TLCC Twinlab Consolidated Holdings Inc (PK)

Certain Relationships and Related Party Transactions

The following are certain transactions, arrangements and relationships with our directors, executive officers and stockholders owning 5% or more of our outstanding Common Stock. Amounts shown below are in thousands (except share amounts).

Pursuant to a July 2014 Debt Repayment Agreement with Little Harbor, an entity owned by Mr. Van Andel and William W. Nicholson, a shareholder who served as a director of the Company from January 2015 through September 22, 2015, the Company is obligated to pay such party $4,900 per year in structured monthly payments for 3 years provided that such payment obligations will terminate at such earlier time as the trailing ninety day volume weighted average closing sales price of the Company’s common stock on all domestic securities exchanges on which such stock is listed equals or exceeds $5.06 per share. This note is unsecured and matured on July 25, 2017 with an outstanding balance of $3,267. On February 6, 2018, we entered into an agreement with Little Harbor to convert the obligations into an unsecured promissory note. The note matures on July 25, 2020, bears interest at an annual rate of 8.5%, with the principal payable at maturity.

On November 13, 2014, the Company raised proceeds of $8,000, less certain fees and expenses, from the issuance of a secured note to Penta Mezzanine SBIC Fund I, L.P. (“Penta”). The Managing Director of Penta, an institutional investor, is Mr. Ellis. We granted Penta a security interest in our assets and pledged the shares of our subsidiaries as security for the note. This note matures on November 13, 2019 with payments of principal due on a quarterly basis commencing on November 13, 2017 in installments of (i) $360 per quarter for the first four quarters, (ii) $440 per quarter for the next four quarters and (iii) $520 per quarter for each quarter thereafter. This note bears interest of 12% per annum, payable monthly. The Company issued a warrant to Penta to purchase 4,960,740 shares of the Company’s common stock in connection with this loan. The estimated fair value of the warrant at the date of issuance was $3,770, which was recorded as a note discount and is being amortized into interest expense over the term of this loan. Additionally, we had incurred loan fees of $273, which is also being amortized into interest expense over the term of this loan. On March 8, 2017, Golisano Holdings LLC acquired this note payable from Penta. The Company's terms of this note payable remain the same with the only change for the Company being the holder of the promissory note. The balance of the note as of December 31, 2017 was $8,000. Interest in the amount of $605 was accrued by the Company pursuant to the note during the year ended December 31, 2017.

In connection with the November 13, 2014 note for $8,000, Penta was issued a warrant to acquire 4,960,740 shares of the Company’s common stock at an aggregate exercise price of $0.01, through November 13, 2019. In connection with Penta’s consent to the terms of additional debt obtained by us, we also granted Penta a warrant to acquire a total of 869,618 additional shares of common stock at a purchase price of $1.00 per share, through November 13, 2019. Both warrant agreements grant Penta certain registration rights, commencing October 1, 2015, for the shares of common stock issuable on exercise of the warrants. Penta has the right, under certain circumstances, to require us to purchase all or any portion of the equity interest in the Company issued or represented by the warrant to acquire 4,960,740 shares at a price based on the greater of (i) the product of (x) ten times the Company's adjusted EBITDA with respect to the twelve months preceding the exercise of the put right times (y) the investor’s percentage ownership in the Company assuming full exercise of the warrant; or (ii) the fair market value of the investor’s equity interest underlying the warrant. In the event (i) the Company does not have the funds available to repurchase the equity interest under the warrant or (ii) such repurchase is not lawful, adjustments to the principal of the note purchased by Penta will be made or, under certain circumstances, interest will be charged on the amount otherwise due for such repurchase. The Company has the right, under certain circumstances, to require Penta to sell to us all or any portion of the equity interest issued or represented by the warrant to acquire 4,960,740 shares. The price for such repurchase will be the greater of (i) the product of (x) eleven times the Company's adjusted EBITDA with respect to the twelve months preceding the exercise of the call right times (y) the investor’s percentage ownership in the company assuming full exercise of the warrant; or (ii) the fair market value of the equity interests underlying the warrant; or (iii) $3,750. In connection with Golisano Holdings LLC’s acquisition of the note payable from Penta on March 8, 2017, these warrants were assigned to Golisano Holdings LLC.

