Item 2.03
|
|
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant
|
On January 3, 2017, The Joint Corp. (the
“Company”) entered into a Credit and Security Agreement (the “Credit Agreement”) with Tower 7 Partnership
LLC, an Ohio limited liability company (“Lender”), and signed a revolving credit note payable to Lender (the “Revolving
Credit Note”).
Under the Credit Agreement, the Company
is able to borrow up to an aggregate of $5,000,000 under revolving loans. Interest on the unpaid outstanding principal amount of
any revolving loans is at a rate equal to 10% per annum, provided, however, that the minimum amount of interest paid in the aggregate
on all revolving loans granted over the term of the Credit Agreement is $200,000. Interest is due and payable on the last day of
each fiscal quarter in an amount determined by the Company, but not less than $25,000. Any amount of interest due and payable at
the end of each fiscal quarter that is not paid in full at that time will be added to the outstanding principal amount of the revolving
loans.
The Credit Agreement contains customary
events of default, including a failure to pay any principal, interest or other amounts when due, a violation of certain affirmative
covenants or any of the negative covenants (which covenants include limitations on borrowing, payment of dividends, the creation
of liens and holding of investments and prohibitions on mergers, acquisitions and disposal of substantially all assets), a breach
of the Company’s representations and warranties, and a change of control. Upon the occurrence of an event of default, payment
of the Company’s indebtedness may be accelerated, and the lending commitments under the credit agreement may be terminated.
Under the Credit Agreement, the Company
granted a security interest to the Lender in the following assets, now owned or later acquired, of the Company: accounts, chattel
paper, deposit accounts, documents, equipment, fixtures, general intangibles, instruments, inventory, investment property, letters
of credit and letter of credit rights, receivables, supporting obligations, commercial tort claims, all tangible and intangible
property, and the proceeds and products of each of the foregoing.
Lender’s lending commitments under
the Credit Agreement terminate in December 2019, unless sooner terminated in accordance with the provisions of the Credit Agreement.
The Company intends to use the credit facility
for general working capital needs. The Company shortly will draw down $1,000,000 of the $5,000,000 available under the Credit Agreement.
The foregoing descriptions of the Credit
Agreement and Revolving Credit Note do not purport to be complete and are qualified in their entirety by reference to the full
texts of the Credit Agreement and Revolving Credit Note, copies of which are filed as Exhibits 10.1 and 10.2, respectively, to
this Current Report on Form 8-K and incorporated herein by reference.