Item 1.01 Entry into a Material Definitive Agreement
On April 28, 2020 GEE Group, Inc., (the "Company") entered into the Seventh
Amendment dated as of April 28, 2020 (the "Amendment"), to the Revolving Credit,
Term Loan and Security Agreement, dated as of March 31, 2017 (as amended,
amended and restated, restated, supplemented or otherwise modified from time to
time, the "Credit Agreement"), by and among the Company, Scribe Solutions, Inc.,
a Florida corporation ("Scribe"), Agile Resources, Inc., a Georgia corporation
("Agile"), Access Data Consulting Corporation, a Colorado corporation
("Access"), Triad Personnel Services, Inc., an Illinois corporation ("Triad
Personnel"), Triad Logistics, Inc., an Ohio corporation ("Triad Logistics"),
Paladin Consulting, Inc., a Texas corporation ("Paladin"), BMCH, INC., an Ohio
corporation ("BMCH"), GEE Group Portfolio Inc., a Delaware corporation and the
surviving corporation of the merger of SNI Holdco Inc., a Delaware corporation,
with and into GEE Group Portfolio Inc., a Delaware corporation ("SNI Holdings"),
and SNI Companies, a Delaware corporation ("SNI" and together with Holdings,
Scribe, Agile, Access, Triad Personnel, Triad Logistics, Paladin, BMCH, SNI
Holdings and each other Person joined thereto as a borrower from time to time,
collectively, the "Borrowers" and each a "Borrower"), each Subsidiary of the
Company listed as a "Guarantor" on the signature pages thereto each lender named
therein and (collectively, the "Lenders" and each a "Lender") and MGG Investment
Group LP ("MGG"), as administrative agent, collateral agent and term loan agent
for the Lenders (together with its successors and assigns, in such capacity, the
"Agent").
Pursuant to the Amendment, the parties agreed, among other things, to extend the
maturity date of the Term Loans (as defined in the Credit Agreement) to June 30,
2023 and to amend the principal repayment schedule as follows:
Principal
Payment
Date Required
June 30, 2021 $ 444,525
September 30, 2021 $ 444,525
December 31, 2021 $ 444,525
March 31, 2022 $ 444,525
June 30, 2022 $ 444,525
September 30, 2022 $ 444,525
December 31, 2022 $ 444,525
March 31, 2023 $ 444,525Pursuant to the Amendment, the Company has agreed that for each six month period
commencing with the period ending on March 31, 2021 and for each fiscal year
commencing with the fiscal year ending on September 30, 2021, it shall utilize
its "Specified Excess Cash Flow Amount" (as defined in the Credit Agreement) to
repay amounts outstanding under the Credit Agreement.
Pursuant to the Amendment, the parties also agreed that commencing on March 31,
2020, a portion (up to 5%) of the interest due and payable on the outstanding
principal amount of the Term Loans (the "Aggregate Term Loan PIK Amount") may be
capitalized on the last day of each calendar month and added to the outstanding
principal amount of the Term Loan. Subject to the satisfaction by the Company of
the "Conversion/Cancelation Condition" and the "Registration Condition" (as
defined below ), upon the occurrence of a "Change of Control" (as defined in the
Credit Agreement) the Aggregate Term Loan PIK Amount shall be converted into
shares of Company common stock at the "Conversion Rate" (as defined below) and
such shares shall be issued pro rata to the Lenders in accordance with the
respective amounts of their outstanding advances.
For purposes of the Credit Agreement the following terms have the following
meanings: "Conversion/Cancelation Condition" means (i) the entry into definitive
agreements with the holders of the Company's subordinated indebtedness and
preferred to convert such indebtedness or shares of preferred stock into shares
of common stock of the Company (the "Conversion Transactions") by no later than
June 27, 2020 (the "Conversion/Cancelation Deadline") and (ii) the consummation
of the Conversion Transactions by no later than 90 days after the
Conversion/Cancelation Deadline subject to an extension, at the option of the
parties of an additional 30 days. "Registration Condition" means the execution
by the Company and MGG of a registration rights agreement with respect to any
shares of common stock of the Company issuable to MGG pursuant to the terms of
the Credit Agreement in forma and substance satisfactory to MGG.. "Conversion
Rate" means the most favorable rate at which the holders of the Company's
subordinated indebtedness or preferred stock have converted their securities to
shares of common stock of the Company in the Conversion Transactions.
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A failure by the Company to satisfy the Conversion/Cancelation Condition shall
constitute an Event of Default under the Credit Agreement.
Pursuant to the Amendment, the parties also agreed to pay to the Agent on behalf
of the Lenders a restructuring fee of $3,478,196.94 (the "Restructuring Fee").
The Restructuring Fee is payable in cash on the earliest to occur of (a) the
expiration of the Term (as defined in the Credit Agreement, (b) the occurrence
of a Change of Control, (c) the date of any refinancing of the advances under
the Credit Agreement, (d) the termination of the Credit Agreement for any other
reason and (e) the acquisition by a loan party, in one transaction or a series
of related transactions, all or substantially all of the assets and/or equity
interests of one or more third parties (each, a "Restructuring Fee Trigger");
provided, that upon the satisfaction of the Conversion/Cancellation Condition,
the Borrowers may, subject to the prior satisfaction of the Registration
Condition and if not prohibited pursuant to certain beneficial ownership
limitations specified in the Credit Agreement, elect to pay the Restructuring
Fee in common stock at the Conversion Rate on or before the first occurrence of
a Restructuring Fee Trigger.
Pursuant to the Amendment, the parties also agreed to pay to the Agent on behalf
of the Lenders an exit fee equal to $1,500,000, payable in cash on the earliest
to occur of (a) the expiration of the Term, (b) the occurrence of a Change of
Control, (c) the date of any refinancing of the advances under the Credit
Agreement and (d) the termination of the Credit Agreement for any other reason
(each, an "Exit Fee Trigger"); provided, that upon the satisfaction of the
Conversion/Cancellation Condition, the Borrowers may, subject to the prior
satisfaction of the Registration Condition and if not prohibited pursuant to
certain ownership limitations specified in the Credit Agreement , elect to pay
the Exit Fee in common stock at the Conversion Rate on or before the first
occurrence of an Exit Fee Trigger.
The issuance of the shares of common stock to be issued to MGG and CM Finance
SPV Ltd. ("CM Finance") pursuant to Amendment will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"). Each of MGG and CM
Finance is an accredited investor. The issuance of such shares of common stock
to MGG and CM Finance is exempt from the registration requirements of the Act
in reliance on an exemption from registration provided by Rule 506(b) of
Regulation D under the Securities Act and Section 4(2) of the Securities Act.
. . .
Item 2.03 Creation of a Direct Financial Obligation.
The information contained in Item 1.01 of this Form is hereby incorporated by
referenced into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information contained in Item 1.01 of this Form is hereby incorporated by
referenced into this Item 3.02.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
10.1 Seventh Amendment dated as of April 28, 2020 to Revolving Credit, Term
Loan and Security Agreement dated as of March 31, 2017 by and among GEE
Group, Inc., the other Borrowers and Guarantors named therein, the
lenders named therein and MGG Investment Group LP, as administrative
agent, term loan agent and collateral agent for the lenders named
therein
10.2 Registration Rights Agreement dated as of April 28, 2020 by and
between GEE Group, Inc. and MGG Investment Group LP
10.3 Registration Rights Agreement dated as of April 28, 2020 by and
between GEE Group, Inc. and CM Finance SPV., Ltd
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