Credit Facility |
The
Company and MUFG Union Bank, N.A. (“Union Bank”), entered into a Loan Agreement dated February 26, 2013, as
amended on September 10, 2013, January 13, 2014, May 20, 2015, June 1, 2016, June 28, 2017 and December 27, 2017 (the original
Loan Agreement, as amended to date, is referred to collectively as the “Credit Facility Agreement.” The Credit
Facility Agreement provided for (i) a $9.0 million term loan (“Term Loan 1”); (ii) a $15.0 million term loan
(“Term Loan 2”); and (iii) an $8.0 million working capital revolving line of credit (“Revolving Loan”).
The term loans were fully paid as of December 31, 2017. The Revolving Loan was fully paid as of March 31, 2018, at which time
the Credit Facility Agreement was terminated.
Borrowings
under the Revolving Loan bear interest at either (i) the London Interbank Offering Rate (“LIBOR”) plus 2.50% or (ii)
the bank’s Reference Rate (prime rate) minus 0.50%, at the option of the Company. Interest under the Revolving Loan adjusts
(i) at the end of each LIBOR rate period (1, 2, 3, 6 or 12 months terms) selected by the Company, if the LIBOR rate is selected;
or (ii) with changes in Union Bank’s Reference Rate, if the Reference Rate is selected. The Company paid a commitment fee
of 0.10% per year on the unused portion of the Revolving Loan, payable quarterly in arrears.
Term
Loan 1 was amortized over a period of four years, with fixed quarterly principal payments of $562,500. Borrowings under Term Loan
1 bore interest at either (i) the bank’s Reference Rate (prime rate) minus 0.50% or (ii) LIBOR plus 2.50%, at the option
of the Company. Interest under Term Loan 1 adjusted (i) at the end of each LIBOR rate period (1, 2, 3, 6 or 12 months terms) selected
by the Company, if the LIBOR rate was selected; or (ii) with changes in Union Bank’s Reference Rate, if the Reference Rate
was selected.
Term
Loan 2 was amortized over a period of five years, with fixed quarterly principal payments of $750,000. Borrowings under Term Loan
2 bore interest at either (i) LIBOR plus 3.00% or (ii) the bank’s Reference Rate (prime rate), at the option of the Company.
Interest under Term Loan 2 adjusted (i) at the end of each LIBOR rate period (1, 2, 3, 6 or 12 months terms) selected by the Company,
if the LIBOR rate was selected; or (ii) with changes in Union Bank’s Reference Rate, if the Reference Rate was selected.
The Company paid an upfront fee of 0.10% of the Term Loan 2 principal amount upon drawing upon Term Loan 2.
On
April 30, 2019, the Company entered into a $25.0 million Revolving Credit and Security Agreement ("PNC Credit
Agreement" or “Revolving Loan”) with PNC Bank, N.A. (“PNC”) as agent, and the Company’s
U.S. subsidiaries Car.com, Inc., Autobytel, Inc., and AW GUA USA, Inc., as Guarantors (“Company Subsidiaries”).
The obligations under the PNC Credit Agreement are guaranteed by the Company Subsidiaries and secured by a first priority lien
on all of the Company’s and the Company Subsidiaries’ tangible and intangible assets. The PNC Credit Agreement provides
a subfacility of up to $5.0 million for letters of credit. The PNC Credit Agreement expires on April 30, 2022. As of December
31, 2019, the Company had $3.7 million outstanding under its credit facility. Financing costs related to the credit facility,
net of accumulated amortization, of approximately $0.3 million, have been deferred over the initial term of the loan and are included
in other assets as of December 31, 2019.
The interest rates per annum
applicable to borrowings under the PNC Credit Agreement will be, at the Company’s option (subject to certain conditions),
equal to either a domestic rate (“Domestic Rate Loans”) or a LIBOR rate for one, two, or three-month interest
periods chosen by the Company (“LIBOR Rate Loans”), plus the applicable margin percentage of 2% for Domestic
Rate Loans and 3% for LIBOR Rate Loans. The domestic rate for Domestic Rate Loans will be the highest of (i) the base commercial
lending rate of Lender, (ii) the overnight bank funding rate plus 0.50%, or (iii) the LIBOR rate plus 1.00% so long as the daily
LIBOR rate is offered, ascertainable and not unlawful. The PNC Credit Agreement also provides for commitment fees ranging from
0.5% to 1.5% applied to unused funds (with the applicable fee based on quarterly average borrowings), but with the fees fixed at
1.5% until September 30, 2019. Fees for Letters of Credit are equal to 3% for LIBOR Rate Loans, with a fronting fee for each Letter
of Credit in an amount equal to 0.5% of the daily average aggregate undrawn amount of all Letters of Credit outstanding.
