Item 1.01 Entry into a Material Definitive Agreement.
The information set forth below under Item 2.03 with respect to the Keep Well
Note (a defined below) and the letter agreement described therein is hereby
incorporated by reference into this Item 1.01.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
As previously reported, on April 15, 2022, Ontrak, Inc. (the "Company") entered
into a Master Note Purchase Agreement (the "Keep Well Agreement") with Acuitas
Capital LLC ("Acuitas"), an entity indirectly wholly owned and controlled by
Terren S. Peizer, the Company's Executive Chairman and largest stockholder,
pursuant to which, subject to specified conditions, the Company may borrow up to
$25.0 million from time to time.
On July 15, 2022, the Company borrowed $5.0 million under the Keep Well
Agreement and applied the proceeds therefrom to pay off in full all outstanding
amounts owed by the Company under that certain Note Purchase Agreement, dated as
of September 24, 2019, by and among the Company, as issuer, certain of its
subsidiaries, as guarantors, the purchasers party thereto from time to time, and
Goldman Sachs Specialty Lending Group, L.P., as collateral agent (as amended,
the "Note Purchase Agreement"). All obligations owing by the Company and the
other Note Parties (as defined in the Note Purchase Agreement) under the Note
Purchase Agreement were released, discharged and satisfied in full, the Note
Purchase Agreement and all other Note Documents (as defined in the Note Purchase
Agreement) were terminated (other than those provisions therein that expressly
survive termination), and all liens securing the Company's obligations under the
Note Purchase Agreement were released.
In connection with the borrowing under the Keep Well Agreement, the Company
issued to Acuitas a senior secured note in the principal amount of $5.0 million
(the "Keep Well Note"), a form of which was filed as Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on May 11, 2022. The Keep Well Note will accrue interest based on the
Term SOFR Reference Rate for a 30 day tenor plus a corresponding applicable
margin for each interest period (the interest rate for the initial interest
period is 17.7%). The Keep Well Note will be due on September 1, 2023, subject
to acceleration for certain customary events of default, including for failure
to make payments when due, breaches by the Company of certain covenants and
representations in the Keep Well Agreement, defaults by the Company under other
agreements related to indebtedness, the Company's bankruptcy or dissolution, and
a change of control of the Company. The Company's obligations under the Keep
Well Agreement will be secured by a first priority lien on substantially all of
the present and future property and assets of the Company and certain of its
subsidiaries, subject to customary exceptions and exclusions.
In accordance with the terms of the Keep Well Agreement, as a result of the
borrowing under the Keep Well Agreement, subject to obtaining approval of the
Company's stockholders as required by applicable Nasdaq listing rules, (a) the
final 25% of the 739,645 shares of the Company's common stock (the "Commitment
Shares") that the Company agreed to issue to Acuitas in connection with entering
into the Keep Well Agreement will be issued upon obtaining such stockholder
approval, and (b) the Company will issue to Acuitas a warrant to purchase
591,716 shares of the Company's common stock upon obtaining such stockholder
approval. The Company agreed to seek such stockholder approval on or on or
before September 9, 2022, and the other 75% of the Commitment Shares will also
be issued upon obtaining stockholder approval. The warrant issuable to Acuitas
will have a term of five years and an exercise price equal to $1.69, which was
the consolidated closing bid price of the Company's common stock as reported by
Nasdaq immediately preceding the time the parties entered into the Keep Well
Agreement, and will be in the form attached as Appendix B to the Keep Well
Agreement, which was filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission on May 11, 2022.
In connection with the Company's borrowing under the Keep Well Agreement, the
Company and Acuitas entered into a letter agreement pursuant to which, among
other things, Acuitas waived, subject to the terms and conditions therein (a)
the condition in the Keep Well Agreement that the Company shall have
unrestricted cash and cash equivalents of greater than $5.0 million as of the
date of issuance of any senior secured note pursuant to the Keep Well Agreement
and after giving pro forma effect to the purchase of such note by Acuitas, and
(b) any violation, through and including August 15, 2022, of the covenant in the
Keep Well Agreement that the Company shall have unrestricted cash and cash
equivalents of greater than $5.0 million at all times. The foregoing description
of the letter agreement does not purport to be complete and is subject to and
qualified in its entirety by reference to the complete text of the letter
agreement, a copy of which is filed as an exhibit to this report, which is
incorporated by reference herein.
1
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Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
Exhibit No. Description
10.1 Letter Agreement dated July 15, 2022, between Ontrak, Inc. and Acuitas
Capital LLC
104 Cover Page Interactive Data File (formatted as Inline XBRL)
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