Item
1.01 Entry into a Material Definitive Agreement.
Senior
Secured Credit Facility
On
May 3, 2019, C-PAK Consumer Product Holdings LLC, a Delaware limited liability company (“C-PAK”) and C-PAK Consumer
Product IP SPV LLC, a Delaware limited liability company (“C-PAK IP”, together with C-PAK, the “Borrowers”)
entered into a loan agreement with Piney Lake Opportunities ECI Master Fund LP, a Cayman Islands exempted limited partnership
(“PLC ECI-Master Fund”), in its respective capacities as the “Administrative Agent”, “Collateral
Agent” and “Lender”, pursuant to which the Borrowers obtained a $22 million term loan (the “Loan Agreement”).
The proceeds of the loan were used to acquire certain assets from The Procter & Gamble Company, an Ohio corporation (“P&G”)
and to pay fees and expenses related thereto.
The
Borrowers are subsidiaries of a majority-owned subsidiary of Capital Park Holdings Corp. (“Capital Park,” “us,”
“our” or the “Company”), C-PAK Consumer Product Holdings SPV I LLC, a Delaware limited liability
company (“C-PAK Holdings”). C-PAK Holdings is a guarantor under the Loan Agreement.
The
interest rate applicable to the borrowing under the Loan Agreement is equal to LIBOR plus a margin of 12.00% which is payable
monthly beginning on June 30, 2019. Under the Loan Agreement, the Borrowers must repay the unpaid principal amount of the loans
quarterly in an amount equal to $440,000 beginning on September 30, 2019. The Loan Agreement will mature on May 3, 2024.
As
security for its obligations under the Loan Agreement, C-PAK Holdings and the Borrowers granted a lien on substantially all of
its assets to the Lender pursuant to a Guaranty and Security Agreement dated May 3, 2019, by and among the Borrowers, C-PAK Holdings
and the Collateral Agent (the “Guaranty and Security Agreement”) and a Trademark Security Agreement dated May 3, 2019
by and between C-PAK IP and the Collateral Agent (the “Trademark Security Agreement”).
The
Loan Agreement contains customary affirmative and negative covenants, which, among other things, limit the Borrower’s ability
to (i) incur additional indebtedness, (ii) pay dividends or make certain distributions or (iii) dispose of its assets, grant liens
or encumber its assets. These covenants are subject to a number of exceptions and qualifications.
The
foregoing summaries of the Loan Agreement, Guaranty and Security Agreement and Trademark Security Agreement do not purport to
be complete and are subject to, and qualified in its entirety by, the full text of the Loan Agreement, Guaranty and Security Agreement
and Trademark Security Agreement which are filed as Exhibits 10.1, 10.2 and 10.3 respectively hereto and are incorporated herein
by reference into this Item 1.01.
Subsidiary
Equity Transactions
Prior
to and in connection with the execution and delivery of the Loan Agreement, Capital Park formed C-PAK Holdings and incorporated
C-PAK PREFCO SPV I, INC., a Delaware corporation (“PrefCo”).
Under
the terms of the Amended and Restated Certificate of Incorporation of PrefCo (the “PrefCo Certificate of Incorporation”),
(i) Capital Park purchased 10,000 shares of Common Stock from PrefCo for $1,000; and (ii) an affiliate of PLC ECI-Master Fund,
Piney Lakes Opportunities NON-ECI Master Fund, LP, a Cayman Islands exempted limited partnership (“PLC NON-ECI Master Fund”),
purchased 3,000 shares of Preferred Stock in PrefCo for $3,000,000.
Immediately
upon receipt of proceeds from the sale of the 3,000 shares of Preferred Stock of PrefCo to PLC NON-ECI Master Fund, PrefCo purchased
3,000 Preferred Units of C-PAK Holdings for $3,000,000. In accordance with the terms of the Amended and Restated Limited Liability
Company Agreement of C-PAK Holdings, dated as of May 3, 2019 (the “C-PAK Holdings LLC Agreement”) and pursuant to
separate subscription agreements, (i) C-PAK Holdings issued and sold to PLC ECI-Master Fund 1,000 Common Units; and (ii) C-PAK
Holdings issued and sold to PrefCo 9,000 Common Units.
