Item 5.02. Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
On
September 30, 2019, the Board increased the size of the Board from
three members to four members and appointed J. Christopher Teets to
fill the vacancy, which was contemplated by the Restructuring and
Exchange Agreement dated September 30, 2019 (the
“Restructuring
Agreement”) by and among the Company and certain of
its subsidiaries, Red Mountain Capital Partners LLC, a Delaware
limited liability company (“Red Mountain”), RMCP PIV DPC, LP,
a Delaware limited partnership and an affiliate of Red Mountain
(“DPC PIV”),
RMCP PIV DPC II, LP, a Delaware limited partnership and an
affiliate of Red Mountain (“DPC PIV II” and together with Red
Mountain and DPC PIV, the “Investors”), and YE Investment
LLC, a Delaware limited liability company and an affiliate of Red
Mountain (“YE”).
Mr.
Teets, age 47, has served as a Partner of Red Mountain, an
investment management firm, since February 2005. Before joining Red
Mountain Capital, Mr. Teets was an investment banker at Goldman,
Sachs & Co. Prior to joining Goldman Sachs & Co. in 2000,
Mr. Teets worked in the investment banking division of Citigroup.
Mr. Teets currently serves on the boards of directors of
Nature’s Sunshine Products, Inc., Marlin Business Services
Corp. and Air Transport Services Group, Inc. He previously served
on the Boards of Directors of Affirmative Insurance Holdings, Inc.,
Encore Capital Group, Inc. and the Company. Mr. Teets holds a
bachelor’s degree from Occidental College and a M.Sc. degree
from the London School of Economics. It has not been determined
whether Mr. Teets will serve on any committees of the
Board.
As part
of the Restructuring Agreement, on September 30, 2019, the Company
and certain of its subsidiaries (collectively, the
“Borrowers”)
entered into a loan modification agreement (the “Loan Modification Agreement”) with
YE which amends the credit agreement dated as of October 26, 2016
(the “Original Credit
Agreement”) by and among the Lender party thereto, YE
as Administrative Agent (in such capacity, the “Agent”), and the Borrowers, as
amended or modified by (A) the First Amendment to Credit Agreement
and Borrowing Base Redetermination dated as of May 19, 2017, (B)
the Second Amendment to Credit Agreement and Borrowing Base
Redetermination dated as of May 8, 2018, (C) the Waiver and Third
Amendment to Credit Agreement dated as of July 31, 2018, (D) the
Limited Waiver dated as of August 30, 2018, in each case among the
Lenders, the Agent and the Borrowers, and (E) and the Successor
Agent and Issuing Bank Agreement dated as of September 10, 2019
(the agreements in (A) through (E), the “Default Documents”, and the
Original Credit Agreement as so amended or modified by the Default
Documents, the “Credit
Agreement”). The Loan Modification Agreement, among
other things, modified the loans outstanding under the Credit
Agreement (the “Modified
Note”) in that it (i) reduced the outstanding
principal balance from approximately $32.8 million, plus accrued
and unpaid interest and expenses, to $1.4 million with the
forgiveness of approximately $31.4 million plus the accrued and
unpaid interest and expenses, (ii) increased the interest rate to
10% per annum payable quarterly until December 31, 2019 and monthly
beginning in January 2020, (iii) extended the maturity date to
September 30, 2022, and (iv) added an event of default if the
closing of the Restructuring Agreement does not occur on or before
September 30, 2020. No interest was paid to YE through September
30, 2019. The sole member and manager of YE is Red Mountain. Mr.
Teets is a member of Red Mountain with a capital interest
representing less than 10% of the outstanding capital interests of
Red Mountain with the right to receive 50% of returns in excess of
capital with respect to Red Mountain’s interest in Yuma. The
approximate dollar value of Mr. Teets’ interest in the Loan
Modification Agreement is not determinable at this
time.
In
connection with the closing of the Restructuring Agreement, the
Company will enter into a customary board representation rights
agreement (the “Board Rights
Agreement”) with Red Mountain containing provisions by
which Red Mountain has the right but not the obligation to nominate
up to four directors to the Board.
No
arrangement or understanding exists between Mr. Teets and any other
person pursuant to which Mr. Teets was selected as a director
of the Company. Mr. Teets would be one of Red Mountain’s
designees under the Board Rights Agreement.