Pursuant to a Stock Purchase Agreement dated June 30, 2015, a warrant was issued to Penta to purchase an aggregate 807,018 shares of our common stock at a price of $0.01 per share at any time prior to the close of business on June 30, 2020. We granted Penta certain registration rights, commencing October 1, 2015, for the shares of common stock issuable upon exercise of the warrant.

On February 6, 2015, the Company raised proceeds of $2,000, less certain fees and expenses, from the issuance of a secured note payable to Penta. The proceeds were restricted to pay a portion of the acquisition of the customer relationships of Nutricap Labs, LLC (“Nutricap”). This note matures on November 13, 2019 with payments of principal due on a quarterly basis commencing November 13, 2017 in installments of (i) $90 per quarter for the first four quarters, (ii) $110 per quarter for the next four quarters and (iii) $130 per quarter for each quarter thereafter. This note bears interest of 8% per annum, payable monthly. The Company issued a warrant to Penta to purchase 869,618 shares of the Company’s common stock in connection with this loan. The estimated fair value of these warrants at the date of issuances totaled $250, which was recorded as a note discount and is being amortized into interest expense over the term of this loan. Additionally, we had incurred loan fees of $90, which is also being amortized into interest expense over the term of these loans. On March 8, 2017, Golisano Holdings LLC acquired this note payable from Penta. The Company's terms of this note payable remain the same with the only change for the Company being the holder of the promissory note. The balance of the note as of December 31, 2017 was $2,000. Interest in the amount of $151.3 was accrued by the Company pursuant to the note during the year ended December 31, 2017.

On June 2, 2015, the Company and Little Harbor entered into a Stock Purchase Agreement (the “Little Harbor SPA”). Pursuant to the Little Harbor SPA, the Company sold Little Harbor 3,289,474 shares of its common stock at $0.76 per share for aggregate proceeds to the Company of $2,500. Little Harbor delivered to the Company the purchase price for the shares in the form of Little Harbor’s irrevocable agreement to accept the shares issued by the Company pursuant to the Little Harbor SPA in lieu of $2,500 worth of periodic payments otherwise due Little Harbor under an outstanding debt agreement.

On January 22, 2015, the Company raised proceeds of $5,000, less certain fees and expenses, from the sale of a note to JL-Mezz Utah, LLC (f/k/a JL-BBNC Mezz Utah, LLC) (“JL”). The proceeds were restricted to pay a portion of the Nutricap asset acquisition. We granted JL a security interest in the Company’s assets, including real estate and pledged the shares of our subsidiaries as security for the note. The note matures on February 13, 2020 with payments of principal due on a quarterly basis commencing March 1, 2017 in installments starting at $250 per quarter and increasing to $350 per quarter. This note bears interest of 12% per annum, payable monthly. The Company issued a warrant to JL to purchase 2,329,400 shares of the Company’s common stock on January 22, 2015 and 434,809 shares of the Company’s common stock on February 4, 2015. The estimated fair value of these warrants at the date of issuances was $4,389, which was recorded as a note discount and is being amortized into interest expense over the term of these loans. Additionally, we had incurred loan fees of $152 relating to this loan, which is also being amortized into interest expense over the term of these loans. The balance of the note payable as of December 31, 2017 was $5,000. Interest in the amount of $445 was accrued by the Company pursuant to the note during the year ended December 31, 2017. On March 8, 2017, Golisano LLC acquired this note payable from JL. The terms of this note payable remain the same with the only change for us being the holder of the promissory note.

From January 1, 2014 to the present, Twinlab has sold certain products to Alticor,Inc., such sales ranging from approximately $1,000 to $2,500 on an annual basis. All product sales by Twinlab to Alticor are pursuant to arm’s length business transactions whereby Alticor at all times has the right to choose the vendor(s) of its choice for supply of its products. Mr. Van Andel is an equity owner and a member of the board of directors of Alticor. The Company believes that the sales by Twinlab to Alticor are such a de minimus part of Alticor’s overall sales, that any pecuniary benefit of these sales potentially attributable to equity owned by Mr. Van Andel is immaterial.

