Item 1.01 Entry into a Material Definitive Agreement.
On June 29, 2022, Enjoy Technology, Inc. ("Enjoy" or the "Company") entered into
a senior secured credit, guaranty and security agreement (the "Credit
Agreement") with Asurion, LLC ("Asurion" or the "Lender") and certain
subsidiaries of the Company, pursuant to which the Company borrowed $2.5 million
(the "Bridge Loan") from the Lender. The Company intends to use the proceeds of
the Bridge Loan to fund working capital requirements. The Bridge Loan has a
scheduled maturity date of July 8, 2022 and will be due and payable in full on
such date or such earlier date as provided in the Credit Agreement unless the
Bridge Loan is converted to loans under the DIP Credit Facility (as defined
below) as further described below. The Bridge Loan bears interest at a rate of
12% per annum, compounded monthly, and such interest will be added to the
principal amount of the Bridge Loan and accrue additional interest thereafter.
The Company must prepay principal on the Bridge Loan upon the occurrence of
certain events, including but not limited to, failure of the Company to file for
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") by June 30, 2022. The Company and all of its domestic
subsidiaries are jointly and severally liable for the Bridge Loan, and the
Bridge Loan is secured by all assets of the Company and its domestic
subsidiaries. The Credit Agreement contains customary affirmative and negative
covenants and representations and warranties, including financial reporting
obligations and certain limitations on indebtedness, liens, investments,
distributions (including dividends), collateral, investments, mergers or
acquisitions and corporate changes. The Credit Agreement also includes events of
default, including payment defaults, breaches of provisions under the loan
documents, certain losses or impairment of collateral and related security
interests, the occurrence of certain events that could reasonably be expected to
have a "material adverse effect" as set forth in the Credit Agreement, cross
defaults to certain other contracts of the Company, certain bankruptcy or
insolvency events, failure to provide budgets or financial reports and
occurrence of a "change of control" as described in the Credit Agreement.
The foregoing description of the terms of the Credit Agreement does not purport
to be complete and is subject to, and is qualified in its entirety by, reference
to the Credit Agreement, a copy of which is filed as Exhibit 10.1 and is
incorporated by reference.
The information set forth below in Item 1.03 in this Current Report on Form 8-K
under the caption "Debtor-in-Possession Commitment Letter" is hereby
incorporated by reference in this Item 1.01.
Item 1.03 Bankruptcy or Receivership.
Voluntary Petition for Reorganization
On June 30, 2022 (the "Petition Date"), the Company and certain of its wholly
owned subsidiaries, Enjoy Technology LLC and Enjoy Technology Operating Corp.
(together with the Company, the "Debtors"), filed voluntary petitions (the
"Bankruptcy Petitions") for reorganization under Chapter 11 of the Bankruptcy
Code in the United States Bankruptcy Court for the District of Delaware (such
court, the "Court" and such cases, the "Cases"). The Debtors will continue to
operate their businesses as "debtors-in-possession" under the jurisdiction of
the Court and in accordance with the applicable provisions of the Bankruptcy
Code and orders of the Court. To ensure their ability to continue operating in
the ordinary course of business, the Debtors have filed with the Court motions
seeking a variety of "first-day" relief (collectively, the "First Day Motions"),
including authority to obtain debtor-in-possession financing and pay employee
wages. The Debtors' objectives in the Cases are to use the proceeds of a
debtor-in-possession financing to make necessary payments, continue operations
in the ordinary course of business, and consummate a sale of substantially all
of their assets to the highest bidder.
Debtor-in-Possession Commitment Letter
On June 29, 2022, prior to commencement of the Cases, the Debtors and Asurion,
in its capacity as lender of the DIP Credit Facility (the "Commitment Party"),
entered into a commitment letter (together with all exhibits and schedules
thereto, the "Commitment Letter"), pursuant to which, and subject to the
satisfaction of the applicable conditions precedent contained therein, including
the entry by the Court of an interim order authorizing and approving the DIP
Credit Facility (the "Interim Order"), the Commitment Party committed to provide
to the Debtors with a secured superpriority debtor-in-possession credit facility
in an aggregate principal amount of up to $55.0 million (the "DIP Credit
Facility" pursuant to the summary of terms set forth in Exhibit A of the
Commitment Letter, the "DIP Term Sheet"), which will be available in two
separate drawings upon the occurrence of certain events. Upon entry of the
Interim Order, the outstanding amount of the Bridge Loan will be converted to
obligations under the DIP Credit Facility (the "Roll-Up Loans") and the Debtors
may draw up to $22.5 million (less the amount of the Roll-Up Loans) of the DIP
Credit Facility. The remaining balance of the DIP Credit Facility may be drawn
upon entry by the Court of a final order authorizing and approving the DIP
Credit Facility. The DIP Credit Facility is expected to include conditions
precedent, representations and warranties, affirmative and negative covenants
and events of default set forth in the DIP Term Sheet or that are otherwise
customary for financings of this type and size. The proceeds of the proposed DIP
Credit Facility may be used by the Debtors (i) to pay certain costs, fees and
expenses related to the Cases (including certain prepetition and pre-filing
expenses approved by the Court), (ii) for working capital and other general
corporate purposes, and (iii) to fund interest, fees and other payments related
to the DIP Credit Facility, in each case subject to the applicable orders of the
Court.
