Item 1.01. Entry Into a Material Definitive Agreement.
On October 4, 2022, Unique Fabricating NA, Inc. (the “US Borrower”) and Unique-Intasco Canada, Inc. (the “CA Borrower” and together with the US Borrower, the “Borrowers” or the “Company”) and their subsidiaries entered into the Eleventh Amendment to Forbearance Agreement with respect to the Amended and Restated Credit Agreement, as amended, among the Borrowers, their subsidiaries, the financial institutions signatory thereto (the “Lenders”) and Citizens Bank, National Association, a national banking association, as Administrative Agent for the lenders (the “Agent”), as amended, included by the Forbearance Agreement (the “Credit Agreement”). The Eleventh Amendment to Forbearance Agreement extends the Forbearance Period from October 24, 2022 to November 7, 2022. The Eleventh Amendment includes certain amendments to the Credit Agreement and permits the Company to raise up to $4 million of debt financing, which is described below. The Eleventh Amendment also amends several financial covenants including: an amendment to the weekly minimum liquidity covenant, an amendment to the minimum sales covenant for the two month period ending September 30, 2022 and an amendment to the weekly cash disbursement covenant.
This summary of the Eleventh Amendment to Forbearance Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Eleventh Amendment to Forbearance Agreement filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Debt Financing
The Company completed the offering of $4 million aggregate principal amount in notes, in two series, bearing pay-in-kind interest at the rate of 12% per annum on October 7, 2022. Investors in the notes also received warrants for up to an aggregate of 120,000 shares at an exercise price of $0.52 per share, the closing sales price of the Company’s common stock on the date of the closing of the first tranche of the notes offering on October 4, 2022. Investors will receive warrants to purchase in the aggregate an additional 280,000 shares if the notes are not repaid within 12 months. Interest on the notes through the end of 2022 will be convertible at the holders’ option into common stock at a price equal to the warrant exercise price. The notes are secured by and will be paid from the expected receipt of the Company’s Employee Retention Credits and any proceeds from the sale of a non-operational financial asset; one series in the aggregate principal amount of $2,500,000 has a first priority security interest in the financial asset, and a series in the aggregate principal amount of $1,500,000 has a first priority security interest the Company’s Employee Retention Credit. The terms of the two series are otherwise identical. The proceeds of this financing have been used to: reduce by $750,000 the outstanding principal amount of the Company’s bank term loans; $1,228,125 to prepay the December 31, 2022, term loan principal payment; and to reduce by $2,021,875 outstanding borrowings under the Company’s revolving line of credit, which amounts remain available to be reborrowed, subject to the Credit Agreement.
Taglich Brothers, Inc. served as placement agent for the offering of Notes and will receive 192,308 shares of the Company’s common stock as a placement fee. An investor also received 38,461 shares of the Company’s common stock. The notes, warrants, shares of common stock issuable upon exercise of the warrants and the shares issued to the placement agent and investor are not being registered under the Securities Act of 1933, as amended (the “Securities Act”) and were offered pursuant to the exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) thereof and Rule 506(b) under Regulation D promulgated under such Act.
The documents governing this financing will be filed as exhibits to the Company’s Quarterly Report on 10-Q for the quarterly period ended September 30, 2022 and the summary of the terms thereof herein will be qualified in their entirety by reference to such documents.