Item 1.01 Entry into a Material Definitive Agreement.
On November 23, 2022 (the “Closing Date”), Owlet, Inc., a Delaware corporation (the “Company”) and Owlet Baby Care, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“OBCI” and together with the Company, “Borrower”), entered into the Third Amended and Restated Loan and Security Agreement (the “LSA”) with Silicon Valley Bank, a California corporation (“Bank”), as the lender. The LSA amended, restated and replaced in its entirety the prior Second Amended and Restated Loan and Security Agreement, dated April 22, 2020, and all amendments thereto prior to the Closing Date, by and between the Bank and OBCI (collectively, the “Prior LSA”).
The LSA provides for a $17.5 million revolving line of credit (the “Revolving Line”), up to $10 million of which is available to Borrower for borrowing thereunder on and after the Closing Date. The Revolving Line facility matures and terminates on April 22, 2024 (the “Revolving Line Maturity Date”), at which time any accrued and unpaid interest thereon and all other Revolving Line-related outstanding obligations becomes immediately due and payable. Interest on the outstanding principal amount of any Revolving Line advance accrues at a floating rate per annum equal to the greater of (i) five percent (5.00%) and (ii) the prime rate plus the prime rate margin (as defined in the LSA), and such interest is payable (a) monthly in arrears, (b) on each prepayment date and (c) on the Revolving Line Maturity Date. Borrower may reborrow prior to the Revolving Line Maturity Date, prepay and repay amounts borrowed under the Revolving Line, subject to the terms and conditions in the LSA, and the Company will use borrowings for working capital purposes and general business purposes.
The LSA also provides for an $8.5 million term loan (the “Term Loan”) to repay the growth capital term loans made by Bank to OBCI under the Prior LSA, which matures on April 1, 2024 (the “Term Loan Maturity Date”). Beginning on December 1, 2022, the Term Loan amortizes with equal monthly installments of $500,000 to be paid by Borrower. The Term Loan accrues interest on the outstanding principal amount at a floating rate per annum equal to the greater of (i) five and three-quarters percent (5.75%) and (ii) the prime rate plus the prime rate margin (as defined in the LSA), and such interest is payable (a) monthly in arrears, (b) on each prepayment date and (c) on the Term Loan Maturity Date. All outstanding principal and accrued and unpaid interest and all other Term Loan-related outstanding obligations shall become due and payable in full on the Term Loan maturity date.
Fees payable under the LSA include the following: (i) the revolving line commitment fee equal to $50,000, which was paid on the Closing Date; (ii) a prepayment fee equal to (a) two and one-half percent (2.50%) of the aggregate outstanding principal amount of the Term Loan so prepaid if on or prior to the first anniversary of the Closing Date, (b) two percent (2.00%) of the aggregate outstanding principal amount of the Term Loan so prepaid if after the first anniversary but on or prior to the second anniversary of the Closing Date and (c) one percent (1.00%) of the aggregate outstanding principal amount of the Term Loan so prepaid thereafter; (iii) final payment fee equal to $450,000, due on the earliest to occur of (a) the Term Loan Maturity Date, (b) the full repayment of the Term Loan, (c) the voluntary or mandatory prepayment of the full amount of the Term Loan or (d) upon the termination of the LSA; (iv) an anniversary fee equal to one-quarter percent (0.25%) per annum of the outstanding portion of the Revolving Line, due and payable on the earlier to occur of (a) each anniversary of the Closing Date, (b) the termination of the LSA or (c) upon the occurrence of an event of default thereunder; (v) a termination fee upon the termination of the Revolving Line prior to the Revolving Line Maturity Date equal to (a) two and one-half percent (2.50%) of the Revolving Line if such termination occurs prior to the first anniversary of the Closing Date or (b) two percent (2.00%) of the Revolving Line if such termination occurs thereafter; and (vi) an unused revolving line facility fee, payable quarterly in arrears and on the Revolving Line Maturity Date, equal to two-tenths percent (0.20%) per annum of the average unused portion of the Revolving Line (which shall be calculated as the difference between $10 million and the average for the period of the daily closing balance of the Revolving Line outstanding).
Other key terms of the LSA include the requirements that Borrower (i) maintain liquidity (as defined in the LSA) greater than (a) $15 million from the Closing Date through and including December 31, 2022, and (b) $25 million from and at all times after January 1, 2023, and (ii) maintain certain minimum net revenue (as defined in the LSA) amounts that are measured quarterly for fiscal quarters through December 31, 2023.
The LSA contains representations, warranties, covenants and events of default customary for agreements of this type, including customary covenants that restrict Borrower’s ability to, among other things, dispose of certain assets, make certain changes in management, entity control or business locations, undergo a merger, consolidation or certain other transactions, incur additional indebtedness, encumber certain Borrower property and assets, declare dividends or make certain distributions, engage in any material transactions with any affiliate of Borrower, make or permit any payment on certain subordinated debt, and comply with governmental and regulatory authorities, laws and regulations. The LSA also contains certain customary events of default. Immediately upon and during the continuance of an event of default (as
defined in the LSA) that is not cured or waived as provided in the LSA, in addition to other remedies that may be available to Bank, outstanding obligations may be accelerated by Bank and shall bear interest at an annual default rate of three percent (3.00%) above the otherwise applicable rate.
The obligations under the LSA with respect to the Revolving Line and Term Loan are secured by substantially all of Borrower’s assets, with certain exceptions as set forth in the LSA, and are required to be guaranteed if certain conditions are not met.
The foregoing summary of the LSA does not purport to be complete and is subject to and qualified in its entirety by references to the terms of the LSA, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.