Item 1.01 Entry into a Material Definitive Agreement.
Subordinated Term Loan Agreement
On November 9, 2021, Team, Inc. (the "Company") entered into a credit agreement
(the "Subordinated Term Loan Credit Agreement") with Corre Credit Fund, LLC
("Corre Fund"), as agent, and the lenders party thereto providing for an
unsecured $50.0 million delayed draw subordinated term loan facility (the
"Subordinated Term Loan").
Pursuant to the Subordinated Term Loan Credit Agreement, the Company borrowed
$22.5 million on November 9, 2021, and expects to borrow an additional
$27.5 million on December 8, 2021, subject to certain conditions. The
Subordinated Term Loan Credit Agreement also permits the ability to borrow an
additional $25 million, subject to certain conditions. The Subordinated Term
Loan matures, and all outstanding amounts become due and payable on the earlier
of December 31, 2026 and the date that is two weeks later than the maturity or
full repayment of the Term Loan (as defined below). The stated interest rate on
the Subordinated Term Loan is 12%.
Under the Subordinated Term Loan Credit Agreement, the Company is required to,
among other things, (i) subject to certain conditions, issue the lenders a
warrant (the "Corre Warrants") providing for the purchase of an aggregate of
5,000,000 shares of its common stock, exercisable at the holder's option at any
time, in whole or in part, until the seventh anniversary of the issue date, at
an exercise price of $1.50 per share, or, if shareholder approval to issue the
Corre Warrants or an exception therefrom is not obtained by November 30, 2021,
issue the lenders their pro rata portion of the Preferred Stock (as defined
below), (ii) amend the Company's charter, bylaws, and all other necessary
corporate governance documents to reduce the size of the Company's board of
directors (the "Board of Directors") to seven directors, and (iii) reconstitute
the Company's Board of Directors (as further described below under "Commitment
Letter Agreement"). The Subordinated Term Loan also contains other customary
prepayment provisions, events of default and covenants.
The foregoing summary of the Subordinated Term Loan Credit Agreement does not
purport to be complete and is subject to, and qualified in its entirety, by the
full text of the Subordinated Term Loan Credit Agreement, which is filed as
Exhibit 10.1 and is incorporated herein by reference.
Amendment No. 3 to Term Loan Credit Agreement
In connection with the Company's entry into the Subordinated Term Loan Credit
Agreement, on November 9, 2021, the Company also entered into Amendment No. 3
(the "Third Amendment") to the Term Loan Credit Agreement, dated December 18,
2020 (as amended on October 19, 2021 and October 29, 2021, the "Term Loan"),
among the Company, the financial institutions party thereto from time to time
(the "Lenders") and Atlantic Park Strategic Capital Fund, L.P. ("APSC"), as
agent for the Lenders. The Third Amendment to the Term Loan, among other
things, (i) waives certain covenants until September 30, 2022 and modifies
covenants thereafter to provide the Company with additional flexibility,
(ii) requires the Company to seek shareholder approval (or an exception
therefrom) to issue additional warrants (the "APSC Warrants" and, together with
the Corre Warrants, the "Warrants") to APSC providing for the purchase of an
aggregate of 1,417,051 shares of Company common stock, exercisable at the
holder's option at any time, in whole or in part, until November 10, 2028, at an
exercise price of $1.50 per share, or, if shareholder approval to issue the full
amount of the APSC Warrants or an exception therefrom is not obtained by
November 30, 2021, issue the Lenders their pro rata portion of the Preferred
Stock, and (iii) to amend the existing warrants held by APSC to provide for an
exercise price of $1.50 per share.
The foregoing summary of the Third Amendment does not purport to be complete and
is subject to, and qualified in its entirety, by the full text of the Third
Amendment, which is filed as Exhibit 10.2 and is incorporated herein by
reference.