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The foregoing description of the Commitment Letter does not purport to be
complete and is qualified in its entirety by reference to the Commitment Letter,
a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.2
and is hereby incorporated by reference in this Item 1.03, which includes as
attachments the DIP Term Sheet, as may be approved by the Court.
Item 2.03 Creation of a Direct Financial Obligation or Obligation Under an
Off-Balance Sheet Arrangement of a Registrant
The information set forth in Item 1.01 regarding the Credit Agreement is
incorporated by reference into this Item 2.03.
Item 2.05 Costs Associated with Exit or Disposal Activities.
On June 29, 2022, Enjoy (UK) Limited ("Enjoy UK"), an indirect, wholly owned
subsidiary of the Company, commenced a reduction in force ("Reduction in Force")
with respect to their U.K.-based employees. This Reduction in Force is part of
Enjoy's restructuring efforts. The Reduction in Force was authorized by Enjoy
UK's board of directors on June 29, 2022 and involves a reduction of the
Company's workforce in the aggregate of approximately 411 employees,
representing approximately 18% of the Company's global workforce as of June 29,
2022. The Company estimates that it will have 1,852 total employees following
the effectiveness of the Reduction in Force. The Company expects execution of
the Reduction in Force to be substantially complete in the second quarter of
2022.
In connection with the Reduction in Force, the Company estimates that it will
incur approximately $5 million in expenses, all of which are expected to be in
the form of future cash-based expenditures and substantially all of which are
expected to be related to employee severance and other termination benefits. The
Company expects to recognize substantially all of these charges in the second
quarter of 2022. The foregoing estimated amounts do not include any non-cash
charges associated with stock-based compensation. The Company expects to
recognize a stock-based compensation expense related to vested awards and does
not anticipate modifying the affected employees' stock awards to accelerate the
vesting of such awards or to otherwise modify such awards in a manner that would
result in such charges.
Item 8.01 Other Events.
The information set forth in Item 2.05 of this Current Report on Form 8-K is
incorporated into this Item 8.01.
On June 29, 2022, the Company announced that it has commenced the wind down of
the operations of Enjoy UK.
This Current Report on Form 8-K contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, including, but
not limited to, statements related to the Commitment Letter and the proposed
debtor-in-possession financing and approval by the Court of the First Day
Motions, the expected cost of the Reduction in Force, the number of positions
affected by the Reduction in Force; the time frame for completion of, and
recognition of charges associated with the Reduction in Force. These
forward-looking statements are based on management's beliefs and assumptions and
on information available to management as of the date they are made. However,
investors should not place undue reliance on any such forward-looking statements
because they speak only as of the date they are made. The Company does not
undertake any obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as
required by law. In addition, forward-looking statements are subject to certain
risks and uncertainties that could cause actual results, events and developments
to differ materially from the Company's historical experience and its present
expectations. Factors that might cause or contribute to such differences
include, but are not limited to: risks attendant to the bankruptcy process,
including the Company's ability to obtain court approval from the Court with
respect to motions or other requests made to the Court throughout the course of
the Cases, including with respect to any proposed debtor-in-possession
financing; the ability of the Company to negotiate, develop, confirm and
consummate a plan of reorganization; the effects of the Cases, including
increased legal and other professional costs necessary to execute the Company's
reorganization, on the Company's liquidity (including the availability of
operating capital during the pendency of the Cases), results of operations or
business prospects; the effects of the Cases on the interests of various
constituents; the length of time that the Company will operate under Chapter 11
protection; risks associated with third-party motions in the Cases; Court
rulings in the Cases and the outcome of the Cases in general; conditions to
which any debtor-in-possession financing is subject and the risk that these
conditions may not be satisfied for various reasons, including for reasons
outside
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the Company's control; trading price and volatility of the Company's common
stock and warrants as well as other risks set forth in Enjoy's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2022 filed with the Securities and
Exchange Commission ("SEC") on May 16, 2022 and those described in the Company's
other filings with the SEC.
Item 9.01 Financial Statements and Exhibits.
Exhibit 10.1 Credit Agreement
Exhibit 10.2 Debtor-in-Possession Commitment Letter
Exhibit 104 Cover Page Interactive Data File (the cover page XBRL tags are
embedded in the Inline XBRL document contained in Exhibit 101).
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