| | | | | |
| Item 1.01 | Entry into a Material Definitive Agreement. |
Substitute Insurance Reimbursement Facility Agreement
On September 29, 2022, Team, Inc. (the “Company”) entered into that certain Substitute Insurance Reimbursement Facility Agreement (the “Agreement”) by and between the Company and 1970 Group, Inc. (the “1970 Group”). The Agreement, among other things, enables 1970 Group to extend credit to the Company in the form of a substitute reimbursement facility to provide up to approximately $21.4 million of letters of credit on behalf of the Company in support of the Company’s workers’ compensation, commercial automotive and general liability insurance carriers for workers’ compensation, commercial automotive and/or general liability policies (the “Insurance Policies”). Under the Agreement, 1970 Group will arrange for the issuance of letters of credit from financial institutions approved by the National Association of Insurance Commissioners. Such letters of credit arranged by the 1970 Group will permit the return of certain existing letters of credit for the account of the Company that are outstanding for the purpose of supporting the Insurance Policies and that are required to be collateralized, thereby providing increased liquidity for the Company in the amount of approximately $17.6 million.
Under the Agreement, the Company will be required to reimburse the 1970 Group for any draws made under the letters of credit provided by the 1970 Group within five (5) business days of notice of any such draw. The Agreement will terminate upon the earlier of (i) the expiration or termination of the Company’s Insurance Policies or (ii) September 29, 2023. The Agreement contains certain affirmative covenants, including for the Company to keep and maintain its Insurance Policies for the compliance in all material respects with applicable requirements. The Agreement contains certain events of default, including, without limitation, the Company’s failure to reimburse 1970 Group for the amount of any draw or other financial obligation or the Company’s payment of 1970 Group’s fees. Upon an event of default, 1970 Group has the option to declare all outstanding obligations immediately due within five (5) business days after the Company’s receipt of such notice from 1970 Group. The obligations of the Company under the Agreement are not guaranteed by any of the Company’s subsidiaries, are unsecured and are subordinated to the Company’s obligations to each of the lenders under each of (1) the Term Loan Credit Agreement, dated as of December 18, 2020 (as amended from time to time), among the Company, as borrower, the other loan parties from time to time party thereto, the lenders from time to time party thereto and Atlantic Park Strategic Capital Fund, L.P., as agent, (2) the Credit Agreement, dated as of February 11, 2022 (as amended from time to time), among the Company, as borrower, the other loan parties from time to time party thereto, the lenders from time to time party thereto and Eclipse Business Capital LLC, as agent, and (3) the Unsecured Term Loan Credit Agreement (as defined below).
The foregoing summary of the Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated by reference herein.
Exchange Agreement and Amendment No. 8 to Unsecured Term Loan Credit Agreement
On October 4, 2022, the Company entered into an exchange agreement (the “Exchange Agreement”) by and among the Company and certain holders (collectively, the “Exchanging Holders”) of the Company’s 5.00% Convertible Senior Notes due 2023 (the “Notes”). The Exchanging Holders held Notes that paid interest, at the Company’s option, at a rate of 5.00% per annum entirely in cash or at a rate of 8.00% per annum in paid-in-kind interest (“PIK Interest”).
Pursuant to the Exchange Agreement, the Company agreed to exchange approximately $57.0 million of aggregate principal amount, plus accrued and unpaid PIK Interest, of Notes beneficially owned by the Exchanging Holders for an equivalent increased principal amount of term loans (the “New Term Loans”) under that certain Unsecured Term Loan Credit Agreement, dated as of November 9, 2021 (as amended from time to time, the “Unsecured Term Loan Credit Agreement”), among the Company, as borrower, the lenders from time to time party thereto and Cantor Fitzgerald Securities, as agent, and pursuant to the terms thereof. The Company entered into the Corre/AP Term Sheet (as defined in the Unsecured Term Loan Credit Agreement) on November 9, 2021 pursuant to which each of the Exchanging Holders had the right to exchange the Notes into New Term Loans and each Exchanging Holder exercised such right.
On October 4, 2022, the Company entered into Amendment No. 8 (the “Amendment No. 8”) to the Unsecured Term Loan Credit Agreement, pursuant to which, among other things, the Company increased the total principal amount outstanding under the Unsecured Term Loan Credit Agreement to approximately $112.7 million to give effect to the exchange described above. In addition, Amendment No. 8 extended the availability date for an additional commitment under the Unsecured Term Loan Credit Agreement of $10.0 million in subordinated delayed draw term loans from October 31, 2022 to December 31, 2022. The Company will not receive any cash proceeds from the issuance of the New Term Loans.
Following the closing of the Exchange Agreement and Amendment No. 8, the Company has approximately $41.2 million in aggregate principal amount of Notes outstanding, which pay interest at a rate of 5.00% per annum entirely in cash.
The foregoing summaries of the Exchange Agreement and Amendment No. 8 do not purport to be complete and are subject to, and qualified in their entirety by, the full text of such agreements, copies of which are attached hereto as Exhibits 10.2 and 10.3, and are incorporated by reference herein.