The PNC Credit Agreement
contains customary representations and warranties and covenants that restrict the Company and the Company Subsidiaries from engaging
in or taking various actions, including, among other things (but except as otherwise permitted by the PNC Credit Agreement): (i)
incurring or guaranteeing additional indebtedness; (ii) making any loans, investments or acquisitions; (iii) selling or otherwise
transferring or disposing of assets other than in the ordinary course of business; (iv) engaging in transactions with affiliates;
and (v) declaring or making distributions on their stock or other equity interests. The Company is also required to maintain a
$5.0 million pledged interest-bearing deposit account with Lender until the Company’s consolidated EBITDA is greater than
$10.0 million. As of December 31, 2019, the Company had restricted cash related to the credit facility of approximately $5.1 million.
The restricted cash accrues interest at a variable rate currently averaging 1.64% per annum.
On October 29, 2019, the
Company, the Company Subsidiaries and PNC entered into a First Amendment to the PNC Credit Agreement (“PNC Credit Agreement
First Amendment”) that provides for an amended financial covenant related to the Company’s minimum required EBITDA
(as defined in the PNC Credit Agreement). This amended financial covenant requires the Company to maintain its consolidated EBITDA
(as defined in the PNC Credit Agreement) at stated minimum levels (i) of $0.7 million for the quarter ended September 30, 2019;
(ii) $250,000 for the month of October 2019; (iii) $600,000 for the two-months ending November 30, 2019; and ranging from $3.6
million to $7.5 million for the later periods set forth in the PNC Credit Agreement First Amendment during the remaining term of
the PNC Credit Agreement. In addition, the PNC Credit Agreement First Amendment adds a new financial covenant requiring the Company
to maintain at least a 1.20 to 1.00 Fixed Charge Coverage Ratio (as defined in the PNC Credit Agreement First Amendment) for the
periods set forth in the PNC Credit Agreement First Amendment. If the Company fails to comply with the minimum EBITDA requirements
or the Fixed Charge Coverage Ratio, the Company has the right to cure (“Cure Right”) through the application
of the proceeds from the sale of new equity interests in the Company, subject to the conditions set forth in the PNC Credit Agreement
First Amendment. The Cure Right may not be exercised more than three times during the term of the PNC Credit Agreement and any
proceeds from a sale of equity interests must not be less than the greater of (i) the amount required to cure the applicable default;
and (ii) $500,000.
On January 16, 2020, the
Company received a notice of event of default and reservation of rights (“Notice”) from PNC Bank, under the
PNC Credit Agreement advising that an event of default has occurred and is continuing under Section 10.3 of the PNC Credit Agreement
by reason of AutoWeb’s failure to deliver to PNC the financial statements and related compliance certificate for the month
ended November 30, 2019. Although not covered by the Notice at this time, AutoWeb also is not in compliance with the minimum EBITDA
financial covenant under the PNC Credit Agreement. As a result of the Notice, PNC has increased the interest rate under the PNC
Credit Agreement by 2.0% per annum.
The Notice advised AutoWeb
that PNC (i) specifically reserves all rights and remedies available to it under the PNC Credit Agreement and (ii) does not waive
the event of default or any other event of default that may exist on the date of the Notice or which may occur thereafter. The
Notice further advised that any loans, advances, and extensions of credit made to AutoWeb from time to time, will be at the sole
discretion of PNC and will not constitute a waiver of the event of default, or a waiver by PNC of any of its rights under the PNC
Credit Agreement or any collateral agreement.
On March 26, 2020, the Company
entered into a $20.0 million Loan, Security and Guarantee Agreement (“the CNC Credit Agreement”) with CIT Northbridge
Credit LLC, as agent, and the Company’s U.S. subsidiaries Car.com, Inc. Autobytel, Inc. and AW GUA USA, Inc., as Guarantors.
The obligations under the CNC Credit Agreement are guaranteed by the Company Subsidiaries and secured by a lien on all the Company’s
and the Company Subsidiaries’ assets. The CNC Credit Agreement expires on March 26, 2023.
The interest rate per annum
applicable to borrowings under the CNC Credit Agreement will be the LIBO Rate plus 5.5%. The LIBO Rate will be equal to the greater
of (i) 1.75% and (ii) the rate determined by the Agent to be equal to the quotient obtained by dividing (1) the LIBO Base Rate
(i.e., the rate per annum determined by Agent to be the offered rate that appears on the applicable Bloomberg page) for the applicable
LIBOR Loan for the applicable interest period by (2) one minus the Eurodollar Reserve Percentage (i.e., the reserve percentage
in effect under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the
maximum reserve requirement with respect to Eurocurrency funding for the applicable LIBOR Loan for the applicable interest period).
Upon commencement, the interest rate will be 7.25%.
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