On June 30, 2015, Twinlab entered into a bill of sale with Essex Capitol Corporation (“Essex”) pursuant to which Twinlab sold certain machinery and equipment associated with Twinlab’s manufacturing operations in American Fork, Utah to Essex for an aggregate purchase price of $2,900 in exchange for (i) Essex’s agreement (the “Essex Guaranty”) to be Twinlab’s guarantor for the Nutricap acquisition described below (“Nutricap”), and (ii) Essex’s agreement, in addition to simply providing the Essex Guaranty, to in fact make all payments to Nutricap as and when due under the Nutricap Note, including payment in full of all amounts due and owing at maturity thereof, thus extinguishing the Nutricap Note of $2,750. On the same date, Twinlab leased the same machinery and equipment back from Essex, pursuant to two 36-month commercial lease agreements requiring monthly lease payments by Twinlab of $89 and $5, respectively. On December 30, 2015, the larger of the two leases was amended to incorporate the equipment leased under the smaller of the two leases (which smaller lease was terminated) and to extend the term of the remaining lease for a term of 36 months from the effective date of the amendment with monthly lease payments of $98.

On December 30, 2015, the Company consolidated these two leases into a single lease with a new 36-month term and requiring monthly payments of $96. The Company received $496 of additional consideration for this consolidation, amendment and extension of the initial lease.

On August 14, 2014, Twinlab entered into a 36-month machinery and equipment lease with Essex with monthly payments of $72.

In connection with the guarantee of the note payable issued in the Nutricap asset acquisition and equipment financing by Essex discussed above, Essex was issued a warrant exercisable for an aggregate 1,428,571 shares of the Company’s common stock at a purchase price of $0.77 per share, at any time prior to the close of business on June 30, 2020. The number of shares issuable upon the exercise of the warrant is subject to adjustment on terms and conditions customary for a transaction of this nature in the event of (i) reorganization, recapitalization, stock split-up, combination of shares, mergers, consolidations and (ii) sale of all or substantially all of our assets or property. Essex subsequently assigned warrants for 350,649 shares to another company.

On January 28, 2016, Golisano Holdings LLC ("Golisano LLC") lent the Company $2,500 pursuant to an Unsecured Promissory Note, dated January 28, 2016 (the “Golisano Note”). The Golisano Note matures on January 28, 2019. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Golisano Note is payable in twenty-four (24) monthly installments of $104 commencing on February 28, 2017. Pursuant to the Golisano Note, the Company issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,136,363 shares of the company’s common stock, at an exercise price of $.01 per share (the “Golisano Warrant”). The Golisano Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Golisano LLC the entire unamortized principal amount of the Golisano Note and any accrued and unpaid interest thereon as of January 28, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Golisano Note). The Company and Golisano LLC previously entered into a Registration Rights Agreement, dated as of October 5, 2015 (the “Registration Rights Agreement”), granting Golisano LLC certain registration rights for certain shares of common stock. The shares of common stock issuable pursuant to the Golisano Warrant are also entitled to the benefits of the Registration Rights Agreement. The balance of the Golisano Note as of December 31, 2017 was $2,500. Interest in the amount of $215 was accrued by the Company pursuant to the Golisano Note during the year ended December 31, 2017.

On January 28, 2016, Great Harbor lent the Company $2,500 pursuant to an Unsecured Promissory Note, dated January 28, 2016 (the “Great Harbor Note”). The Great Harbor Note matures on January 28, 2019. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Great Harbor Note is payable in twenty-four (24) monthly installments of $104 commencing on February 28, 2017. The Great Harbor Note provides that the Company issue into escrow in the name of Great Harbor a warrant to purchase an aggregate of 1,136,363 shares of Common Stock at an exercise price of $.01 per share (the “Great Harbor Warrant”). The Great Harbor Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Great Harbor the entire unamortized principal amount of the Great Harbor Note and any accrued and unpaid interest thereon as of January 28, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Great Harbor Note). The Company has reserved 1,136,363 shares of Common Stock for issuance under the Great Harbor Warrant. The Great Harbor Warrant, if exercisable, expires on February 28, 2022. The Great Harbor Warrant grants Great Harbor certain registration rights for the shares of Common Stock issuable upon exercise of the Great Harbor Warrant. The balance of the Great Harbor Note as of December 31, 2017 was $2,500. Interest in the amount of $215 was accrued by the Company pursuant to the Great Harbor Note during the year ended December 31, 2017.

