid interest as of the date of the Notes, and by subordinating their rights to the rights of NFS. Each Holder
has returned its Original Note to the Company for cancellation. In partial consideration of the above agreements by each Holder
of the Original Notes, the Company issued to each such Holder a Series A Common Stock Purchase Warrant (each a “
Series
A Warrant
”, and collectively, the “
Series A Warrants
”), as further described below.
On
May 31, 2019, the Company issued to each of the Holders a Series A Warrant, as follows: the Series A Warrant issued to Wynnefield
Small Cap Value, L.P. I is to purchase up to 646,981 shares of Common Stock; the Series A Warrant issued to Wynnefield Small Cap
Value, L.P. is to purchase up to 417,843 shares of Common Stock; the Series A Warrant issued to Mr. Geib is to purchase up to
733,630 shares of Common Stock; the Series A Warrant issued to Ms. Geib is to purchase up to 733,630 shares of Common Stock; and
the Series A Warrant issued to Mr. Trapp is to purchase up to 26,756 shares of Common Stock. The Series A Warrants are exercisable
commencing on the date of issuance at an exercise price of $1.55 per share. The Series A Warrants will expire on the fifth (5
th
)
anniversary of their date of issuance. The exercise price is subject to adjustment upon stock splits, reverse stock splits, and
similar capital changes. A Holder does not have a right to exercise its respective Series A Warrant to the extent that such exercise
would result in such Holder being the beneficial owner in excess of 4.99% (or, upon election of such Holder, to 9.99% or greater),
which beneficial ownership limitation may be increased or decreased up to 9.99% or greater upon notice to the Company, provided
that any increase in such limitation will not be effective until 61 days following notice to the Company. The Series A Warrants
were issued by the Company to the Holders as partial consideration for their agreement to extend the maturity date of Notes and
modify such other terms as discussed above and further provided in the Notes.
The
foregoing descriptions of Schedule 4, Amendment No. 2 to Lease Agreement, Addendum to Schedule 4, the Royalty Agreement, the GlyEco
Amended and Restated Security Agreement, the GlyEco WV Amended and Restated Security Agreement, the Patent Security Agreement,
the Conditional Patent Assignment, the Series B Warrant, the Notes and the Series A Warrants are not complete and are qualified
in their entirety by reference to the full text of such documents, which are attached as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5,
10.6. 10.7, 10.8, 4.1, 4.2-4.6 and 4.7-4.11, respectively, and which are incorporated by reference herein in their entirety.