Under
the C-PAK Holdings LLC Agreement, holders of Preferred Units shall be entitled to receive cumulative preferred distributions which
shall accrue on the sum of $1,000, plus the amount of accrued and unpaid preferred distributions at a rate of 13% per annum plus
the LIBOR rate set forth under the Loan Agreement, as the same shall be increased by 2% per annum in the event the Company fails
(a) to properly redeem the Preferred Units as required under the C-PAK Holdings LLC Agreement, (b) to pay the Redemption Price
upon the liquidation, dissolution or winding-up of C-PAK Holdings; or (c) to redeem the Common Units owned by PLC ECI-Master Fund
when and if PLC ECI-Master Fund exercised its right to put the Common Units to C-PAK Holdings, at the then fair market value thereof.
The holders of the Preferred Units shall furthermore be entitled to receive distributions before the holders of the Common Units.
On each Distribution Payment Date up to fifty percent (50%) of any Preferred Unit distributions accrued during the quarter ending
on such date may be declared and paid in cash. For the portion of the distributions on Preferred Units that are not paid in cash
on the Distribution Payment Date, that amount shall be added to the Liquidation Preference and shall thereafter accrue and compound
at the Preferred Distribution Rate.
C-PAK
Holdings may redeem Preferred Units at any time upon payment of the Redemption Price. In the event of a change of control, insolvency,
or liquidation of C-PAK Holdings or any default and acceleration under the Loan Agreement, C-PAK Holdings must redeem the Preferred
Units at the Redemption Price. Finally, holders of Preferred Units may elect to sell their Preferred Units to the Company at any
time following May 2, 2024 at the applicable Redemption Price.
Under
the C-PAK Holdings LLC Agreement, the “Redemption Price” to be paid (i) before May 2, 2022 is equal to the sum of
two (2) times
the sum of the sum of (A) $1,000, plus (B)(1) the amount of accrued and unpaid preferred distributions calculated
at a rate of 13% per annum plus the LIBOR rate set forth under the Loan Agreement, plus (2) the amount of the preferred distributions
that would accrue during the same period; and (ii) after May 2, 2022, shall be an amount equal to the sum of (Y) $1,000, plus
(Z) the amount of accrued and unpaid preferred distributions calculated at a rate of 13% per annum plus the LIBOR rate set forth
under the Loan Agreement, as the same may be adjusted to reflect defaults under the C-PAK Holdings LLC Agreement.
Under
certain circumstances of a redemption breach, PLC ECI-Master Fund shall have the right, and not the obligation, to force C-PAK
Holdings to effect a sale thereof.
The
terms of the PrefCo Certificate of Incorporation mirror the provisions of the C-PAK Holdings LLC Agreement with the terms of the
Preferred Stock and Common Stock being similar to the terms of the Preferred Units and the Common Units, respectively. Moreover,
the manner in which the Redemption Price on the Preferred Stock is calculated mirrors the manner in which the Redemption Price
on the Preferred Units is calculated. Once the Preferred Stock is redeemed under the PrefCo Certificate of Incorporation, PLC
NON-ECI Master Fund shall no longer hold an equity interest in PrefCo. Furthermore, at any time after November 2, 2024 through
and including November 2, 2025, PLC ECI-Master Fund may compel C-PAK Holdings LLC to repurchase its Common Units at the then fair
market value.
In
addition, Capital Park and/or its subsidiaries entered into additional agreements, including a Stockholders’ Agreement,
Investors’ Rights Agreement and Management Services Agreement, each dated as of May 3, 2019, which memorialize supplemental
agreements between the parties related to the transactions described above.
The
foregoing summaries of the PrefCo Certificate of Incorporation, C-PAK Holdings LLC Agreement, Stockholders’ Agreement, Investors’
Rights Agreement and Management Services Agreement do not purport to be complete and are subject to, and qualified in its
entirety by, the full text of the PrefCo Certificate of Incorporation, C-PAK Holdings LLC Agreement, Stockholders’ Agreement,
Investors’ Rights Agreement and Management Services Agreement which are filed as Exhibits 10.4, 10.5, 10.6, 10.7 and
10.8 respectively hereto and are incorporated herein by reference into this Item 1.01.