On March 21, 2016, Golisano LLC lent the Company $7,000 pursuant to an Unsecured Promissory Note, dated March 21, 2016 (the “Second Golisano Note”). The Second Golisano Note matures on March 21, 2019. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Second Golisano Note is payable in 24 monthly installments of $292 commencing on April 21, 2017. The Second Golisano Note provides that the Company issue into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 3,181,816 shares of the Company’s common stock at an exercise price of $0.01 per share (the “Second Golisano Warrant”). The Second Golisano Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Golisano LLC the entire unamortized principal amount of the Second Golisano Note and any accrued and unpaid interest thereon as of March 21, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Second Golisano Note). The Company has reserved 3,181,816 shares of the Company's common stock for issuance under the Second Golisano Warrant. The Second Golisano Warrant, if exercisable, expire on March 21, 2022. The shares of Common Stock issuable pursuant to the Golisano Warrant are also entitled to the benefits of the Registration Rights Agreement. The balance of the Second Golisano Note as of December 31, 2017 was $7,000. Interest in the amount of $603 was accrued by the Company pursuant to the Second Golisano Note during the year ended December 31, 2017.

On March 21, 2016, Great Harbor lent the Company $7,000 pursuant to an Unsecured Promissory Note, dated March 21, 2016 (the “Second Great Harbor Note”). The Second Great Harbor Note matures on March 21, 2019. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Second Great Harbor Note is payable in 24 monthly installments of $292 commencing on April 21, 2017. The Second Great Harbor Note provides that the Company issue into escrow in the name of Great Harbor a warrant to purchase an aggregate of 3,181,816 shares of the Company’s common stock at an exercise price of $0.01 per share (the “Second Great Harbor Warrant”). The Second Great Harbor Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Great Harbor the entire unamortized principal amount of the Second Great Harbor Note and any accrued and unpaid interest thereon as of March 21, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Second Great Harbor Note). The Company has reserved 3,181,816 shares of the Company's common stock for issuance under the Second Great Harbor Warrant. The Second Great Harbor Warrant, if exercisable, expires on March 21, 2022. The Second Great Harbor Warrant grants Great Harbor certain registration rights for the shares of Common Stock issuable upon exercise of the Second Great Harbor Warrant. The balance of the Second Great Harbor Note as of December 31, 2017 was $7,000. Interest in the amount of $603 was accrued by the Company pursuant to the Second Great Harbor Note during the year ended December 31, 2017.

On July 21, 2016, the Company issued an Unsecured Delayed Draw Promissory Note in favor of Golisano LLC (the “Third Golisano Note”) pursuant to which Golisano LLC may, in its sole discretion and pursuant to draw requests made by the Company, loan the Company up to the maximum principal amount of $4,770. The Third Golisano Note matures on January 28, 2019. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Third Golisano Note is payable at maturity. The Third Golisano Note provides that the Company issue into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 2,168,178 shares of the Company’s common stock at an exercise price of $0.01 per share (the “Third Golisano Warrant”). The Third Golisano Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Golisano LLC the entire unamortized principal amount of the Third Golisano Note and any accrued and unpaid interest thereon as of January 28, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Third Golisano Note). The Company has reserved 2,168,178 shares of the Company's common stock for issuance under the Third Golisano Warrant. The Third Golisano Warrant, if exercisable, expires on July 21, 2022. The shares of common stock issuable pursuant to the Third Golisano Warrant are also entitled to the benefits of the Registration Rights Agreement. The balance of the Third Golisano Note as of December 31, 2017 was $4,770. Interest in the amount of $376 was accrued by the Company pursuant to the Third Golisano Note during the year ended December 31, 2017.

