Item 1.01 Entry into Material Definitive Agreement.
On February 22, 2022, (the “Closing Date”), Zevia LLC, a Delaware limited liability company (the “Borrower”) and direct subsidiary of Zevia PBC, a Delaware public benefit corporation (the “Company”), entered into that certain Loan and Security Agreement (the “Loan and Security Agreement”), by and among the Borrower, the financial institutions party thereto from time to time as Lenders and Bank of America, N.A., a national banking association, as agent for the Lenders (in such capacity, “Agent”). The Company intends to guaranty the Borrower’s obligations under the Loan and Security Agreement at a later date.
The Loan and Security Agreement provides for a revolving credit facility up to a principal amount of $20,000,000 (the “Secured Revolving Line of Credit”), including a $2,000,000 sublimit for letters of credit, with the option to increase the line of credit to up to $10,000,000 upon meeting certain conditions. No drawings were made under the Secured Revolving Line of Credit on the Closing Date.
The Secured Revolving Line of Credit matures in five years on February 22, 2027. The obligations of the Borrower under the Loan and Security Agreement are secured by a first priority security interest in substantially all of the Borrower’s assets.
Loans under the Secured Revolving Line of Credit bear interest at a rate per annum equal to the Bloomberg Short-Term Bank Yield Index rate plus an applicable margin between 1.50% to 2.00% and Base Rate (customarily defined) between 0.50% to 1.00%, in each case largely based on average daily availability under the Secured Revolving Line of Credit.
The Secured Revolving Line of Credit may be optionally prepaid or terminated or have unutilized commitments reduced at any time without premium or penalty. In connection with the Secured Revolving Line of Credit, the Borrowers will pay an unused line fee equal to 0.375% per annum. The unused line fee decreases to 0.20% per annum when 50% or more of the Secured Revolving Line of Credit is utilized.
The Loan and Security Agreement includes covenants that place certain restrictions on the Borrower’s ability to, among other things and subject to various exceptions, borrow secured debt or unsecured debt beyond a certain amount, create or suffer to exist any liens, sell or transfer any of the Borrower’s and certain subsidiaries’ assets, make distributions, liquidate, dissolve, merge, amalgamate, combine or consolidate, or become a party to certain agreements restricting the Borrower’s and certain subsidiaries’ ability to incur or repay debt, grant liens, make distributions, or modify loan agreements.
The availability of borrowings under the Loan and Security Agreement is subject to certain conditions and requirements, including among others, the Borrower must maintain Liquidity of $7,000,000 at all times until December 31, 2023 and thereafter, it must maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 as of the last day of each fiscal quarter when availability under the Secured Revolving Line of Credit is less than the greater of $3,000,000 and 17.5% of the borrowing base and continuing until such availability is above such threshold for 30 consecutive days and no event of default exists.
The events of default under the Loan and Security Agreement include, among others and subject to certain exceptions, thresholds and cure periods, payment defaults, the material inaccuracy of representations or warranties, defaults in the performance of affirmative and negative covenants, bankruptcy and insolvency related defaults, a cross-default related to other indebtedness, judgments entered against the Borrower in an amount and change of control.
The foregoing description of the Loan and Security Agreement is only a summary of the material terms thereof, does not purport to be complete and is qualified in its entirety by reference to the full text of the Loan and Security Agreement filed as Exhibit 10.1 to this Current Report on Form 8-K.