ASURE SOFTWARE, INC. Item 1.01. Entry into a Material Definitive Agreement
OnSeptember 10, 2021 , we entered into a Loan and Security Agreement (the "Loan Agreement") withStructural Capital Investments III, LP ("Structural" and together with the other lenders that are or become parties thereto, the "Lenders"), andOcean II PLO LLC , as administrative and collateral agent for Structural and the Lenders ("Agent"), under the terms of which the Lenders have committed to lend us up to$50 million in term loan financing to support our growth needs (the "Facility") untilMarch 31, 2022 . We also entered into a secured promissory note with the Agent evidencing our obligations under the Facility. Our obligations are further guaranteed by each of our subsidiaries and secured by our assets and the assets of our subsidiaries. We had previously entered a commitment letter with Structural with respect to this Facility, which we announced onAugust 9, 2021 , in our quarterly report on Form 10-Q for the period endedJune 30, 2021 . The commitment letter terminated upon the entering of the Loan Agreement. There were no material changes to the Facility from those terms that we reported onAugust 9, 2021 .
As of
Interest accrues on any outstanding balance at a rate equal to the greater of
9.0% or the Prime Rate, plus 5.75% (the "Basic Rate") and is payable in advance.
In addition, interest is paid in kind ("PIK") at a rate of 1.00% or 1.25% based
on our ARR Ratio (discussed below), measured on a quarterly basis. The PIK
interest is added to our outstanding balance and begins accruing interest at the
Basic Rate.
Interest only payments are due until October 1, 2023 . We could extend our
interest only payments until October 1, 2024 , if we have achieved an annualized
EBITDA of $8.0 million , or $90.0 million of annual recurring revenue before the
end of the first twenty-four months of the Facility.
Principal payments begin after the expiration of the interest only period (as
extended, if applicable) and are based on a five year amortization schedule,
with a balloon payment due on October 1, 2025 .
Upon payment in full of the obligations under the Facility, we would pay to
Lenders a final payment fee equal to 1.0% of the increase in our market
capitalization since
We have agreed to provide the Lenders the right to participate in a future
offering (whether public or private) on the same terms and conditions as other
investors for an amount not to exceed
There will be no financial covenants if our net cash position is equal to or greater than zero. If our net cash position is less than zero, we would be subject to the following financial covenants:
•We must have unrestricted cash of no less than$5.0 million •We must maintain an ARR ratio of no less than 0.70:1.00 for throughSeptember 10, 2023 ; and •We must maintain an ARR ratio of no less than 0.60:1.00 fromSeptember 10, 2023 , through the remainder of the term of the Facility. The ARR ratio would be the ratio of our tested debt to our annual recurring revenue and would be measured on a quarterly basis. Our Tested Debt consists of our outstanding obligations under the Facility (exclusive of PIK interest) and any indebtedness issued or earnouts owed to sellers in connection with acquisitions. We used the loan proceeds from the Facility, in part, to repay our obligations toWells Fargo N.A. under our third amended and restated credit agreement. We expect to use the remaining proceeds of the Facility for growth related initiatives and acquisitions. The foregoing description of the Facility, the Loan Agreement and the Secured Promissory Note does not purport to be complete and is qualified in its entirety by reference to the full text of the Loan Agreement and the Secured Promissory Note which are filed as Exhibits 10.1 and 10.2 to this Form 8-K and incorporated herein by reference. --------------------------------------------------------------------------------
Item 1.02. Termination of a Material Definitive Agreement
OnSeptember 10, 2021 , and in conjunction with our entering the new Facility, we terminated our third amended and restated credit agreement (the "Wells Fargo Facility") datedDecember 31, 2019 , withWells Fargo N.A. ("Wells Fargo") and paid Wells Fargo an aggregate amount of approximately$9.925 million (the "Payoff Amount") in full payment of our outstanding obligations under the Wells Fargo Facility. The Payoff Amount represented$9.750 million due on our outstanding term note, a prepayment premium in the amount of$147,500 and an immaterial amount of interest, fees and other expenses due to Wells Fargo.
Our commitment letter with Structural was also terminated on
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information set forth in Item 1.01 is incorporated herein by reference in its entirety.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
Loan and Security Agreement, dated as of 10.1Software, Inc. , and Structural Capital Investments
as administrative and collateral agent and the other lenders that are or
become parties thereto.*
10.2 Secured Term Promissory Note, dated as of Software Inc. , andOcean II PLO LLC 104 Cover Page Interactive Data File (embedded within
the Inline XBRL document).
*Certain schedules and similar attachments to this agreement have been omitted pursuant to Item 601(a)(5) of Rule S-K. We agree to furnish supplementally a copy of all omitted schedules and attachments to theSEC upon its request.
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