On July 21, 2016, the Company issued an Unsecured Delayed Draw Promissory Note in favor of Little Harbor (the “Little Harbor July 2016 Note”), pursuant to which Little Harbor may, in its sole discretion and pursuant to draw requests made by the Company, loan the Company up to the maximum principal amount of $4,770. This note is unsecured and matures on January 28, 2019. This note bears interest at an annual rate of 8.5%, with the principal payable at maturity. If Little Harbor, in its discretion, accepts a draw request made by the Company under this note, Little Harbor shall not transfer cash to the Company, but rather Little Harbor shall irrevocably agree to accept the principal amount of any monthly delayed draw under this note in lieu and in complete satisfaction of the obligation to make an equivalent dollar amount of periodic cash payments otherwise due Little Harbor under the July 2014 note payable. During the year ended December 31, 2017, there were not draws. The balance of this note as of December 31, 2017 was $4,770. Interest in the amount of $376 was accrued by the Company pursuant to the note during the year ended December 31, 2017.

This note provides that we issue into escrow in the name of Little Harbor a warrant to purchase an aggregate of 2,168,178 shares of common stock at an exercise price of $0.01 per share (the “Little Harbor July 2016 Warrant”). The Little Harbor July 2016 Warrant will not be released from escrow or be exercisable unless and until we fail to pay Little Harbor the entire unamortized principal amount of the Little Harbor July 2016 Note and any accrued and unpaid interest thereon as of January 28, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Little Harbor July 2016 Note). We have reserved 2,168,178 shares of the Company’s common stock for issuance under the Little Harbor July 2016 Warrant. The Little Harbor July 2016 Warrant grants Little Harbor certain registration rights for the shares of the Company’s common stock issuable upon exercise of the Little Harbor July 2016 Warrant.

On December 30, 2016, the Company issued an Unsecured Promissory Note in favor of Golisano LLC, pursuant to which Golisano LLC loaned the Company $2,500 (the “Fourth Golisano Note”). The Fourth Golisano Note matures on December 30, 2019. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Fourth Golisano Note is payable in 24 monthly installments of $104 commencing on February 5, 2017. The Fourth Golisano Note provides that the Company issue into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,136,363 shares of the Company’s common stock at an exercise price of $.01 per share (the “Fourth Golisano Warrant”).The Fourth Golisano Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Golisano LLC the entire unamortized principal amount of the Fourth Golisano Note and any accrued and unpaid interest thereon as of December 30, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Fourth Golisano Note).The Company has reserved 1,136,363 shares of common stock for issuance under the Fourth Golisano Warrant. The Fourth Golisano Warrant, if exercisable, expires on December 30, 2022. The shares of common stock issuable pursuant to the Fourth Golisano Warrant are also entitled to the benefits of the Registration Rights Agreement. The balance of the Fourth Golisano Note as of December 31, 2017 was $2,500. The Company accrued interest on the Fourth Golisano Note of $201 during the year ended December 31, 2017.

On December 31, 2016, Great Harbor lent the Company $2,500 pursuant to an Unsecured Promissory Note, dated December 31, 2016 (the “Third Great Harbor Note”). The Third Great Harbor Note matures on December 31, 2019. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Third Great Harbor Note is payable in 24 monthly installments of $104 commencing on February 5, 2017. The Third Great Harbor Note provides that the Company issue into escrow in the name of Great Harbor a warrant to purchase an aggregate of 1,136,363 shares of the Company’s common stock at an exercise price of $0.01 per share (the “Third Great Harbor Warrant”). The Third Great Harbor Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Great Harbor the entire unamortized principal amount of the Third Great Harbor Note and any accrued and unpaid interest thereon as of December 31, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Third Great Harbor Note). The Company has reserved 1,136,363 shares of the Company's common stock for issuance under the Third Great Harbor Warrant. The Third Great Harbor Warrant, if exercisable, expires on December 30, 2022. The Third Great Harbor Warrant grants Great Harbor certain registration rights for the shares of common stock issuable upon exercise of the Third Great Harbor Warrant. The balance of the Third Great Harbor Note as of December 31, 2017 was $2,500. The Company accrued interest on the Third Great Harbor Note of $201 during the year ended December 31, 2017.

