Aston Advances and Promissory Notes
Prior to the 2018 fiscal year, Aston had from time to time provided
advances and loans to the Company. At January 1, 2018, the
Company owed $12.7 million to Aston, including an
$11.7 million outstanding promissory note and
$1.0 million in outstanding advances.
On May 7, 2018, Aston lent the Company an additional
$2.0 million. On May 15, 2018, Aston lent the Company an
additional $1.5 million, and on June 15, 2018, Aston lent
the Company an additional $2.0 million.
On June 30, 2018, the Company issued Aston a
$17.7 million amended promissory note (the “June Note”),
reflecting the increased aggregate borrowings at that time, as well
as accrued and unpaid interest of $0.5 million. The June Note
had a maturity date of July 1, 2020 and bore interest at a 9%
On August 3, 2018, the Company agreed, pursuant to an Exchange
Agreement dated as of such date (the “Exchange Agreement”), to
issue to Aston 1.1 million shares of the Company’s common
stock in exchange for cancellation of $3.3 million of
outstanding principal and interest under the June Note. At Aston’s
direction, the Company issued 1,000,000 of the shares to
Mr. LaPenta and 100,000 shares to James DePalma, the Company’s
former Chief Financial Officer and an affiliate of Aston.
In connection with the Exchange Agreement transaction, on
August 3, 2018 the Company issued a $14.5 million amended
and restated promissory to Aston (the “August Note”), reflecting
the $3.3 million exchange of amounts owed under the June Note
for shares. The August Note was issued with the same terms and
conditions as the June Note, except that the maturity date was
extended to July 20, 2020. After its issuance, the August Note
was the only promissory note outstanding in favor of Aston.
On September 4, 2018, Aston advanced the Company an additional
$0.4 million (the “September Advance”).
On November 21, 2018, the Company entered into a Forbearance
Agreement and Fourteenth Amendment to its loan and security
agreement (the “Loan Agreement”) with Bank of America, N.A. (“Bank
of America”). Simultaneously with its entry into the amendment, the
Company consolidated all of its outstanding promissory notes and
advances due to Mr. LaPenta and Aston and issued a new
promissory note, dated as of November 21, 2018, to
Mr. LaPenta and Aston (the “Consolidated Note”). The
Consolidated Note had an initial aggregate principal amount of
$38.4 million, which reflected (i) an advance of
$1.0 million from Aston in March 2017 (the “March Advance”),
(ii) $14.5 million in principal owed to Aston under the August
Note, (iii) the September Advance, (iv) $10.5 million in
principal owed to Mr. LaPenta under two promissory notes
issued to Mr. LaPenta in November 2018 (the “November Notes”),
and (v) $12.0 million owed by the Company to Mr. LaPenta
in respect of a guaranty exchange on November 21, 2018. In
addition, approximately $0.1 million of accrued and unpaid
interest on the March Advance, the August Note, the September
Advance, and the November Notes was included in the Consolidated
Note. The Consolidated Note incurs interest at the greater of
(i) LIBOR plus 3.75% and (ii) 1% above the rate in effect at
any time under the Loan Agreement. The Consolidated Note is
scheduled to mature on July 20, 2020.
The Consolidated Note is secured by a lien on the Company’s and its
subsidiaries’ assets in favor of Aston, as agent for Aston and
Mr. LaPenta, pursuant to a Security Agreement (the “Security
Agreement”) entered into by the Company and its subsidiaries on
November 21, 2018. In connection with the issuance of the
Consolidated Note, the Company’s guarantor subsidiaries under the
Loan Agreement guaranteed the Company’s obligations under the
Consolidated Note by issuing a Guaranty (the “Guaranty”) in favor
of Mr. LaPenta and Aston.
Also, in connection with the issuance of the Consolidated Note,
Mr. LaPenta and Aston entered into a Subordination and
Intercreditor Agreement (the “Subordination Agreement”) with Bank
of America, the Company and its direct and indirect subsidiaries.
Pursuant to the Subordination Agreement, Aston’s liens securing the
Company’s indebtedness under the Consolidated Note are subordinated
in all material respects to the liens securing the Company’s
indebtedness to Bank of America under the Loan Agreement.
During the three months ended March 31, 2019 and the fiscal
year ended December 31, 2018, the Company recorded interest
expense related to the forgoing financing arrangements with Aston
of $0.9 million and $1.6 million, respectively. As of
March 31, 2019, there was $46.8 million in aggregate
principal and interest outstanding under the Consolidated Note.