Commitment Letter Agreement
On November 9, 2021, the Company entered into a Commitment Letter Agreement (the
"Commitment Letter Agreement") with Corre Partners Management, LLC ("Corre
Partners") and APSC. Pursuant to the Commitment
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Letter Agreement, the Company will (i) reduce the size of the Board of Directors
to seven directors, (ii) appoint two Directors to the Board of Directors
selected by Corre Partners after consultation with APSC, (iii) appoint one
Director selected by Corre Partners to the Board of Directors' Independent
Subcommittee selected by Corre Partners and one Director selected by APSC,
(iv) provide Corre Partners and APSC with Board of Director observation rights,
(v) launch a strategic alternatives process and present results of the review to
the Board of Directors, (vi) issue the Warrants or, if shareholder approval to
issue the Warrants or an exception therefrom is not obtained by November 30,
2021, issue to Corre Partners and APSC a pro rata portion of $12.0 million in
liquidation preference of newly issued preferred stock (the "Preferred Stock")
of the Company having a dividend rate of 18% (with additional terms to be
agreed), and (vii) directly pay certain advisor fees on behalf of Corre Partners
and APSC.
Amended and Restated Warrant
On December 18, 2020, in connection with the execution of the Term Loan, the
Company issued to APSC a warrant (the "Existing Warrant") to purchase up to
3,582,949 shares of Company common stock, which was initially exercisable at the
holder's option at any time, in whole or in part, until June 14, 2028, at an
exercise price of $7.75 per share.
In connection with execution of the Subordinated Term Loan and Third Amendment,
on November 10, 2021, the Company entered into an Amended and Restated Common
Stock Purchase Warrant (the "A&R Warrant") with APSC Holdco II, L.P. ("APSC
Holdco") pursuant to which the Existing Warrant was amended and restated to
provide for the purchase of up to 4,082,949 shares of Company common stock
(which includes 500,000 of the shares of common stock issuable pursuant to the
APSC Warrant) and to reduce the exercise price to $1.50 per share. The exercise
price and the number of shares of Company common stock issuable on exercise of
the A&R Warrant are subject to certain antidilution adjustments, including for
stock dividends, stock splits, reclassifications, noncash distributions, cash
dividends, certain equity issuances and business combination transactions.
The foregoing summary of the A&R Warrant does not purport to be complete and is
qualified in its entirety by reference to the full and complete text of the Form
of A&R Warrant, a copy of which is attached hereto as Exhibit 4.1 and is
incorporated by reference herein.
Item 3.02 Unregistered Sales of Equity Securities.
The information contained in Item 1.01 of this Report regarding the issuance of
the Warrants or the issuance of Preferred Stock is incorporated by reference
into this Item 3.02. Neither the Warrants, the shares of Common Stock issuable
upon exercise thereof, nor the Preferred Stock (if issued) have been registered
under the Securities Act of 1933, as amended, and are being (or will be) issued
in a private placement pursuant to Section 4(a)(2) thereof.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Anthony Horton as a Director
On November 7, 2021, the Board of Directors appointed Anthony Horton as a
Director effective until the May 2022 annual meeting of shareholders and as a
member of the Company's Independent Subcommittee.
Mr. Horton currently serves as the Chief Executive Officer of AR Horton Advisors
and has previously served on the board of numerous companies. Mr. Horton has
more than 25 years of energy and technology experience and was Executive Vice
President and Chief Financial Officer at Energy Future Holdings and Senior
Director of Corporate and Public Policy at TXU Energy from April 2000 through
March 2018. Mr. Horton holds a Masters of Professional Accounting and Finance
from the University of Texas at Dallas/Arlington and a BBA in Economics and
Management from the University of Texas at Arlington. He is a Certified Public
Accountant, Chartered Financial Analyst, Certified Management Accountant and
Certified Financial Manager.
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Appointment of Evan S. Lederman as a Director
On November 7, 2021, the Board of Directors appointed Evan S. Lederman as a
Director effective until the May 2022 annual meeting of shareholders and as a
member of the Company's Independent Subcommittee.
From February 2011 to December 31, 2020, Mr. Lederman was a Partner and member
of the Risk Committee at Fir Tree Partners. Among other responsibilities at Fir
Tree, Mr. Lederman led their energy investments effort. Prior to joining Fir
Tree in 2011, Mr. Lederman worked as a corporate attorney at Weil, Gotshal &
Manges LLP and Cravath, Swaine & Moore LLP. Mr. Lederman has previously served
on the board of numerous companies. Mr. Lederman received a J.D. degree with
honors from New York University School of Law and a B.A., magna cum laude, from
New York University.