On March 14, 2017, the Company issued an Unsecured Promissory Note in favor of Golisano LLC pursuant to which Golisano LLC loaned the Company a principal amount of $3,267 (the “Fifth Golisano Note”). The Fifth Golisano Note matures on December 30, 2019. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Fifth Golisano Note is payable at maturity. The Fifth Golisano Note provides that the Company issue into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,484,847 shares of common stock, at an exercise price of $.01 per share (the “Fifth Golisano Warrant”). The Fifth Golisano Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Golisano LLC the entire unamortized principal amount of the Fifth Golisano Note and any accrued and unpaid interest thereon as of December 30, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Fifth Golisano Note). The Company has reserved 1,484,847 shares of common stock for issuance under the Fifth Golisano Warrant. The shares of common stock issuable pursuant to the Fifth Golisano Warrant are also entitled to the benefits of the Registration Rights Agreement. The balance of the Fifth Golisano Note as of December 31, 2017 was $3,267. The Company accrued interest on the Fifth Golisano Note of $202 during the year ended December 31, 2017.

On August 30, 2017, Great Harbor lent the Company $3,000 pursuant to a Secured Promissory Note, dated August 30, 2017 (the “Fourth Great Harbor Note”). The Fourth Great Harbor Note matures on August 29, 2020. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Fourth Great Harbor Note is payable at maturity. The Fourth Great Harbor Note provides that the Company issue into escrow in the name of Great Harbor a warrant to purchase an aggregate of 1,363,636 shares of the Company’s common stock at an exercise price of $0.01 per share (the “Fourth Great Harbor Warrant”). The Fourth Great Harbor Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Great Harbor the entire unamortized principal amount of the Fourth Great Harbor Note and any accrued and unpaid interest thereon as of August 29, 2020, or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Fourth Great Harbor Note). The Company has reserved 1,363,636 shares of the Company's common stock for issuance under the Fourth Great Harbor Warrant. The Fourth Great Harbor Warrant, if exercisable, expires on August 30, 2023. The Fourth Great Harbor Warrant grants Great Harbor certain registration rights for the shares of common stock issuable upon exercise of the Fourth Great Harbor Warrant. The balance of the Fourth Great Harbor Note as of December 31, 2017 was $3,000. The Company accrued interest on the Fourth Great Harbor Note of $85 during the year ended December 31, 2017.

On February 6, 2018, Great Harbor lent the Company $2,000 pursuant to a Secured Promissory Note, dated February 6, 2018 (the “Fifth Great Harbor Note”). The Fifth Great Harbor Note matures on February 6, 2021. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Fifth Great Harbor Note is payable at maturity. The Fifth Great Harbor Note provides that the Company issue into escrow in the name of Great Harbor a warrant to purchase an aggregate of 1,818,182 shares of common stock at an exercise price of $0.01 per share (the “Fifth Great Harbor Warrant”). The Fifth Great Harbor Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Great Harbor the entire unamortized principal amount of the Fifth Great Harbor Note and any accrued and unpaid interest thereon as of February 6, 2021, or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Fifth Great Harbor Note). The Company has reserved 1,818,182 shares of the Company's common stock for issuance under the Fifth Great Harbor Warrant. The Fifth Great Harbor Warrant, if exercisable, expires on February 6, 2024. The Fifth Great Harbor Warrant grants Great Harbor certain registration rights for the shares of common stock issuable upon exercise of the Fifth Great Harbor Warrant.

On February 6, 2018, the Company issued a Secured Promissory Note in favor of Golisano LLC pursuant to which Golisano LLC loaned the Company a principal amount of $2,000 (the “Sixth Golisano Note”). The Sixth Golisano Note matures on February 6, 2021. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Sixth Golisano Note is payable at maturity. The Sixth Golisano Note provides that the Company issue into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,818,182 shares of the company’s common stock, at an exercise price of $.01 per share (the “Sixth Golisano Warrant”). The Sixth Golisano Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Golisano LLC the entire unamortized principal amount of the Sixth Golisano Note and any accrued and unpaid interest thereon as of February 6, 2021 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Sixth Golisano Note). The Company has reserved 1,818,182 shares of common stock for issuance under the Sixth Golisano Warrant. The shares of common stock issuable pursuant to the Sixth Golisano Warrant are also entitled to the benefits of the Registration Rights Agreement.

On July 27, 2018, Great Harbor lent the Company $5,000 pursuant to a Secured Promissory Note, dated July 27, 2018 (the “Sixth Great Harbor Note”). The Sixth Great Harbor Note matures on January 27, 2020. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Sixth Great Harbor Note is payable at maturity. The Company also issued to Great Harbor a warrant to purchase an aggregate of 2,500,000 shares of the Company’s common stock at an exercise price of $0.01 per share (the “Sixth Great Harbor Warrant”). The Sixth Great Harbor Warrant is exercisable on any business day prior to the expiration date of July 27, 2024. The Company has reserved 2,500,000 shares of the Company's common stock for issuance under the Sixth Great Harbor Warrant.

Pursuant to a November 5, 2018 Secured Promissory Note, GH loaned the Company $4,000 ("November 2018 GH Note"). The November 2018 GH Note matures on November 5, 2020 and bears interest at an annual rate of 8.5%, with the principal payable on maturity. Interest on the outstanding principal accrues at a rate of 8.5% per year and is payable monthly on the first day of each month, beginning December 1, 2018. The principal of the November 2018 GH Note is payable at maturity on November 5, 2020. November 2018 GH Note is secured by collateral. We issued a warrant in connection with this loan (see GH Warrants in Note 7 of the original Form 10-K).

GH also delivered a deferment letter to which GH agreed to defer all payments due under all the notes specified in the Great Harbor Deferment Letter through May 31, 2019 and agreed to refrain from declaring a default and/or exercising any remedies under the notes. 

Mr. Mark Bugge is a former member of the board of directors of Macatawa Bank and was a member of the Company’s Board of Directors at the time of the term loan note. Two other members of the Company’s Board of Directors, Mr. B. Thomas Golisano and Mr. David L. Van Andel, are the owners and principals of the guarantor, 463IP Partners LLC. Furthermore, Mr. Van Andel, through his interest in a trust, holds an indirect limited partnership interest in White Bay Capital, LLLP, which has an ownership interest of greater than 10% in the Macatawa Bank.

On December 4, 2018, the Company entered into a Term Loan Note and Agreement (the "Term Loan") in favor of Macatawa Bank (the "Macatawa"). Pursuant to the Term Loan, the Macatawa loaned the Company $15,000. The Term Loan matures on November 30, 2020. The Term Loan accrues interest at the interest rate equivalent to the one-month LIBOR Rate plus 1.00% (the interest rate will not be less than 2.50%; the rate was 3.38% as of December 31, 2018). After the maturity date or upon the occurrence or continuation of an event of default, the unpaid principal balance shall bear interest at the interest rate of the note plus 3.00%. The note is secured by the Limited Guaranty, defined below, and is subordinate to the indebtedness owed to MidCap.

In connection with the Term Loan, 463IP Partners, LLC (the "463IP") has entered into a limited guaranty, dated as of December 4, 2018, in favor of the Macatawa (the "Limited Guaranty") pursuant to which it has agreed to guarantee payment under the Term Loan and any and all renewals of the Term Loan and all interest accrued on such indebtedness limited to $15,000 plus any accrued interest.

Director Independence

The Board has determined that the following directors are independent pursuant to the rules of the Nasdaq Stock Market ("NASDAQ"): Messrs. Ellis, Golisano, Still and Van Andel. Since the OTCPK does not have rules regarding director independence, the Board makes its determination as to director independence based on the definition of “independence” as defined under the NASDAQ rules. In evaluating and determining the independence of the directors, the Board considered the relationships disclosed above under "Certain Relationships and Related Person Transactions" and determined that those relationships do not impair the directors' independence from us and our management under the NASDAQ rules. The members of the Audit Committee are David A. Still and Seth Ellis, all of whom are independent directors as determined by the NASDAQ rules. The members of our Compensation Committee are B. Thomas Golisano, Chairman, and Seth Ellis, all of whom are independent directors as determined by the NASDAQ rules. The members of our Nominating and Corporate Governance Committee are David L. Van Andel, Chairman, and B. Thomas Golisano, all of whom are independent directors as determined by the NASDAQ rules.