Appointment of Sylvia J. Kerrigan as Lead Independent Director
On November 7, 2021, the Board of Directors designated Sylvia J. Kerrigan as the
Lead Independent Director, effective immediately. In the lead independent
director role, Ms. Kerrigan will perform the duties outlined for the Lead
Independent Director in the Company's definitive proxy statement dated April 9,
2021. Ms. Kerrigan replaces Louis A. Waters as the Lead Independent Director.
Ms. Kerrigan has been a member of the Board of Directors since 2015.
Ms. Kerrigan is the Executive Director of the Kay Bailey Hutchison Center for
Energy, Law and Business at the University of Texas in Austin. She previously
held various positions at Marathon Oil Corporation for 22 years, ultimately as
the Executive Vice President, General Counsel and Secretary, serving in that
position from 2012 to 2017. Ms. Kerrigan also served as Marathon Oil
Corporation's Chief Public Policy Officer and Chief Compliance Officer.
Ms. Kerrigan worked at the United Nations Security Council's Commission
d'Indemnisation in Geneva, Switzerland, serving as the senior legal officer
responsible for arbitrating losses sustained by international oil companies
following the 1990 Iraq invasion of Kuwait. Ms. Kerrigan is a past chairman of
the State Bar of Texas International Law Section and a Life Fellow of the Texas
Bar Foundation. She serves on the board of directors of Diversified Energy, LLC
and on the Board of Trustees for Southwestern University. Ms. Kerrigan
previously served on the boards of directors of Nine Point Energy and Alta Mesa
Resources. The Company believes Ms. Kerrigan's qualifications to serve on the
Board include her experience as chief legal, public policy, compliance and
information governance officer of a public corporation, as well as her extensive
merger and acquisitions, risk management and corporate governance expertise.
Mr. Kerrigan takes over from Louis A. Waters. Mr. Waters has been a member of
the Board of Directors since 1998.
Appointment of Matt Kvarda as Interim Chief Financial Officer
On November 7, 2021, the Board of Directors appointed Matt Kvarda, as Interim
Chief Financial Officer of the Company, effective the later of November 12, 2021
or the date of the filing of the Company's Form 10-Q, until a permanent Chief
Financial Officer is appointed.
Mr. Kvarda is a Managing Director with Alvarez & Marsal North America, LLC
("Alvarez & Marsal") in Los Angeles, California where he has worked since 2004.
Prior to joining Alvarez & Marsal, Mr. Kvarda was a Senior Director at KPMG LLP,
from 2002 to 2003. Mr. Kvarda was also a Senior Director with Arthur Andersen &
Co. from 1996 to 2002. He also served as an Assistant Vice President at of Bank
America from 1992 to 1996. Mr. Kvarda earned a bachelor's degree in economics
from the University of California, San Diego, and an MBA from the University of
California, Los Angeles. The Company believes that Mr. Kvarda's extensive
experience and expertise in advising on financial matters makes him well suited
to serve as Interim Chief Financial Officer of the Company.
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Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit number Description
4.1 Form of Amended & Restated Common Stock Purchase Warrant
No. 1 dated November 10, 2021 between the Company and APSC
Holdco II, L.P.
10.1* Subordinated Term Loan Agreement dated November 9, 2021, by
and among the lenders from time to time party thereto, and
Corre Credit Fund, LLC, as agent.
10.2* Amendment No. 3 to Credit Agreement, dated December 18,
2020, among Team, Inc., as Borrower, the financial
institutions party thereto from time to time and Atlantic
Park Strategic Capital Fund, L.P., as Agent.
104 Cover Page Interactive Data File (embedded within the Inline
XBRL document)
* Certain schedules and similar attachments have been omitted in reliance on Item
601(a)(5) of Regulation S-K. The Company will provide, on a supplemental basis,
a copy of any omitted schedule or attachment to the SEC or its staff upon
request.
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